EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT  ("Agreement") is made by and between SEAGULL
ENERGY CORPORATION, a Texas corporation ("Company"), and James T. Hackett
("Executive").

                              W I T N E S S E T H:

         WHEREAS,  Company is desirous of  employing  Executive  in an executive
capacity on the terms and conditions, and for the consideration, hereinafter set
forth and  Executive is desirous of being  employed by Company on such terms and
conditions and for such consideration;

         NOW,  THEREFORE,  for  and in  consideration  of the  mutual  promises,
covenants and  obligations  contained  herein,  Company and  Executive  agree as
follows:

ARTICLE 1:  EMPLOYMENT AND DUTIES

         1.1 Employment;  Effective Date. Company agrees to employ Executive and
Executive  agrees to be employed by Company,  beginning as of the Effective Date
(as  hereinafter  defined)  and  continuing  for the period of time set forth in
Article  2 of this  Agreement,  subject  to the  terms  and  conditions  of this
Agreement.  For purposes of this  Agreement,  the "Effective  Date" shall be the
first date that Executive reports for work at the offices of the Company, but no
later than October 15, 1998.

         1.2 Positions.  Effective as of the Effective Date, Company shall cause
Executive to be appointed  President and Chief Executive  Officer of Company and
to be  elected a member of the Board of  Directors  of  Company  (the  "Board of
Directors").  Effective as of January 1, 1999,  Company shall cause Executive to
be  elected  as  Chairman  of the Board of  Directors.  Company  shall  maintain
Executive in such positions,  or in such other positions as the parties mutually
may agree, for the full term of Executive's employment hereunder.

         1.3 Duties and  Services.  Executive  agrees to serve in the  positions
referred to in paragraph  1.2 and to perform  diligently  and to the best of his
abilities the duties and services  appertaining to such office,  as well as such
additional  duties and  services  appropriate  to such office  which the parties
mutually may agree upon from time to time.  Executive's employment shall also be
subject to the policies  maintained and established by Company,  as the same may
be amended from time to time.

         1.4  Other  Interests.  Executive  agrees,  during  the  period  of his
employment  by Company,  to devote his primary  business  time,  energy and best
efforts to the  business  and affairs of Company and its  affiliates  and not to
engage, directly or indirectly, in any other business or businesses,  whether or
not  similar  to that of  Company,  except  with  the  consent  of the  Board of
Directors. The foregoing  notwithstanding,  the parties recognize and agree that
Executive may engage in passive personal investments and other civic, charitable
and business activities that do not conflict with the business

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<PAGE>



and affairs of Company or interfere with  Executive's  performance of his duties
hereunder  without  the  necessity  of  obtaining  the  consent  of the Board of
Directors.

         1.5 Duty of Loyalty.  Executive  acknowledges and agrees that Executive
owes a fiduciary duty of loyalty,  fidelity,  and allegiance to act at all times
in the best interests of Company. In keeping with these duties,  Executive shall
make full  disclosure  to Company of all business  opportunities  pertaining  to
Company's  business  and shall  not  appropriate  for  Executive's  own  benefit
business   opportunities   concerning   the  subject  matter  of  the  fiduciary
relationship.

ARTICLE 2:  TERM AND TERMINATION OF EMPLOYMENT

         2.1 Term. Unless sooner terminated pursuant to other provisions hereof,
Company  agrees to employ  Executive  for the period  beginning on the Effective
Date and ending on the third  anniversary of the Effective Date.  Beginning with
the first  anniversary of the Effective Date,  said term of employment  shall be
extended  automatically for an additional  successive one-year period as of each
anniversary  date of the Effective  Date that occurs while this  Agreement is in
effect;  provided,  however,  that if, at any time prior to any such anniversary
date of the Effective Date,  either party shall give written notice to the other
that no such automatic extension shall occur, then Executive's  employment shall
terminate on the last day of the two-year  period  beginning on the  anniversary
date of the Effective Date that next occurs after such notice is given.

         2.2 Company's  Right to Terminate.  Notwithstanding  the  provisions of
paragraph 2.1, Company shall have the right to terminate Executive's  employment
under this Agreement at any time for any of the following reasons:

                  (i)      upon Executive's death;

                  (ii) upon  Executive's  becoming  incapacitated  by  accident,
         sickness or other circumstance which renders him mentally or physically
         incapable  of  performing  the  duties  and  services  required  of him
         hereunder  on a full-time  basis with  reasonable  accommodation  for a
         period of at least 120 consecutive days or for a period of 180 business
         days during any twelve-month period;

                  (iii) for cause,  which for purposes of this  Agreement  shall
         mean Executive's gross negligence,  gross neglect or willful misconduct
         in  the  performance  of  the  duties  required  of  him  hereunder  or
         Executive's final conviction of a felony or of a misdemeanor  involving
         moral  turpitude,  excluding  misdemeanor  convictions  relating to the
         operation of a motor vehicle;

                  (iv) for Executive's material breach of any material provision
         of this Agreement  which,  if correctable,  remains  uncorrected for 30
         days  following  written notice to Executive by Company of such breach;
         or

                  (v) for any other reason whatsoever, in the sole discretion of
         the Board of Directors.

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<PAGE>



         2.3 Executive's Right to Terminate.  Notwithstanding  the provisions of
paragraph 2.1,  Executive shall have the right to terminate his employment under
this Agreement at any time for any of the following reasons:

                  (i)  for  (A)  Company's   material  breach  of  any  material
         provision of this Agreement,  (B) Company's  assignment to Executive of
         duties and responsibilities  that are materially  inconsistent with the
         positions  referred  to in  paragraph  1.2,  (C)  Company's  failure to
         appoint or elect or  reappoint or reelect  Executive  to the  positions
         referred  to in  paragraph  1.2 or (D) a  change  in  the  location  of
         Executive's  principal  place of employment by the Company by more than
         50  miles  from  the  location  where  he  was   principally   employed
         immediately  prior to such change;  provided,  however,  that, prior to
         Executive's  termination  of  employment  under (A), (B) or (C) of this
         paragraph 2.3(i),  Executive must give written notice to Company of any
         such  breach,  assignment  or failure and such  breach,  assignment  or
         failure  must remain  uncorrected  for 30 days  following  such written
         notice; or

                  (ii) for any other reason  whatsoever,  in the sole discretion
of Executive.

         2.4 Notice of Termination. If Company or Executive desires to terminate
Executive's  employment hereunder at any time prior to expiration of the term of
employment as provided in paragraph  2.1, it or he shall do so by giving written
notice to the other  party that it or he has  elected to  terminate  Executive's
employment  hereunder  and  stating  the  effective  date  and  reason  for such
termination,  provided  that no such  action  shall  alter  or amend  any  other
provisions hereof or rights arising hereunder,  including,  without  limitation,
the  provisions  of Article 4 hereof.  Such  notice  shall  also,  to the extent
material to any right or obligation hereunder, constitute notice under paragraph
2.1 of the  discontinuance  of any further  automatic  extensions of the term of
paragraph 2.1.

ARTICLE 3:  COMPENSATION AND BENEFITS

         3.1 Base Salary.  During the period of this Agreement,  Executive shall
receive a minimum annual base salary of $500,000.  The Compensation Committee of
the Board of Directors (the  "Compensation  Committee") shall review Executive's
annual base  salary on an annual  basis and shall make a  recommendation  to the
Board of Directors  regarding possible increases in such annual base salary, and
the Board of Directors, in its sole discretion,  may increase, but not decrease,
Executive's annual base salary.  Executive's annual base salary shall be paid in
equal  installments in accordance with the Company's  standard policy  regarding
payment of  compensation  to  executives  but no less  frequently  than monthly.
Notwithstanding  the  foregoing,  in lieu of annual base salary  (other than the
amount necessary to provide certain Company  benefits,  which is not expected to
exceed  $5,000  annually)  for the period  beginning on the  Effective  Date and
ending on December 31,  1999,  on the  Effective  Date,  Company  shall grant to
Executive  an option (the  "Option")  to purchase  200,000  shares of  Company's
common stock ("Stock") under the Seagull Energy  Corporation  1998 Omnibus Stock
Plan (the "1998  Plan").  The purchase  price for each share of Stock subject to
the Option  shall be equal to the Fair Market  Value (as such term is defined in
the 1998  Plan) of a share of Stock as of the  Effective  Date.  Subject  to the
terms of the 1998 Plan and the agreement, in the form attached hereto as Exhibit
A1, to be executed by Company and Executive evidencing the

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<PAGE>



Option,  such  Option  shall (i) be a  nonqualified  stock  option,  (ii) have a
ten-year term,  (iii) be fully  exercisable  on the date of grant  thereof.  The
grant of the  Option  shall be deemed to  satisfy  Company's  obligation  to pay
Executive's  annual  base  salary  under  this  Agreement   including,   without
limitation,  pursuant to this  paragraph 3.1 and the  termination  provisions of
Article 7, with respect to the period beginning on the Effective Date and ending
on December 31, 1999.

         3.2 Signing Bonus. On the Effective  Date,  Executive shall be entitled
to a signing  bonus in the amount of $580,000,  which  Company shall cause to be
credited to Executive's  Deferred  Compensation Account under the Seagull Energy
Corporation  Supplemental  Benefit Plan (the "SBP"),  and which Executive agrees
shall be credited with Phantom Stock (as such term is defined in the SBP) for at
least one year following the Effective Date.

         3.3  Annual  Bonuses.  For the 1999  performance  year  and  subsequent
performance years ending during the period of this Agreement, Executive shall be
eligible  to  receive  an annual  bonus  under the  Seagull  Energy  Corporation
Executive  Incentive Plan (or any successor  thereto) (the "EIP") as established
from time to time by the  Compensation  Committee,  based on an Incentive Target
(as such term is used in the EIP) of 60% of  Executive's  annual base salary (or
the annual base salary that Executive would have received if he had not received
an Option in lieu of such annual  salary  pursuant  to  paragraph  3.1),  with a
Maximum  Incentive  (as  such  term is used in the  EIP) of 120% of  Executive's
annual base salary (or the annual base salary that Executive would have received
if he had not  received  an Option in lieu of such  annual  salary  pursuant  to
paragraph 3.1).

         3.4 Initial Stock Option. On the Effective Date, Company shall grant to
Executive an option (the "Initial  Option") to purchase  191,996 shares of Stock
pursuant to the Seagull  Energy  Corporation  1995 Omnibus Stock Plan (the "1995
Plan"). The purchase price for each share of Stock subject to the Initial Option
shall be equal to the Fair  Market  Value (as such term is  defined  in the 1995
Plan) of a share of Stock as of the Effective Date.  Subject to the terms of the
1995 Plan and the agreement, in the forms attached hereto as Exhibits A2 and A3,
to be executed by Company  and  Executive  evidencing  the Initial  Option,  the
Initial  Option shall (i) be an incentive  stock option to the extent  permitted
under  applicable  law and a  nonqualified  stock  option  to the  extent of the
remainder  of the  grant,  if any,  (ii)  have a  ten-year  term,  (iii)  become
exercisable  in 25%  increments on each of the first four  anniversaries  of the
Effective Date.

         3.5 Initial  Restricted Stock Awards.  Company shall grant to Executive
300,000  restricted  shares of Stock (the "Initial  Restricted Stock Awards") as
follows:

                  (i) Effective as of the Effective Date, Company shall grant to
         Executive 58,004  restricted shares of Stock pursuant to the 1995 Plan.
         Subject  to the  terms  of the  Plan  and the  agreement,  in the  form
         attached  hereto as Exhibit B1, to be executed by Company and Executive
         evidencing such award, such award shall contain forfeiture restrictions
         that  shall  lapse with  respect  to (A)  25,000 of the shares  subject
         thereto on December 31, 1998,  (B) the remainder of the shares  subject
         thereto,  if any,  in  331/3%  increments  on each of the  first  three
         anniversaries of the Effective Date.

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<PAGE>



                  (ii)  Effective as of January 1, 1999,  Company shall grant to
         Executive 241,996 restricted shares of Stock pursuant to the 1998 Plan.
         Subject  to the  terms  of the  Plan  and the  agreement,  in the  form
         attached  hereto as Exhibit B2, to be executed by Company and Executive
         evidencing such award, such award shall contain forfeiture restrictions
         that shall lapse with respect to (A) 1/3 of the shares subject  thereto
         on the first  anniversary of the Effective  Date, (B) an additional 1/3
         of  the  shares  subject  thereto  on  the  second  anniversary  of the
         Effective  Date,  and (C) and an additional  1/3 of the shares  subject
         thereto on the third anniversary of the Effective Date.

         3.6 Subsequent  Stock Options.  On each of the first,  second and third
anniversaries of the Effective Date, Company shall grant to Executive options to
purchase a number of shares of Stock (the "Subsequent  Options") pursuant to the
1998 Plan or any other appropriate Company stock plan (the "Company Stock Plan")
in accordance with the following schedule:

<TABLE>
<S>                                                             <C>
                  Anniversary of Effective Date                 Number of Shares
                           First Anniversary                          75,000
                           Second Anniversary                         50,000
                           Third Anniversary                          25,000
</TABLE>

The purchase  price for each share of Stock  subject to each  Subsequent  Option
shall be equal to the Fair Market  Value (as such term is defined in the Company
Stock  Plan) of a share  of  Stock  as of the  date of grant of such  Subsequent
Option.  Subject to the terms of the Company  Stock Plan and the agreement to be
executed  by Company and  Executive  evidencing  each  Subsequent  Option,  each
Subsequent Option shall (i) be an incentive stock option to the extent permitted
under  applicable  law and a  nonqualified  stock  option  to the  extent of the
remainder  of the  grant,  if any,  (ii)  have a  ten-year  term,  (iii)  become
exercisable  in 25%  increments on each of the first four  anniversaries  of the
date of grant of such Subsequent Option. To the extent the grant of a Subsequent
Stock Option would exceed the  applicable  limitations  under any Company  Stock
Plan,  such grant or portion  thereof  shall be subject to the  approval  by the
shareholders  of Company of an amendment  to such Company  Stock Plan that would
permit  such  grant or  portion  thereof.  In the event of any such  limitation,
Company shall (a) cause the 1998 Plan to be amended,  (b) submit such  amendment
to Company's  shareholders at Company's 1999 Annual Meeting of Shareholders  and
(c) use its reasonable  best efforts to secure  approval by the  shareholders of
Company of such amendment.

         3.7 Subsequent  Restricted Stock Awards.  On each of the first,  second
and third  anniversaries of the Effective Date, Company shall grant to Executive
a number  of  restricted  shares  of Stock  (the  "Subsequent  Restricted  Stock
Awards") in accordance with the following schedule:

<TABLE>
<S>                                                  <C>
                  Anniversary of Effective Date      Number of Restricted Shares
                           First Anniversary                  25,000
                           Second Anniversary                 50,000
                           Third Anniversary                  75,000
</TABLE>

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<PAGE>



Subject to the terms of the  agreement  to be executed by Company and  Executive
evidencing each Subsequent  Restricted Stock Award,  each Subsequent  Restricted
Stock Award shall contain forfeiture  restrictions that shall lapse with respect
to (i) 1/3 of the shares subject  thereto on the first  anniversary of the grant
thereof,  (ii) an  additional  1/3 of the shares  subject  thereto on the second
anniversary of the grant thereof,  and (iii) and an additional 1/3 of the shares
subject  thereto on the third  anniversary of the grant  thereof.  Company shall
file a registration  statement on Form S-8 (or other  applicable  form) with the
Securities and Exchange  Commission in connection  with  Executive's  receipt of
shares pursuant to the Subsequent Restricted Stock Awards.

         3.8 Life Insurance.  Company will provide, or cause to be provided,  to
Executive, at no cost to Executive,  $1,0000,000 of term life insurance coverage
payable to a beneficiary to be designated in writing by Executive, together with
a tax gross-up  payment in the amount  necessary to offset any applicable  taxes
imposed on Executive by reason of such  coverage and such tax gross-up  payment.
Notwithstanding the foregoing,  however, if Executive fails to qualify medically
for such insurance  coverage at standard rates for his age group,  Company shall
not be required to provide such coverage unless  Executive pays the cost of such
coverage that is in excess of the standard rate cost. Such insurance,  including
replacement or substitute  policies  therefor,  shall be maintained for the same
period as Executive's  compensation hereunder is continued pursuant to Article 7
hereof.

         3.9      Other Perquisites.  During his employment hereunder, Executive
shall be afforded the following benefits as incidences of his employment:

                  (i) Business and Entertainment Expenses - Subject to Company's
         standard policies and procedures with respect to expense  reimbursement
         as  applied  to  its  executive  employees  generally,   Company  shall
         reimburse Executive for, or pay on behalf of Executive,  reasonable and
         appropriate   expenses  incurred  by  Executive  for  business  related
         purposes,   including  dues  and  fees  to  industry  and  professional
         organizations and costs of entertainment and business development.

                  (ii) Club  Memberships - In addition to the other business and
         entertainment  expenses  reimbursable  pursuant to subparagraph  3.9(i)
         above,  Company shall pay (A) 50% of the  initiation fee for the Castle
         Pines Golf Club and (B) the membership  fees,  dues and assessments for
         (1) the Castle Pines Golf Club,  (2) the River Oaks Country  Club,  (3)
         the Merit Club in Chicago,  Illinois,  (4) a luncheon  club  located in
         Houston,  Texas,  to be  selected  by  Executive,  and (5)  such  other
         luncheon or country club memberships as the Compensation  Committee may
         deem to be justified by business usage. The foregoing  notwithstanding,
         Company shall not be obligated to buy from  Executive,  or to reimburse
         Executive  for the  price  of,  his  membership  in any  club of  which
         Executive  is a member  prior to the  Effective  Date,  other  than the
         Castle Pines Golf Club.

                  (iii) Annual Physical  Examination - Company shall pay for the
         cost of an annual  physical  examination to be conducted by a doctor or
         clinic of Executive's choosing in Houston, Texas.

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<PAGE>



                  (iv)  Parking  -  Company  shall  provide  at  no  expense  to
         Executive a parking place convenient to Executive's office.

                  (v) Executive  Supplemental  Retirement Plan - Executive shall
         be allowed  to  participate  in the  Company's  Executive  Supplemental
         Retirement  Plan (the  "ESRP").  For purposes of the ESRP,  Executive's
         Applicable  Percentage  (as such term is defined in the ESRP)  shall be
         50% and  Executive's  Vested  Interest  (as such term is defined in the
         ESRP) in his benefit  under the ESRP shall be  determined in accordance
         with the following schedule:

<TABLE>
<S>                                                              <C>
                                                                 Vested Interest

         Prior to First Anniversary of Effective Date                 50%
         As of First Anniversary of Effective Date*                   60%
         As of Second Anniversary of Effective Date*                  70%
         As of Third Anniversary of Effective Date*                   80%
         As of Fourth Anniversary of Effective Date*                  90%
         As of Fifth Anniversary of Effective Date*                  100%
</TABLE>

         *provided  that  Executive  is employed by Company on such date and has
         been  so  employed  by  Company  on  a  full-time   basis   during  the
         twelve-month period immediately preceding such date.

         Notwithstanding  the  foregoing,  Executive's  Vested  Interest  in his
         benefit  under the ESRP  shall be 100% in the event of his  Involuntary
         Termination (as such term is defined in the Severance Agreement between
         Company and Executive  (the  "Severance  Agreement"))  within two years
         after the date upon which a Change of Control  (as such term is defined
         in the Severance  Agreement) occurs.  Further,  Company shall cause the
         ESRP  to  be  amended  (A)  to  expand  the   definition  of  the  term
         "Compensation"  in Section 1.01(8) with respect to Executive to include
         (1) "deemed  salary"  equal to the annual  base  salary that  Executive
         would have  received  if he had not  received an Option in lieu of such
         annual salary  pursuant to paragraph 3.1 and (2) bonuses under the EIP,
         (B) to remove  Section  5.02,  which  provides for the  forfeiture of a
         Member's  Accrued  Benefit  (as such term is  defined  in the ESRP) for
         competition  with the Company and (C) to expand Section 7.01 to provide
         that no amendment  to the ESRP shall  deprive any Member of any Accrued
         Benefit  under the ESRP to the  extent  that such  Member  has a Vested
         Interest in such Accrued Benefit at the time of such amendment.

                  (vi) Supplemental Benefit Plan - Executive shall be allowed to
         participate  in  the  SBP.   Further,   Executive   shall  receive  the
         Supplemental  Thrift  Benefit  pursuant  to Section  3.2(a) of the SBP.
         Finally,  Company  shall  cause  the SBP to be  amended  (A) to  remove
         Section 6.4 thereof, which provides for reductions of benefits to avoid
         imposition of the sanctions imposed under sections 280G and 4999 of the
         Code and (B) to provide  for the  crediting  of an  additional  benefit
         thereunder which, with respect to Executive, shall not be less than the
         Supplemental Thrift Benefit and the

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         Supplemental  ESOP Benefit  under the SBP,  the Employer  Contributions
         under the Seagull Thrift Plan and the Employer  Contributions under the
         Seagull  Employee  Stock  Ownership  Plan  that  Executive  would  have
         received if he had made the maximum allowable  contributions under such
         plans,  and based on the annual base salary that  Executive  would have
         received  if he had not  received an Option in lieu of such annual base
         salary pursuant to paragraph 3.1.

                  (vii) Other  Company  Benefits - Executive  and, to the extent
         applicable,  Executive's spouse, dependents and beneficiaries, shall be
         allowed to participate in all benefits,  plans and programs,  including
         improvements  or  modifications  of the  same,  which  are now,  or may
         hereafter be, available to other executive  employees of Company.  Such
         benefits,  plans and programs shall include,  without  limitation,  any
         profit sharing plan, thrift plan, employee stock ownership plan, health
         insurance or health care plan,  life insurance,  disability  insurance,
         pension plan,  supplemental  retirement  plan,  vacation and sick leave
         plan,  and the like which may be maintained  by Company.  Company shall
         not,  however,  by reason of this  paragraph be obligated to institute,
         maintain,  or refrain from changing,  amending,  or discontinuing,  any
         such  benefit plan or program,  so long as such  changes are  similarly
         applicable  to  executive  employees  generally.   In  the  event  that
         Executive (or his  beneficiaries)  are provided  welfare benefits under
         Company's  benefit  plans that are less than the welfare  benefits that
         would  have  been  provided  to  Executive  (or his  beneficiaries)  if
         Executive  had not  received  an Option in lieu of annual  base  salary
         pursuant  to  paragraph  3.1,  Company  shall  provide,  or cause to be
         provided, to Executive (or his beneficiaries) any such welfare benefits
         lost as a result of Executive's receipt of the Option in lieu of annual
         base salary.

                  (viii)   Vacation  -  During  each  year  of  his  employment,
         Executive  shall  be  entitled  to  five  weeks  of  paid  vacation  in
         accordance with Company's vacation policy.

                  (ix) Tax and  Financial  Planning  - Company  shall  reimburse
         Executive for reasonable  expenses incurred by Executive for tax return
         preparation and financial planning.

ARTICLE 4:  PROTECTION OF INFORMATION

         4.1 Disclosure to Executive.  Company shall  disclose to Executive,  or
place  Executive  in a position to have access to or develop,  trade  secrets or
confidential  information  of Company or its  affiliates;  and/or shall  entrust
Executive with business opportunities of Company or its affiliates; and/or shall
place Executive in a position to develop business good will on behalf of Company
or its affiliates.

         4.2  Disclosure  to and Property of Company.  All  information,  ideas,
concepts, improvements,  discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive,  individually or
in conjunction with others,  during  Executive's  employment by Company (whether
during business hours or otherwise and whether on Company's

                                       -8-


<PAGE>



premises or otherwise) which relate to Company's business, products, or services
(including,  without  limitation,  all such  information  relating to  corporate
opportunities,  research,  financial and sales data, pricing terms, evaluations,
opinions, interpretations,  acquisitions prospects, the identity of customers or
their  requirements,   the  identity  of  key  contacts  within  the  customer's
organizations or within the organization of acquisition prospects,  or marketing
and merchandising  techniques,  prospective names, and marks) shall be disclosed
to Company  and are and shall be the sole and  exclusive  property  of  Company.
Moreover,   all  documents,   drawings,   memoranda,   notes,  records,   files,
correspondence,  manuals,  models,  specifications,  computer programs,  E-mail,
voice mail, electronic  databases,  maps, and all other writings or materials of
any type  embodying  any of such  information,  ideas,  concepts,  improvements,
discoveries,  and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's  employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.

         4.3 No Unauthorized Use or Disclosure.  Executive will not, at any time
during  or after  Executive's  employment  by  Company,  make  any  unauthorized
disclosure of any confidential  business information or trade secrets of Company
or its  affiliates,  or make any use  thereof,  except  in the  carrying  out of
Executive's  employment  responsibilities  hereunder.  Affiliates of the Company
shall be  third  party  beneficiaries  of  Executive's  obligations  under  this
paragraph. As a result of Executive's employment by Company,  Executive may also
from time to time  have  access  to,  or  knowledge  of,  confidential  business
information  or trade secrets of third  parties,  such as customers,  suppliers,
partners,  joint  venturers,  and the  like,  of  Company  and  its  affiliates.
Executive also agrees to preserve and protect the  confidentiality of such third
party confidential  information and trade secrets to the same extent, and on the
same basis, as Company's confidential business information and trade secrets.

         4.4 Ownership by Company. If, during Executive's employment by Company,
Executive  creates  any work of  authorship  fixed  in any  tangible  medium  of
expression which is the subject matter of copyright (such as videotapes, written
presentations,   or  acquisitions,   computer  programs,   E-mail,  voice  mail,
electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures,  or the like) relating to Company's business,  products, or services,
whether such work is created solely by Executive or jointly with others (whether
during  business  hours or  otherwise  and  whether  on  Company's  premises  or
otherwise),  Company  shall be  deemed  the  author  of such work if the work is
prepared by Executive in the scope of Executive's employment; or, if the work is
not  prepared by Executive  within the scope of  Executive's  employment  but is
specially  ordered by Company as a contribution to a collective  work, as a part
of  a  motion  picture  or  other  audiovisual  work,  as  a  translation,  as a
supplementary work, as a compilation, or as an instructional text, then the work
shall be  considered to be work made for hire and Company shall be the author of
the work.  If such work  relates in any way to the  business  of Company  but is
neither prepared by Executive  within the scope of Executive's  employment nor a
work specially ordered that is deemed to be a work made for hire, then Executive
hereby agrees to assign,  and by these  presents does assign,  to Company all of
Executive's  worldwide  right,  title,  and interest in and to such work and all
rights of copyright therein.

         4.5  Assistance  by  Executive.  Both during the period of  Executive's
employment by Company and  thereafter,  Executive  shall assist  Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts,

                                       -9-


<PAGE>



improvements,  discoveries, and inventions, and its copyrighted works, including
without limitation,  the execution of all formal assignment  documents requested
by Company or its nominee and the execution of all lawful oaths and applications
for patents  and  registration  of  copyright  in the United  States and foreign
countries.

         4.6 Remedies.  Executive  acknowledges  that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the  provisions of this Article by  terminating  payments
then owing to Executive under this Agreement and/or to specific  performance and
injunctive  relief  as  remedies  for  such  breach  or any  threatened  breach;
provided,  however,  that payments then owing to Executive may not be terminated
unless the Board of  Directors  determines  that such  breach by  Executive  has
directly  resulted  or could  reasonably  be  expected  to result in a  material
adverse  economic impact on the Company's  business.  Such remedies shall not be
deemed the  exclusive  remedies  for a breach of this  Article,  but shall be in
addition to all remedies available at law or in equity to Company, including the
recovery of damages from  Executive  and his agents  involved in such breach and
remedies  available  to  Company  pursuant  to this and  other  agreements  with
Executive.

ARTICLE 5:  NONCOMPETITION AND NONSOLICITATION

         5.1 In General.  As part of the  consideration for the compensation and
benefits to be paid to  Executive  hereunder;  to protect the trade  secrets and
confidential  information of Company and its affiliates  that have been and will
in the future be disclosed or entrusted to Executive,  the business good will of
Company and its affiliates  that has been and will in the future be developed in
Executive,  or the business  opportunities that have been and will in the future
be disclosed or entrusted to Executive by Company and its affiliates;  and as an
additional  incentive  for  Company to enter into this  Agreement,  Company  and
Executive  agree  to the  noncompetition  and  the  nonsolicitation  obligations
hereunder.

         5.2  Noncompetition.  Executive  shall not,  directly or indirectly for
Executive or for others,  in any geographic  area or market where Company or any
of its affiliates are conducting any business or have during the previous twelve
months conducted such business:

                  (i)      engage in any business competitive with the business 
         conducted by Company; or

                  (ii) render  advice or services to, or otherwise  assist,  any
         other  person,  association,  or entity  who is  engaged,  directly  or
         indirectly,  in any business competitive with the business conducted by
         Company with respect to such competitive business.

These  noncompetition  obligations  shall  apply  (A)  during  the  period  that
Executive  is  employed  by  Company,  (B) during any period  after  Executive's
termination  of  employment  by Company for a reason  encompassed  by  paragraph
2.2(ii) when Company is providing  Executive with Termination  Benefits pursuant
to Article 7, and (C) if Executive terminates his employment with Company for a

                                      -10-


<PAGE>



reason  encompassed  by paragraph  2.3(ii)  within two years after the Effective
Date,  during  the  two-year  period  commencing  on  the  date  of  Executive's
termination of employment.

         5.3  Nonsolicitation.  Executive shall not,  directly or indirectly for
Executive or for others,  in any geographic  area or market where Company or any
of its affiliates are conducting any business or have during the previous twelve
months  conducted  such  business,  induce any employee of Company or any of its
affiliates to terminate his or her employment  with Company or such  affiliates,
or hire or assist in the hiring of any such employee by any person, association,
or entity not affiliated with Company.  These nonsolicitation  obligations shall
apply  during the period  that  Executive  is employed by Company and during the
one-year period commencing on the date of Executive's  termination of employment
for any reason.  Notwithstanding the foregoing, the provisions of this paragraph
5.3 shall not  restrict  the ability of Company to take  actions with respect to
the employment or the termination of employment of any of its employees,  or for
Executive  to  participate  in any such actions in his capacity as an officer of
Company.

         5.4 Enforcement and Remedies. Executive acknowledges that money damages
would not be sufficient remedy for any breach of this Article by Executive,  and
Company  shall  be  entitled  to  enforce  the  provisions  of this  Article  by
terminating any payments then owing to Executive under this Agreement  and/or to
specific  performance  and injunctive  relief as remedies for such breach or any
threatened breach; provided,  however, that payments then owing to Executive may
not be terminated  unless the Board of Directors  determines that such breach by
Executive has directly  resulted or could  reasonably be expected to result in a
material adverse economic impact on the Company's business.  Such remedies shall
not be deemed the exclusive remedies for a breach of this Article,  but shall be
in addition to all remedies available at law or in equity to Company,  including
without  limitation,  the recovery of damages  from  Executive  and  Executive's
agents  involved in such breach and remedies  available  to Company  pursuant to
this and other agreements with Executive.

         5.5 Reformation. It is expressly understood and agreed that Company and
Executive  consider the restrictions  contained in this Article to be reasonable
and necessary to protect the proprietary  information of Company.  Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be  unreasonable,  or overly broad as to  geographic  area or time, or otherwise
unenforceable,  the parties intend for the restrictions  therein set forth to be
modified  by such  court  so as to be  reasonable  and  enforceable  and,  as so
modified by the court, to be fully enforced.

ARTICLE 6:  STATEMENTS CONCERNING COMPANY

         6.1 In General.  Executive  shall  refrain,  both during the employment
relationship and after the employment relationship  terminates,  from publishing
any oral or written statements about Company,  any of its affiliates,  or any of
such  entities'  officers,   employees,   agents  or  representatives  that  are
slanderous,  libelous,  or defamatory;  or that disclose private or confidential
information  about  Company,  any of its  affiliates,  or any of such  entities'
business  affairs,  officers,  employees,  agents, or  representatives;  or that
constitute  an  intrusion  into the  seclusion  or private  lives of any of such
entities' officers, employees, agents, or representatives;  or that give rise to
unreasonable  adverse publicity about the private lives of any of such entities'
officers,  employees, agents, or representatives;  or that place Company, any of
its affiliates, or any of such entities' officers, employees, agents, or

                                      -11-


<PAGE>



representatives in a false light before the public;  or that constitute a

misappropriation of the name or likeness of Company,  any of its affiliates,  or
any of such entities' officers,  employees,  agents, or representatives,  except
where any of such  actions  are  disclosures  required  by  operation  of law or
judicial process. A violation or threatened violation of this prohibition may be
enjoined by the courts.  The rights  afforded  Company and its affiliates  under
this  provision  are in  addition to any and all rights and  remedies  otherwise
afforded by law.

ARTICLE 7:  EFFECT OF TERMINATION ON COMPENSATION

         7.1 By Expiration.  If Executive's employment hereunder shall terminate
upon  expiration  of the  term  provided  in  paragraph  2.1  hereof,  then  all
compensation   and  all  benefits  to  Executive   hereunder   shall   terminate
contemporaneously with termination of his employment.

         7.2 By Company. If Executive's employment hereunder shall be terminated
by Company prior to expiration of the term provided in paragraph 2.1, then, upon
such  termination,  regardless  of the reason  therefor,  all  compensation  and
benefits to  Executive  hereunder  shall  terminate  contemporaneously  with the
termination of such  employment;  provided,  however,  that if such  termination
shall be for any reason other than those  encompassed by paragraphs 2.2 (iii) or
(iv), then Company shall provide  Executive with the Termination  Benefits.  For
purposes  of this  Agreement,  the term  "Termination  Benefits"  shall mean the
following:  (i) Company shall  continue to pay to Executive his base salary then
in effect  pursuant to paragraph  3.1 (but not less than $500,000 for the period
beginning on January 1, 2000) for the unexpired portion of the term set forth in
paragraph  2.1;  (ii) all  outstanding  stock  options  granted  by  Company  to
Executive  shall  become  immediately   exercisable  in  full  upon  Executive's
termination of employment and shall remain exercisable thereafter for the period
provided  pursuant to the terms  thereof,  which  period  shall not be less than
twelve months (but in no event shall any such stock option be exercisable  after
the expiration of the original term of such stock option);  (iii) the forfeiture
restrictions  with  respect  to  all  outstanding  restricted  stock  issued  to
Executive shall lapse upon  Executive's  termination of employment,  (iv) within
five  business days after the date of  Executive's  termination  of  employment,
Company  shall pay to Executive a lump sum cash payment  equal to the sum of (A)
the  product  of  Executive's  Incentive  Target  set  forth  in  paragraph  3.3
multiplied  by  Executive's  annual base salary at the time of such  termination
(the "Target  Bonus") and (B) the Target Bonus amount prorated for the number of
months in the  performance  year of Executive's  termination of employment  that
have elapsed  prior to such  termination,  (v) the life  insurance  coverage and
annual tax gross-up  pursuant to paragraph 3.8 shall  continue to be provided to
Executive for the unexpired portion of the term set forth in paragraph 2.1, (vi)
Company  shall  continue to pay to Executive his club dues pursuant to paragraph
3.9(ii) for the unexpired  portion of the term set forth in paragraph 2.1, (vii)
within  five  business  days  after  the  date  of  Executive's  termination  of
employment,  Company shall pay to Executive a lump sum cash payment equal to the
amounts  credited to his accounts  under the Seagull  Thrift  Plan,  the Seagull
Employee  Stock  Ownership  Plan and the SBP that are  forfeitable in accordance
with the terms of such plans and (viii)  during  the  period,  if any (but in no
event for more

                                      -12-


<PAGE>



than 18 months after the date of Executive's  termination of  employment),  that
Executive  elects to  continue  coverage  for  himself  and any of his  eligible
dependents  under Company's  group health plans pursuant to the  continuation of
coverage  provisions  contained  in Sections  601  through  608 of the  Employee
Retirement  Income  Security Act of 1974, as amended,  Executive's  premiums for
such coverage shall be no greater than that charged by Company  generally to its
active  executive  employees  for  coverage  under such plans.  In the event the
Company does not fulfill its obligations under paragraph 1.1 to employ Executive
and appoint him to the  positions  set forth in paragraph  1.2,  then  Executive
shall be entitled to the Initial Option,  which shall be fully exercisable,  and
the Initial  Restricted  Stock Awards (or to the extent such Initial  Restricted
Stock Awards cannot be granted to Executive,  the economic value thereof), which
shall be fully  nonforfeitable,  and to  Termination  Benefits as if Executive's
employment terminated on the Effective Date.

         7.3  By  Executive.   If  Executive's  employment  hereunder  shall  be
terminated  by Executive  prior to  expiration of the term provided in paragraph
2.1,  then,  upon such  termination,  regardless  of the  reason  therefor,  all
compensation    and   benefits   to   Executive    hereunder   shall   terminate
contemporaneously  with the termination of such employment;  provided,  however,
that if such  termination  shall occur for the reason  encompassed  by paragraph
2.3(i), then Company shall provide Executive with the Termination Benefits.

         7.5 No Duty to Mitigate  Losses.  Executive  shall have no duty to find
new employment  following the termination of his employment under  circumstances
which require Company to pay any amount to Executive pursuant to this Article 7.
Any salary or  remuneration  received  by  Executive  from a third party for the
providing of personal  services  (whether by employment or by  functioning as an
independent  contractor)  following  the  termination  of his  employment  under
circumstances  pursuant to which this Article 7 apply shall not reduce Company's
obligation  to make a payment  to  Executive  (or the  amount  of such  payment)
pursuant to the terms of this Article 7. Notwithstanding the preceding sentence,
if, and to the extent that,  following the  termination of his employment  under
circumstances pursuant to which this Article 7 apply, Executive becomes entitled
to receive  benefits from a third party that are  comparable to the  Termination
Benefits set forth in paragraphs 7.2(v), (vi) and (viii),  Company's  obligation
to provide such Termination Benefits to Executive shall cease.

         7.6 Liquidated  Damages. In light of the difficulties in estimating the
damages for an early termination of this Agreement, Company and Executive hereby
agree that the  payments,  if any, to be received by Executive  pursuant to this
Article 7 shall be received by Executive as liquidated damages.

         7.7 Incentive and Deferred  Compensation.  This  Agreement  governs the
rights and obligations of Executive and Company with respect to Executive's base
salary and certain  perquisites  of  employment.  Except as  expressly  provided
herein,  Executive's  rights  and  obligations  both  during  the  term  of  his
employment  and  thereafter  with respect to stock  options,  restricted  stock,
incentive and deferred  compensation,  life insurance policies insuring the life
of  Executive,  and other  benefits  under the plans and programs  maintained by
Company shall be governed by the separate agreements,  plans and other documents
and  instruments  governing  such  matters.  Without  limiting  the scope of the
preceding  sentence,  Executive  acknowledges  that he has no right to grants of
stock options or

                                      -13-


<PAGE>



restricted  stock  either  under the stock  plans  maintained  by the Company or
otherwise  other than (i) as provided in  paragraphs  3.1,  3.4, 3.5, 3.6 or 3.7
hereof or (ii) in the discretion of the  Compensation  Committee or the Board of
Directors.

ARTICLE 8:  MISCELLANEOUS

         8.1  Notices.  For  purposes of this  Agreement,  notices and all other
communications  provided  for herein  shall be in writing and shall be deemed to
have been duly given when  personally  delivered or when mailed by United States
registered  or  certified  mail,  return  receipt  requested,  postage  prepaid,
addressed as follows:

         If to Company to:    Seagull Energy Corporation
                              1700 First City Tower
                              1001 Fannin
                              Houston, Texas 77002
                              Attention:  Chairman of the Board of Directors

         If to Executive to:  James T. Hackett
                              3372 Del Monte
                              Houston, Texas 77019

or to such other  address as either party may furnish to the other in writing in
accordance  herewith,  except  that  notices  or  changes  of  address  shall be
effective only upon receipt.

         8.2      Applicable Law.  This Agreement is entered into under, and 
shall be governed for all purposes by, the laws of the State of Texas.

         8.3 No Waiver.  No failure by either  party  hereto at any time to give
notice of any breach by the other party of, or to require  compliance  with, any
condition or provision of this Agreement  shall be deemed a waiver of similar or
dissimilar  provisions  or  conditions at the same or at any prior or subsequent
time.

         8.4 Severability.  If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or  unenforceability  of  that  provision  shall  not  affect  the  validity  or
enforceability  of  any  other  provision  of  this  Agreement,  and  all  other
provisions shall remain in full force and effect.

         8.5  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 Agreement.

         8.6  Withholding  of Taxes and Other Employee  Deductions.  Company may
withhold  from any benefits and payments  made  pursuant to this  Agreement  all
federal,  state,  city and other taxes as may be required pursuant to any law or
governmental  regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally. Company shall

                                      -14-


<PAGE>



cause the  agreements  evidencing  the Initial  Restricted  Stock Awards and the
Subsequent Restricted Stock Awards to provide that, upon lapse of the forfeiture
restrictions  contained  therein,  Company  will  withhold  (a)  at  Executive's
election,   shares  of  Stock  subject  to  such  Awards  to  satisfy  Company's
withholding  obligation  under  applicable tax laws or regulations  and (b) such
additional shares of Stock subject to such Awards as may be requested in writing
by Executive.

         8.7 Headings. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.

         8.8 Gender and Plurals. Wherever the context so requires, the masculine
gender  includes the feminine or neuter,  and the singular  number  includes the
plural and conversely.

         8.9 Affiliate.  As used in this Agreement,  the term "affiliate"  shall
mean any entity which owns or controls,  is owned or controlled  by, or is under
common ownership or control with, Company.

         8.10 Assignment.  This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise.  Except
as  provided  in the  preceding  sentence,  this  Agreement,  and the rights and
obligations of the parties  hereunder,  are personal and neither this Agreement,
nor any right,  benefit, or obligation of either party hereto,  shall be subject
to voluntary  or  involuntary  assignment,  alienation  or transfer,  whether by
operation of law or otherwise,  without the prior  written  consent of the other
party.

         8.11 Term.  This  Agreement  has a term  co-extensive  with the term of
employment provided in paragraph 2.1.  Termination shall not affect any right or
obligation  of any party which is accrued or vested  prior to such  termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
4, 5 and 6 shall survive any termination of the employment  relationship  and/or
of this Agreement.

         8.12 Entire  Agreement.  Except as provided in (i) the written  benefit
plans and programs and  agreements  referenced  in Article 3, (ii) the Severance
Agreement  between  Company and Executive  dated August 25, 1998 (the "Severance
Agreement"),  and  (iii)  any  signed  written  agreement  contemporaneously  or
hereafter  executed by Company and  Executive,  this Agreement  constitutes  the
entire  agreement of the parties with regard to the subject matter  hereof,  and
contains all the covenants, promises, representations, warranties and agreements
between the parties with respect to employment of Executive by Company.  Without
limiting  the scope of the  preceding  sentence,  all prior  understandings  and
agreements  among the parties  hereto  relating to the subject matter hereof are
hereby  null and void and of no  further  force  and  effect.  Further,  without
limiting the scope of this paragraph, this Agreement supersedes and replaces the
Employment  Agreement  between  Company and Executive dated August 25, 1998 (the
"Prior  Agreement")  in its entirety and the Prior  Agreement  shall be null and
void and of no  further  force  and  effect,  and any  references  to the  Prior
Agreement in any other agreement  including,  without limitation,  the Severance
Agreement,  shall be deemed to be references to this Agreement. Any modification
of this  Agreement  will be effective only if it is in writing and signed by the
party to be charged.

                                      -15-


<PAGE>


         8.13  Representation  By Executive.  Executive  hereby  represents  and
warrants to Company  that,  as of August 25, 1998 and the date of  execution  of
this Agreement,  he is not a party to any employment or other agreement with any
third party which would preclude him from accepting  employment with Company and
performing his obligations under this Agreement.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on
the 16th day of September, 1998 to be effective as of the Effective Date.

                                    SEAGULL ENERGY CORPORATION

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

                                            "COMPANY"

                                    /s/ James T. Hackett
                                    James T. Hackett

                                            "EXECUTIVE"

VEHOU02:119869.1

                                      -16-