Acquisition Proposal Letter - Huffco Group Inc. and Harken de Colombia Ltd.


                               HUFFCO GROUP, INC.
                           1000 Louisiana, Suite 6700
                             Houston, Texas  77002





Harken de Colombia, Ltd.
2505 North Hwy. 360, Suite 800
Grand Prairie, Texas  75050

Attention:  Richard H. Schroeder

                 Re:  Alcaravan Contract Area

Gentlemen:

                 Huffco Group, Inc. ('Huffco') is pleased to submit a proposal
to acquire a 50% undivided interest in all of the rights of Harken de Colombia,
Ltd. ('Harken') in that certain Association Contract between Harken and Empresa
Colombiana de Petroleos ('Ecopetrol') dated effective February 13, 1993, as
amended by letter dated July 22, 1994 (as so amended, the 'Contract') and in
and to the Alcaravan Contract Area in the Department of Casanare, Colombia (the
'Contract Area').  Once accepted by Harken by execution and return of a copy of
this letter, this letter shall constitute a binding agreement between Huffco
and Harken, subject to the conditions in paragraph 10 below.  The terms of the
parties' agreement are as follows:

                 1.       In consideration of Huffco's agreements contained
herein, Harken agrees to sell, assign and convey to Huffco, and Huffco agrees
to purchase and accept from Harken, effective as of August 1, 1994 (the
'Effective Date'), an undivided fifty percent (50%) of Harken's rights and
interest in the Contract, the Contract Area, and all related improvements,
equipment, contracts, data, records, licenses and permits (the 'Assigned
Interest').  Harken shall execute and deliver to Huffco an instrument of
assignment in substance similar to Exhibit A attached hereto, with such changes
as the parties and their Colombian legal counsel may agree are reasonably
necessary or desirable (the 'Assignment'), as promptly as possible after
Ecopetrol has approved the form of the Assignment (but in any case within 5
days thereafter).

                 2.       In consideration of Harken's agreements contained 
herein, Huffco agrees to

                          a.      pay Harken U.S. $200,000 in reimbursement of
         a portion of the costs previously incurred by Harken to perform the
         seismic survey conducted during the first year of the Contract, and






                          b.      pay and bear 100% of the costs incurred by
         the parties from and after the Effective Date for joint operations
         pursuant to the terms of the Operating Agreement (as defined in
         paragraph 6 below) ('Joint Account Costs') until the total Joint
         Account Costs paid by Huffco pursuant to this paragraph 2.b equal $1.0
         million or until the date of Huffco's notice of withdrawal pursuant to
         paragraph 8 below, whichever occurs first.  If Huffco does not
         withdraw, Joint Account costs beyond the $1.0 million limit shall be
         borne 50% by Huffco and 50% by Harken in accordance with the terms of
         the Operating Agreement.

                 3.       Huffco shall not be required to commence making
payments under paragraphs 2.a or 2.b until Ecopetrol and the Colombian Ministry
of Mines and Energy have approved the transfer of the Assigned Interest to
Huffco pursuant to the terms of the Contract and have approved the form of the
Assignment, and Huffco has received a duly executed copy of the Assignment from
Harken.  Within three business days after satisfaction of these conditions,
Huffco shall make the payment required under paragraph 2.a above in
immediately-available funds, in U.S. dollars, to Harken's designated bank
account.  Also following satisfaction of those conditions, Huffco shall
commence payments under paragraph 2.b above by the payment of monthly cash
calls and billings in accordance with the terms of the Operating Agreement.
All amounts billed or cash called shall be accompanied by detailed breakdowns
of costs as shall be called for under the terms of the Operating Agreement, and
copies of actual third party invoices shall be made available at Huffco's
request.  The first monthly cash call under the Operating Agreement following
satisfaction of the conditions referenced above shall include Huffco's share of
all Joint Account Costs pursuant to paragraph 2.b since the Effective Date.

                 4.       Harken represents and warrants to Huffco as follows:

                          a.      Harken is a corporation duly organized,
         validly existing and in good standing under the laws of the Cayman
         Islands.  Harken has full corporate power and authority to execute,
         deliver and perform this letter, and the execution, delivery and
         performance hereof have been duly authorized by all necessary
         corporate action on the part of Harken.

                          b.      The Contract is in full force and effect, and
         no provision of the Contract has been amended, waived or terminated.
         The Spanish language copy of the Contract furnished by Harken to
         Huffco (receipt of which is hereby acknowledged by Huffco) is a true
         and complete copy of the original, and there are no other agreements
         between Harken and Ecopetrol or any agency of the Colombian government
         regarding the Contract or the Contract Area.

                          c.      Neither Harken nor, to Harken's knowledge, 
         Ecopetrol is in default under the Contract.





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                          d.      Harken has to date expended at least $1.2
         million for operations in connection with the Contract.

                          e.      Harken has good and defensible title, free of
         all encumbrances, to 100% of the 'Associate's' interest in the
         Contract.

                          f.      There are no suits, actions or proceedings
         pending, or to the knowledge of Harken, threatened, against Harken
         before any court or governmental authority, which, if adversely
         determined, would prevent the consummation of the transactions
         contemplated by this letter.

                          g.      No consents, approvals or waivers are
         required to consummate the transactions contemplated by this letter
         except the consent of Ecopetrol and the Colombian Ministry of Mines
         and Energy under the terms of the Contract.

                          h.      Harken has not directly or indirectly
         employed any broker, finder or intermediary to whom Huffco shall have
         any liability in connection with the transactions contemplated hereby.

                          i.      Neither Harken nor any of its affiliates has
         taken or directed any other person to take any action in connection
         with the award, terms or continuation of the Contract, or with any
         other aspect of operations under the Contract or in the Contract Area,
         that would violate or create liability for either party under the
         United States Foreign Corrupt Practices Act, 15 USC Sections 78dd-1
         and 78dd-2.

                 5.       Huffco represents and warrants to Harken as follows:

                          a.      Huffco is a corporation duly organized,
         validly existing and in good standing under the laws of Delaware,
         U.S.A.  Huffco has full corporate power and authority to execute,
         deliver and perform this letter, and the execution, delivery and
         performance hereof have been duly authorized by all necessary
         corporate action on the part of Huffco.

                          b.      Huffco has not directly or indirectly
         employed any broker, finder or intermediary to whom Harken shall have
         any liability in connection with the transactions contemplated hereby.

                          c.      Huffco has the financial ability and
         substance to carry out and bear the obligations that it will assume
         pursuant to the terms of this letter.

                 6.       Operations by Huffco and Harken under the Contract
shall be conducted pursuant to the terms of an operating agreement to be
negotiated and entered into by such parties promptly following the execution of
this letter (the 'Operating Agreement').  The parties intend





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that the Operating Agreement be based upon the AIPN Model Form International
Operating Agreement and that it provide, among other things, for the following:

                          a.      Harken will be appointed Operator;

                          b.      In addition to any other grounds for removal,
         the Operator may be removed by a vote of the majority of the
         Non-Operators (i) if the Operator has committed a material breach of
         the Operating Agreement and has failed to cure that breach within 90
         days of notice or (ii) if Operator together with its affiliates holds
         less than 20% of the Associate interest in the Contract.  If any
         Non-Operator holding at least 20% of the Associate interest offers to
         provide services equivalent to those provided by Operator at a cost at
         least twenty percent lower than that proposed by Operator, and the
         offer is supported by specific designated reductions in line items in
         the approved or proposed work program and budget, Operator will either
         match those reductions or resign and vote to elect another party
         agreeing to enact such reductions as successor Operator.  In the event
         any proposed cost savings could reasonably result in a materially
         increased risk of loss to life or property, a materially increased
         risk to the environment or higher premiums under insurance policies
         carried for the Joint Account, Operator may refuse to adopt such
         savings and need not resign from its position.  If any non-Operator
         disagrees with Operator's analysis of the risks associated with such
         changes, then it may propose that the dispute be referred to
         arbitration.

                          c.      The Operator will bear no liability as a
         result of being Operator except liability for the gross negligence or
         willful misconduct of its supervisory personnel at the field level and
         above.  Gross negligence and willful misconduct will be objective
         standards not dependent on the good faith or bad faith of the
         Operator.  In no event will the Operator be liable (beyond its
         percentage interest) for environmental, consequential, punitive or
         similar indirect damages.

                          d.      Decisions will be made at Operating Committee
         meetings by votes of two or more unaffiliated parties having at least
         68% of the Associate interest, except that (i) Operator will be
         permitted to make certain decisions regarding the conduct of the
         minimum work program and mandatory relinquishments necessary to
         satisfy the parties' obligations under the Contract in the event of a
         deadlock and (ii) unanimous votes will be required for the voluntary
         relinquishment of portions of the Contract Area, amendment or
         termination of the Contract, and amendment or termination of the
         Operating Agreement.

                          e.      When a well has been drilled as proposed, the
         Operator will make its recommendation as to subsequent operations.
         Any Non-Operator may make an alternate proposal.  In the event
         multiple proposals are made, preference will be given in the following
         priority:  (i) additional testing; (ii) completion at the target
         depth; (iii) deepening; (iv) sidetracking; (v) plugging back and
         attempting completion at a shallower depth; (vi) other operations; and
         (vii) plugging and abandonment.





                                      -4-


                          f.      The Operator will be required to solicit
         competitive bids for all contracts in excess of U.S.  $150,000 and
         shall obtain the approval of the Operating Committee for any contracts
         awarded to affiliates.

                          g.      The Operator will furnish and obtain
         Operating Committee approval for AFEs for all operations (excluding
         general and administrative activities) estimated to cost in excess of
         U.S. $50,000.

                          h.      The Operator will be entitled to make
         emergency cash calls during a month if the Operator is required to pay
         amounts exceeding U.S. $50,000 that were not foreseen at the time of
         the regular monthly cash call.

                          i.      The Operating Agreement will provide for
         minimum levels of insurance coverage.

                          j.      Wells, well bore operations and development
         may be conducted as sole risk operations by fewer than all parties if
         not approved as joint operations.  Seismic and other geophysical data
         gathering operations may not be conducted on a sole-risk basis (except
         as part of a sole risk well or development and except that any party
         may individually conduct a seismic program on the Contract Area at its
         sole expense conditioned upon it agreeing to make such data available
         to all parties for their use).

                          k.      Parties not participating in exclusive (sole
         risk) operations will be required to pay actual costs plus cash
         premiums of 1500% to restore their rights in any operations in which
         they fail to participate.  The cash premiums will be payable by
         separate letter agreement performable at a mutually-agreeable location
         outside of Colombia.  If a party fails to restore its rights in an
         exploitation area at the time development is approved, that party will
         be deemed to have forfeited all interest in the exploitation area.

                          l.      Reimbursements from Ecopetrol pursuant to
         Clause 9 of the Contract will be shared by the parties in proportion
         to the reimbursable costs actually borne by or attributed under this
         paragraph to each.  For this purpose, each party will be considered to
         have borne $1.2 million in reimbursable expenses at the time Huffco
         satisfies its obligations under paragraph 2.b.

                          m.      The Operator will furnish the representative
         of the parties for the Executive Committee under the Contract and will
         otherwise be the principal representative of the parties before
         Ecopetrol and the Colombian Ministry of Mines and Energy.  In such
         roles, the Operator and its representative will act only in accordance
         with the instructions of the Operating Committee.  The Non-Operators
         will be entitled to have personnel attend all meetings with Ecopetrol
         and the Colombian Ministry of Mines and Energy except to the extent
         those authorities determine otherwise.





                                      -5-


                          n.      The Operator will only be entitled to charge
         the Joint Account for amounts contained in approved Work Programs and
         Budgets (as they may be amended by approved AFEs) or otherwise
         authorized under the Operating Agreement and for overruns not to
         exceed in the aggregate 12.5% of any individual line item and 5% of
         the entire annual budget.

                          o.      Any party will be entitled to withdraw at the
         time the Work Program and Budget is approved for the following
         calendar year or the time the parties must elect to Ecopetrol to
         continue into the next Contract year, whichever comes first, from all
         of the Contract Area except existing discoveries in which that party
         has participated, and the withdrawing party will be relieved of
         liability for subsequent minimum work programs for exploration under
         the terms of the Contract.

                          p.      Any obligation to sell or refine oil and/or
         gas in the domestic Colombian market will be borne by the parties in
         proportion to their shares of the production affected.

                          q.      Any party will be entitled to elect not to
         participate in any approved operation that can be conducted on a sole
         risk basis.

                          r.      A separate completion election will be made
         for each well following receipt of the results of all approved tests.

                          s.      The Operating Agreement will be governed by
         the laws of Texas and disputes will be resolved pursuant to
         arbitration in accordance with the Commercial Arbitration Rules of the
         American Arbitration Association.

                          t.      Each party will be free to assign all or a
         part of its interest in the Contract and the Operating Agreement,
         provided that the assignee is technically and financially competent
         and that neither the assignor nor the assignee will be left with less
         than a 10% Associate interest.

                          u.      Each party will have a right of first refusal
         to participate for its percentage interest share in any opportunity
         obtained by any party to transport and market production from the
         Contract Area for a term in excess of 180 days, subject to any
         limitations that may be desirable to insure that the parties avoid
         association status for U.S. tax purposes.

                          v.      The Operator will be entitled to select the
         statutory auditor for operations under the Contract.  The
         Non-Operators will have independent audit rights.

                          w.      Overhead will be charged as set forth on the
         Accounting Procedure attached hereto as Exhibit B.  Manday rates
         charged for timewriting employees under the





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         Accounting Procedure shall be limited to the actual salary and bonus
         of those employees and pro-rata employee benefit costs.

The parties agree that the Accounting Procedure attached hereto as Exhibit B
shall be used as the Accounting Procedure under the Operating Agreement.

                 In the event of a conflict between the provisions of this
letter and the provisions of the Operating Agreement, the provisions of this
letter shall prevail.  Until the Operating Agreement has been executed by both
parties, all decisions and elections with respect to the Contract and Contract
Area arising after the date hereof must be approved by both Huffco and Harken.

                 7.       The parties agree in advance that the first well to
be drilled under the Contract shall be a well on the El Mundo Neuvo prospect
(the 'El Mundo Well').  The parties shall select the final well location
following evaluation of the reprocessing of seismic line HE-94-9 and the
modeling of seismic line HE-94-7.  If line HE-94-9 clearly identifies a
structurally high position with a well-defined fault cut, the El Mundo Well
will be located between shot points 270 and 300 on that line.  If line HE-94-7
contains the structural high location, the El Mundo Well will be located
between shot points 250 and 270 on that line.  The parties also agree that the
seismic program required under the second year of the Contract shall consist of
25 km of seismic to be shot at a mutually agreeable location in the Contract
Area (the 'Seismic Program').  Harken shall submit AFEs for both the El Mundo
well and the Seismic Program to Huffco under the terms of the Operating
Agreement promptly after execution of the Operating Agreement by the parties.
Unless the parties agree otherwise in writing or except in the event of an
emergency, they shall not conduct further operations chargeable to the Joint
Account under the Contract (except the Seismic Program) until the El Mundo Well
has been drilled and logged and copies of the logs have been distributed to the
parties, unless the well shall be abandoned before reaching objective depth by
the agreement of the parties as provided in the Operating Agreement.

                 8.       Huffco may, by written notice to Harken, elect to
withdraw from the Contract and Operating Agreement (and, if applicable, the
Second Contract and the Second Operating Agreement (as defined below)) and
reassign its interests therein to Harken at any time during the 30 day period
following the completion of drilling and logging and receipt of the well logs
for the El Mundo Well or the abandonment of the El Mundo Well before reaching
objective depth by the agreement of the parties, whichever first occurs
('Casing Point').  Taxes, fees and similar costs charged by Ecopetrol and the
government of Colombia in connection with the approval of the reassignment or
for related filings, notarizations and the like shall be borne by Huffco.
Huffco shall have no liability for costs incurred following its withdrawal,
including without limitation costs for any remaining minimum work program under
the Contract (and Second Contract) and any remaining work program and budget
approved under the Operating Agreement (and Second Operating Agreement), other
than costs to plug and abandon the El Mundo Well if it is not completed for
production and any remaining costs of the Seismic Program and (if applicable)
the Second Contract Work Program.  In the event of its withdrawal under this





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paragraph 8, Huffco shall not be liable for its share of any Seismic Program
costs in connection with the Contract that exceed $175,000 or such other amount
as the parties may subsequently mutually agree.  Once the Seismic Program has
been completed (and, if applicable, the El Mundo Well has been plugged and
abandoned), Harken shall send Huffco a statement showing all Joint Account
Costs paid by Huffco pursuant to paragraph 2.b and this paragraph 8.  Within 30
days after receipt of the statement, Huffco shall pay to Harken in immediately
available funds the amount remaining, if any, after subtracting from U.S.
$1,000,000 all such amounts previously paid by Huffco.  Neither Huffco nor
Harken shall withdraw from the Contract and Operating Agreement prior to Casing
Point.

                 9.       Huffco shall have a right of first refusal to acquire
an undivided fifty percent (50%) interest in any association contract or
similar agreement that Harken or its affiliates acquire within 180 days from
the date of this letter that includes any acreage that is contiguous to the
Contract Area (the 'Second Contract').  Should Harken or any affiliate desire
to acquire such a contract, it shall first send notice to Huffco describing the
contract terms.  Huffco shall have ten (10) days from receipt of notice to
elect to join in the Second Contract as an original party (or as an assignee if
so required by Ecopetrol) and to bear 50% of any costs of application and of
any mandatory first year work program required by the Second Contract (the
'Second Contract Work Program').  If the parties both acquire interests in the
Second Contract, they shall enter into an operating agreement with respect to
the Second Contract in substantially the form of the Operating Agreement (the
'Second Operating Agreement').

                 10.      Neither Huffco nor Harken may assign, pledge,
encumber or otherwise transfer all or any part of its rights and obligations in
the Contract and the Operating Agreement prior to Casing Point, except that
Huffco may transfer its entire interest to an affiliate (but will remain liable
following such a transfer).  After Casing Point, either party may assign all or
any part of its rights and obligations, subject to the terms of the Contract
and the Operating Agreement.

                 11.      Promptly after the execution of this letter, Harken
shall furnish Huffco with copies of all data in its or its affiliates'
possession, including without limitation geological and geophysical data, that
relates to the Contract Area, except data that it is prohibited from disclosing
by law or third party agreement.  To the extent possible, Harken shall
reproduce such data in-house at its cost.  If Harken cannot reproduce any data
in-house without undue burden, it shall be deemed to have satisfied its
obligations under this paragraph 11 if it so notifies Huffco and offers to have
such data reproduced by a third party at Huffco's expense.  If this letter is
terminated pursuant to paragraph 12, Huffco shall promptly return data received
under this paragraph 11 to Harken.

                 12.      The obligations of the parties under this letter,
except those obligations in paragraphs 13, 15, 16 and 17, shall be subject to
receipt of the approval by Ecopetrol and of the Colombian Ministry of Mines and
Energy of the transfer of the Assigned Interest to Huffco under the terms of
the Contract and of the form of the Assignment.  As soon as reasonably possible





                                      -8-


following execution of this letter, Harken shall submit a certificate to
Ecopetrol and the Colombian Ministry of Mines and Energy requesting approval of
the transfer of the Assigned Interest and shall diligently pursue approval
thereafter.  Following the receipt of such approval, the parties shall submit
the form of the Assignment for approval and shall diligently pursue approval
thereafter.  If Ecopetrol or the Colombian Ministry of Mines and Energy should
fail to approve the transfer of the Assigned Interest and the form of
Assignment within 45 days after the date of this letter, then Huffco may, at
its option, terminate this letter, except paragraphs 13, 15, 16 and 17, at any
time prior to receipt of such approvals by written notice to Harken.  In
addition, the obligations of Harken under this letter shall be subject to
Huffco's commencement of payment under paragraphs 2.a and 2.b within 45 days
after the date of this letter.  If Huffco has not commenced payment by that
date, then, notwithstanding whether the conditions in paragraph 3 have been
satisfied, Harken may, at its option, terminate this letter, except paragraphs
13, 15, 16 and 17, at any time prior to Huffco's commencement of payment by
written notice to Huffco.  Furthermore, the obligations of Huffco under this
letter shall be subject to receipt of the executed Assignment on or before the
date due, failing which Huffco may, at its option, terminate this letter
(except paragraphs 13, 15, 16 and 17) at any time prior to receipt of the
executed Assignment by written notice to Harken.

                 13.      Each party shall pay its own legal fees and other
costs and expenses (including income or profits taxes, if any) incurred by it
in connection with the transactions contemplated by this letter.  The parties
shall each bear one-half of any taxes (other than income or profits taxes),
fees or similar costs charged by Ecopetrol or the government of Colombia in
connection with the approval of the Assignment (and any assignment of interest
in the Second Contract to Huffco) or for related filings, notarizations and the
like.

                 14.      The representations and warranties in paragraphs 4
and 5 above shall survive the execution and delivery of the Assignment and the
satisfaction of Huffco's obligations under paragraph 2.

                 15.      This letter shall be construed in accordance with,
and the rights and obligations of the parties governed by, the laws of the
State of Texas, U.S.A.  Each party consents to be subject to the jurisdiction
of the courts of Texas for the limited purpose of the enforcement of this
letter.

                 16.      It is not the intention of the parties to create, nor
shall this letter be construed as creating, a mining or other partnership or
other association or otherwise render the parties liable as partners.  The
liability of the parties hereto shall be several and not joint or collective.

                 17.      Unless otherwise specifically provided, all notices
under this letter shall be given in writing and in the English language and
shall be delivered in person or sent by courier service, telex or telecopier to
each party at the address given below.  Notice shall be deemed given only when
received by the party to whom such notice is directed.





                                      -9-


                          Huffco Group, Inc.
                          First Interstate Bank Plaza
                          1000 Louisiana, Suite 6700
                          Houston, Texas  77002
                          Attention:  David A. Trice
                          Telecopy:  (713) 651-0119

                          Harken de Colombia, Ltd.
                          2505 North Hwy. 360, Suite 800
                          Grand Prairie, Texas  75050
                          Attention:  Larry E. Cummings
                          Telecopy:  (817) 652-4463

Either party may change its address for notice by delivering notice to the
other in the manner provided for above.

                 18.      This letter (including the Exhibits) constitutes the
entire understanding of the parties with respect to the subject matter hereof
and supersedes any prior agreements, whether written or oral.  This letter may
be amended only in a writing signed by both parties.

                 19.      This letter shall be binding upon and inure to the
benefit of the parties and their respective permitted successors and assigns.

                 20.      Each party agrees to execute and deliver such further
documents and take such further actions as the other may reasonably request to
consummate and assure the effectiveness of the transactions contemplated by
this letter.

                 21.      This letter may be executed in any number of
counterparts, and by different parties in separate counterparts, all of which
shall be considered to be one agreement.





                                      -10-


                 If the foregoing accurately sets forth your understanding,
please execute two originals of this letter in the space provided below, retain
one fully executed original for your files, and return the other to the
undersigned.  This proposal will expire unless a signed copy is received by the
undersigned on or before 5:00 p.m. on Wednesday, September 14, 1994.

                                           Very truly yours,

                                           HUFFCO GROUP, INC.



                                           By:_____________________________


AGREED TO AND ACCEPTED
THIS ____ DAY OF __________, 1994

HARKEN DE COLOMBIA, LTD.



By:_______________________________________





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