THIRD AMENDMENT TO
                           SEAGULL ENERGY CORPORATION

                     EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN

         WHEREAS,  SEAGULL ENERGY  CORPORATION (the  "Company"),  has heretofore
adopted  and  currently  maintains  the  SEAGULL  ENERGY  CORPORATION  EXECUTIVE
SUPPLEMENT RETIREMENT PLAN (the "Plan"); and

         WHEREAS, the Company desires to amend the Plan;

         NOW, THEREFORE, the Plan shall be amended as follows, effective as of 
August 24, 1998;

         1. The  following  sentence  shall be added to Paragraph (1) of Section
1.01 of the Plan:

         "Notwithstanding the foregoing, for purposes of recognizing the expense
         of a Member's  benefit  under the Plan,  the Member's  benefit shall be
         deemed to accrue in accordance  with the Vesting  Schedule set forth in
         the Member's Membership Agreement."

         2.  Paragraph  (8) of Section 1.01 of the Plan shall be deleted and the
following shall be substituted therefor:

     "(8) Compensation:  Except as otherwise  provided in a Member's  Membership
     Agreement,  the  total of all  amounts  paid by the  Company  to or for the
     benefit  of a Member  for  services  rendered  or labor  performed  while a
     Member,  including elective  contributions made on a Member's behalf by the
     Company  that are not  includable  in income  under  section 125 or section
     402(e)(3) of the Code and elective  deferrals  of  compensation  other than
     incentive bonuses under a nonqualified  deferred  compensation program, but
     excluding  non-cash  remuneration,  income  incurred  as a  result  of  the
     exercise of stock options or stock appreciation  rights,  incentive bonuses
     or other  supplemental pay (whether paid in cash or in kind) and, except as
     expressly  included  herein,  Company  contributions  to any other deferred
     compensation program."

         3. The following new paragraphs  (18A),  (18B) and (18C) shall be added
to Section 1.01 of the Plan:

         Trust:  The trust, if any, established under the Trust Agreement.

         (18B)    Trust Agreement:  The agreement,  if any, entered into between
                  the Company and the Trustee pursuant Article II.

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         (18C)    Trust Fund:  The funds and properties, if any, held pursuant 
                  to the provisions of the Trust Agreement, together with all 
                  income, profit, and increments thereto."

         4. The  following  new  paragraph  shall be added to  Article II of the
Plan:

                  "The Committee in its sole discretion, may establish the Trust
         and direct  the  Company  to enter  into the Trust  Agreement.  In such
         event,  the Company  shall  remain the owner of all assets in the Trust
         Fund and the assets  shall be  subject  to the claims of the  Company's
         creditors if the Company ever becomes  insolvent.  For purposes hereof,
         the  Company  shall be  considered  'insolvent'  if (a) the  Company is
         unable to pay its  debts as they  become  due,  or (b) the  Company  is
         subject to a pending  proceeding  as a debtor  under the  United  Sates
         Bankruptcy Code (or any successor federal statute). The chief executive
         officer of the Company and its board of  directors  shall have the duty
         to inform the Trustee in writing if the Company becomes insolvent. When
         so informed, the Trustee shall suspend payments to the Members and hold
         the assets for the benefit of the Company's general  creditors.  If the
         Trustee  receives a written  allegation  that the Company is insolvent,
         the Trustee  shall  suspend  payments to the Members and hold the Trust
         Fund for the  benefit of the  Company's  general  creditors,  and shall
         determine whether the Company is insolvent.  If the Trustee  determines
         that the Company is not insolvent, the Trustee shall resume payments to
         the Members.  No Member or beneficiary  shall have any preferred  claim
         to, or any  beneficial  ownership  interest in, any assets of the Trust
         Fund."

         5. Section 5.02 of the Plan shall be deleted and the following shall be
substituted therefor:

         "5.02  Competition  with the Company Except as otherwise  provided in a
         Member's  Membership  Agreement,  if a Member  engages  in  competitive
         activities  against the Company and its  subsidiaries  to the  material
         detriment of the Company and its subsidiaries following his termination
         of employment, he shall forfeit all right and entitlement to any amount
         of Accrued  Benefit under the Plan  (regardless  of whether  payment of
         same  has  commenced)  at the  time  he  engages  in  such  competitive
         activities."

         6. The first  sentence of Section 7.01 of the Plan shall be deleted and
the following shall be substituted therefor:

         "The  Company  reserves  the  right  to  amend  the  Plan at any  time;
         provided,  however,  that no such amendment shall deprive any Member of
         any Accrued Benefit under the Plan to the extent that such Member has a
         Vested Interest in such Accrued Benefit."

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         7. As amended hereby, the Plan is specifically ratified and reaffirmed.

         EXECUTED effective as of August 24, 1998.

                                            SEAGULL ENERGY CORPORATION

                                            By:    /s/ William L. Transier
                                            Name:  William L. Transier
                                            Title: Executive Vice President and
                                                   Chief Finanical Officer
VEHOU02:123718.1

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