Exhibit 10.2

PETROQUEST ENERGY, INC.

2018 ANNUAL CASH BONUS PLAN

WHEREAS, the Board of Directors (the “Board”) of PetroQuest Energy, Inc. (the
“Company”) in consultation with its compensation advisor Longnecker & Associates
adopted the PetroQuest Energy, Inc. 2018 Annual Cash Bonus Plan (the “Plan”) to
reward certain key employees of the Company and its subsidiaries for their
performance based on a review of the criteria determined by the Compensation
Committee of the Board (the “Committee”) as provided on Exhibit A attached
hereto;

WHEREAS, the Plan consists of a total cash pool of $1.5 million (the “Cash
Pool”) to be awarded to employees in amounts determined by management as
delegated by the Committee based on the criteria in Exhibit A;

WHEREAS, on November 2, 2018, Company’s management awarded and paid one fourth
(1⁄4) of the Cash Pool as bonuses to certain employees as listed on Exhibit B;
and

WHEREAS, the remaining portion of the Cash Pool under the Plan shall be awarded
by management to employees of the Company and its subsidiaries in accordance
with Exhibit C, subject to approval of the Board and (the “Bonus Amounts”) and
will be paid as provided below.

NOW THEREFORE, the Plan shall be administered and Bonus Amounts will be paid in
cash as follows:

ADMINISTRATION

The Committee shall have the authority to make all determinations under the
Plan, including eligibility and the allocation of bonus amounts to employees,
provided, however, that the Committee may delegate any of its duties to the
Company’s management, and thus, management shall have the authority of the
Committee with respect thereto. The Committee shall have the authority to
interpret and construe the Plan, and provide any omitted terms or definitions.
Unless delegated to management, all determinations under the Plan shall be
vested in the sole and exclusive discretion of the Committee, and the
determinations of the Committee as to such matters shall be final and conclusive
on all persons interested in the Plan.

ACTUAL AWARDED AMOUNTS

While the Company intends to award the Bonus Amounts for 2018 as determined by
the Committee on Exhibit C, the Bonus Amounts payable under this Plan are
discretionary and no amounts shall be deemed to be awarded and no employee shall
have a legally binding right to a Bonus Amount until the Board approves the
Bonus Amounts on Exhibit C.

 

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PAYMENT

After Bonus Amounts on Exhibit C are approved by the Board, the Bonus Amounts
will be paid to each employee as indicated on Exhibit C in a pro rata amount on
a quarterly basis in the first three quarters of 2019 (each referred to herein
as a “Payment Date;” subject to the employee’s continuous employment with the
Company or its subsidiaries from November 2, 2018 through the applicable Payment
Date. If an employee’s employment with the Company and its subsidiaries
terminates for any reason prior to a Payment Date all unpaid portions of the
Bonus Amount awarded to such employee shall be forfeited and reallocated on a
pro-rata basis to the other employees subject to the Bonus Pool on Exhibit C.

MISCELLANEOUS PLAN PROVISIONS

The Plan is an incentive bonus arrangement and is, therefore, not intended to be
subject to the reporting requirements of the Employee Retirement Income Security
Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended, for
certain employee benefit plans.

The Board reserves the right to amend, revise, modify, revoke or terminate the
Plan at any time in its sole discretion, without prior notice to or consent of
any employee. No contractual right to any benefit or payment described herein is
created or is intended to be created by this document or any related action of
the Board or the Committee and none should be inferred from the descriptions of
this Plan. No officer or other employee of the Company is automatically entitled
to any Bonus Amount under the Plan.

Bonus Amounts may not be assigned or transferred except in the event of the
employee’s death. Unless otherwise designated in writing, the employee’s
beneficiary will be the same as stated in the employee’s 401k beneficiary
designation.

The Company shall have the right to deduct all minimum required withholding for
tax purposes from the Bonus Amount for an employee.    

All administrative expenses of the Plan will be borne by the Company.

All amounts payable under this Plan shall be paid from the general assets of the
Company. Neither the establishment of the Plan nor the making of Bonus Amounts
hereunder shall be deemed to create a trust. No individual shall have any
security or other interest in any of the assets of the Company, in shares of
stock of the Company or otherwise.

 

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Nothing in the adoption of the Plan nor the making of Bonus Amounts hereunder
shall confer on any individual the right to continued employment by the Company
or a subsidiary or affect in any way the right of the Company or such subsidiary
to terminate his or her employment at any time.

All provisions of the Plan and all amounts paid or payable hereunder shall be
construed in accordance with and governed by the laws of Delaware.

 

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EXHIBIT A

Performance and Other Criteria

Accomplishments for PQ during FY18, including:

 

  •  

Completion of two (2) very successful Cotton Valley wells (P0 #29 & #30)

 

  •  

Completed the assemblage of an acreage position in the Austin Chalk and sold 20%
to recoup $10 million of invested capital.

 

  •  

Completed the Gulf of Mexico assets sales providing for the return of cash
collateral that was securing the bonding of these assets.

 

  •  

Worked closely with critical vendors in managing working capital to bring all
accounts payable current thus preventing filing of third party liens

 

  •  

Begun the process to secure partners for CV JV II, which is expected to generate
significant capital

 

  •  

Eliminated between $20MM - $40MM of litigation exposure, with minimal capital
contribution

 

  •  

The Company was successful working with Cotton Valley Joint Venture I partners
to suspend drilling during 2018 until restructuring of the company’s balance
sheet is complete. Since we are still in the restructuring process they have
agreed to begin drilling PQ # 31 and all have agreed to participate and fund
their pro-rata share of cost.

Additional key considerations

 

  •  

Nominal salary increases (<2% per year over 5 years)

 

  •  

Nominal to no bonus opportunity over an extended period:

 

  •  

2017 bonuses were significantly reduced

 

  •  

There have been no bonuses paid for 2018 performance and none are currently
anticipated to be without a KEIP/KERP or FY 2018 Incentive Plan

 

  •  

When a 2019 performance bonus program is instituted, payouts will likely not
occur until March of 2020

 

  •  

An extended period without bonus payments can result in a high potential for
retention concerns

 

  •  

Since 2010, there has been a cumulative bonus reduction of ~$20MM, further
displaying the systemic nature of low bonus payouts relative to performance
achieved

 

  •  

Total compensation opportunity is significantly below the market 25th
percentile; however, having a bonus opportunity aids in improving alignment,
albeit minimal

 

  •  

While being paid less than the market, PQ executives are working with fewer
support staff and half of the executive level positions they had 4 years ago

 

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