SEVERANCE AGREEMENT

     AGREEMENT  BETWEEN OCEAN ENERGY,  INC., A TEXAS CORPORATION (THE "COMPANY")
formerly   known  as  Seagull   Energy   Corporation,   and  JOHN  D.   SCHILLER

("EXECUTIVE"),

                              W I T N E S S E T H :

         WHEREAS,  the Company desires to retain certain key employee  personnel
and,  accordingly,  the Board of  Directors  of the COMPANY  (THE  "BOARD")  has
approved the Company entering into a severance agreement with Executive in order
to encourage his continued service to the Company; and

         WHEREAS,  Executive  is prepared to commit such  services in return for
specific arrangements with respect to severance compensation and other benefits;

         NOW,  THEREFORE,  in  consideration of the foregoing and for other good
and valuable consideration, the Company and Executive agree as follows:

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         1.       DEFINITIONS.

                  (A)  "AVERAGE  BONUS"  shall  mean the  average  of the  bonus
payments, if any, received by Executive for the two immediately preceding fiscal
years of the Company;  provided,  however,  that for purposes of computing  such
Average Bonus,  Executive shall be deemed to have received a bonus payment equal
to 45% of Executive's annual salary at the time he commenced employment with the
Company for each of the 1997 and 1998 fiscal  years of the Company and any bonus
payments  actually  received  by  Executive  for  such  fiscal  years  shall  be
disregarded.

                  (B) "CHANGE IN DUTIES" shall mean the  occurrence,  within two
years after the date upon which a Change of Control  occurs,  of any one or more
of the following:

                           (i)  A   significant   reduction  in  the  duties  of
         Executive from those applicable to him immediately prior to the date on
         which a Change of Control occurs;

                           (ii) A  reduction  in  Executive's  annual  salary or
         bonus opportunity under any applicable bonus or incentive  compensation
         plan from that provided to him immediately prior to the date on which a
         Change of Control occurs;

                           (iii) Receipt of employee benefits (including but not
         limited  to  medical,  dental,  life  insurance,  accidental  death and
         dismemberment,  and  long-term  disability  plans) and  perquisites  by
         Executive that are materially  inconsistent  with the employee benefits
         and  perquisites  provided by the Company to executives with comparable
         duties; or

                           (iv)  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 the
         date on which a Change of Control occurs;

provided,  however,  that with  respect to the merger of Ocean  Energy,  Inc., a
Delaware corporation,  with and into the Company, which was consummated on March
30, 1999 (the "OEI Merger"), this Paragraph 1(b) shall be applied with reference
to Executive's  duties,  annual salary or bonus opportunity,  employee benefits,
and location of principal place of employment by the Company as of the effective
date of this Agreement rather than prior to the OEI Merger.

                  (C) "CHANGE OF  CONTROL"  means the  occurrence  of one of the
following events:

                           (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;

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                           (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;

provided,  however,  that the OEI Merger shall  constitute a "Change of Control"
for purposes of this Agreement.

                  (D) "CODE"  shall mean the Internal  Revenue Code of 1986,  as
amended.

                  (E) "COMPENSATION" shall mean the greater of:

                           (i) Executive's  annual salary plus his Average Bonus
         immediately prior to the date on which a Change of Control occurs, or

                           (ii) Executive's annual salary plus his Average Bonus

at the time of his Involuntary Termination.

                  (F)  "INVOLUNTARY  TERMINATION"  shall mean any termination of
Executive's employment with the Company which:

                           (i) does not result from a  resignation  by Executive
         (other than a resignation  pursuant to clause (ii) of this subparagraph
         (f) or a resignation at the request of the Company); or

                           (ii)  results from a  resignation  by Executive on or
         before the date which is sixty days after the date upon which Executive
         receives notice of a Change in Duties;

PROVIDED,  HOWEVER,  THE TERM  "INVOLUNTARY  TERMINATION"  shall  not  include a
Termination  for Cause, a termination of Executive's  employment  occurring as a
result of or in connection with the sale or other  divestiture by the Company of
a  division,   subsidiary,   or  other  business  segment  (including,   without
limitation,  a divestiture by sale of shares of stock or of assets) if Executive
is offered  continued  employment on terms that would not constitute a Change in
Duties by the acquiror of such business  segment  immediately  upon such sale or
divestiture,  or  any  termination  as  a  result  of  death,  disability  under
circumstances entitling him to benefits under the Company's long-term disability
plan, or Retirement.

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<PAGE>

                  (G) "RETIREMENT" shall mean Executive's  voluntary resignation
on or after the date he reaches age sixty-five (other than a resignation  within
sixty days after the date Executive  receives  notice of a Change in Duties or a
resignation at the request of the Company).

                  (H)  "SEVERANCE  AMOUNT"  shall  mean an amount  equal to 2.99
times Executive's Compensation.

                  (I)   "TERMINATION   FOR  CAUSE"  shall  mean  termination  of
Executive's  employment  by the  Company  (or its  subsidiaries)  by  reason  of
Executive's  gross  negligence,  gross  neglect  or  willful  misconduct  in the
performance  of his duties 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.

                  (J)  "WELFARE  BENEFIT  COVERAGES"  shall  mean  the  medical,
dental, life insurance and accidental death and dismemberment coverages provided
by the Company to its active employees.

         2.  SERVICES.  Executive  agrees  that he will  render  services to the
Company (as well as any  subsidiary  thereof or  successor  thereto)  during the
period  of his  employment  to the  best of his  ability  and in a  prudent  and
businesslike manner and that he will devote substantially the same time, efforts
and dedication to his duties as heretofore devoted.

         3. SEVERANCE BENEFITS. If Executive's  employment by the Company or any
subsidiary  thereof or  successor  thereto  shall be  subject to an  Involuntary
Termination  which occurs within two years after the date upon which a Change of
Control  occurs,  then  Executive  shall be entitled to receive,  as  additional
compensation for services rendered to the Company  (including its subsidiaries),
the following severance benefits:

                  (a) A lump sum cash payment in an amount equal to  Executive's
Severance Amount.

                  (b)  Executive  shall be  entitled  to  continue  the  Welfare
Benefit  Coverages for himself and, where  applicable,  his eligible  dependents
following  his  Involuntary   Termination  for  up  to  thirty-six  months  (the
"Continuation  Period"),  as  long  as  Executive  continues  either  to pay the
premiums  paid by active  employees of the Company for such  coverages or to pay
the actual (nonsubsidized) cost of such coverages for which the Company does not
subsidize for active  employees.  Such benefit  rights shall apply only to those
Welfare Benefit  Coverages which the Company has in effect from time to time for
active  employees,  and the  applicable  payments  shall  adjust as premiums for
active  employees  of the  Company or actual  costs,  whichever  is  applicable,
change.  Welfare Benefit  Coverage(s)  shall  immediately  end upon  Executive's
obtainment  of new  employment  and  eligibility  for  similar  Welfare  Benefit
Coverage(s)  (with Executive  being obligated  hereunder to promptly report such
eligibility to the Company).  Nothing herein shall be deemed to adversely affect
in any  way the  additional  rights,  after  consideration  of the  Continuation
Period,  of Executive and his eligible  dependents  to health care  continuation
coverage as required  pursuant to Part 6 of Title I of the  Employee  Retirement
Income Security Act of 1974, as amended.  If, for any reason,  Company is unable
to  continue  any of the  Welfare  Benefit  Coverages  during a period  in which
Executive   would  otherwise  be  entitled  to  continue  such  Welfare  Benefit
Coverage(s),  Company shall pay Executive an amount equal to the economic  value
of such Welfare Benefit Coverage(s).

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<PAGE>

                  (c)  Executive  shall be  entitled  to  receive  out-placement
services in connection  with  obtaining  new  employment up to a maximum cost of
$6,000, or an equivalent cash payment, if Executive either has or is not seeking
new employment.

                  (d) The severance  benefits payable under this Agreement shall
be paid to Executive  on or before the tenth  business day after the last day of
Executive's employment with the Company; provided,  however, that such severance
benefits  shall  not be paid  earlier  than  the  day  after  expiration  of the
revocation  period for the release  required by Paragraph  6(i).  Any  severance
benefits  paid  pursuant  to this  Paragraph  will be deemed  to be a  severance
payment and not  compensation  for purposes of  determining  benefits  under the
Company's qualified plans and shall be subject to any required tax withholding.

         4. INTEREST ON LATE BENEFIT  PAYMENTS.  If any payment  provided for in
Paragraph  3(a) or 3(b) hereof is not made when due,  the  Company  shall pay to
Executive  interest on the amount payable from the date that such payment should
have been made under such paragraph  until such payment is made,  which interest
shall be calculated at a rate equal to two  percentage  points over the prime or
base rate of interest  announced by Chase Bank of Texas,  N.A. (or any successor
thereto) at its principal office in Houston,  Texas and shall change when and as
any such change in such prime or base rate shall be announced by such bank.

         5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding anything
to the contrary in this Agreement, in the event that any payment or distribution
by the Company to or for the benefit of  Executive,  whether  paid or payable or
distributed  or  distributable  pursuant  to the  terms  of  this  Agreement  or
otherwise (a  "Payment"),  would be subject to the excise tax imposed by Section
4999 of the Code or any  interest or  penalties  with respect to such excise tax
(such excise tax, together with any such interest or penalties,  are hereinafter
collectively  referred  to as  the  "Excise  Tax"),  the  Company  shall  pay to
Executive an  additional  payment (a "Gross-up  Payment") in an amount such that
after  payment by  Executive of all taxes  (including  any interest or penalties
imposed  with respect to such  taxes),  including  any Excise Tax imposed on any
Gross-up  Payment,  Executive retains an amount of the Gross-up Payment equal to
the Excise Tax imposed upon the Payment. The Company and Executive shall make an
initial  determination  as to whether a Gross-up  Payment  is  required  and the
amount of any such  Gross-up  Payment.  Executive  shall  notify the  Company in
writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a Gross-up  Payment (or a Gross-up Payment in excess
of that, if any,  initially  determined by the Company and Executive) within ten
days of the receipt of such claim. The Company shall notify Executive in writing
at least ten days prior to the due date of any response required with respect to
such claim if it plans to contest the claim.  If the Company  decides to contest
such claim,  Executive  shall  cooperate  fully with the Company in such action;
provided,  however,  the Company shall bear and pay directly or  indirectly  all
costs and expenses  (including  additional  interest and penalties)  incurred in
connection with such action and shall indemnify and hold Executive harmless,  on
an after-tax  basis,  for any Excise Tax or income tax,  including  interest and
penalties with respect thereto, imposed as a result of the Company's action. If,
as a result of the Company's action with respect to a claim,  Executive receives
a refund of any amount paid by the Company with respect to such claim, Executive
shall  promptly pay such refund to the Company.  If the Company  fails to timely
notify  Executive  whether it will contest such claim or the Company  determines
not to contest such claim,  then the Company shall  immediately pay to Executive
the  portion  of  such  claim,  if any,  which  it has  not  previously  paid to
Executive.

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         6.       GENERAL.

                  (A) TERM.  THE  EFFECTIVE  DATE OF THIS  AGREEMENT IS JUNE 22,
1999. The initial term of this Agreement  shall be the period  beginning on said
effective date and ending on the three-year  anniversary of said effective date.
Within sixty days following the expiration of the initial term of this Agreement
and within sixty days after each successive three-year period of time thereafter
that this  Agreement  is in effect,  the Company  shall have the right to review
this  Agreement,  and in its sole  discretion  either  continue  and extend this
Agreement,   terminate  this  Agreement,  and/or  offer  Executive  a  different
agreement.  The Board  (excluding any member of the Board who is covered by this
Agreement or by a similar agreement with the Company) will vote on whether to so
extend, terminate,  and/or offer Executive a different agreement and will notify
Executive of such action before the end of said sixty-day time period  mentioned
above. This Agreement shall remain in effect until so terminated and/or modified
by the Company.  Failure of the Board to take any action  within said  sixty-day
time  period  shall be  considered  as an  extension  of this  Agreement  for an
additional three-year period of time.  Notwithstanding  anything to the contrary
contained in this "SUNSET  PROVISION,"  it is agreed that if a Change of Control
occurs  while this  Agreement  is in effect,  then this  Agreement  shall not BE
SUBJECT TO TERMINATION OR MODIFICATION UNDER THIS "SUNSET  PROVISION," and shall
remain in force for a period of two years after such  Change of Control,  and if
within  said two  years  the  contingency  factors  occur  which  would  entitle
Executive to the benefits as provided  herein,  this  Agreement  shall remain in
effect in accordance with its terms. If, within such two years after a Change of
CONTROL,  THE CONTINGENCY  FACTORS THAT WOULD ENTITLE EXECUTIVE TO SAID BENEFITS
DO NOT OCCUR,  THEREUPON  THIS  THREE-YEAR  "SUNSET  PROVISION"  shall  again be
applicable  with the  sixty-day  time  period  for Board  action  to  thereafter
commence at the expiration of said two years after such Change of Control and on
each three-year anniversary date thereafter.

                  (B)  INDEMNIFICATION.  If  Executive  shall  obtain  any money
judgment  or  otherwise  prevail  with  respect  to any  litigation  brought  by
Executive or the Company to enforce or interpret any provision contained herein,
the  Company,  to  the  fullest  extent  permitted  by  applicable  law,  hereby
indemnifies  Executive  for his  reasonable  attorneys'  fees and  disbursements
incurred in such  litigation  and hereby agrees (i) to pay in full all such fees
and  disbursements  and (ii) to pay  prejudgment  interest on any money judgment
obtained by  Executive  from the  earliest  date that payment to him should have
been made under this Agreement until such judgment shall have been paid in full,
which interest shall be calculated at a rate equal to two percentage points over
the prime or base rate of interest  announced  by Chase Bank of Texas,  N.A. (or
any successor  thereto) at its  principal  office in Houston,  Texas,  and shall
change when and as any such change in such prime or base rate shall be announced
by such bank.

                  (C) PAYMENT OBLIGATIONS ABSOLUTE.  The Company's obligation to
pay (or cause one of its  subsidiaries to pay) Executive the amounts and to make
the arrangements  provided herein shall be absolute and  unconditional and shall
not be  affected  by  any  circumstances,  including,  without  limitation,  any
set-off,  counterclaim,  recoupment,  defense or other  right  which the Company
(including  its  subsidiaries)  may have against him or anyone else. All amounts
payable by the Company  (including  its  subsidiaries  hereunder)  shall be paid
without  notice or  demand.  Executive  shall  not be  obligated  to seek  other
employment in mitigation of the amounts payable or  arrangements  made under any
provision of this  Agreement,  and, except as provided in Paragraph 3(b) hereof,
the  obtaining  of any  such  other  employment  shall in no  event  effect  any
reduction  of the  Company's  obligations  to make (or  cause  to be  made)  the
payments and arrangements required to be made under this Agreement.

                  (D) SUCCESSORS. This Agreement shall be binding upon and inure
to the benefit of the Company and any  successor  of the  Company,  by merger or
otherwise. This Agreement shall also be binding upon and inure to the benefit of
Executive  and his  estate.  If  Executive  shall die prior to full  payment  of
amounts due pursuant to this Agreement,  such amounts shall be payable  pursuant
to the terms of this Agreement to his estate.

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                  (E)  SEVERABILITY.  Any provision in this  Agreement  which is
prohibited or  unenforceable  in any  jurisdiction  by reason of applicable  law
shall,  as to such  jurisdiction,  be  ineffective  only to the  extent  of such
prohibition or unenforceability  without invalidating or affecting the remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

                  (F)  NON-ALIENATION.  Executive  shall  not have any  right to
pledge,  hypothecate,   anticipate  or  assign  this  Agreement  or  the  rights
hereunder, except by will or the laws of descent and distribution.

                  (G) NOTICES. Any notices or other communications  provided for
in this Agreement  shall be sufficient if in writing.  In the case of Executive,
such notices or communications shall be effectively  delivered if hand delivered
to Executive at his  principal  place of  employment or if sent by registered or
certified  mail to  Executive at the last address he has filed with the Company.
In the case of the Company,  such notices or communications shall be effectively
delivered  if  sent by  registered  or  certified  mail  to the  Company  at its
principal executive offices.

                  (H) CONTROLLING  LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas. Further, Executive
agrees that any legal  proceeding to enforce the  provisions  of this  Agreement
shall be brought in Houston,  Harris County,  Texas, and hereby waives his right
to any pleas regarding subject matter or personal jurisdiction and venue.

                  (I)  RELEASE.  As a  condition  to the  receipt of any benefit
under Paragraph 3 hereof,  Executive shall first execute a release,  in the form
established by the Company, releasing the Company, its affiliates, predecessors,
successors,  shareholders,  partners, officers, directors,  employees and agents
from any and all  claims  and from any and all  causes  of action of any kind or
character,  including but not limited to all claims or causes of action  arising
out of  Executive's  employment  with the  Company  or the  termination  of such
employment.

                  (J) FULL SETTLEMENT.  If Executive is entitled to and receives
the benefits provided  hereunder,  performance of the obligations of the Company
hereunder will  constitute  full  settlement of all claims that Executive  might
otherwise   assert  against  the  Company  on  account  of  his  termination  of
employment.

                  (K) UNFUNDED  OBLIGATION.  The obligation to pay amounts under
this  Agreement  is  an  unfunded  obligation  of  the  Company  (including  its
subsidiaries),  and no such  obligation  shall create a trust or be deemed to be
secured by any pledge or encumbrance  on any property of the Company  (including
its subsidiaries).

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                  (L) NOT A CONTRACT OF EMPLOYMENT.  This Agreement shall not be
deemed to constitute a contract of  employment,  nor shall any provision  hereof
affect (i) the right of the Company (or its subsidiaries) to discharge Executive
at will or (ii)  the  terms  and  conditions  of any  signed  written  agreement
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 any  termination of  Executive's  employment
with the 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  any  Severance  Agreement,  Employment  Agreement  or
Severance  Protection  Agreement  between  Company  (or  its  predecessors)  and
Executive (a "Prior  Agreement")  in its  entirety and any such Prior  Agreement
shall be null and void and of no further force and effect.  Any  modification of
this  Agreement  will be  effective  only if it is in writing  and signed by the
party to be charged.

                  (M) NUMBER AND GENDER. Wherever appropriate herein, words used
in the  singular  shall  include  the plural and the plural  shall  include  the
singular. The masculine gender where appearing herein shall be deemed to include
the feminine gender.

                  (N)  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.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on
the 27 day of September, 1999.

                                      "EXECUTIVE"

                                      /s/ John D. Schiller

                                     "COMPANY"

                                      OCEAN ENERGY, INC.

                             By:      /s/ Robert K. Reeves
                             Name:    Robert K. Reeves
                             Title:   Executive Vice President, General Counsel
                                      and Secretary

VEHOU02:140045.1, modified
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