EMPLOYMENT AND CONSULTING AGREEMENT

         THIS EMPLOYMENT AND CONSULTING AGREEMENT ("Agreement"), effective as of
August  24,  1998 (the  "Effective  Date"),  is by and  between  SEAGULL  ENERGY
CORPORATION,  a Texas corporation ("Seagull"),  and BARRY J. GALT, an individual
who resides in Houston, Texas ("Galt").

                              W I T N E S S E T H :

         WHEREAS, Galt is currently employed by Seagull; and

         WHEREAS,  Seagull and Galt entered into an Employment  Agreement  dated
December 30, 1983,  which has been previously  amended in certain minor respects
and is currently in effect (the "Employment Agreement"); and

         WHEREAS,  Seagull  and Galt  desire  to enter  into an  agreement  that
replaces the  Employment  Agreement and that  reflects  their desire for Galt to
perform  certain  services  as a Seagull  employee  during a  transition  period
beginning on the Effective Date and  subsequently to perform certain services as
a consultant after such transition period;

         NOW THEREFORE,  the parties,  in  consideration of the mutual promises,
covenants and obligations contained herein, do hereby agree as follows:

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

         2.  Employment.  Galt has resigned (a) as President and Chief Executive
Officer of Seagull,  effective as of James T. Hackett's  first day of employment
with  Seagull  (the  "Resignation  Effective  Date"),  (b)  as a  member  of the
Executive Committee and its Chairman,  effective as of the Resignation Effective
Date,  (c) as a member of any other  committee  of Seagull on which Galt serves,
effective as of the Resignation  Effective Date, (d) as Chairman of the Board of
Directors  of Seagull (the "Board of  Directors"),  effective as of December 31,
1998,  provided  that  Galt has been  designated  as Vice  Chairman  of  Seagull
effective as of January,  1, 1999,  and  continuing  through the  adjournment of
Seagull's 1999 Annual Meeting of Shareholders (the "1999 Annual  Meeting"),  (e)
as Chairman of Seagull's  ENSTAR Natural Gas Company division and as Chairman of
the ENSTAR Natural Gas Company Advisory Board, effective as of December 31, 1998
(but not as a member of such  Advisory  Board),  and (f) from any other  office,
trusteeship or position that Galt holds with

                                       -1-


<PAGE>



Seagull  (other than as a director or employee of Seagull) or any  subsidiary or
division of Seagull  (other  than as a member of the ENSTAR  Natural Gas Company
Advisory  Board) or any employee  benefit plan (other than as a  participant  or
beneficiary  of any employee  benefit  plan)  relating to Seagull,  in each case
effective  as of the  Resignation  Effective  Date.  Effective  at the  close of
business on May 31,  1999,  Galt shall cease to be an employee of Seagull.  Galt
acknowledges  that,  effective as of January 1, 1999, he has been  designated as
Vice Chairman of Seagull.

         3.  Vice  Chairman.  Effective  as of  January  1,  1999,  the Board of
Directors  has elected Galt to serve as Vice Chairman of the Board of Directors.
As Vice  Chairman,  Galt shall have such  powers  and  duties as  designated  in
Seagull's bylaws and as from time to time may be assigned to him by the Board of
Directors or the Chairman of the Board of  Directors.  The  designation  of Vice
Chairman shall continue through the adjournment of the 1999 Annual Meeting.

         4. Directorship.  Galt shall serve the remainder of his current term as
a director of  Seagull.  Any  renomination  of Galt for a  subsequent  term as a
director of Seagull shall be considered in the same manner as other directors of
Seagull.

         5.  Consultancy.  Effective  June  1,  1999,  and  continuing  for  the
remainder of the Term of this Agreement  pursuant to Paragraph 7 (the "Period of
Consultancy"),  Galt shall serve as a consultant  to the  management  of Seagull
with  respect to such  areas as are  requested  by the  management  of  Seagull,
including the prosecution,  defense, or other resolution of any litigation,  now
pending or future. It is understood that during the Period of Consultancy,  Galt
may be  rendering  services  to  others  and,  in  using  the  services  of Galt
hereunder,  Seagull will exercise due regard for other commitments of Galt. Galt
shall  faithfully   render  his  best  efforts  and  professional   judgment  in
performance of these services  consistent with good  consulting  practice and to
the promotion, advancement and successful conduct of the business of Seagull. In
providing such consultation,  Galt shall provide Seagull with such of his ideas,
assessments,  and evaluations as Seagull may deem  necessary.  Galt agrees to be
available for such meetings as Seagull deems necessary for proper  communication
of his consultation.

         6.  Compensation,  Benefits and Perquisites.  In consideration  for the
services  to be  rendered  pursuant  to this  Agreement,  Seagull  agrees to the
following:

                  (a)  Compensation  and Benefits  During Period of  Employment.
         During the period beginning on the Effective Date and ending on May 31,
         1999 (the "Period of  Employment"),  Seagull  shall provide to Galt the
         following compensation and benefits:

                           (i) Signing  Bonus.  Within five  business days after
                  the date of execution hereof, Seagull shall pay to Galt a lump
                  sum cash payment in the amount of $1,800,000.

                                       -2-


<PAGE>



                           (ii) Base  Salary.  Seagull  shall pay to Galt a base
                  salary of  $49,166.67  per  month  ($590,000  annual  rate) in
                  accordance with Seagull's standard policy regarding payment of
                  compensation  to  executives,  but  no  less  frequently  than
                  monthly.

                           (iii) Bonuses.  For the 1998  performance  year, Galt
                  shall be  eligible  to receive an annual  bonus under the 1998
                  Seagull  Energy  Corporation  Executive  Incentive  Plan  (the
                  "EIP"),  based on an Incentive Target (as such term is used in
                  the EIP) of 50% of Galt's  annual base salary,  with a Maximum
                  Incentive  (as such term is used in the EIP) of 100% of Galt's
                  annual base salary;  provided however, that the amount of such
                  annual  bonus  shall  not be less  than  $295,000.  In lieu of
                  participation  in the  EIP  for  the  1999  performance  year,
                  Seagull  shall pay Galt a lump sum cash  payment in the amount
                  of $122,917 within five business days after May 31, 1999.

                           (iv) Stock Options. On August 24, 1998, Seagull shall
                  grant  to Galt  the  option  to  purchase  100,000  shares  of
                  Seagull's  common  stock  ("Stock")  pursuant  to the  Seagull
                  Energy  Corporation  1998 Omnibus  Stock Plan (the "Plan") and
                  effective as of January 1, 1999,  Seagull  shall grant to Galt
                  an option to purchase  50,000 shares of Stock  pursuant to the
                  Plan  (jointly,  the  "Options").  The purchase price for each
                  share of Stock  subject to the  Options  shall be equal to the
                  Fair  Market  Value (as such term is defined in the Plan) of a
                  share of Stock as of the date of grant thereof. Subject to the
                  terms of the Plan and the agreements to be executed by Seagull
                  and Galt  evidencing  the Options,  each Option shall (A) be a
                  nonqualified stock option, (B) have a term that expires on May
                  31, 2004 and (C) become fully  exercisable  as of May 31, 1999
                  (prior to which  date it shall not be  exercisable,  except to
                  the extent  otherwise  provided  pursuant  to the terms of the
                  Plan).

                           (v) Loan.  After the  Effective  Date,  Seagull shall
                  lend,  or cause to be lent to Galt  (the  "Loan"),  an  amount
                  sufficient  to enable Galt to exercise  his option to purchase
                  192,000 shares of Stock, which expires September 20, 1998 (the
                  "Expiring Option"), and to pay any applicable taxes imposed on
                  Galt by reason of the  exercise of the  Expiring  Option.  The
                  loan shall (A) be recourse,  (B) be secured by a pledge of the
                  Stock underlying the Expiring Option, (C) have a term maturing
                  on May 31,  2002 and (D) bear  interest  at a rate that is not
                  less than the applicable  Federal rate as such term is defined
                  in

                                       -3-


<PAGE>



                  section  7872(f)(2)  of the Internal  Revenue Code of 1986, as
                  amended (the "Code") at the time thereof.

                           (vi) Outstanding  Stock Options.  Effective as of May
                  31, 1999, Seagull shall cause Galt's options to purchase Stock
                  outstanding as of such date to be amended to provide that each
                  such option shall be fully  exercisable on such date and shall
                  continue to be exercisable until May 31, 2004,  subject to the
                  expiration date contained in such options.  Galt  acknowledges
                  and agrees that the  extension of the such  outstanding  stock
                  options may cause any such  options  intended to be  incentive
                  stock options within the meaning of section 422(b) of the Code
                  ("ISOs") to be treated as options that do not constitute ISOs.

                           (vii) Executive  Supplemental  Retirement Plan. Prior
                  to May 31, 1999, Seagull shall establish a trust (the "Trust")
                  in  connection   with  the  Seagull   Executive   Supplemental
                  Retirement  Plan (the  "ESRP").  The Trust is not  intended to
                  result in the ESRP being treated as funded for purposes of the
                  Code and Title I of the Employee  Retirement  Income  Security
                  Act of 1974, as amended, and shall conform to the terms of the
                  model rabbi trust set forth in Revenue Procedure 92-64, 1992-2
                  C.B. 422. Prior to May 31, 1999,  Seagull shall  contribute to
                  the Trust the Actuarially  Equivalent (as such term is defined
                  in the ESRP) present value of Galt's Accrued  Benefit (as such
                  term is defined in the ESRP) under the ESRP. Further,  Seagull
                  shall cause the ESRP to be amended to expand  Section  7.01 to
                  provide that no amendment to the ESRP shall deprive any Member
                  (as such term is defined in the ESRP) of any  Accrued  Benefit
                  under the ESRP to the  extent  that such  Member  has a Vested
                  Interest (as such term is defined in the ESRP) in such Accrued
                  Benefit at the time of such amendment.

                           (viii) Supplemental Benefit Plan. Seagull shall cause
                  the  Seagull  Supplemental  Benefit  Plan  (the  "SBP")  to be
                  amended to provide that  benefits  under the SBP shall be paid
                  upon the later of a Participant's  (as such term is defined in
                  the SBP)  termination  of employment or termination of service
                  as a consultant of Seagull.

                           (ix) Seagull  Benefit Plans.  Galt and, to the extent
                  applicable, Galt's spouse, dependents and beneficiaries, shall
                  be allowed to participate in all benefits, plans and programs,
                  including

                                       -4-


<PAGE>



                  improvements or  modifications  of the same, which are now, or
                  may hereafter be,  available to other  executive  employees of
                  Seagull.  Such  benefits,  plans and programs  shall  include,
                  without  limitation,  the SBP, 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 that may be  maintained  by Seagull.
                  Seagull  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.

                  (b) Other Items.  Seagull shall  reimburse Galt for reasonable
         out-of-pocket  legal  expenses that he has incurred in connection  with
         the transition of his employment. Such reimbursement shall occur within
         five business days after the date of execution  hereof or the date that
         Galt  submits  a  copies  of the  invoices  for  such  legal  expenses,
         whichever  is later.  Prior to May 31,  1999,  Seagull  shall cause the
         following  items to be  transferred  to Galt, AS IS, WHERE IS,  without
         warranty (i) the Seagull  memberships  in the River Oaks Country  Club,
         the Coronado Club,  the Houston  Petroleum Club and the Ramada Club and
         (ii) Galt's current office  furnishings,  all of which shall be used in
         the office provided  pursuant to Paragraph  (d)(vi) for as long as Galt
         maintains  an office at  Seagull's  offices or  otherwise  provided  by
         Seagull.

          (c) Compensation and Benefits During Period of Consultancy. During the
     Period  of  Consultancy,  Seagull  shall  provide  to  Galt  the  following
     compensation and benefits:

                           (i) Consulting Fees.  Within five business days after
                  the first day of each month during the Period of  Consultancy,
                  Seagull shall pay Galt a monthly  consulting fee in the amount
                  of $35,416.67 ($425,000 annual rate).

                           (ii)   Economic   Value  of  Seagull   Benefit   Plan
                  Participation. On January 1, 1999, Seagull shall pay to Galt a
                  lump sum cash payment in the amount of  $400,000,  which shall
                  represent  the economic  value of  participation  in Seagull's
                  benefit plans (based on an annual salary rate of $590,000) for
                  the Period of Consultancy.

                  (d) Perquisites  During Term of Agreement.  During the Term of
         this   Agreement,   Seagull   shall   provide  to  Galt  the  following
         perquisites:

                                       -5-


<PAGE>




                           (i) Annual Life Insurance  Premiums.  On the date and
                  in the manner  designated by Galt,  which date shall be within
                  ninety days of the date specified below,  Seagull shall tender
                  annual  premiums  in the  amounts  specified  below  by  check
                  payable  to the  insurance  company  designated  by Galt to be
                  applied by such company to the insurance policy  designated by
                  Galt.
<TABLE>
<S>                                                                    <C>

                           Due Date                                    Amount
                           2-9-99                                      $6,355
                           2-9-00                                       7,225
                           2-9-01                                       8,100
                           2-9-02                                       8,990
</TABLE>

                           (ii) Company Automobile. Seagull will provide to Galt
                  for  his  personal   and   business   use  a   top-of-the-line
                  automobile,   and  shall  provide,   or  reimburse  Galt  for,
                  maintenance  and insurance  (liability and collision  coverage
                  insuring  both Seagull and Galt and covering both business and
                  personal use) for such  automobile.  Such automobile  shall be
                  owned or leased by Seagull,  or an affiliate of Seagull,  and,
                  if requested by Galt,  shall be replaced,  provided  that more
                  than three years have elapsed since the last such replacement.
                  At any time during the term of this Agreement, Galt shall have
                  the right to purchase the automobile provided by Seagull as of
                  the  date  of  execution  hereof,  and  any  other  automobile
                  subsequently  provided  by  Seagull  for an  amount  equal  to
                  Seagull's book value at the time of any such purchase.

                           (iii) Business and  Entertainment  Expenses.  Seagull
                  will reimburse Galt for, or pay on behalf of Galt,  reasonable
                  and appropriate  expenses incurred and properly  accounted for
                  by Galt for Seagull business related purposes,  including dues
                  and fees to industry and professional organizations,  costs of
                  entertainment and business  development,  and costs reasonably
                  incurred  as a result of Galt's  spouse  accompanying  Galt on
                  business travel.

                           (iv) Club Dues. In addition to the other business and
                  entertainment  expenses  reimbursable  pursuant  to  Paragraph
                  6(d)(iii),  Seagull shall pay the  membership  fees,  dues and
                  assessments  for Galt's  memberships  in the Eldorado  Country
                  Club, the Castle Pines Golf Club, the River Oaks Country Club,
                  the Southern Hills Country

                                       -6-


<PAGE>



                  Club, the Coronado Club, the Houston Petroleum Club and the
                  Ramada Club.

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

                           (vi) Office,  Secretary  and Parking.  Seagull  shall
                  provide  Galt with an office and  secretary  within  Seagull's
                  Houston offices.  Further, Seagull shall provide at no expense
                  to  Galt  a  parking  place   convenient  to  Galt's   office.
                  Notwithstanding  the  foregoing,  during the period  beginning
                  June 1, 2002 and ending May 31, 2004,  Seagull  shall  provide
                  Galt  with (A) an  office  in the same  office  building,  but
                  outside of Seagull's principal executive offices,  (B) Seagull
                  support  services  with respect to such office,  and (C) at no
                  expense to Galt a parking place convenient to such office.

                           (vii) Medicare  Supplemental  Coverage.  In the event
                  that Seagull  amends its health  insurance or health care plan
                  during  the Term of this  Agreement  in order to  provide  for
                  Medicare supplemental  coverage for retirees,  Galt and any of
                  his eligible  dependents  shall be allowed to  participate  in
                  such  coverage;  provided,  however,  that if  such  amendment
                  occurs  during  the  Period of  Consultancy,  and Galt and his
                  dependents are not otherwise eligible for such coverage,  Galt
                  shall receive, within five business days of the effective date
                  of such  amendment,  a lump sum payment in amount equal to the
                  economic  value of such coverage for the remainder of the Term
                  of this Agreement.

Galt  acknowledges and hereby agrees that the  compensation  payable pursuant to
this Paragraph is for all services  rendered pursuant to this Agreement and that
he shall receive no separate fees or other compensation, benefits or perquisites
with respect to his services as a director,  Vice  Chairman or any other offices
of Seagull.

         7. Term and  Termination  of  Agreement.  Seagull  agrees to retain the
services  of Galt and Galt  agrees to provide  such  services  pursuant  to this
Agreement  for a term of beginning on the  Effective  Date and ending on May 31,
2002  (the  "Term"),   subject  to  earlier   termination  as  provided   below.
Notwithstanding the foregoing,  the parties hereto may terminate Galt's services
prior to the end of such Term pursuant to Paragraphs (a) or (b) below.

                                       -7-


<PAGE>



                  (a) Seagull shall have the right to terminate  Galt's services
         under this Agreement at any time for any of the following reasons:

                           (i)      Upon Galt's death;

                           (ii)     Upon  Galt'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 a finding by the Board
                                    of Directors of  Galt's  gross negligence or
                                    wilful   misconduct  in  the  rendering   of
                                    services  required  of  him pursuant to this
                                    Agreement  or  Galt'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 Galt's  material  breach of any material
                                    provision  of  this  Agreement,   which,  if
                                    correctable, remains uncorrected for 30 days
                                    following  written  notice of such breach to
                                    Galt by Seagull; or

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

                  (b) Galt shall have the right to terminate his services  under
         this Agreement at any time for any of the following reasons:

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

                           (ii)     For any other reason  whatsoever in the sole
                                    discretion of Galt.

                                       -8-


<PAGE>



                  (c) If Seagull or Galt  desires to terminate  Galt's  services
         hereunder  at any  time  prior  to the  expiration  of the Term of this
         Agreement,  it or he shall do so by giving  written notice to the other
         party that it or he has elected to terminate Galt's services  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.

                  (d) In the  event  that  Galt's  services  are  terminated  by
         Seagull as provided in (a) above prior to the expiration of the Term of
         this Agreement, then, upon such termination, the compensation, benefits
         and  perquisites  payable  pursuant  to  Paragraph  6  shall  terminate
         contemporaneously with the termination of such services, except that if
         such termination shall be pursuant to (a)(i),  (a)(ii) or (a)(v),  such
         compensation,  benefits and perquisites  shall continue for the balance
         of the  Term of this  Agreement;  provided,  however,  that (i) if such
         termination occurs prior to January 1, 1999, the stock option scheduled
         to be granted on such date  pursuant  to  Paragraph  6(a)(iv)  shall be
         granted outside the Plan and shall be fully  exercisable on the date of
         grant  thereof,  and (ii) if such  termination  occurs prior to May 31,
         1999,  (A)  effective  as of  the  date  of  such  termination,  Galt's
         outstanding  options as of such date shall become fully exercisable and
         shall  continue to be  exercisable  until May 31, 2004,  subject to the
         expiration  date  contained in such options and (B) Galt shall  receive
         the Economic Value of  participation  in the Seagull  Benefit Plans for
         the period after the date of such termination and before May 31, 1999.

                  (e) In the event that Galt's  services are  terminated by Galt
         as provided in (b) above  prior to the  expiration  of the Term of this
         Agreement, then, upon such termination, the compensation,  benefits and
         perquisites   payable   pursuant  to   Paragraph   6  shall   terminate
         contemporaneously with the termination of such services, except that if
         such  termination  shall be  pursuant  to  (b)(i),  such  compensation,
         benefits and perquisites  shall continue for the balance of the Term of
         this Agreement provided,  however,  that (i) if such termination occurs
         prior to January 1, 1999,  the stock option  scheduled to be granted on
         such date pursuant to Paragraph  6(a)(iv) shall be granted  outside the
         Plan and shall be fully  exercisable on the date of grant thereof,  and
         (ii) if such termination occurs prior May 31, 1999, (A) effective as of
         the date of such  termination,  Galt's  outstanding  options as of such
         date  shall  become  fully   exercisable   and  shall  continue  to  be
         exercisable  until  May  31,  2004,  subject  to  the  expiration  date
         contained in such options and (B) Galt shall receive the Economic Value
         of  participation in the Seagull Benefit Plans for the period after the
         date of such termination and before May 31, 1999.

         8. Protection of Information. Galt acknowledges that Seagull's business
is highly competitive and that Seagull's methods,  strategies,  books,  records,
and documents, Seagull's

                                       -9-


<PAGE>



technical  information  concerning  its  products,   equipment,   services,  and
processes,  procurement procedures and pricing techniques,  and the names of and
other  information  (such as credit and  financial  data)  concerning  Seagull's
customers,   business   affiliates,   affairs,   and   operations  all  comprise
confidential   business   information   and/or  trade   secrets   ("Confidential
Information")  of Seagull  which are  valuable,  special,  and unique  assets of
Seagull  which  Seagull uses in its business to obtain a  competitive  advantage
over its  competitors  which do not know or use this  information.  Galt further
acknowledges  that  protection  of Seagull's  Confidential  Information  against
unauthorized  disclosure  and  use  is of  critical  importance  to  Seagull  in
maintaining  its  competitive  position.  Accordingly,  Galt hereby agrees that,
notwithstanding  any  other  provisions  of  this  Agreement  other  than  those
contained in the following sentences, he will not at any time during the Term of
this Agreement make any unauthorized disclosure of any Confidential  Information
of Seagull or make any unauthorized  use thereof.  However,  Galt's  obligations
under this paragraph shall not extend to:

         (a)      Information which is or becomes a part of the public domain or
                  is available to the public by publication or otherwise without
                  disclosure by Galt;

         (b)      Information  which  was  within  Galt's  knowledge  or in  his
                  possession prior to his initial employment by Seagull;

         (c)      Information  which,  either prior or  subsequent  to Seagull's
                  disclosure  to  Galt,  was  disclosed  to  Galt,   without  an
                  obligation  of  confidentiality,  by a third party who did not
                  acquire such  information,  directly or indirectly  from Galt,
                  Seagull, or from any third party who is under an obligation of
                  confidentiality; or

         (d)      Any disclosure of  Confidential  Information by Galt which is
                  required by law,  including  deposition or trial  testimony by
                  Galt   pursuant   to   subpoena.  If  Galt  is  requested  or 
                  required  (by  oral  questions, interrogatories,  requests for
                  information  or  documents,  subpoena,    civil  investigative
                  demand,  or similar  process)  to  disclose  any  Confidential
                  Information, Galt will promptly notify Seagull of such request
                  or  requirements  so  that  Seagull  may  seek an  appropriate
                  protective  order or  waive  compliance  with  the  provisions
                  of this Agreement.

Galt  acknowledges and agrees that money damages would not be sufficient  remedy
for any breach of this Paragraph  concerning  Confidential  Information by Galt,
and Seagull shall be entitled to seek specific performance and injunctive relief
as remedies for such breach or  threatened  breach,  as well as  reasonable  and
necessary  attorneys' fees,  experts' fees, and costs incurred in the connection
with such breach or threatened  breach.  Such  remedies  shall not be deemed the
exclusive remedies for

                                      -10-


<PAGE>



such a breach by Galt but shall be in addition to all remedies  available at law
or in equity to  Seagull,  including  the  recovery  of damages  from Galt.  For
purposes of this  Paragraph,  Seagull  shall be construed to include any parent,
subsidiary, or other affiliate of Seagull.

         9. Ownership by Seagull. Seagull shall, without further remuneration to
Galt, own, be entitled to possession of, and have the right to use, publish, and
disclose any results,  reports,  product,  or data  developed by Galt during the
course of his services hereunder,  but identification of Galt with such results,
reports, or data shall not be made without Galt's express consent.

         10.  Noncompetition  Provisions.  As part of the  consideration for the
compensation,  benefits and perquisites to be paid to Galt pursuant to Paragraph
6  hereunder;  to protect the trade  secrets  and  confidential  information  of
Seagull and its affiliates that have been and will in the future be disclosed or
entrusted to Galt, the business good will of Seagull and its affiliates that has
been and will in the future be developed in Galt, or the business  opportunities
that  have been and will in the  future be  disclosed  or  entrusted  to Galt by
Seagull and its affiliates;  and as an additional incentive for Seagull to enter
into this Agreement,  Seagull and Galt agree to the  noncompetition  obligations
hereunder. Galt shall not, directly or indirectly for Galt or for others, in any
geographic  area or market where Seagull or any of its affiliates are conducting
any business as of the Effective Date or have during the previous  twelve months
conducted such business:

         (a)      engage in any business competitive with the business conducted
                  by Seagull;

         (b)      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  Seagull   with  respect  to  such   competitive
                  business; or

         (c)      induce any  employee  of Seagull or any of its  affiliates  to
                  terminate  his  or  her   employment   with  Seagull  or  such
                  affiliates,  or hire  or  assist  in the  hiring  of any  such
                  employee by any person,  association, or entity not affiliated
                  with Seagull.

These  noncompetition  obligations  shall  apply  during the period that Galt is
employed by Seagull,  is a consultant to Seagull or following the termination of
employment or consultancy,  is receiving  compensation,  benefits or perquisites
pursuant  to  Paragraph  6.   Notwithstanding  the  preceding  sentence,   these
noncompetition  obligations  shall not apply  after a  termination  for a reason
encompassed  by  Paragraph   7(a)(v)  or  (b)(i).   Galt  understands  that  the
restrictions  set forth in this  Paragraph may limit Galt's ability to engage in
certain  businesses  anywhere in the world during the period provided for above,
but acknowledges that Galt will receive  sufficiently  high  remuneration  under
this Agreement to justify such restriction. Galt acknowledges that money damages
would not be  sufficient  remedy for any breach of this  Paragraph by Galt,  and
Seagull shall be entitled to enforce

                                      -11-


<PAGE>



the provisions of this Paragraph by terminating  any payments then owing to Galt
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 Galt may not be terminated  unless the Board of Directors
determines that such breach by Galt has directly resulted or could reasonably be
expected to result in a material adverse economic impact on Seagull's  business.
Such remedies  shall not be deemed the  exclusive  remedies for a breach of this
Paragraph,  but shall be in  addition  to all  remedies  available  at law or in
equity to Seagull,  including without  limitation,  the recovery of damages from
Galt and Galt's agents involved in such breach and remedies available to Seagull
pursuant to other  agreements  with Galt. It is expressly  understood and agreed
that Seagull and Galt consider the  restrictions  contained in this Paragraph to
be reasonable and necessary to protect the  proprietary  information of Seagull.
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.

         11.  Release.  As  part  of the  consideration  for  the  compensation,
benefits and  perquisites  to be paid to Galt  pursuant to Paragraph 6 and as an
additional  incentive  for  Seagull to enter into this  Agreement,  Galt  hereby
agrees to execute a release, at the time and in the form established by Seagull,
releasing Seagull, its 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 Galt's employment with Seagull or his separation therefrom, other
than claims or causes of action arising out of the provisions of this Agreement.

         12.  Withholding  of Taxes and Other  Employee  Deductions.  During the
Period of  Employment,  Seagull 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 Seagull's employees generally.

         13. Independent  Contractor.  During the Period of Consultancy,  Galt's
relationship  to Seagull  hereunder will be that of an  independent  contractor.
Nothing  in  this   Agreement   is  intended  to  create  an   employer/employee
relationship  between  Seagull and Galt during the Period of  Consultancy  or to
allow  Seagull to  exercise  control or  direction  over the manner or method by
which Galt performs the consulting services which are the subject matter of this
Agreement  during  such  period.  Galt shall be  responsible  for payment of all
income,  self-employment,  or other  taxes  attributable  to  compensation  paid
hereunder by Seagull to Galt during the Period of  Consultancy,  and Galt agrees
to hold Seagull harmless for withholding or payment of such taxes.

                                      -12-


<PAGE>



         14.  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,  if
addressed as follows:

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

         If to Galt, to:                             Mr. Barry J. Galt
                                                     1811 Kirby Drive
                                                     Houston, Texas  77019

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

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

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

         17. 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  time  or at any  prior  or
subsequent time.

         18. 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.

         19.  Assignment.  This Agreement shall be binding upon and inure to the
benefit  of  Seagull  and any  successor  of  Seagull,  by merger or  otherwise.
Further,  this Agreement  shall be binding and inure to the benefit of Galt, his
spouse, Kathryn M. Galt, and his estate. If Galt 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 spouse,  Kathryn M. Galt, if then
living,  or if  Kathryn M. Galt is not then  living,  to his  estate.  Except as
provided in the preceding sentences, this

                                      -13-


<PAGE>


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.

         20.  Entire  Agreement.  Except as provided in (i) the written  benefit
plans  and  programs  referenced  in  Paragraph  6,  (ii) any  signed  agreement
contemporaneously executed by Seagull and Galt and (iii) the Severance Agreement
dated March 17,  1997,  as amended,  between  Seagull and Galt,  this  Agreement
represents the entire  agreement  between the parties hereto with respect to the
matters  covered  herein and may not be  changed,  altered,  or  modified in any
respect except by an instrument in writing signed by both the parties hereto.

         IN WITNESS  WHEREOF,  Seagull  has  caused  this  Agreement  to be duly
executed by one of its officers  thereunto duly authorized and Galt has executed
this  Agreement,  this 21st day of  September,  1998,  to be effective as of the
Effective Date.

                                                SEAGULL ENERGY CORPORATION

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

                                                     /s/Barry J. Galt
                                                     BARRY J. GALT

VEHOU02:119746.1

                                                       -14-