AMENDMENT NO.  1 TO CREDIT AGREEMENT


         AMENDMENT  dated as of October 15,  1999 to the  Amended  and  Restated
Credit  Agreement  dated  as of June 8,  1999  (the  "Credit  Agreement")  among
HALLWOOD  ENERGY  CORPORATION,  HALLWOOD  ENERGY  PARTNERS,  L.P.  and  HALLWOOD
CONSOLIDATED RESOURCES CORPORATION  (collectively,  the "Borrowers"),  the BANKS
party thereto (the "Banks"),  FIRST UNION NATIONAL BANK, as Collateral Agent and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").

                                      W I T N E S S E T H :

         WHEREAS, the parties hereto desire to amend the Credit Agreement as
set forth herein;

         NOW, THEREFORE, the parties hereto agree as follows:

         SECTION 1. Defined Terms;  References.  Unless  otherwise  specifically
defined herein,  each term used herein which is defined in the Credit  Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference to
"hereof",  "hereunder",  "herein" and "hereby" and each other similar  reference
and  each  reference  to  "this  Agreement"  and each  other  similar  reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.

         SECTION 2.  Resetting of the Availability Limit and the Debt Limit.
  (a) The definition of "Availability Limit" set forth in Section 1.01 of the
Credit Agreement is amended by to read in its entirety as follows:

         "Availability  Limit" means, on any date, an amount equal to the lesser
of  (i)  the  aggregate  amount  of  the  Commitments  at  such  date  and  (ii)
$90,000,000.  The  Availability  Limit may be increased  only by an amendment in
accordance  with Section  8.05,  which the Banks may agree to or not agree to in
their sole discretion.

         (b)  Effective  on and as of the date  hereof,  the  "Debt  Limit",  as
determined  in  accordance  with  subsection  (b) of Section  4.17 of the Credit
Agreement, shall be $90,000,000.

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         (c) (i) On or prior to November 19, 1999,  the Borrowers  shall provide
to the Banks such  information as the Required  Banks may reasonably  request in
order to redetermine the Debt Limit.

                  (ii)  Reasonably  promptly  after  receipt of the  information
         delivered  pursuant to clause (i) above,  Banks  having at least 70% of
         the  aggregate  amount  of the  Commitments  shall  have the  option to
         redetermine  the Debt Limit and the Agent shall notify the Borrowers of
         any such  redetermination,  upon which  notice such new Debt Limit (the
         "New Debt Limit") shall become immediately effective and binding on all
         parties to the Credit Agreement and shall be the Debt Limit thereunder,
         until further determinations thereof in accordance with Section 4.17(c)
         of the Credit Agreement. The redetermination of the Debt Limit pursuant
         to this  Section  shall not affect  the  ability  of the  Borrowers  to
         request  an  additional  such   redetermination   pursuant  to  Section
         4.17(c)(iv) of the Credit  Agreement in accordance with, and subject to
         the terms of, such Section.

                  (iii) If upon the  effectiveness  of the New Debt  Limit,  the
         aggregate unpaid principal amount of the Debt of the Borrowers  exceeds
         the New Debt Limit, then:
                  (A) the Borrowers  shall take one of the actions  contemplated
                  by clauses  (i),  (ii) and (iii) of Section 2.10 of the Credit
                  Agreement  within three (3) months from the date the Borrowers
                  receive  notice from the Agent of the New Debt Limit,  and the
                  Banks hereby waive the requirement under such Section that the
                  Borrowers  take one such action  within  thirty (30) days from
                  the earlier of the Agent's  notification  to the  Borrowers of
                  such excess or the Borrowers  otherwise becoming aware of such
                  excess  and  subject  to clause  (iv) any  Default or Event of
                  Default arising under Section 5.01(a) of the Credit  Agreement
                  solely  as a  result  of the  failure  by any  Borrower  to so
                  comply; and

                           (B) from and including the date of  effectiveness  of
                  the New Debt  Limit  to but  excluding  the date on which  the
                  Borrowers  take one of the  actions  required  by  clause  (A)
                  above,  the  Euro-Dollar  Margin shall be equal to 2.50%,  the
                  Base  Rate  Margin  shall be equal to 1.50%  and the CD Margin
                  shall be equal to 2.625%.

                  (iv) Failure by the Borrowers to comply with the provisions of
         clause (iii) shall  constitute  an "Event of Default"  under the Credit
         Agreement and shall  entitle the Agent,  the  Collateral  Agent and the
         Banks

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         to  exercise  all rights and  remedies  available  under the  Financing
         Documents upon the occurrence of an Event of Default.

         SECTION 3.  Change in Pricing. The definition of "Level III Status" set
forth in  Section  1.01 of the  Credit  Agreement  is  amended by to read in its
entirety as follows:

         "Level III Status" exists on any date if on such date (i) the aggregate
outstanding principal amount of the Loans is less than 90% of the Debt Limit and
(ii) neither Level I Status nor Level II Status exists on such date.

         SECTION 4.  Change in Amortization Schedule.  The first sentence of
Section  2.02 of the Credit  Agreement  is amended  to read in its  entirety  as
follows:

         Pursuant to Section 2.11, the Borrowers will repay the principal amount
outstanding on each Note in seven (7) equal quarterly  installments,  commencing
on the Term  Date and  thereafter  on the last day of each  consecutive  3 month
period.

         SECTION 5.  Representations of Borrowers.  The Borrowers  represent and
warrant that (i) the  representations  and warranties of the Borrowers set forth
in Article 3 of the Credit  Agreement  are true on and as of the date hereof and
(ii) no Default has occurred and is continuing.

         SECTION 6.  Governing Law.  This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.

         SECTION 7. Counterparts.  This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         SECTION 8.  Effectiveness.  This Amendment shall become effective as of
the date  hereof on the date on which the Agent  shall  have  received  from the
Borrowers and the Banks a  counterpart  hereof signed by such party or facsimile
or other  written  confirmation  (in form  satisfactory  to the Agent) that such
party has signed a counterpart hereof.

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         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.


                                            HALLWOOD ENERGY CORPORATION



                                            By:
                                                  Name:
                                                  Title:


                                            HALLWOOD CONSOLIDATED
                                                RESOURCES CORPORATION



                                            By:
                                                  Name:
                                                  Title:



                                            HALLWOOD ENERGY PARTNERS, L.P.


                                            By: HEC Acquisition Corp., its
                                                   General Partner

                          By___________________________
                                      Name:
                                                        Title:




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                                            MORGAN GUARANTY TRUST
                                                  COMPANY OF NEW YORK



                                            By:
                                                  Name:
                                                  Title:


                                            FIRST UNION NATIONAL BANK



                                       By:
                                      Name:
                                     Title:


                                            BANK OF AMERICA, N.A., formerly
                                                  NATIONSBANK, N.A.



                                            By:
                                                  Name:
                                                  Title:

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Acknowledged by:

                                    HALLWOOD LA PLATA, LLC
                                    LA PLATA ASSOCIATES, LLC

                                    By: HALLWOOD PETROLEUM, INC.

                                    By:______________________________________
                                      Name:
                                     Title:

                                    The Manager of Hallwood La Plata LLC and La
                                            Plata Associates LLC

                                    CONCISE OIL AND GAS PARTNERSHIP
                                    EM NOMINEE PARTNERSHIP COMPANY
                                    MAY ENERGY PARTNERS OPERATING
                                                 PARTNERSHIP LTD.

                                    By: HEC ACQUISITION CORP.

                                    By:______________________________________
                                      Name:
                                     Title:

                                    The  General  Partner of Concise Oil and Gas
                                    Partnership, EM Nominee Partnership Company,
                                    May Energy  Partners  Operating  Partnership
                                    LTD.

                                    HALLWOOD CONSOLIDATED PARTNERS,
                                    L.P.

                                    By: HALLWOOD CONSOLIDATED
                                    RESOURCES CORPORATION

                                    By:______________________________________
                                      Name:
                                     Title:

                                    The General Partner of Hallwood Consolidated
                                            Partners, L.P.


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