[Newhall/Valley Gateway Note]

                         AMENDED AND RESTATED PROMISSORY NOTE


       US $5,500,000.00                             As of December 18, 1997


            FOR VALUE RECEIVED, Hondo Oil & Gas Company, a Delaware  corporation
       ("Borrower"), hereby promises to pay to the order of London Australian  &
       General   Property  Company   Limited,  a   United  Kingdom   corporation
       ("Lender"), the principal sum  of FIVE MILLION FIVE HUNDRED THOUSAND  AND
       00/100  DOLLARS  (US  $5,500,000.00)  or  so  much  as  may  be  advanced
       (including  the  addition  of  interest  to  principal)  and  outstanding
       hereunder   (the  "Loans"),   in  ten   (10)  semi-annual   installments,
       commencing January  15, 1999,  the amount of  each payment  to equal  the
       amount  then outstanding  on this  Note  divided by  the number  of  then
       remaining  installments, including  the installment  to be  made on  such
       date (the  "Maturity Date").   Borrower promises to  pay interest on  the
       unpaid principal balance hereof  from (and including) October 1, 1997  to
       (but excluding) the date of payment in full of such amount at a rate  per
       annum equal at  all times to six percent (6%)  per annum (or the  maximum
       interest rate permitted  by law, whichever is  less).  Interest shall  be
       payable on each April 1 (for  the period through March 31) and October  1
       (for the period through September 30) until maturity; provided,  however,
       that  any amount  of principal  that is  not paid  when due  (whether  at
       stated maturity, by  acceleration or otherwise) shall bear interest  from
       (and  including)  the  date on  which  such  amount  is  due  until  (but
       excluding) the date such amount is paid in full on demand, at a rate  per
       annum  equal at  all times  to eleven  percent (11%)  per annum  (or  the
       maximum  interest  rate permitted  by  law,  whichever is  less).    Both
       interest and  principal as  herein provided  shall be  payable in  lawful
       money  of the  United States  of  America at  the  offices of  Lender,  4
       Grosvenor Place, London SW1X 7DL England, or at such other place as  from
       time to time may be designated in writing by Lender.

            Notwithstanding anything  in the foregoing to  the contrary, if,  in
       the opinion of its Board of Directors, Borrower does not have  sufficient
       cash resources to pay interest on  this Note when due, then Borrower  may
       offer to Lender a payment of the interest in shares of Borrower's  common
       stock, valued  at (i) the last  reported sales price  regular way on  the
       interest due day  or, in case no such reported  sale takes place on  such
       day, the  average of the  reported closing bid  and asked prices  regular
       way on such day, in either  case on the American Stock Exchange or  other
       principal national securities  exchange on which Borrower's common  stock
       is listed or, if not listed  on any national securities exchange, on  The
       Nasdaq  Stock Market's  National Market  System or,  (ii) if  (i) is  not
       applicable, the  average of the bid  and asked prices at  the end of  the
       interest due day in the  over-the-counter market as furnished by any  New
       York Stock  Exchange member  firm selected by  Lender in  good faith  for
       that purpose.   In making this determination, Borrower's management  will
       not,  without the  consent  of Lender,  allocate  cash resources  to  new
       capital projects not related to the Opon Association Contract dated  July
       15, 1987  between Empressa Colombiana de  Petroleos and Opon  Development
       Company.  Lender will then notify Borrower whether it will either  accept
       the payment of interest in Borrower's  common stock or add the amount  of
       interest  due to  the principal  of this  Note.   If Lender  accepts  the
       payment of interest in  Borrower's common stock, Borrower will issue  the
       requisite  number of  shares to  Lender within  ten business  days  after


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       Borrower receives  notice of acceptance from  Lender.  Lender  recognizes
       that any  shares of Borrower's common  stock that it  may acquire by  the
       payment  of  interest in  Borrower's  common  stock will  not  have  been
       registered under the Securities Act of 1933, as amended (the "Act"),  and
       may not  be sold in the  absence of an  effective registration under  the
       Act or an  exemption from the registration requirements  of the Act.   If
       Lender so  requests at  any time  and from time  to time  after the  date
       shares of Borrower's common stock  are issued to Lender pursuant to  this
       provision,  Borrower will  use its  best efforts  to effect  registration
       under the Act of the shares so issued.

            No borrowing may be made by Borrower under this Note after the  date
       hereof,  except pursuant  to the  immediately preceding  paragraph.   All
       additions to principal (including the addition of interest to  principal)
       and payments made pursuant to this Note may be recorded by Lender on  its
       books  and records  or  any Grid  attached  hereto, and  such  books  and
       records and any Grid attached hereto (or any statement or certificate  of
       Lender based  thereon) shall be  conclusive as to  existence and  amounts
       thereof absent manifest error.

            This Note is  secured under, and entitled  to the benefits of,  that
       certain Deed  of Trust  dated August 30,  1993, granted  by Borrower  and
       Newhall Refining  Co., Inc. ("Newhall")  recorded as  Instrument No.  93-
       2006475 in the Real Property Records of Los Angeles, California, as  same
       has  been,  and  as same  may  be,  supplemented,  modified,  amended  or
       restated from time to time (the "Valley Gateway Mortgage");

            Borrower  and  Lender,  as assignee  of  Thamesedge  Ltd.,  in  turn
       assignee of Lonrho Plc ("Original Lender"), are parties to those  certain
       letter agreements  dated December 17, 1993,  November 10, 1994,  December
       22, 1995,  December 13, 1996 and  December 18, 1997, and  as same may  be
       from   time  to   time  further   supplemented,  amended   or   restated,
       collectively,  the "Letter  Agreements") pursuant  to which  1994  Letter
       Agreement  Lender  made  loans  to  Borrower  in  the  total  amount   of
       US $4,000,000 and  to which there has  been added to principal,  pursuant
       to  the Letter  Agreements,  accrued but  unpaid  interest in  the  total
       amount of $672,858.12 through October 1, 1997.

            Borrower  hereby  acknowledges,  certifies  and  agrees  that:   (a)
       pursuant to the Letter Agreements, Borrower has issued a Promissory  Note
       dated June 25, 1993 in  the original principal amount of $4,000,000  (the
       "Prior Note"); (b) pursuant to the  Prior Note, Lender has made loans  to
       Borrower that  are outstanding  as of the  date hereof  in the  aggregate
       principal amount  of U.S.$4,672,858.12, after  giving effect to  interest
       added to principal  of the Prior Note  as hereinabove provided; (c)  this
       Note has  been issued by  Borrower to renew,  extend, amend, restate  and
       replace the Prior  Note (in order to,  among other things, implement  the
       aforesaid  December   18,  1997  letter   agreement),  to  evidence   all
       indebtedness and other amounts  outstanding under the Prior Note, and  to
       evidence any further advances of interest that may be added to  principal
       pursuant to the terms of this Note;  (d) although issued in  substitution
       for and restatement of the Prior  Note, this Note shall not be deemed  to
       have been  issued in payment, satisfaction,  cancellation or novation  of
       the  Prior Note;  and (e)  Borrower's obligations  to repay  those  loans
       (with interest) to Lender and to perform or otherwise satisfy  Borrower's
       other obligations,  as well as the  security interests granted to  Lender
       by Borrower  under the  Valley Gateway  Mortgage, and  any other  related
       loan  documents (i)  each remain  and shall  continue in  full force  and
       effect,  both  before  and  after  giving  effect  to  this  renewal  and


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       extension,  (ii) are  not subject  as of  the date  of this  renewal  and
       extension  to any  defense, counterclaim,  setoff, right  of  recoupment,
       abatement, reduction or other  claim or determination, and (iii) are  and
       shall be governed  by the terms and provisions  of this Note, the  Letter
       Agreements and the Valley Gateway Mortgage.

            Notwithstanding  the foregoing,  the Lender  may, by  notice to  the
       Borrower  at any  time thereafter,  declare  all or  any portion  of  the
       principal amount of  this Note, all or any part  of the then accrued  but
       unpaid interest thereon, and  any or all other amounts payable  hereunder
       to be forthwith due and payable at any time after:

                 (a)  the  Borrower  shall  fail  to  pay  any  installment   of
       principal of, or interest on, this  Note when due and such failure  shall
       remain unremedied for three (3) days;

                 (b)  the  Borrower,   Hondo  Magdalena  Oil   &  Gas   Limited,
       presently a wholly-owned subsidiary of the Borrower ("Hondo  Magdalena"),
       and any of their respective subsidiaries  shall (i) fail to pay any  Debt
       (but  excluding indebtedness  evidenced by  this Note)  of the  Borrower,
       Hondo Magdalena or such subsidiary (as the case may be), or any  interest
       or premium thereon,  when due (whether upon scheduled maturity,  required
       prepayment,  acceleration, demand  or other  notice or  formality of  any
       kind) and such failure shall continue after the applicable grace  period,
       if any, specified  in the agreement or  instrument relating to such  Debt
       or (ii)  fail to perform or  observe any term,  covenant or condition  on
       its part to  be performed or observed  under any agreement or  instrument
       relating to  any such Debt,  when required to  be performed or  observed,
       and such  failure shall continue  after the applicable  grace period,  if
       any, specified  in such agreement  or instrument, if  the effect of  such
       failure  to  perform or  observe  is  to accelerate,  or  to  permit  the
       acceleration of,  the maturity of such  Debt; or any  such Debt shall  be
       declared to be due and payable, or required to be prepaid (other than  by
       a regularly scheduled required prepayment), prior to the stated  maturity
       thereof.   "Debt" means  all (i)  indebtedness for  borrowed money,  (ii)
       obligations  evidenced  by bonds,  debentures,  notes  or  other  similar
       instruments,  (iii) obligations  to pay  the deferred  purchase price  of
       property or services, (iv)  obligations as lessee under leases that  have
       been  or should  be, in  accordance  with generally  accepted  accounting
       principles, recorded as  capital leases, (v) obligations under direct  or
       indirect  guaranties  in  respect  of,  and  obligations  (contingent  or
       otherwise) to  purchase or otherwise  acquire, or otherwise  to assure  a
       creditor  against loss  in respect  of,  indebtedness or  obligations  of
       others of  the kinds referred to  in clauses (i)  through (v) above,  and
       (vi)  liabilities in  respect of  unfunded  vested benefits  under  plans
       covered by Title IV of ERISA;

                 (c)  the Borrower  shall have failed to  furnish to Lender,  by
       October 1,  1998, a  proved gas reserve  report of  Netherland, Sewell  &
       Associates that shows  that a minimum of  13,000,000 mcf (25%) of  proved
       gas reserve  exists, which are subject  to the Opon Association  Contract
       in which Hondo Magdalena then participates, above the proved gas  reserve
       of 52,475,554 mcf at September 30, 1997;

                 (d)  the Borrower, Hondo  Magdalena or any of their  respective
       subsidiaries shall generally not pay its debts as they become due,  shall
       admit in writing its inability to  pay its debts or shall make a  general
       assignment  for the  benefit of  creditors; or  any proceeding  shall  be
       instituted by or  against the Borrower, Hondo  Magdalena or any of  their


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       respective  subsidiaries   seeking  to  adjudicate   it  a  bankrupt   or
       insolvent,   or   seeking  liquidation,   winding   up,   reorganization,
       arrangement, adjustment, protection, relief, or composition of it or  its
       Debts under any law relating to bankruptcy, insolvency or  reorganization
       or relief of debtors, or seeking the entry of an order for relief or  the
       appointment of a receiver, trustee,  or other similar official for it  or
       for  any  substantial  part of  its  property;  or  the  Borrower,  Hondo
       Magdalena  or  any  of  their  respective  subsidiaries  shall  take  any
       corporate  or other  action to  authorize any  of the  actions set  forth
       above in this paragraph (d); or

                 (e)  a final  judgment or  order for  the payment  of money  in
       excess  of  $75,000  shall  be  rendered  against  the  Borrower,   Hondo
       Magdalena or any of their respective subsidiaries, and any such  judgment
       or order  shall continue unsatisfied  and in effect  for a  period of  60
       consecutive days.

                 (f)  any  other default  (whether in  whole or  in part)  shall
       occur  in  the  due observance  or  performance  of  any  other  term  or
       provision  of this  Note, the  Letter Agreements  or the  Valley  Gateway
       Mortgage;

                 (g)  This  Note,  the Letter  Agreements,  the  Valley  Gateway
       Mortgage (in whole or in part) shall cease to be in full force or  effect
       or shall be  contested, challenged or repudiated  by the Borrower or  any
       surety.

            If this Note  is placed in the hands  of an attorney for  collection
       after default,  or if all or  any part of  the indebtedness   represented
       hereby  is proved,  established  or collected  in  any court  or  in  any
       bankruptcy,  receivership,   debtor  relief,  probate   or  other   court
       proceedings, Borrower and all endorsers, sureties and guarantors of  this
       Note jointly  and severally agree to  pay reasonable attorneys' fees  and
       collection costs to  the holder hereof in  addition to the principal  and
       interest payable hereunder.

            Borrower and  all endorsers, sureties  and guarantors  of this  Note
       hereby severally waive  demand, presentment for payment, protest,  notice
       of protest, notice of intention to accelerate the maturity of this  Note,
       diligence in collection, the bringing  of any suit against any party  and
       any notice of or defense on account of any extensions, renewals,  partial
       payments or changes  in any manner of  or in this Note  or in any of  its
       terms, provisions and covenants, or any releases or substitutions of  any
       security, or  any delay, indulgence or  other act of  any trustee or  any
       holder hereof, whether before or after maturity.

            This Note and the rights and  duties of the parties hereto shall  be
       governed by  the laws of  the State of  New York (other  than those  that
       would defer  to the substantive laws  of another jurisdiction).   Without
       in  any way  limiting the  preceding choice  of law,  the parties  intend
       (among  other things)  to  thereby avail  themselves  of the  benefit  of
       Section 5-1401 of the General Obligations Law of the State of New York.

            All notices  and other communications  provided for hereunder  shall
       be in writing and shall be delivered to the addressees at the  applicable
       addresses set  forth below by  mail, telecopy, Federal  Express or  other
       equivalent  overnight  carrier or  by  telephone  (confirmed  in  writing
       within 24 hours) or telecopy or hand-delivered, if to Borrower, to it  at
       Hondo Oil &  Gas Company, 10375 Richmond  Avenue, Suite 900, Houston,  TX


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       77042, telephone  (713) 954-4600, telecopier  (713) 954-4601,  Attention:
       John  J. Hoey;  if  to Lender,  to  it  at London  Australian  &  General
       Property Company, 4 Grosvenor Place, London, SW1X 7DL England,  telephone
       011-44-171-201-6000,  telecopier  011-44-171-201-6100,  Attention  R.  E.
       Whitten with a copy to Rudolph  H. Funke, Esq. at 805 Third Avenue,  18th
       Floor,  New York,  NY 10022,  telephone 212-715-7001,  telecopy  212-838-
       8141; or,  as to each  party, to  it at such  other address  as shall  be
       designated by  such party in a  written notice to the  other party.   All
       such notices and communications shall not be effective until received  by
       Lender.

            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  the  Letter
       Agreements,  this  Note  or  the  Valley  Gateway  Mortgage,  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.   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  the
       immediately preceding  paragraph hereof.   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.  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.  Borrower further agrees that  any
       action or proceeding brought by  it against Lender shall be brought  only
       in New  York State or  United States Federal  court sitting  in New  York
       County, New York.    Borrower and Lender waive  any right it may have  to
       jury trial.  Nothing in this  paragraph shall affect the right of  Lender
       to serve  legal process in any  other manner permitted  by law or  affect
       the right of  Lender to bring any  action or proceeding against  Borrower
       or any of  its properties in the courts of  any other jurisdictions.   To
       the extent that 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, Borrower hereby irrevocable waives such immunity in respect  of
       its obligations  under the Letter  Agreements, this Note  and the  Valley
       Gateway Mortgage.

                                               HONDO OIL & GAS COMPANY

                                               By:  /s/ John J. Hoey
                                               -------------------------------
                                                    John J. Hoey, President

                                     [END OF PAGE]

                                   SCHEDULE TO NOTE

                      Amount of      Principal      Principal      Notation
            Date      Advance        Paid           Outstanding    Made By
            ----      ---------      ---------      -----------    --------
                      Carryover
            12/18/97  from Prior          --        $4,672,858.12
                      Note




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