EMPLOYMENT AGREEMENT

     This  Employment  Agreement  ("Agreement")  is entered into effective as of
July 20, 2000 (the "Effective Date"), by and between Ocean Energy, Inc., a Texas
corporation (the "Company"), and John D. Schiller ("Employee").

         WHEREAS,  the Company  employs  Employee  and desires to continue  such
employment relationship and Employee desires to continue such employment; and
          WHEREAS,  the Company and Employee entered into a Severance  Agreement
effective  as of June 22, 1999,  which is  currently  in effect (the  "Severance
Agreement"); and
         WHEREAS,  the Company and  Employee  desire to enter into an  agreement
reflecting the terms of the employment  relationship,  including the termination
thereof, that replaces the Severance Agreement;
         NOW,   THEREFORE,   in   consideration   of   the   mutual   covenants,
representations,  warranties,  and agreements  contained  herein,  and for other
valuable   consideration,   the  receipt  and   adequacy  of  which  are  hereby
acknowledged, the parties agree as follows:

     1.   Effect  of  Agreement.  Effective  as  of  the  Effective  Date,  this
          Agreement  supersedes  and  replaces  the  Severance  Agreement in its
          entirety and the Severance  Agreement shall be null and void and of no
          further force and effect.

     2.   Employment.  The Company hereby employs Employee,  and Employee hereby
          accepts  employment by the Company,  on the terms and  conditions  set
          forth in this Agreement.

     3.   Term of Employment.  Subject to the provisions for earlier termination
          provided in this  Agreement,  this Agreement  shall expire on July 20,
          2005.

     4.   Employee's Duties.  During the Term of this Agreement,  Employee shall
          serve as Executive  Vice  President - Operations of the Company,  with
          such duties and  responsibilities as may from time to time be assigned
          to him by the  board  of  directors  of  the  Company  (the  "Board"),
          provided that such duties are consistent with the customary  duties of
          such position.

         Employee  agrees to devote his full  attention  and time during  normal
business  hours to the business and affairs of the Company and to use reasonable
best   efforts   to  perform   faithfully   and   efficiently   his  duties  and
responsibilities.  Employee shall not, either directly or indirectly, enter into
any  business  or  employment  with  or for any  person,  firm,  association  or
corporation other than the Company during the Term of this Agreement;  provided,
however, that Employee shall not be prohibited from making financial investments
in any other  company or business or from  serving on the board of  directors of
any other  company.  Employee  shall at all times  observe  and comply  with all
lawful directions and instructions of the Board.

<PAGE>

     5.   Base  Compensation.  For  services  rendered  by  Employee  under this
          Agreement,  the Company  shall pay to  Employee a base  salary  ("Base
          Compensation")  of $350,000 per annum payable in  accordance  with the
          Company's customary pay periods and subject to customary withholdings.
          The amount of Base  Compensation  shall be reviewed by the Board on an
          annual  basis as of the close of each  fiscal  year of the Company and
          may be increased, as the Board may deem appropriate.  In the event the
          Board deems it appropriate to increase  Employee's annual base salary,
          said  increased  amount shall  thereafter be the "Base  Compensation."
          Employee's Base Compensation,  as increased from time to time, may not
          thereafter  be  decreased  unless  agreed  to  by  Employee.   Nothing
          contained  herein  shall  prevent  the Board  from  paying  additional
          compensation  to Employee in the form of bonuses or  otherwise  during
          the Term of this Agreement.

     6.   Additional Benefits. In addition to the Base Compensation provided for
          in Section 5 herein, Employee shall be entitled to the following:

     (a)  Expenses. The Company shall, in accordance with any rules and policies
          that  it may  establish  from  time to time  for  executive  officers,
          reimburse  Employee for business expenses  reasonably  incurred in the
          performance  of  his  duties.   It  is  understood  that  Employee  is
          authorized  to incur  reasonable  business  expenses for promoting the
          business of the Company, including reasonable expenditures for travel,
          lodging, meals and client or business associate entertainment. Request
          for reimbursement for such expenses must be accompanied by appropriate
          documentation.

     (b)  Vacation. Employee shall be entitled to five (5) weeks of vacation per
          year, without any loss of compensation or benefits. Employee shall not
          be  entitled to  compensation  for,  or to carry  forward,  any unused
          vacation time.

     (c)  General  Benefits.  Employee  shall be entitled to  participate in the
          various employee  benefit plans or programs  provided to the employees
          of the company in  general,  including  but not  limited  to,  health,
          dental,   disability  and  life  insurance   plans,   subject  to  the
          eligibility requirements with respect to each of such benefit plans or
          programs, and such other benefits or perquisites as may be approved by
          the Board during the Term of this Agreement. Nothing in this paragraph
          shall be deemed to prohibit the Company from making any changes in any
          of the  plans,  programs  or  benefits  described  in this  Section 6,
          provided the change  similarly  affects all executive  officers of the
          Company  similarly  situated.

     (d)  Options.  Upon the  occurrence of a "Corporate  Change" as hereinafter
          defined,  Employee  shall be  considered  as  immediately  and totally
          vested in any and all stock options or other similar awards previously
          made to Employee by the Company or its subsidiaries under a "Long Term
          Incentive Plan" duly adopted by the Board (such
<PAGE>

          options or similar awards are hereinafter  collectively referred to as
          "Options"). For purposes of this Agreement, a "Corporate Change" shall
          occur if (i) the Company (A) shall not be the surviving  entity in any
          merger,  consolidation or other  reorganization (or survives only as a
          subsidiary   of  an  entity  other  than  a  previously   wholly-owned
          subsidiary of the Company) or (B) is to be dissolved  and  liquidated,
          and as a result of or in connection with such transaction, the persons
          who were directors of the Company before such transaction  shall cease
          to  constitute  a majority  of the  Board,  (ii) any person or entity,
          including  a  "group"  as  contemplated  by  Section  13(d)(3)  of the
          Securities  Exchange  Act of  1934,  as  amended,  acquires  or  gains
          ownership or control (including, without limitation, power to vote) of
          20% or more of the  outstanding  shares of the Company's  voting stock
          (based upon voting  power),  and as a result of or in connection  with
          such transaction, the persons who were directors of the Company before
          such transaction shall cease to constitute a majority of the Board, or
          (iii) the Company sells all or substantially  all of the assets of the
          Company  to any  other  person or entity  (other  than a  wholly-owned
          subsidiary of the Company) in a transaction that requires  shareholder
          approval pursuant to the Texas Business Corporation Act.


     7.   Confidential  Information.  Employee, during the Term, may have access
          to and become  familiar  with  confidential  information,  secrets and
          proprietary  information  concerning  the  business and affairs of the
          Company.  As to such  confidential  information,  Employee  agrees  as
          follows:  (a) During the  employment  of Employee with the Company and
          thereafter Employee will not, either directly or indirectly,  disclose
          to any third party without the written permission of the Company,  nor
          use in any way  (except as  required  in the course of his  employment
          with the Company) any confidential information,  secret or proprietary
          information  of the  Company.  In the event of a breach or  threatened
          breach of the  provisions of this Section  7(a),  the Company shall be
          entitled,  in addition to any other remedies available to the Company,
          to  an   injunction   restraining   Employee  from   disclosing   such
          confidential  information.  (b)  Upon  termination  of  employment  of
          Employee, for whatever reason, Employee shall surrender to the Company
          any and all documents, manuals,  correspondence,  reports, records and
          similar  items  then or  thereafter  coming  into  the  possession  of
          Employee  which  contain  any  confidential,   secret  or  proprietary
          information  of the Company.

     8.   Termination.  This Agreement may be terminated prior to the end of its
          Term as set forth below:

<PAGE>

     (a)  Resignation  (other  than  for  Good  Reason).  Employee  may  resign,
          including  by  reason  of  retirement,  his  position  at any  time by
          providing  written  notice of resignation to the Company in accordance
          with Section 11 hereof.  In the event of such  resignation,  except in
          the case of  resignation  for Good  Reason (as  defined  below),  this
          Agreement  shall  terminate  and  Employee  shall not be  entitled  to
          further compensation pursuant to this Agreement other than the payment
          of any unpaid Base  Compensation  accrued  hereunder as of the date of
          Employee's resignation.


     (b)  Death. If Employee's  employment is terminated due to his death,  this
          Agreement shall terminate and the Company shall have no obligations to
          Employee or his legal  representatives  with respect to this Agreement
          other  than the  payment of any unpaid  Base  Compensation  previously
          accrued hereunder.

     (c)  Discharge.(i) The Company may terminate Employee's  employment for any
          reason at any time upon written notice  thereof  delivered to Employee
          in  accordance  with Section 11 hereof.  In the event that  Employee's
          employment is terminated during the Term by the Company for any reason
          other than his Misconduct or Disability (both as defined below),  then
          (A) the  Company  shall  pay in lump sum in cash to  Employee,  within
          fifteen (15) days following the date of  termination,  an amount equal
          to the  product  of (i)  Employee's  Base  Compensation  as in  effect
          immediately prior to Employee's termination, multiplied by (ii) three,
          (B) for three years following the date of termination, the Company, at
          its cost,  shall  provide  or arrange to  provide  Employee  (and,  as
          applicable,  Employee's  dependents)  with  accident  and group health
          insurance benefits  substantially similar to those which Employee (and
          Employee's  dependents) were receiving immediately prior to Employee's
          termination;  however,  the welfare benefits  otherwise  receivable by
          Employee  pursuant  to this  clause (B) shall be reduced to the extent
          comparable  welfare benefits are actually received by Employee (and/or
          Employee's  dependents)  during such period under any other employer's
          welfare  plan(s) or  program(s),  with  Employee  being  obligated  to
          promptly disclose to the Company any such comparable welfare benefits,
          (C) in addition to the aforementioned  compensation and benefits,  the
          Company shall pay in lump sum in cash to Employee  within fifteen (15)
          days  following the date of termination an amount equal to the product
          of (i)  Employee's  average bonus paid by the Company  during the most
          recent  two (2) years  immediately  prior to the date of  termination,
          provided,  however, that for purposes of computing such average bonus,
          Employee shall be deemed to have
<PAGE>

          received a bonus payment  equal to 45% of Employee's  annual salary at
          the time he commenced  employment with the Company for the 1998 fiscal
          year of the  Company  and any  bonus  payments  actually  received  by
          Employee for such fiscal year shall be disregarded, multiplied by (ii)
          three and (D) Employee shall be considered as immediately  and totally
          vested in any and all Options  previously  made to Employee by Company
          or its subsidiaries.  (ii) Notwithstanding the foregoing provisions of
          this  Section  8, in the  event  Employee  is  terminated  because  of
          Misconduct,  the Company  shall have no  obligations  pursuant to this
          Agreement after the Date of Termination  other than the payment of any
          unpaid Base Compensation  accrued through the Date of Termination.  As
          used herein,  "Misconduct" means (A) the continued failure by Employee
          to  substantially  perform his duties with the Company (other than any
          such failure  resulting from Employee's  incapacity due to physical or
          mental  illness or any such actual or  anticipated  failure  after the
          issuance  of a Notice of  Termination  by Employee  for Good  Reason),
          after a written  demand for  substantial  performance  is delivered to
          Employee by the Board, which demand specifically identifies the manner
          in which  the  Board  believes  that  Employee  has not  substantially
          performed his duties, (B) the engaging by Employee in conduct which is
          demonstrably  and materially  injurious to the Company,  monetarily or
          otherwise   (other  than  such  conduct   resulting  from   Employee's
          incapacity  due to  physical  or mental  illness or any such actual or
          anticipated  conduct after the issuance of a Notice of  Termination by
          Employee  for  Good  Reason),  or (C)  Employee's  conviction  for the
          commission of a felony.  Anything  contained in this  Agreement to the
          contrary  notwithstanding,  the Chief Executive Officer of the Company
          shall have the sole power and authority to terminate the employment of
          Employee on behalf of the Company.

     (d)  Disability.  If Employee  shall have been  absent  from the  full-time
          performance  of  Employee's  duties  with the  Company for ninety (90)
          consecutive calendar days as a result of Employee's  incapacity due to
          physical or mental illness, Employee's employment may be terminated by
          the Company for  "Disability"  and  Employee  shall not be entitled to
          further compensation pursuant to this Agreement,  except that Employee
          shall be considered as  immediately  and totally vested in any and all
          Options previously granted to Employee by Company or its subsidiaries.

     (e)  Resignation  for Good Reason.  Employee shall be entitled to terminate
          his  employment  for  Good  Reason  as  defined  herein.  If  Employee
          terminates  his employment for Good Reason he shall be entitled to the
          compensation and benefits provided in
<PAGE>


     Paragraph 8(c)(i) hereof. "Good Reason" shall mean the occurrence of any of
     the following  circumstances  without  Employee's  express  written consent
     unless such breach or  circumstances  are fully corrected prior to the Date
     of  Termination  specified  in the Notice of  Termination  given in respect
     hereof:  (i) the material breach of any of the Company's  obligations under
     this  Agreement  without  Employee's  express  written  consent;  (ii)  the
     continued assignment to Employee of any duties inconsistent with the office
     of Executive Vice President - Operations;  (iii) the failure by the Company
     to pay to Employee any portion of Employee's  compensation on the date such
     compensation is due; (iv) the failure by the Company to continue to provide
     Employee  with  benefits  substantially  similar to those  enjoyed by other
     executive officers who have entered into similar employment agreements with
     Employer  under any of the  Company's  medical,  health,  accident,  and/or
     disability plans in which Employee was  participating  immediately prior to
     such time;  (v) a change in the location of Employee's  principal  place of
     employment by the Company by more than 50 miles from the location  where he
     was principally  employed  immediately prior to the date of such change; or
     (vi) the failure of the Company to obtain a satisfactory agreement from any
     successor to assume and agree to perform this Agreement, as contemplated in
     Section 13 hereof. In addition,  the occurrence of a Corporate Change other
     than as described in Section  6(d)(i)(A),  shall  constitute  "Good Reason"
     hereunder,  but only if Employee  terminates his  employment  within ninety
     (90) days following the effective date of such Corporate Change.

     (f)  Notice  of  Termination.   Any  purported  termination  of  Employee's
          employment  by the Company  under  Sections  8(c)(ii)  or 8(d),  or by
          Employee under Section 8(e),  shall be  communicated by written Notice
          of Termination to the other party hereto in accordance with Section 11
          hereof.  For  purposes of this  Agreement,  a "Notice of  Termination"
          shall mean a notice which,  if by the Company and is for Misconduct or
          Disability,  shall set forth in reasonable  detail the reason for such
          termination of Employee's employment, or in the case of resignation by
          Employee  for Good  Reason,  said  notice must  specify in  reasonable
          detail the basis for such  resignation.  A Notice of Termination given
          by Employee  pursuant to Section 8(e) shall be effective even if given
          after the  receipt  by  Employee  of  notice  that the Board has set a
          meeting to consider terminating Employee for Misconduct. Any purported
          termination for which a Notice of
<PAGE>


         Termination is required which is not effected  pursuant to this Section
         8(f) shall not be effective.

     (g)  Date of  Termination.  "Date  of  Termination"  shall  mean  the  date
          specified  in the  Notice of  Termination,  provided  that the Date of
          Termination shall be at least 15 days following the date the Notice of
          Termination  is given.  Notwithstanding  the  foregoing,  in the event
          Employee is terminated for Misconduct, the Company may refuse to allow
          Employee access to the Company's offices (other than to allow Employee
          to collect his personal  belongings  under the Company's  supervision)
          prior to the Date of Termination.

     (h)  Mitigation.  Employee  shall not be required to mitigate the amount of
          any payment provided for in this Section 8 by seeking other employment
          or otherwise, nor shall the amount of any payment provided for in this
          Agreement  be  reduced by any  compensation  earned by  Employee  as a
          result of  employment by another  employer,  except that any severance
          amounts payable to Employee  pursuant to the Company's  severance plan
          or policy for employees in general  shall reduce the amount  otherwise
          payable  pursuant to Sections  8(c)(i) or 8(e).

     (i)  Excess Parachute Payments.  Notwithstanding anything in this Agreement
          to the contrary, to the extent that any payment or benefit received or
          to  be  received  by  Employee   hereunder  in  connection   with  the
          termination  of  Employee's  employment  would,  as  determined by tax
          counsel  selected  by the  Company,  constitute  an "Excess  Parachute
          Payment" (as defined in Section 280G of the  Internal  Revenue  Code),
          the Company shall fully "gross-up" such payment so that Employee is in
          the same "net"  after-tax  position he would have been if such payment
          and gross-up payments had not constituted Excess Parachute Payments.

     (j)  Resignation from Board. In the event Employee is a member of the board
          of directors of the Company or any of its subsidiaries, and Employee's
          employment  by the Company is  terminated  for any reason  (other than
          Employee's  death),  Employee shall immediately  resign as a member of
          such board of  directors  upon the written  request of the Chairman of
          the Board.  Nothing  herein  shall be deemed to limit the power of the
          shareholders  of the  Company  to at any  time  remove  any  director,
          including, without limitation, Employee, in accordance with applicable
          law.

     9.   Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or
          limit  Employee's  continuing or future  participation in any benefit,
          bonus,  incentive, or other plan or program provided by the Company or
          any of its  affiliated  companies and for which  Employee may qualify,
          nor shall  anything  herein limit or otherwise  adversely  affect such
          rights as Employee  may have under any Options with the Company or any
          of its affiliated companies.
<PAGE>


     10.  Assignability.  The obligations of Employee hereunder are personal and
          may not be assigned or delegated by him or  transferred  in any manner
          whatsoever,   nor  are  such   obligations   subject  to   involuntary
          alienation,  assignment or transfer.  The Company shall have the right
          to assign  this  Agreement  and to  delegate  all  rights,  duties and
          obligations  hereunder,  either  in whole or in part,  to any  parent,
          affiliate,  successor  or  subsidiary  organization  or company of the
          Company,  so  long  as the  obligations  of  the  Company  under  this
          Agreement remain the obligations of the Company.

     11.  Notice.  For the  purpose  of this  Agreement,  notices  and all other
          communications  provided for in this Agreement shall be in writing and
          shall be deemed to have been duly  given when  delivered  or mailed by
          United States  registered  mail,  return  receipt  requested,  postage
          prepaid,  addressed to the Company at its  principal  office  address,
          directed to the attention of the Board with a copy to the Secretary of
          the Company,  and to Employee at Employee's  residence  address on the
          records of the  Company or to such other  address as either  party may
          have furnished to the other in writing in accordance  herewith  except
          that notice of change of address shall be effective only upon receipt.


     12.  Validity.  The invalidity or unenforceability of any provision of this
          Agreement shall not affect the validity or enforceability of any other
          provision  of this  Agreement,  which  shall  remain in full force and
          effect.

     13.  Successors;  Binding  Agreement.  (a) The  Company  will  require  any
          successor   (whether   direct  or  indirect,   by  purchase,   merger,
          consolidation  or  otherwise)  to  all  or  substantially  all  of the
          business and/or assets of the Company to expressly assume and agree to
          perform this  Agreement in the same manner and to the same extent that
          the Company would be required to perform it if no such  succession had
          taken place.  Failure of the Company to obtain such agreement prior to
          the  effectiveness  of any such  succession  shall be a breach of this
          Agreement and shall entitle Employee to compensation  from the Company
          in the same  amount and on the same terms as he would be  entitled  to
          hereunder if he terminated his employment for Good Reason, except that
          for purposes of implementing the foregoing, the date on which any such
          succession  becomes effective shall be deemed the Date of Termination.
          As used herein,  the term "Company" shall include any successor to its
          business  and/or assets as aforesaid  which  executes and delivers the
          Agreement  provided for in this Section 13 or which otherwise  becomes
          bound by all terms and  provisions  of this  Agreement by operation of
          law. (b) This  Agreement  and all rights of Employee  hereunder  shall
          inure to the benefit of and be enforceable  by Employee's  personal or
          legal representatives,  executors, administrators,  successors, heirs,
          distributees, devisees and legatees. If Employee should
<PAGE>

         die while any amounts would be payable
         to him hereunder if he had continued to live, all such amounts,  unless
         otherwise  provided herein,  shall be paid in accordance with the terms
         of this Agreement to Employee's devisee, legatee, or other designee or,
         if there be no such designee, to Employee's estate.


     14.  Miscellaneous.  No provision of this Agreement may be modified, waived
          or discharged unless such waiver,  modification or discharge is agreed
          to in  writing  and  signed by  Employee  and such  officer  as may be
          specifically authorized by the Board. No waiver by either party hereto
          at any  time  of any  breach  by the  other  party  hereto  of,  or in
          compliance  with,  any condition or provision of this  Agreement to be
          performed  by such other  party shall be deemed a waiver of similar or
          dissimilar  provisions  or  conditions  at the same or at any prior or
          subsequent  time.  This  Agreement  is an  integration  of the parties
          agreement; no agreement or representations, oral or otherwise, express
          or implied,  with respect to the subject  matter hereof have been made
          by either  party,  except those which are set forth  expressly in this
          Agreement. THE VALIDITY, INTERPRETATION,  CONSTRUCTION AND PERFORMANCE
          OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

     15.  Counterparts.   This   Agreement  may  be  executed  in  one  or  more
          counterparts,  each of which shall be deemed to be an original but all
          of which  together will  constitute one and the same  instrument.

     16.  Arbitration.  Either  party may elect that any dispute or  controversy
          arising  under or in  connection  with this  Agreement  be  settled by
          arbitration  in  Houston,  Texas in  accordance  with the rules of the
          American Arbitration Association then in effect. If the parties cannot
          mutually  agree  on an  arbitrator,  then  the  arbitration  shall  be
          conducted by a three arbitrator  panel,  with each party selecting one
          arbitrator  and the two  arbitrators  so  selected  selecting  a third
          arbitrator.  The  findings  of the  arbitrator(s)  shall be final  and
          binding,  and  judgment  may be entered  thereon  in any court  having
          jurisdiction.  The findings of the arbitrator(s)  shall not be subject
          to appeal to any court,  except as  otherwise  provided by  applicable
          law. The  arbitrator(s)  may, in his or her (or their) own discretion,
          award legal fees and costs to the prevailing party.

<PAGE>

         IN WITNESS  WHEREOF,  the parties have executed this  Agreement on July
20, 2000, effective for all purposes as provided above.

                                        OCEAN ENERGY, INC.



                                  By: ____________________________
                                  Name:  Peggy T. d'Hemecourt
                                  Title: Vice President - Human Resources


                                         EMPLOYEE:

                                   ---------------------------------------


43206.1