

                                                              EXHIBIT 2.1


                                                 January 23, 1995



Mr. Ira L. Morris, President
Waco Oil & Gas Co., Inc.
P.O. Box 397
Glenville, WV  26351

Dear Mr. Morris:

         Ashland Oil, Inc. ("Ashland"), is pleased to present this proposal for
the acquisition by Ashland of all of the oil and gas properties owned by Waco
Oil and Gas Co., Inc. ("Waco") (except for those properties located in
McDowell County, West Virginia) and those oil and gas interests owned both
individually and jointly by Mr. & Mrs. Ira L.  Morris (the "Properties"). 
Waco and Mr. & Mrs. Morris are collectively referred to herein as "Sellers."

         Ashland offers to purchase the Properties for a price equal to the
number of shares of Ashland Oil, Inc. Common Stock ("Common Stock") determined
by dividing the sum of $42 million by the average closing price ("Average
Price") per share of Ashland Oil, Inc. Common Stock on the New York Stock
Exchange Composite Tape for the three (3) trading days prior to  the Closing
Date for the transaction, provided, however, that (i) should the closing price
per share for the Common Stock on the last trading day prior to the Closing
Date be such that the aggregate value of the shares of Common Stock to be
delivered as determined by using the Average Price is less than $41 million,
then Sellers shall not be obligated to consummate the transaction unless
Ashland agrees to deliver such additional shares of Common Stock as are
required to make the aggregate value of the shares to be delivered (based on
the closing price per share of Common Stock on the last trading day prior to
the Closing Date) equal to $41 million, however, further provided that, (ii)
if the closing price per share on the last trading day referred in (i) above
results in an aggregate value of the shares of Common Stock to be delivered of
more than $43 million, then Ashland shall be obligated to deliver only that
number of shares of Common Stock as would equal $43 million in value (based on
the closing price per share of  Common Stock on the last trading day prior to
the Closing Date).  In addition to the foregoing, should the Average Price per
share of Common Stock when calculated be less than $32 per share then in such
event Ashland shall only be obligated to deliver to Sellers  no  more than
1,312,500 shares of Common Stock in which event Sellers shall have the option
to either accept the number of shares to be tendered or terminate the
transaction.

         Our offer as described above is conditioned upon (i) all parties 
agreeing to a mutually acceptable definitive purchase and sale agreement (the
"Definitive Agreement"),  (ii) the execution and delivery of the Definitive
Agreement being authorized by the Boards of Directors of both Waco and Ashland

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and Ashland's parent company, Ashland Oil, Inc., and (iii) the Definitive
Agreement being duly executed by and delivered to the parties.  Until all of
the foregoing have been accomplished no party shall be obligated to buy or
sell any interests or properties which are the subject of this proposal.

         The Definitive Agreement will contain such terms, representations,
agreements, and conditions as the parties may deem appropriate including,
without limitation, the following:

(1)      Access to Information.  The Definitive Agreement  shall provide that
prior to closing Sellers shall allow Ashland, its attorneys, accountants,
engineers and agents access to the Properties and all title, land,
engineering, production, sales, financial, gas contract, regulatory,
environmental, and other records relating thereto maintained by Sellers, and
Sellers shall use their best efforts to cause the operator of any portion of
the Properties to allow similar access to records.  In addition, Sellers shall
allow Ashland to conduct field inspections of the Properties.  Ashland
acknowledges that some data and information furnished to it by Sellers may be
either non-public, confidential, or proprietary in nature.  As a consequence,
Ashland agrees not to disclose such information to anyone not a representative
of Ashland.  For this purpose, the term "representative" shall include
Ashland's directors, employees, agents, or advisors (including accountants,
consultants, bankers and financial advisors) and shall also include
representatives of its parent company, Ashland Oil, Inc.

(2)      Properties.  The Properties shall include all of the oil and gas
properties, together with all associated equipment, and interests owned by
Sellers as of the Effective Date (except for Properties located in McDowell
County, West Virginia and such other mineral interests as were not disclosed
to Ashland for evaluation purposes), with no farm-in or farm-out transactions
occurring after the Effective Date.

(3)      Title Examination.  Prior to closing Ashland will be entitled to 
perform a review of Sellers' title to the Properties, including formal examina-
tion thereof if Ashland elects to do so.  As a result of such review, Ashland 
shall be entitled to adjust the Purchase Price to reflect any adjustments to
Sellers' interest as hereinafter provided.

(4)      Waivers and Consents.  Sellers shall use their best efforts to obtain
timely all necessary consents of third parties and waivers of preferential
rights, and the failure to obtain any such consent or waiver shall constitute
a title defect unless waived by Ashland.

(5)      Registration of Ashland Oil, Inc. Common Stock.  Sellers acknowledge
that the sale of Ashland Oil, Inc. Common Stock to them has not been
registered under the Securities Act of 1933, as amended, and therefore, the
Common Stock cannot be resold unless registered under such Act or an exemption
therefrom is available.  However, Ashland Oil, Inc. will, at its sole cost and
expense, file with the Securities and Exchange Commission ("SEC") a

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registration statement on Form S-3 with respect to the resale of the Ashland
Oil, Inc. Common Stock issued to the Sellers and shall use its best efforts to
cause the registration statement to become effective prior to the closing and
to remain effective for a period of 90 days thereafter, subject to the usual
and customary exceptions.  In addition, Ashland Oil, Inc. shall make necessary
associated Blue Sky filings, with any filings after the initial filings to be
at Waco's sole cost and expense.  This will provide an opportunity for the
Sellers to sell their Ashland Oil, Inc. Common Stock should they choose to do
so.  As an alternative to the above, Ashland will consider whether the
registration of the Common Stock sold to the Sellers and the resale of such
Common Stock by the Sellers can be reasonably and practicably registered on a
Form S-4 registration statement and, if Ashland so determines, Ashland will,
at its sole cost and expense, file such a registration statement with the SEC
and will use its best efforts to cause such registration statement to become
effective prior to the closing.

The closing shall not occur until the SEC has declared the registration
statement effective.  Failure to have an effective registration statement on
the proposed Closing Date shall allow Sellers the right to terminate the
transaction.  At Sellers' request, Ashland will use its best efforts to extend
the effective period of the Form S-3 registration statement for an additional
fifteen (15) days provided, however, that Sellers will reimburse Ashland for
all costs associated with such extension.

(6)      Closing Date.  Subject to having an effective registration statement,
the sale will have an Effective Date of 12:01 a.m. EST on March 1, 1995 and a
Closing Date of March 1, 1995.

(7)      Adjustments to Purchase Price.  The Definitive Agreement will provide
that the Purchase Price will be adjusted at closing for (i) title defects as
defined in the Definitive Agreement, (ii) the value of Properties rejected as
a result of Ashland's inspection which rejection shall be based upon criteria
set forth in the Definitive Agreement; and (iii) breaches of Sellers'
representations and warranties discovered by Ashland prior to closing.  If for
any reason Properties having a value in the aggregate equal to or greater than
25% of the Purchase Price can be excluded from the sale by Ashland pursuant to
its options under the Definitive Agreement, Ashland shall have the further
option to withdraw its offer and terminate the transaction.

(8)      Employees and Consultants.   Ashland shall have no obligation to 
retain Any current or former employees or consultants employed by Sellers.

     (9)  Indemnification  - Pre-Closing  Date  Liabilities.  Sellers shall
indemnify  and hold  harmless  Ashland  against all claims and  liabilities
arising out of events  occurring  before the Closing  Date.  Ashland  shall
indemnify  and hold  harmless  Sellers  against all claims and  liabilities
arising  out  of  events  occurring  after  the  Closing  Date. 

    (10)  This transaction is intended to be a taxable acquisition of assets.


<PAGE>
Ashland retains the option to terminate the transaction if Ashland determines
that there is a risk of the IRS asserting that the transaction was tax-free.

     (11) Upon  acceptance of this offer by Sellers and securing  necessary
Board of Directors' approval,  Ashland and Sellers shall promptly prepare a
mutually acceptable press release and announcement  relating to the subject
matter of this transaction.  Neither party shall issue such a press release
or announcement without the prior written approval of the other;  provided,
however,  that any party may make any public disclosure it believes in good
faith is required by law or regulation (in which case the disclosing  party
will advise the other party prior to making the disclosure).

(12)     Upon acceptance of this offer by Sellers, Ashland and Sellers shall
promptly meet to begin negotiating the Definitive Agreement and will use their
best efforts to execute the Definitive Agreement within fifteen (15) days of
such acceptance.  Pending the preparation and execution of the Definitive
Agreement, Sellers, and their representatives and affiliates, will not solicit
from, or negotiate with, any other company or person with respect to the sale
or other disposition of the Properties.

(13)     This letter expresses solely the intentions of the parties hereto and
does not  constitute a binding agreement on, or create any legal obligation
whatsoever on the part of Sellers or Ashland.  Any party may terminate
negotiations at any time without incurring any liability to any other party.

         If this offer is acceptable, please so signify by signing in the space
below and returning at least one executed copy of this letter to Ashland at
the address specified.  This offer will expire at 3:00 p.m. E.S.T. on January
23, 1995.

                                                     Very truly yours,

                                                     /s/ G. T. Wilkinson

                                                     G. Thomas Wilkinson
                                                     Senior Vice President

AGREED TO AND ACCEPTED this 
23rd day of January, 1995.

WACO OIL & GAS CO., INC.


By  /s/ Ira L. Morris  President


    /s/ Ira L. Morris
Ira L. Morris, Individually


     /s/ Betty Sue Morris
Betty Sue Morris, Individually

