<PAGE>
                                FORM 10-Q/A

                     SECURITIES AND EXCHANGE COMMISSION

                          WASHINGTON, D.C.  20549


      (Mark One)

          [ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended: December 31, 1997

                                     OR

          [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

               For the transition period from              to


                                   1-8979
                          (Commission File Number)


                          HONDO OIL & GAS COMPANY
           (Exact name of registrant as specified in its charter)


                        Delaware                                95-1998768
              (State or other jurisdiction                   (I.R.S. Employer
           of incorporation or organization)               Identification No.)

      10375 Richmond Ave, Ste. 900, Houston, Texas                  77042
        (Address of principal executive offices)                  (Zip Code)

    Registrant's telephone number, including area code:  (713) 954-4600

  Indicate by check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
  1934 during the preceding 12 months (or for such shorter period that the
  registrant was required to file such reports), and (2) has been subject to
  such filing requirements for the past 90 days.  Yes X   No
                                                     ---    ---


  The registrant has one class of common stock outstanding.  As of March 20,
  1998, 13,798,424 shares of registrant's $1 par value common stock were
  outstanding.













                                     1




       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS

       GENERAL DISCUSSION


       Introduction
       ------------
       Hondo Oil & Gas Company is an independent oil and gas company focusing
       on international oil and gas exploration and development.  The Company's
       principal asset is its interest in the Opon Association Contract (the
       "Opon Contract"), an exploration concession for an area in the Middle
       Magdalena Valley of Colombia, South America.  Significant reserves of
       natural gas and condensate were shown to exist in the Opon Contract area
       by two discovery wells drilled during 1994 and 1995.  In accordance with
       the terms of the Opon Contract, Empresa Colombiana de Petroleos
       ("Ecopetrol") declared a portion of the area  commercial in May 1996.  A
       pipeline and related wellsite facilities to deliver natural gas and
       condensate to a market are complete, and production began in December
       1997.  Deliveries of natural gas to a power plant located at the Opon
       Contract area also began in December 1997.  During 1997, the Opon No. 6
       well encountered mechanical problems during completion operations and
       was temporarily suspended to evaluate information and develop plans for
       further operations on the well, including workover of the well.*  The
       associate parties have recently decided to commence production of the
       Opon No. 6 well without performing further work.  Drilling of the Opon
       No. 14 well began in October 1997 and has been completed.  If no
       problems are encountered, the Opon No. 14 well should be tested in the
       Spring of 1998.*  The Company will require additional financing to
       continue development of the Opon project.


       Opon Exploration
       ----------------
       Hondo Magdalena Oil & Gas Limited ("Hondo Magdalena"), a wholly-owned
       subsidiary, became involved in the Opon Contract through a farmout
       agreement with Opon Development Company ("ODC") in 1991.  In August
       1993, Hondo Magdalena and ODC entered into a Farmout Agreement under
       which Amoco Colombia Petroleum Company ("Amoco Colombia") earned a 60%
       participating interest in the Opon Contract.  To earn the interest,
       Amoco Colombia paid $3.0 million in cash in 1993 and paid all of the
       costs related to drilling the Opon No. 3 well in 1994.  In addition,
       Amoco Colombia paid Hondo Magdalena $5.0 million in October 1994 and
       paid all but $2.0 million of Hondo Magdalena's costs for drilling the
       Opon No. 4 well in 1995.

       The Opon No. 3 well, completed in September 1994, was drilled to a depth
       of 12,710 feet at a total cost of approximately $30.0 million.  The well
       tested at a daily rate of 45 million cubic feet of natural gas and 2,000
       barrels of condensate.  Downhole restrictions prevented the well from
       testing at higher rates.  The Opon No. 4 well, completed in September
       1995, was drilled to a depth of 11,500 feet at a total cost of
       approximately $28.5 million.  The well tested at a daily rate of 58
       million cubic feet of natural gas and 1,900 barrels of condensate.
       These two wells have confirmed the existence of a significant natural
       gas field and will supply gas for the contracts described below.


       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           2




       Presently, Amoco Colombia, Hondo Magdalena and ODC have interests in the
       Opon Contract (outside the commercial area described below) of
       approximately 60%, 30.9% and 9.1%, respectively.  As provided in the
       Opon Contract, upon the designation of an area or field as commercial,
       Ecopetrol acquires a 50% interest in such area or field and will
       reimburse the associate parties for 50% of the direct exploration costs
       for each commercial discovery from its share of production.  In May
       1996, Ecopetrol approved a commercial field of approximately 2,500 acres
       around the Opon No. 3 and No. 4 wells.  The interests in the commercial
       field are approximately 50%, 30%, 15.4%, and 4.6% for Ecopetrol, Amoco
       Colombia, Hondo Magdalena, and ODC, respectively.  The commercial field
       is substantially smaller than that requested, but may be enlarged by
       future drilling and/or additional technical information.*  The associate
       parties submitted an application to declare the area around the Opon No.
       6 well commercial in August 1997.  Ecopetrol responded in September 1997
       that it considered the information presented to be insufficient to
       evaluate the application for the extension of the commercial area.  The
       associate parties are evaluating Ecopetrol's response in light of the
       terms of the Opon Contract and have approached Ecopetrol for
       clarification of its response.  At this date, the area around the Opon
       No. 6 well is not a part of the commercial area.  Ecopetrol will not pay
       for its share of expenditures to enlarge the commercial field until the
       new areas are proven and declared commercial.  Ecopetrol will
       participate in further development costs of the existing commercial
       field.

       The Opon Contract provides that the Opon Contract area will be reduced
       after the end of the exploration period, or September 30, 1995.  The
       first acreage relinquishment of 50% was completed during 1996.  The Opon
       Contract area now covers 25,021.5 hectares (61,827 acres).  The second
       acreage relinquishment was due on September 30, 1997.  By agreement with
       Ecopetrol, the second relinquishment has been postponed until September
       30, 1998.  As consideration, the associate parties agreed to perform,
       for the full Opon Contract area, surface geological studies and
       petrochemical analysis, and to undertake a study to determine the
       economic and technical viability of putting the shallow oil producing
       wells in the Opon Contract area into production.  On September 30, 1999,
       the Opon Contract area will be reduced to the area of the commercial
       field that is in production or development, plus a reserve zone of five
       kilometers in width around the productive limit of such field.  The
       commercial field plus the zone surrounding such field will become the
       area of exploitation.  The associate parties designate the acreage to be
       released.  Additional wells will be required to enlarge the commercial
       area and to increase the size of the area of exploitation.*

       The Opon No. 6 well commenced drilling in October 1996.  This well is
       slightly more than 1 kilometer north of the Opon No. 3 well and is
       outside the current commercial area.  The well is presently estimated to
       cost $30.6 million, of which Hondo Magdalena's share is 30.9%.*  After
       the drilling was completed, several mechanical problems in the
       completion and testing of the Opon No. 6 well occurred.  After there was
       a failure of a portion of the guns during the initial completion attempt
       in April 1997, a second set of perforating guns were fired.  Cleanup and
       testing on the second set of perforations commenced in May 1997 and,
       while all the guns fired, the well has not flowed as anticipated.  The
       associate parties recently decided to connect the well in its present
       condition and commence production in hopes debris from past mechanical

       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           3




       problems will be evacuated.  Further workover alternatives will be
       evaluated after a production history has been accumulated.*

       The associate parties are attempting to negotiate a settlement of claims
       against suppliers of services and equipment related to the problems
       encountered during completion operations on the Opon No. 6 well, but no
       settlement has been reached.  The claims relate to the failure of
       perforating guns, problems with the installation of the production
       tubing and failure of a downhole safety valve provided by Colombian
       branches of U.S. and multinational oil service companies.  The claims
       are based upon contract and purchase order terms providing for
       warranties, adequate supervision of assembly of components and other
       work, equipment to be in good working order, and work to be performed in
       a workmanlike manner.  The disputed charges aggregate approximately $1.5
       million (net to the Company's interest in the costs of the well).
       Consequential losses, depending on how measured, make the claims larger.
       If a settlement is not reached, the next step will be either non-binding
       mediation or arbitration.*  No prediction of the outcome of these
       matters can be made at this time.

       The Opon No. 14 well, approximately 4 kilometers south of the Opon No. 4
       well, commenced drilling in October 1997.  The total cost of the well is
       estimated to be $23.5 million, of which Hondo Magdalena will bear
       30.9%.*  The well was planned and intended to confirm the existence of
       the La Paz gas and condensate reservoir in the south of the Opon
       Contract area.*  The well has been drilled to a depth of 12,200 feet.
       The associate parties have commenced testing of both the La Paz
       formation and the deeper Lisama formation.  The associate parties will
       review and analyze the results of the Opon No. 14 well prior to making
       any decisions about further drilling.*

       In July 1995, Hondo Magdalena, ODC, Amoco Colombia and Ecopetrol agreed
       to construct a pipeline and wellhead facilities (which were not
       contemplated in the Opon Contract).  The parties constructed a 16 inch
       pipeline approximately 88 kilometers in length from the Opon Contract
       area north to Ecopetrol's gas processing plant at El Centro, and from
       there to Ecopetrol's refinery at Barrancabermeja.  The investment in the
       pipeline is to be recovered through a pipeline tariff, but see the
       discussion in the next paragraph concerning the action of the
       governmental agency on the associate parties' tariff application.*
       Ecopetrol has constructed improvements at its El Centro gas processing
       plant to handle incremental production from the Opon Contract area.
       Ecopetrol will recover its investment through a gas processing fee.

       The Comision de Regulacion de Energia y Gas (Commission for the
       Regulation of Energy and Gas, "CREG"), an agency of the Ministry of
       Mines and Energy of the Colombian government, regulates natural gas
       pipelines and the sale of natural gas in Colombia.  CREG's  regulations
       provide the ceiling price for natural gas and the methodology for
       establishing pipeline tariffs.  Based upon these regulations, Amoco
       Colombia, as operator, applied for a pipeline tariff of 60.4 cents per
       thousand cubic feet of gas; CREG has responded by rejecting the proposed
       tariff, instead approving a tariff of 25.0 cents per thousand cubic feet
       of gas.  Amoco Colombia has appealed this decision.  In the interim, the
       associate parties can charge a provisional tariff for shipments to
       Ecopetrol, but are precluded from making shipments to buyers on the
       national gas grid.

       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           4




       Contracts, covering the sale of natural gas, the sale of condensate and
       natural gas liquids, the processing of the gas stream, and
       transportation of natural gas and liquids are complete and have been
       signed by all parties.  The contracts provide for: (i) the sale of 100
       million cubic feet of natural gas per day for the life of the Opon
       Contract at the regulated price determined semi-annually by a formula
       based upon the average price received by Ecopetrol for exported fuel oil
       during the prior two six-month periods (currently US$1.15 per million
       British Thermal Units); (ii) the sale of condensate and natural gas
       liquids at market-related and market-indexed prices; and (iii) the
       processing of the gas stream at Ecopetrol's El Centro gas processing
       plant for a fee of $0.159 per thousand cubic feet of gas.  Ecopetrol, as
       purchaser, pays the pipeline tariff for the natural gas sold by the
       associate parties.

       In March 1997, Hondo Magdalena, ODC, Amoco Colombia and Ecopetrol, as
       sellers, signed a contract with Termo Santander de Colombia E.S.P., as
       purchaser ("Termo Santander"), to supply, subject to the conditions
       noted below, natural gas to its electric generation plant at the Opon
       Contract area.  Under the contract, the sellers will supply natural gas
       requested by the purchaser up to 60 million cubic feet per day.  The
       sellers will receive $4.2 million per year for making the gas available
       for purchaser's call.  Purchaser will pay 60% of the government-
       regulated price (described above) for the natural gas it takes.  The
       sellers will also receive additional bonus payments if the power plant
       achieves a price for its electrical power in excess of certain target
       rates.  Condensate associated with the natural gas that is delivered to
       the purchaser will be separately sold to Ecopetrol.  The contract
       provides for substantial penalties, decreasing over the life of the
       contract, to the sellers for the failure to deliver gas.  The
       commencement of the contract is conditioned upon a determination by the
       sellers that there are sufficient reserves to supply natural gas to the
       purchaser for the entire term of the agreement.  In order to begin
       deliveries before the condition concerning the sufficiency of reserves
       is satisfied, an interim agreement for the sale of gas to Termo
       Santander was signed on November 20, 1997.  The interim agreement will
       be effective until January 1, 1999, or until sufficient reserves are
       determined through additional work on the Opon No. 6 well or the
       successful completion of the Opon No. 14 well.*  The gas sales price
       under the interim agreement will be equivalent to the price, including
       pipeline tariff, that would have been received if the same gas were sold
       under the contract with Ecopetrol described in the preceding paragraph.

       The pipeline and wellsite facilities were completed in June 1997.
       Ecopetrol completed the improvements to the El Centro gas processing
       plant in November 1997.  Production from the Opon field began on
       December 1, 1997, with gas supplied to Termo Santander for testing the
       first of two turbines at the power plant.  The first shipment of gas
       through the pipeline occurred on December 5, 1997.

       The associate parties have submitted invoices to Ecopetrol under the gas
       sales agreement for payments under the take-or-pay clause, which
       provides that Ecopetrol will pay 200% of the gas price for the Company's
       share of 100 million cubic feet per day if the gas pipeline is completed
       and ready and the El Centro gas plant improvements have not been
       completed.  The associate parties believe the pipeline was complete on
       June 25, 1997, and submitted invoices accordingly.  Ecopetrol has
       indicated that it will not pay these invoices.  The Company has not
       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           5




       accrued its $5.2 million invoice in its financial statements.  The
       associate parties are reviewing their legal options to pursue the
       collection of these invoices, which could include negotiation of a
       settlement and arbitration in a Colombian forum.*

       Amoco Colombia has submitted budgets to Hondo Magdalena and ODC for
       calendar years 1996, 1997 and 1998.  Hondo Magdalena approved capital
       expenditures for wells and the pipeline projects, and certain other
       expenditures, but did not approve the proposed overhead.  As of this
       date, no final budget has been approved for calendar years 1996, 1997 or
       1998.  The parties are currently at an impasse in resolving the dispute
       about overhead.  Hondo Magdalena has paid invoices from Amoco Colombia,
       including disputed overhead and has charged the full overhead amount to
       expense.  It is management's opinion that the Company is not obligated
       to pay for overhead unless charged pursuant to an approved budget;
       however the Company has paid Amoco Colombia's invoices, under protest
       and subject to audit, in the hope of resolving the dispute.  If the
       dispute cannot be resolved, the joint operating agreement among Amoco
       Colombia, Hondo Magdalena and ODC provides for arbitration of disputes.

       Hondo Magdalena, on behalf of itself and ODC, has conducted audits of
       the joint account with Amoco Colombia for 1994, 1995, and 1996. Attempts
       to resolve the audit exceptions for 1994 and 1995 have been ineffective.
       In March 1998, the Company submitted audit exceptions of $1.9 million
       (gross charges to the joint account) to arbitration.  The report for the
       1996 audit was submitted to Amoco Colombia in March 1998.  The Company
       has not accrued in its financial statements any potential recoveries
       which may arise from these audits.


       Discontinued Operations
       -----------------------
       Two of the Company's former business segments, refining and marketing
       operations and real estate operations were discontinued in 1991.  No
       change in the status of these discontinued operations from that reported
       in the Company's 1997 Annual Report on Form 10-K occurred during the
       current period.


       RESULTS OF OPERATIONS

       Results of continuing operations for the quarter ended December 31, 1997
       amounted to a net loss of $3.2 million, or 23 cents per share. The
       Company reported a net loss from continuing operations of $2.4 million,
       or 18 cents per share, for the quarter ended December 31, 1996.  No
       losses from discontinued operations were reported for either period.

       In the current period, the Company reported operating revenue for the
       first time since 1993.  The Company's Colombian operations began
       delivering gas to Ecopetrol in December 1997.  Due to a number of
       startup operations, the revenue was considerably lower, and operating
       expenses in relation to that revenue, were higher, than will be expected
       in the future.

       The level of the Company's debts to Lonrho Plc and to Amoco Colombia
       under the Funding Agreement have increased by approximately $30.0
       million between December 31, 1996 and December 31, 1997.  Interest

       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           6




       expense increased by only $0.5 million between the quarters because the
       majority of the charges from the Funding Agreement are capitalized.


       LIQUIDITY AND CAPITAL RESOURCES

       During the quarter ended December 31, 1997, cash inflows of $3.1 million
       arose from borrowings from Lonrho Plc.  The Company utilized cash of
       $1.5 million and $0.1 million to finance continuing and discontinued
       operations, respectively, $2.2 million for capital expenditures, and
       made scheduled debt repayments of $0.3 million.  At December 31, 1997,
       the Company had cash balances of $0.1 million.

       The Company has had an obligation to Phillips Petroleum arising from a
       1992 decision to plug and abandon certain California offshore wells in
       which the Company owns a working interest.  In December 1997, the
       Company entered into an agreement to settle the $1.1 million obligation
       (included in accounts payable on the balance sheet) by issuing 178,848
       shares of common stock valued at a price of $6.91 per share (the average
       closing price for the ten days prior to filing of the registration
       statement).  In addition, the agreement granted a warrant to purchase
       29,808 additional shares from the Company at a price of $1.00 per share
       if the price of the Company's common stock is below $5.415 per share for
       20 consecutive business days.  A registration statement on Form S-3 was
       filed on January 7, 1998, but is not effective and closing will not
       occur, nor will the shares and warrants be issued, until the
       registration statement has become effective.  Phillips has the right to
       terminate the agreement if the registration statement has not been
       declared effective before March 31, 1998.

       In December 1993, the Company restructured the terms of its debts to
       Lonrho Plc.  The revised terms included reduction of interest rates to a
       fixed rate of 6% and provisions allowing the Company to offer payment of
       future interest in shares of its common stock, and allowing Lonrho Plc
       to either accept such payment in kind or add the amount of the interest
       due to principal.  The ability to pay interest in kind or capitalize
       interest allows the Company to service its debt while cash resources are
       scarce.

       The Company obtained a facility loan of $13.5 million in a Revolving
       Credit Agreement dated as of June 28, 1996, between the Company and
       Thamesedge, Ltd., a subsidiary of Lonrho Plc.  Under a December 1996
       letter agreement, as consideration for extension of maturities and
       certain other financial undertakings, the Company granted to Lonrho a
       security interest in all of the shares of Hondo Magdalena.

       In July 1997, the Company and Thamesedge, Ltd. agreed to amend and
       restate the June 1996 Revolving Credit Agreement.  Under the Amended and
       Restated Revolving Credit Agreement dated as of July 2, 1997, Thamesedge
       agreed to make additional advances of $7.0 million to the Company,
       making the total amount of the loan $20.5 million.  The interest rate
       remains 13%, due semi-annually; as provided in other debts to Thamesedge
       and described above, the Company may make interest payments in shares of
       its common stock.  The loan now matures January 1, 1999.  As additional
       consideration for the loan, the Company agreed to give Lonrho an option
       to convert $7.0 million of existing debt with an interest rate of 6%
       into the Company's shares at $7.70 per share (110% of the closing price
       on July 1, 1997).  The option to convert was approved by the Company's
       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           7




       shareholders at its annual meeting in March 1998.  As of  December 31,
       1997, $17.7 million of this facility has been drawn.

       In August 1997, Thamesedge Ltd. assigned all of its interest in the
       Company's indebtedness to London Australian & General Property Company
       Limited ("LAGP"), a subsidiary of Lonrho Plc.  In December 1997, the
       Company restructured the terms of certain debt to LAGP, and obtained an
       additional funding commitment of $7.0 million for fiscal 1998.  Also in
       December 1997, Lonrho Plc committed to provide $3.2 million to the
       Company for payment of a contingent liability arising from the 1993 sale
       of the Company's Fletcher refinery, should the contingency become
       payable.  The Company extended all of the above described indebtedness
       due on January 1, 1998 to January 15, 1999 and amended the notes by
       adding a cross-default provision and a new event of default.  The new
       event of default requires the Company to furnish to LAGP by October 1,
       1998 a reserve report that shows a minimum of 13 billion cubic feet of
       gas increase over the 1997 proved reserve figure.  In the event of a
       default under this new provision, LAGP has the right to declare all the
       loans in default and demand payment.  Based on advice of the Company's
       engineering consultants given at the time the loan amendments were
       executed, management believes the results of drilling the Opon No. 14
       well will be sufficient to meet this requirement.*  However, please
       refer to Risks of Oil and Gas Exploration in the Cautionary Statements
       below.  The new $7.0 million commitment from Lonrho Plc for fiscal 1998
       will be added to the July 1997 Amended and Restated Revolving Credit
       Agreement under the same terms and conditions as the existing agreement
       explained above and is currently being drafted and negotiated with
       execution anticipated in March 1998.*  The Company presently owes Lonrho
       Plc $106.5 million, of which $99.8 million is due January 15, 1999.

       In May 1995, Hondo Magdalena, ODC and Amoco Colombia entered into a
       Funding Agreement for Tier I Development Project costs (the "Funding
       Agreement") to finance costs associated with the construction of a
       pipeline from the Opon Contract area, certain wellsite facilities, a
       geological and geophysical work program, and for related overheads.
       The Funding Agreement provides that Hondo Magdalena may repay the
       amounts financed up to 365 days after the date of first production and
       sales, along with an equity premium computed on a 22% annualized
       interest rate.  The equity premium is computed monthly on Hondo
       Magdalena's share of expenditures (including any amounts to be later
       recouped from Ecopetrol after commerciality).  Alternatively, from the
       date of first production and sales until 90 days thereafter, Hondo
       Magdalena may elect to repay 125% of its share (excluding any amounts to
       be later recouped from Ecopetrol after commerciality) of the total costs
       accumulated up to the date of repayment.  If the financed amounts are
       not repaid within 365 days after the date of first production and sales,
       an additional penalty of 100% of the amount then due would be recovered
       out of Hondo Magdalena's revenues.  Hondo Magdalena's revenues from
       production of the first 80 million cubic feet of natural gas per day and
       corresponding condensate and natural gas liquids are pledged to secure
       its obligations under the Funding Agreement.  The associate parties have
       agreed that the date of first production is January 13, 1998.  The
       Company does not presently have  commitments or funds to repay the
       Funding Agreement within either the 90 or 365 day option periods.*  If
       the Company does not secure financing to repay the Funding Agreement
       prior to 365 days after the date of first production and sales, it will
       incur the 100% penalty and will pay the increased amount out of
       production, as described above.*
       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           8





       Based upon the Company's budget and current information, management
       believes existing cash, available facilities, Lonrho commitments, net
       proceeds from the sale of Opon gas (from production greater than the
       pledged first 80 million cubic feet of natural gas per day and
       associated liquids) and the Funding Agreement will be sufficient to
       finance the Company's known obligations (the pipeline and related
       facilities, estimated completion expenses of the Opon No. 6 well,
       estimated drilling and completion expenses of the Opon No. 14 well,
       overhead obligations unrelated to capital projects and other business
       activities), estimated to be $16.8 million, during fiscal 1998.*
       However, management believes the Company will need additional cash to
       participate in the drilling of additional wells in Colombia and/or to
       participate in other capital projects, that are not now budgeted or
       committed.*  If the Company becomes obligated for the drilling of an
       additional well, the Company has the option to not participate in the
       drilling of wells under the sole risk provisions of the joint operating
       agreement among Amoco Colombia, Hondo Magdalena and ODC. These
       provisions provide for penalties of 200% to 1000% (depending on the
       nature of the well) of the costs attributable to the Company. These sole
       risk provisions do not apply to other capital projects if the projects
       are approved in accordance with the operating agreement.  In
       management's view, use of this sole risk election would be a last resort
       to preserve the Company's existing interest in the Opon Contract area
       because of the substantial penalties that would be incurred by not
       participating.

       Cash flow from operations which commenced in December 1997 is not
       expected to be a significant source of free funds since pursuant to the
       Funding Agreement, Amoco receives the proceeds from the first 80 million
       cubic feet of gas per day and associated liquids.*  Any additional free
       cash flow (as defined in the Company's loan agreements with Lonrho Plc)
       is committed to existing loan obligations.  Management is reviewing
       several options for raising funds including sale of the Company's 15.4%
       interest in the pipeline.*  Any proceeds realized from a sale of the
       pipeline must be applied first to repayment of the Funding Agreement.
       Management continues to pursue discussions with a number of financial
       institutions regarding debt or equity financing of the Company's future
       obligations for the Opon project but has received no commitments.*
       Additional deliverability from current drilling projects and adequate
       production capability through the pipeline infrastructure are important
       factors in obtaining third party financing.*  In the interim, the
       Company must continue to rely on the financial support of Lonrho.*
       Recently, in its annual report, Lonrho stated that it intends to sell
       its investment in the Company.  The Company has relied upon Lonrho to
       provide funds for capital investment and operations when such funds have
       not been available from third parties.  If and when Lonrho sells its
       investment in the Company, the Company will need to find another source
       of financing, from outside sources or a new controlling shareholder.
       The Company cannot predict the effect that a sale of Lonrho's interest
       to a third party will have on the Company's ability to secure financing.
       While the Company will continue to seek permanent financing in the near-
       term, there can be no assurance that the Opon Project will be
       successfully developed or that additional debt or equity funds will
       become available.*  Furthermore, the success of the Opon  No. 14 well is
       critical to obtaining third party financing (either debt or equity) and
       for the decision by the associate parties to continue the development of
       the Opon project.*
       ____________________
       *  This statement may be considered to be forward-looking.  See
       Cautionary Statements following Liquidity and Capital Resources.
                                           9




       Cautionary Statements
       ---------------------
       The Company believes that this report contains certain forward-looking
       statements, as defined in the Private Securities Litigation Reform Act
       of 1995, including, without limitation, statements containing the words
       "believes," "anticipates," "estimates," "expects," "may" and words of
       similar import, or statements of management's opinion.  Such forward
       looking statements involve known and unknown risks, uncertainties and
       other factors which may cause the actual results, performance or
       achievements of the Company to be materially different from any future
       results, performance or achievements expressed or implied by such
       forward-looking statements.  Such factors include, among others, the
       following:

       Substantial Reliance On Single Investment.  The Company's success
       currently is dependent on its investment in the Opon project, a oil and
       gas exploration concession in Colombia, South America.  The Opon project
       began producing natural gas and condensate in December 1997 and is the
       Company's only source of operating revenue.

       Ecopetrol's Inherent Conflict of Interest and Role.  Ecopetrol is a
       quasi-governmental corporate organization wholly-owned by the Colombian
       government, a party to the Opon Contract and a purchaser of natural gas
       and liquid hydrocarbons under contracts for the sale of production from
       the Opon field.  At present, the price of natural gas is set by law
       enacted by the legislature of Colombia in 1983.  The regulated price of
       natural gas could be changed in the future by governmental action.  The
       participation of Ecopetrol, a government-owned company, in the Opon
       project as a producer and as a purchaser, and the power of the
       government of Colombia to set the price of natural gas creates an
       inherent conflict of interest in Ecopetrol and the government.
       Disputes with Ecopetrol, including a recent disagreement about the
       obligation to make take-or-pay payments under a gas sales agreement,
       must be resolved in non-judicial or judicial proceedings in Colombia.
       These conflicts may affect the value of the Company's interest in the
       Opon project.

       Under the terms of the Opon Contract, an application for commerciality
       must be submitted to, and approved by, Ecopetrol before production of
       the wells in that area can begin.  Ecopetrol cannot prevent the other
       contract parties from producing discovered hydrocarbons by disapproving
       the application, but Ecopetrol can delay the commencement of production
       for up to one year by requiring additional work (which can cost no more
       than $1.0 million).

       Marketing Of Natural Gas.  The Company must secure additional markets
       and sales contracts for natural gas in Colombia in order to increase
       production and cash flow from the Opon project.  This will depend on the
       continued development of gas markets and an infrastructure for the
       delivery of natural gas in Colombia.  Also, other producers of natural
       gas in Colombia will compete for the natural gas market and for access
       to limited pipeline transportation facilities.









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       Foreign Operations.  The Company's operations in Colombia are subject to
       political risks inherent in all foreign operations, including: (i) loss
       of revenue, property, and equipment as a result of unforeseen events
       such as expropriation, nationalization, war and insurrection, (ii) risks
       of increases in taxes and governmental royalties, (iii) renegotiation of
       contracts with governmental entities, as well as, (iv) changes in laws
       and policies governing operations of foreign-based companies in
       Colombia.  Guerrilla activity in Colombia has disrupted the operation of
       oil and gas projects, including those at the Opon Contract area.
       Security in the area has been improved and the associate parties have
       taken steps to enhance relations with the local population through a
       community relations program.  The government continues its efforts
       through negotiation and legislation to reduce the problems and effects
       of insurgent groups, including regulations containing sanctions such as
       impairment or loss of contract rights on companies and contractors if
       found to be giving aid to such groups.

       Colombia is among several nations whose progress in stemming the
       production and transit of illegal drugs is subject to annual
       certification by the President of the United States.  In February 1997,
       the President of the United States announced that Colombia again would
       neither be certified nor granted a national interest waiver.  The
       consequences of the failure to receive certification generally include
       the following: all bilateral aid, except anti-narcotics and humanitarian
       aid, has been or will be suspended; the Export-Import Bank of the United
       States and the Overseas Private Investment Corporation will not approve
       financing for new projects in Colombia; U. S. representatives at
       multilateral lending institutions will be required to vote against all
       loan requests from Colombia, although such votes will not constitute
       vetoes; and the President of the United States and Congress retain the
       right to apply future trade sanctions.  Each of these consequences of
       the failure to receive such certification could result in adverse
       economic consequences in Colombia and could further heighten the
       political and economic risks associated with the Company's operations in
       Colombia.


       Risks Of Oil And Gas Exploration.  Inherent to the oil and gas industry
       is the risk that future wells will not find hydrocarbons where
       information from prior wells and engineering and geological data
       indicate hydrocarbons should be found.  Further, existing wells can
       deplete faster than anticipated, potentially causing revisions to
       reserve estimates and increasing costs due to replacement wells.  Also,
       because of the limited number of wells in the Opon Contract area (there
       are presently two producing wells), the impact of the loss of a single
       well would potentially affect the Company's production capability.
       Operations in the Opon Contract area are subject to the operating risks
       normally associated with exploration for, and production of oil and gas,
       including blowouts, cratering, and fires, each of which could result in
       damage to, or destruction of, the oil and gas wells, formations or
       production facilities or properties.  In addition, there are greater
       than normal mechanical drilling risks at the Opon Contract area
       associated with high pressures in the La Paz and other formations.
       These pressures may: cause collapse of the well bore, impede the drill
       string while drilling, or cause difficulty in completing a well with
       casing and cement.  These potential problems were substantially overcome
       in the drilling of the Opon No. 3, No. 4, No. 6, and No. 14 wells by the
       use of a top-drive drilling rig, heavy-weight and oil-based drilling
       fluids and other technical drilling enhancements.


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       Acreage Relinquishments.  The terms of the Opon Contract include
       provisions which require the associate parties to relinquish portions of
       the concession acreage which have not been found to contain hydrocarbons
       in commercial quantities.  Management believes the relinquishments of
       acreage to date have not deprived the associate parties of significant
       undiscovered reserves.  Ecopetrol has agreed to extend contractual
       relinquishment requirements in light of current exploration activity on
       more than one occasion.  Nonetheless, there can be no assurances that
       Ecopetrol will agree to additional extensions in the future, or that
       other factors (including for example: lack of capital, rig availability
       or political unrest) will prevent the parties from completing assessment
       of unproved acreage before the acreage must be released.

       Laws And Regulations.  The Company may be adversely affected by new laws
       or regulations in the United States or Colombia regarding its operations
       and/or environmental compliance, or by existing laws and regulations.
       The Colombian governmental agency responsible for setting pipeline
       tariffs has set a tariff substantially lower than that requested by the
       Company.  This action will be appealed, but no prediction can be made
       about the outcome and the final determination of the tariff.  A
       reduction of the tariff will impair the Company's ability to recover its
       investment in the pipeline through tariff revenue and/or sale of the
       pipeline.  For additional information, see Other Factors Affecting the
       Company's Business in Item 1, Business of the Company's 1997 Annual
       Report on Form 10-K.

       Highly Leveraged.  As of December 31, 1997, the Company owed debts to
       its principal shareholder, Lonrho Plc, of $106.5 million, of which $99.8
       million is due January 15, 1999.  The terms of this debt require the
       Company to increase its September 30, 1997 proved reserves of 52.5
       billion cubic of gas by 13.0 billion cubic feet of gas by October 1,
       1998 to avoid an acceleration of the maturity of all of the debt to that
       date.  Acquisition of the additional reserves is dependent on the
       results of drilling of the Opon No. 14 well and additional work to be
       performed on the Opon No. 6 well, if any.  As more fully described above
       under Risks of Oil and Gas Exploration, there can be no assurances that
       the additional work will discover the reserves necessary to prevent the
       debts from being accelerated.  The Company does not have the resources
       to repay the indebtedness when it is due.  Over the past five years,
       Lonrho Plc has demonstrated a willingness to extend the repayment terms
       of the Company's debts.  However, there can be no assurances that Lonrho
       Plc will continue to extend the maturity of the Company's debts in the
       future.  See Limited Capital and Change of Control and Financial Support
       Shareholder, below.

       Limited Capital.  At December 31, 1997, the Company had a deficiency in
       net assets of $96.4 million.  The Company's principal asset, its
       investment in the Opon project, will require additional capital for
       further exploration works (additional exploratory wells and the related
       surface facilities to put newly discovered hydrocarbons into production)
       if the associate parties elect to proceed beyond the works currently in
       progress.  The Opon project commenced production in December 1997.
       However, net revenue from the sale of the first 80 million cubic feet of
       natural gas per day and associated condensate (estimated to be
       approximately 60% to 80% of the Company's net revenue) is pledged to
       repayment of amounts advanced by the operator under a Funding Agreement.
       Cash from operations after Funding Agreement repayments will not be
       sufficient to fund Colombian operating costs and capital expenditures,


                                          12




       and U.S. overhead, during fiscal 1998.  The Company has been unable to
       secure financing from sources other than its principal shareholder.
       Management believes successful completion of the Opon No. 14 well is
       critical to obtaining third party financing.  See Highly Leveraged,
       above, and Change of Control and Financial Support Shareholder, below.

       Change of Control and Financial Support of Shareholder.  In a Schedule
       13D amendment filed October 15, 1997 by Lonrho Plc and its affiliates,
       the filing parties said that Lonrho Plc had retained Morgan Stanley &
       Co. Incorporated to assess and implement strategic alternatives with
       respect to Lonrho's direct and indirect investment in the Company.
       Lonrho Plc said such strategic alternatives could include, without
       limitation, a possible recapitalization of the Company or a sale or
       business combination involving the Company or Lonrho's direct and
       indirect equity interest in the Company (including the sale or
       assumption of the debt obligations of the Company to affiliates of
       Lonrho).  Recently, in its annual report, Lonrho stated that it
       intends to sell its investment in the Company.  The Company has relied
       upon Lonrho to provide funds for capital investment and operations when
       such funds have not been available from third parties, and at December
       31, 1997, was indebted to Lonrho in the amount of $106.5 million.  If
       and when Lonrho sells its investment in the Company, the Company will
       need to find another source of financing, from outside sources or a new
       controlling shareholder.  The Company cannot predict the effect that a
       sale of Lonrho's interest to a third party will have on the Company's
       ability to secure financing.  See Highly Leveraged and Limited Capital,
       above.

       Limited Revenues and Losses From Operations.  The Opon Project commenced
       production in December 1997.  The Company reported its first operating
       revenue of $0.1 million for the quarter ended December 31, 1997.  This
       is the only operating revenue the Company has had since it sold its
       domestic operations in 1992.  The Company experienced losses of
       $12,388,000, $12,657,000 and $11,906,000 for the years ended September
       30, 1997, 1996 and 1995, respectively.  The Company anticipates
       continued losses through fiscal 1998.  See Results of Operations.

       Continuation Of American Stock Exchange Listing.  Because of continuing
       losses and decreases in shareholders' equity, the Company does not fully
       meet all of the guidelines of the American Stock Exchange for continued
       listing of its shares.  For additional information, see Item 5, Market
       For Registrant's Equity and Related Shareholder Matters in the Company's
       1997 Annual Report on Form 10-K.  Management has kept the Exchange fully
       informed regarding the Company's present status and future plans.
       Although the Company does not or may not meet all of the guidelines, to
       date, the American Stock Exchange has chosen to allow the Company's
       shares to remain listed.  However, no assurances can be given that the
       Company's shares will remain listed on the Exchange in the future.  If
       the Company's shares are delisted from the Exchange, there may be
       significantly reduced liquidity and a concomitant decrease in stock
       price.

       Given these uncertainties, prospective investors are cautioned not to
       place undue reliance on such forward-looking statements.  The Company
       disclaims any obligation to update any such factors or to publicly
       announce the result of any revisions to any of the forward-looking
       statements contained herein to reflect future events or developments.




                                          13





                                      SIGNATURES

       Pursuant to the requirements of the Securities Exchange Act of 1934, the
       registrant has duly caused this report to be signed on its behalf by the
       undersigned, thereunto duly authorized.

                                             HONDO OIL & GAS COMPANY
                                             (Registrant)

       Date: March 23, 1998                  /s/ Stanton J. Urquhart
             -----------------               -----------------------
                                             Stanton J. Urquhart
                                             Vice President and Controller

       The above officer of the registrant has signed this report as its duly
       authorized representative and as its chief accounting officer.












































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