PROMISSORY NOTE
                                    ---------------

            FOR VALUE RECEIVED, the undersigned, HONDO OIL & GAS COMPANY, a
       Delaware corporation (the "Borrower"), hereby promises to pay to the
       order of THAMESEDGE, LTD., a United Kingdom corporation (the "Lender")
       on January 1, 1999 the principal sum of $20,500,000 or, if less than
       $20,500,000, the aggregate unpaid principal amount of all Advances (as
       defined below), made by the Lender to the Borrower pursuant to the
       Agreement (as defined below) together with all accrued but unpaid
       interest and all interest added to the principal of this Note.

            The Borrower promises to pay interest on the unpaid principal
       amount of each Advance from the date of such Advance until such
       principal amount is paid in full, at the rate per annum equal at all
       times to 13% (or the maximum interest rate permitted by law, whichever
       is less) on each October 1 and April 1 until maturity; provided,
       however, that any amount of principal on Advances that are not paid when
       due (whether at stated maturity, by acceleration or otherwise) shall
       bear interest from the date on which such amount is due until such
       amount is paid in full, payable on demand, at a rate per annum equal at
       all time to 18% (or the maximum interest rate permitted by law,
       whichever is less).

            As used herein, "Business Day" means any day of the year on which
       banks are not required or authorized to close in London or Houston,
       Texas.  All computations of interest shall be made by the Lender on the
       basis of a year of 360 days and the actual number of days occurring in
       the period from which such interest is payable.  Whenever any payment
       hereunder shall be due on a day other than a Business Day, such payment
       shall be made on the next succeeding Business Day, and such extension of
       time shall in such case be included in the computation of payment of
       interest.

            Both principal and interest are payable not later than 12:00 noon
       London time on the day when due in lawful money of the United States of
       America to the Lender at such account and place as Lender shall
       designate in immediately available funds.  Each Advance made by the
       Lender to the Borrower pursuant to the Agreement, and all payments made
       on account of principal thereof, may, but need not be recorded by the
       Lender on its books and records on the grid attached hereto and such
       books and records shall be conclusive as to the existence and amounts
       thereof absent manifest error.  Failure to make any such entry or
       endorsement shall not effect the actual principal amount outstanding or
       the enforceability of this Note.

            This Note is the "Note" referred to in, and is entitled to the
       benefits of, the Amended and Restated Revolving Credit Agreement between
       the Borrower and the Lender dated as of July 2, 1997 (the "Agreement").
        The Agreement, among other things: (1) provides for the making of
       advances (the "Advances") by the Lender to the Borrower  and (2)
       contains provisions for acceleration of the maturity hereof upon the
       happening of certain stated events and also for prepayments on account
       of principal hereof prior to the maturity hereof upon the terms and
       conditions specified therein.

            This Note is a renewal and replacement of that certain other note
       in the amount of $13,500,000 from Borrower to Lender dated as of June
       28, 1996.


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            This Note is guaranteed by the Amended and Restated Guaranty of
       Hondo Magdalena Oil & Gas Limited dated as of July 2, 1997.

            This Note shall be governed by, and construed in accordance with,
       the laws of the State of New York (without giving effect to New York's
       principles of conflicts of law, other than Title 14 of Article 5 of New
       York's General Obligations Law).

            The Borrower hereby irrevocably submits to the jurisdiction of any
       New York State or United States Federal court sitting in New York City
       over any action or proceeding arising out of or relating to this Note or
       the Agreement, and hereby irrevocably agrees that all claims in respect
       of such action or proceeding may be heard and determined in such New
       York State or Federal court.  The Borrower irrevocably consents to the
       service of any and all process in any such action or proceeding by
       sending copies of such process to it at its address and in the manner
       determined under Section 7.02 of the Agreement.  The Borrower agrees
       that a final judgment in any such action or proceeding shall be
       conclusive and may be enforced in other jurisdictions by suit on the
       judgment or in any other manner provided by law.  The Borrower further
       waives any objections to venue in such State and any objection to an
       action or proceeding in such State on the basis of forum non conveniens.
        The Borrower further agrees that any action or proceeding brought by it
       against the Lender shall be brought only in New York State or United
       States Federal court sitting in New York County, New York.  The Borrower
       and the Lender waive any right it may have to jury trial.

            Nothing herein shall affect the right of the Lender to serve legal
       process in any other manner permitted by law or affect the right of the
       Lender to bring any action or proceeding against the Borrower or any of
       its properties in the courts of any other jurisdictions.

            To the extent that the Borrower has or hereafter may acquire any
       immunity from jurisdiction of any court or from any legal process
       (whether from service or notice, attachment prior to judgment,
       attachment in aid of execution, execution or otherwise) with respect to
       itself or its property, the Borrower hereby irrevocable waives such
       immunity in respect of its obligations under the Credit Documents.

                                          HONDO OIL & GAS COMPANY



                                          By:       /s/ J. J. Hoey
                                               -------------------------
                                                    John J. Hoey
                                                    President and CEO

                                   SCHEDULE TO NOTE
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                 Amount of     Principal       Principal     Notation
       Date       Advance        Paid         Outstanding    Made By







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