Exhibit 10.1





Exhibit 10.1


September 13, 2010


Directors, Officers and Employees of


PetroQuest Energy, Inc. 

Holding Options to Purchase Common Stock


Ladies & Gentlemen:


PetroQuest Energy,
Inc. (the “Company”) has initiated a program to increase the number
of shares of Company common stock available for future issuances under the
PetroQuest Energy, Inc. 1998 Incentive Plan, as amended and restated effective
May 14, 2008 (the “Plan”), particularly in light of the fact
that many of our directors, officers and employees are holding stock options
issued under the Plan with exercise prices that exceed today’s stock
price and further considering the limited number of shares of Company common
stock that are currently available for grant under the Plan pursuant to
applicable rules, regulations, and statutes.


As a director,
officer or employee of the Company, you may participate in the program at your
sole discretion.


The program has the
following terms and conditions:



	 	•	 	
You can elect to surrender for cancellation
any amount of currently held stock options, but you are required to surrender
the entire amount of any individual award that you have received. All stock
options that are not surrendered remain exercisable in accordance with the
terms of the original stock option award.








	 	•	 	
You will receive no consideration for the
surrender of your stock options.








	 	•	 	
The decision to surrender stock options must
be made in writing by signing this letter and returning it to your supervisor
or Desireé D. Early.








	 	•	 	
You will continue to be eligible to receive
future stock option or other equity-based awards under the Plan, but the
Company cannot agree to make any future stock option or other equity-based
awards to you. Future stock options awarded to you under the Plan, if any, will
have an exercise price per share equal to the closing sales price on the
business day immediately preceding the date of grant of a share of Company
common stock as reported on the New York Stock Exchange or other principal
securities exchange on which the Company common stock is then listed or
admitted to trading.







There can, of
course, be no assurances that future stock options or other equity-based awards
under the Plan will be awarded to you, or with respect to the per share price
of the Company’s common stock on any date subsequent to the date on which
you elect to participate in the program.


 


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In making your
decision we ask that you consider the Company’s publicly available SEC
reports, including the “Risk Factors” included therein, for a
discussion of the Company’s financial condition and certain other
“forward looking” information. A copy of the Annual Report on Form
10-K for the year ended December 31, 2009, the Quarterly Report on Form
10-Q for the quarter ended March 31, 2010 and the Quarterly Report on Form
10-Q for the quarter ended June 30, 2010 are on file with the SEC, and you
should review each of these documents carefully before you elect to surrender
for cancellation any currently held stock options.


We have identified
each of your existing stock option awards that are currently out of the money
on the Optionee Statement attached to this letter. If you would like to
participate in this program and surrender for cancellation these currently held
stock options, please sign this letter and return a copy to your supervisor or
Desireé D. Early.


Sincerely,


Charles T. Goodson


Chairman, Chief Executive Officer & President


Accepted and Agreed to 

by the
Optionholder:


                                                      


(signature)


Print Name:
                                        


Date: September    , 2010


	 	 	 	 	 
	  	 	 	 	 
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