Approved March 16, 1998




                           SEAGULL ENERGY CORPORATION
                                      1998
                            EXECUTIVE INCENTIVE PLAN


Background

     The 1998 Executive Incentive Plan (the "Incentive Plan") for Seagull Energy
Corporation  is  designed to motivate  key  employees  of the Company to achieve
tough,  but  realistic,  performance  goals and to reward  those  employees  who
perform at or above the expected level. The Incentive Plan defines participants,
award  opportunities and performance goals for the 1998 performance year. It is,
of course,  based upon the 1998  Operating  Plan (the  "Operating  Plan") and is
designed to maximize  performance  incentives while allowing for the recognition
of individual efforts through a significant discretionary component.

Participation

     Participants  in the Incentive Plan are those key employees whose positions
have been valued in the salary  structure  in and above Grade 12.  These are the
persons responsible for the annual and longer-term success of the company.

Timing of Payments

     One  hundred  percent  of any  Incentive  Plan  award  earned  for the 1998
performance  year will be paid to the recipient  during the first quarter of the
year  following the  performance  year. The recipient must be an employee on the
payment date in order to receive such payment.

Award Opportunities

     Annual  incentive  targets are  expressed as a  percentage  of total salary
earned  during a given year and can increase to double the  targeted  amounts or
decrease to zero, relative to the achievement of predetermined performance goals
and subject to senior  management and Board of Director  discretion at year-end.
The  Compensation  Committee  of the Board  reserves  the  right to  modify  the
performance  measures and award levels specified in the objective  components of
the Incentive Plan if presently unforeseen circumstances should occur during the
year  which  invalidate  any of  the  material  assumptions  that  underlie  the
Operating  Plan,  or if, in the  opinion  of the  Compensation  Committee,  such
modifications  are required to avoid a result that is  inequitable to either the
company or the Incentive Plan participants.


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Performance Measures

     The  performance  measures for the  Incentive  Plan are  summarized  on the
following  pages.  Four  performance  components are included with the following
weightings:

<TABLE>
<S> <C> Pre-tax  cash flow from  operations  20% weight  Reserve  additions  and
production replacement costs 30% weight Company stock performance assessment 10%
weight Discretionary individual performance assessment 40% weight </TABLE>

     Pre-tax cash flow from  operations  (PCFO) - the first component is defined
as earnings before income taxes, plus operating and non-operating  depreciation,
depletion and amortization,  plus pre-tax incentive compensation expense, and is
based on actual corporate  performance for the year as compared to the Company's
Operating Plan projection of PCFO.

     Reserve  additions and production  replacement costs - the second component
is comprised of two  subparts,  reserve  additions  and  production  replacement
costs,  weighted at 15% each. Using the Company's Operating Plan projections for
the Incentive Plan year, actual reserves added and actual production replacement
costs are compared to the corresponding projections for each.

     Company stock  performance  assessment - the third component  compares both
the Company's  average and year-end stock price for the Plan year to its average
and year-end  stock price for the preceding year and then compares the resulting
percentage changes to the percentage changes (calculated in the same manner) for
each of the peer group companies.

     Discretionary individual performance assessment - the fourth component will
be  determined  individually  and  subjectively,  based  on  each  participant's
individual job performance.

     The performance  components will be measured  independently of the other at
year-end.  At that time, the Chief  Executive  Officer will  recommend  specific
awards,  subject to final  approval of each  element of the total  awards by the
Compensation Committee and ultimately by the Board of Directors.
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Performance Weightings:

                 20% on  pre-tax  cash  flow  from  operations  30%  on  reserve
                 additions and production  replacement cost 10% on Company stock
                 performance   assessment   40%  on   discretionary   individual
                 performance assessment

I. Objective Performance Assessments - 60%:

     Pre-Tax Cash Flow from Operations (PCFO) - 20%

 The performance award will be calculated as follows:

<TABLE>
<CAPTION>

                 Column 1                Column 2            Column 3             Column 4

                                                                                 Percentage of
               Pre-Tax Cash            Percentage of      Percentage of             Total
                Flow From             Operating Plan       PCFO Target           Target Award
              Operations (1)          Projection (2      Award Earned (3)         Earned (3)

<S>           <C>                     <C>                  <C>                   <C>

                 $173,437                    85                        0              0
                 $183,640                    90                       25              5
                 $193,842                    95                       60             12
                 $204,044                   100                      100             20
                 $255,055                   125                      150             30
                 $306,066                   150                      200             40


</TABLE>


     (1)  Earnings   before  income  taxes  plus  operating  and   non-operating
depreciation,  depletion  and  amortization  and  also  plus  pre-tax  incentive
compensation expense (dollars in thousands).

     (2) If subsequent events over the course of the performance year invalidate
any of the basic assumptions in the Operating Plan, then the original  Operating
Plan  projections  will be revised to conform the Operating Plan  assumptions to
reality.  The initial PCFO performance  criteria for the Incentive Plan shown in
Column 1 will then be adjusted by applying the percentages  shown in Column 2 to
the revised Operating Plan projection of PCFO.

     (3) If, after the actual PCFO for the  performance  year is determined,  it
falls within the ranges shown in Column 1, the exact incentive award percentages
from Columns 3 and 4 will be calculated by interpolation.


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               Reserve Additions and Production Replacement Cost - 30%

     The performance award will be comprised of two subparts as follows:

     1. The first element is weighted at 15% and compares  actual reserves added
during the Plan year to the Company's  Operating  Plan  projection  for the Plan
year.

<TABLE>
<CAPTION>


              Column 1                 Column 2                 Column3                   Column 4

              Reserves              Percentage of            Percentage of           Percentage of Total
               Added                Operating Plan            Target Award              Target Award
             (BCFE) (1)             Projection (1)             Earned (2)                Earned (2)

<S>          <C>                    <C>                      <C>                     <C>

               205.2                      80                        0                          0
               230.9                      90                       25                       3.75
               243.7                      95                       60                          9
               256.5                     100                      100                         15
               282.2                     110                      150                       22.5
               307.8                     120                      200                         30

</TABLE>

     (1) If subsequent events over the course of the performance year invalidate
any of the basic assumptions in the Operating Plan, then the original  Operating
Plan  projections  will be revised to conform the Operating Plan  assumptions to
reality.  The initial reserve  addition  performance  criteria for the Incentive
Plan shown in Column 1 will then be adjusted by applying the  percentages  shown
in Column 2 to the revised Operating Plan projection of reserve additions.

     (2) If after the actual  reserve  additions  for the  performance  year are
determined,  the aggregate total falls between the ranges shown in Column 1, the
exact  incentive  award  percentages  from Columns 3 and 4 will be calculated by
interpolation.





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2.  The  second  element  is  weighted  at 15% and  compares  actual  production
replacement  costs for the Plan year to the Company's  Operating Plan projection
for the Plan  year,  calculated  in both cases in the  manner  reflected  in the
Operating Plan.

<TABLE>
<CAPTION>


                  Column 1                Column 2                Column3                  Column 4

                 Production            Percentage of           Percentage of          Percentage of Total
                Replacement            Operating Plan          Target Award              Target Award
                  Cost (1)             Projection (2)           Earned (3)                Earned (3)

<S>             <C>                    <C>                     <C>                    <C>

                   $1.20                    120                      0                         0
                   $1.10                    110                     40                         6
                   $1.00                    100                     100                       15
                   $0.90                     90                     140                       21
                   $0.80                     80                     200                       30

</TABLE>

     (1) Considers cost of all reserve additions, including acquisitions.

     (2) If subsequent events over the course of the performance year invalidate
any of the basic assumptions in the Operating Plan, then the original  Operating
Plan  projections  will be revised to conform the Operating Plan  assumptions to
reality.  The initial production  replacement cost performance  criteria for the
Incentive  Plan  shown  in  Column  1 will  then be  adjusted  by  applying  the
percentages  shown in  Column 2 to the  revised  Operating  Plan  projection  of
production replacement cost.

     (3) If after the actual  production  replacement  cost for the  performance
year are  determined,  it falls  within the ranges  shown in Column 1, the exact
incentive  award  percentages  from  Columns  3  and 4  will  be  calculated  by
interpolation.


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     Company Stock Performance Assessment - 10%

     The  performance  award will be based upon, A) the  difference  between the
Company's  average stock price ("Average Price") for the calendar year preceding
the performance  year and the Average Price for the performance year and, B) the
difference  between the stock's year-end closing price ("Closing Price") for the
calendar year preceding the performance  year and the stock's  year-end  closing
price for the performance  year. The Average Price for each respective year will
be determined by dividing the number of trading days in the year into the sum of
the respective  closing prices of the Company's stock for each such trading day.
The  percentage  changes in the  Average  Price and the  Closing  Price from the
previous year to the performance year are calculated.  Then the same comparisons
are made for each of the peer  companies  selected for the Plan, and the Company
is ranked  accordingly.  The  performance  award for this component will then be
calculated as follows:

<TABLE>
<CAPTION>


                        Column 1                      Column 2                       Column 3

                      Change In                    Percentage of               Percentage of Total
                    Average Price                  Target Award                   Target Award
                  Relative to Peers                 Earned (1)                     Earned (1)

<S>               <C>                              <C>                         <C>
                   25th percentile                      0                              0
                   40th percentile                      40                              4
                   50th percentile                      80                              8
                   55th percentile                     100                             10
                   60th percentile                     120                             12
                   70th percentile                     160                             16
                   80th percentile                     200                             20


 </TABLE>


     (1) If after the  actual  percentile  is  determined,  it falls  within the
ranges shown in Column 1, the exact  incentive  award  percentages for Columns 2
and 3 will be calculated by interpolation.



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<TABLE>
<CAPTION>

     The peer companies are:

<S>        <C>                                                     <C>
           1.    Anadarko Petroleum Corp.                          13.  Ocean Energy, Inc.
           2.    Apache Corp.                                      14.  Oryx Energy Co.
           3.    Barrett Resources Corp.                           15.  Pioneer Natural Resources Co.
           4.    Burlington Resources, Inc.                        16.  Pogo Producing Co.
           5.    Devon Energy Corp.                                17.  Santa Fe Energy Resources, Inc.
           6.    EEX Corp.                                         18.  Union Pacific Resources Group Inc.
           7.    Enron Oil & Gas Co.                               19.  Union Texas Petroleum Corp.
           8.    Equitable Resources, Inc.                         20.  United Meridian Corp.
           9.    Forcenergy, Inc.                                  21.  Vastar Resources Inc.
           10.  Newfield Exploration Co.                           22.  Vintage Petroleum, Inc.
           11.  Noble Affiliates, Inc.                             23.  Trans Texas Gas Corp.
           12.  Nuevo Energy Co.                                   24.  Triton Energy, Ltd.

</TABLE>

     II. Discretionary Individual Performance Assessment - 40%

          The discretionary individual performance assessment will be determined
     informally and subjectively on the basis of each  participant's  individual
     job  performance and primarily  governed by the extent to which  individual
     and  collective  goals and  objectives  established at the beginning of the
     year are achieved.

          At year-end,  the Chief Executive Officer will counsel with his direct
     reports  in  completing  discretionary  performance  assessments  for  each
     participant and recommend  specific awards,  which will be subject to final
     approval  by the  Compensation  Committee  and  ultimately  by the Board of
     Directors.


     Total Plan Payout Potential:

     Maximum potential is 200%
     Target goal is 100%
     Minimum potential is 0%