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                                                                    EXHIBIT 10.3

                          SECOND AMENDED AND RESTATED
                               GUARANTY AGREEMENT



                          DATED AS OF OCTOBER 15, 1997


                                       BY

                               OCEAN ENERGY, INC.
                                 AS GUARANTOR,


                                  IN FAVOR OF


                           THE CHASE MANHATTAN BANK,
                                   AS AGENT,

                                      AND

                 THE LENDERS SIGNATORY TO THE CREDIT AGREEMENT
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                               TABLE OF CONTENTS

<TABLE>
       <S>         <C>                                                       <C>
                                    ARTICLE I
                                  General Terms

       Section 1.01  Terms Defined Above.   . . . . . . . . . . . . . . . . .  1
       Section 1.02  Certain Definitions.   . . . . . . . . . . . . . . . . .  1
       Section 1.03  Credit Agreement Definitions   . . . . . . . . . . . . .  3

                                   ARTICLE II
                                  The Guaranty

       Section 2.01  Obligations Guaranteed.  . . . . . . . . . . . . . . . .  3
       Section 2.02  Nature of Guaranty.  . . . . . . . . . . . . . . . . . .  3
       Section 2.03  Lenders' Rights.   . . . . . . . . . . . . . . . . . . .  4
       Section 2.04  Guarantor's Waivers.   . . . . . . . . . . . . . . . . .  4
       Section 2.05  Maturity of Obligations; Payment.  . . . . . . . . . . .  4
       Section 2.06  Lenders' or Agent's Expenses.  . . . . . . . . . . . . .  4
       Section 2.07  Liability.   . . . . . . . . . . . . . . . . . . . . . .  5
       Section 2.08  Events and Circumstances Not Reducing or Discharging the
                     Guarantor's Obligations.   . . . . . . . . . . . . . . .  5
       Section 2.09  Subrogation.   . . . . . . . . . . . . . . . . . . . . .  6

                                   ARTICLE III
                    Representations and Warranties; Covenants

       Section 3.01  Representations and Warranties.  . . . . . . . . . . . .  7
       Section 3.02  Covenants.   . . . . . . . . . . . . . . . . . . . . . .  9
       Section 3.03  Financial Covenants.   . . . . . . . . . . . . . . . . . 12

                                   ARTICLE IV
                                    Security

       Section 4.01  Grant of Security Interest.  . . . . . . . . . . . . . . 13
       Section 4.02  Financing Statements.  . . . . . . . . . . . . . . . . . 13
       Section 4.03  Remedies.  . . . . . . . . . . . . . . . . . . . . . . . 13
       Section 4.04  Rights.  . . . . . . . . . . . . . . . . . . . . . . . . 13

                                    ARTICLE V
                                  Miscellaneous

       Section 5.01  Successors and Assigns.  . . . . . . . . . . . . . . . . 13
       Section 5.02  Notices.   . . . . . . . . . . . . . . . . . . . . . . . 13
       Section 5.03  Governing Law; Submission to Jurisdiction; Waiver
                     of Jury Trial.   . . . . . . . . . . . . . . . . . . . . 14
       Section 5.04  NO ORAL AGREEMENTS.  . . . . . . . . . . . . . . . . . . 15
       Section 5.05  Prior Guaranty.  . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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Exhibit A     Form of Certificate of Responsible Officer of Guarantor re:  No
              Default and Financial Covenants

Schedule I    Taxes
Schedule II   Subsidiaries





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              THIS SECOND AMENDED AND RESTATED GUARANTY AGREEMENT by OCEAN
ENERGY, INC. (formerly known as Flores & Rucks, Inc.), a Delaware corporation
("Guarantor"), is in favor of THE CHASE MANHATTAN BANK, as agent (in such
capacity, "Agent") for the lenders which are or become parties to the Credit
Agreement (each lender individually called a "Lender" and collectively called
the "Lenders").

                                   RECITALS:

       A.     Ocean Energy, Inc. (formerly known as Flores & Rucks, Inc.), a
Louisiana corporation (the "Borrower"), the Agent and certain financial
institutions entered into that certain Amended and Restated Credit Agreement
dated as of March 27, 1997 (the "Prior Credit Agreement").

       B.     One of the terms and conditions stated in the Prior Credit
Agreement for the making of the loans described therein was the execution and
delivery to the Agent of that certain Amended and Restated Guaranty Agreement
dated as of March 27, 1997 (the "Prior Guaranty Agreement").

       C.     Of even date herewith, the Borrower, the Agent and the Lenders
are entering into that certain Second Amended and Restated Credit Agreement (as
amended or supplemented from time to time, the "Credit Agreement") which amends
and restates the Prior Credit Agreement.

       D.     The Agent and the Lenders have requested and the Guarantor has
agreed to amend and restate the Prior Guaranty Agreement.

       E.     NOW, THEREFORE, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) to induce the Lenders, at any time or
from time to time, to loan monies, with or without security to or for the
account of the Borrower in accordance with the terms of the Credit Agreement,
(iii) at the special insistence and request of the Lenders, and (iv) for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby agrees as follows:

                                   ARTICLE I
                                 General Terms

       Section 1.01  Terms Defined Above.  As used in this Guaranty Agreement,
the terms "Agent", "Borrower", "Guarantor", "Lender", "Lenders", "Credit
Agreement", "Prior Credit Agreement" and "Prior Guaranty Agreement" shall have
the meanings indicated above.

       Section 1.02  Certain Definitions.  As used in this Guaranty Agreement,
the following terms shall have the following meanings, unless the context
otherwise requires:

       "Adjusted Consolidated Net Tangible Assets" shall have the meaning
assigned such term in the Indenture.

       "Collateral" shall have the meaning indicated in Section 4.01 hereof.

       "Consolidated Net Income" shall mean, with respect to the Guarantor and
its Restricted Subsidiaries, for any period, the aggregate of the net income
(or loss) of the Guarantor and its Restricted Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance





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with GAAP; provided that there shall be excluded from such net income (to the
extent otherwise included therein) the following: (i) the net income of any
Person in which the Guarantor or any Restricted Subsidiary has an interest
(which interest does not cause the net income of such other Person to be
consolidated with the net income of the Guarantor and its Restricted
Subsidiaries in accordance with GAAP), except to the extent of the amount of
cash dividends or cash distributions actually paid in such period by such other
Person to the Guarantor or to a Restricted Subsidiary, as the case may be; (ii)
the net income (but not loss) of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions or transfers
or loans by that Restricted Subsidiary is not at the time permitted by
operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Restricted Subsidiary, or is
otherwise restricted or prohibited in each case determined in accordance with
GAAP; (iii) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (iv) any extraordinary gains or losses, including gains or losses
attributable to Property sales not in the ordinary course of business; (v) the
cumulative effect of a change in accounting principles and any gains or losses
attributable to writeups or write downs of assets; and (vi) any write downs of
non-current assets, provided however, that any ceiling limitation write downs
under SEC guidelines shall be treated as capitalized costs, as if such write
downs had not occurred.

       "EBITDA" shall mean, for any period, the sum, determined (without
duplication) for the Guarantor and its Restricted Subsidiaries, determined on a
consolidated basis, of (i) net income (or net loss) of the Guarantor and its
Restricted Subsidiaries for such period (calculated before extraordinary items
and income attributable to minority interest in Affiliates which has not been
remitted in cash to the Guarantor or its Restricted Subsidiaries); plus (ii)
Interest Expense for such period to the extent deducted in the determination of
such net income (or loss); plus (iii) depreciation, amortization and other
similar non-cash items to the extent deducted in the determination of such net
income (or loss) plus (iv) all taxes accrued for such period on or measured by
income to the extent deducted in the determination of such net income (or
loss); provided that if the Guarantor or any Restricted Subsidiary shall
acquire any Person, EBITDA for the preceding 12-month period prior to such
acquisition may be determined on a pro forma basis using the revenue
attributable to such Person's Oil and Gas Properties net of operating expenses,
severance and ad valorem taxes incurred with respect to such Properties during
the relevant period.

       "Guaranty Agreement" shall mean this Second Amended and Restated
Guaranty Agreement, as the same may from time to time be amended or
supplemented.

       "Interest Coverage Ratio" shall mean the ratio of EBITDA as of the end
of any fiscal quarter to Interest Expense as of the end of any fiscal quarter.

       "Interest Expense" shall mean, for any period, the sum (determined
without duplication) of the aggregate amount of interest expense accruing
during such period on Debt of the Guarantor and its Restricted Subsidiaries,
determined on a consolidated basis, including the interest portion of payments
under capitalized leases and any capitalized interest, but excluding
amortization of debt discount and expense.

       "Obligations" shall mean: (a) any and all indebtedness, obligations and
liabilities of the Borrower pursuant to the Credit Agreement and the other Loan
Documents to which the Borrower is a party, including without limitation, the
unpaid principal of and interest on the Notes (whether accruing prior or
subsequent to the filing of a petition or other action concerning bankruptcy or
other similar proceeding); (b) any additional loans made by the Lenders to the
Borrower or any of its Restricted Subsidiaries; (c) payment of and performance
of any and all present or future obligations of the Borrower according to the





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terms of any present or future interest or currency rate swap, rate cap, rate
floor, rate collar, exchange transaction, forward rate agreement or other
exchange or rate protection agreements or any option with respect to any such
transaction now existing or hereafter entered into between the Borrower or any
of its Restricted Subsidiaries and the Agent or any of the Lenders; (d) payment
of and performance of any and all present or future obligations of the Borrower
or any of its Restricted Subsidiaries according to the terms of any present or
future swap agreements, cap, floor, collar, exchange transaction, forward
agreement or other exchange or protection agreements relating to crude oil,
natural gas or other hydrocarbons or any option with respect to any such
transaction now existing or hereafter entered into between the Borrower or any
of its Restricted Subsidiaries and the Agent or any of the Lenders; (e)
performance of all Letter of Credit Agreements executed from time to time by
the Borrower under or pursuant to the Credit Agreement and all reimbursement
obligations for drawn or undrawn portions under any Letter of Credit now
outstanding or hereafter issued under or pursuant to the Credit Agreement; (f)
all renewals, rearrangements, increases, extensions for any period, amendments
or supplement in whole or in part of the Notes or any documents evidencing the
above; and (g) the obligations of Guarantor under this Guaranty Agreement.

       "Tangible Net Worth" shall mean, as at any date, the sum of the
following for the Guarantor and its Restricted Subsidiaries determined (without
duplication) in accordance with GAAP:

              (i)    preferred stock (if any), par value of common stock,
       capital in excess of par value of common stock, and retained earnings;
       less

              (ii)   treasury stock (if any), goodwill, cost in excess of fair
       value of net assets acquired and all other assets as are properly
       classified as intangible assets under GAAP; plus

              (iii)  the amount of noncash write downs of long-lived assets in
       compliance with GAAP, intangible drilling costs capitalized in
       accordance with GAAP and unamortized debt discount and expense to the
       extent classified as an intangible asset by GAAP.

       Section 1.03  Credit Agreement Definitions.  Unless otherwise defined
herein, all terms beginning with a capital letter which are defined in the
Credit Agreement shall have the same meanings herein as therein.

                                   ARTICLE II
                                  The Guaranty

       Section 2.01  Obligations Guaranteed.  The Guarantor hereby irrevocably
and unconditionally guarantees the prompt payment at maturity of the
Obligations.

       Section 2.02  Nature of Guaranty.  This guaranty is an absolute,
irrevocable, completed and continuing guaranty of payment and not a guaranty of
collection, and no notice of the Obligations or any extension of credit already
or hereafter contracted by or extended to the Borrower need be given to the
Guarantor.  This guaranty may not be revoked by the Guarantor and shall
continue to be effective with respect to debt under the Obligations arising or
created after any attempted revocation by the Guarantor and shall remain in
full force and effect until the Obligations are paid in full and the Aggregate
Commitments are terminated, notwithstanding that from time to time prior
thereto no Obligations may be outstanding.  The Borrower and the Lenders may
modify, alter, rearrange, extend for any period and/or renew from time to time,
the Obligations, and the Lenders may waive any Default or Events of Default
without notice to the Guarantor and in such event the Guarantor will remain
fully bound hereunder on





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the Obligations.  This Guaranty Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of the Obligations
is rescinded or must otherwise be returned by the Lenders upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, all as though such
payment had not been made. This Guaranty Agreement may be enforced by the
Lenders and any subsequent holder of the Obligations and shall not be
discharged by the assignment or negotiation of all or part of the Obligations.
Without prejudice to any notices expressly required by the terms hereof, the
Guarantor hereby expressly waives presentment, demand, notice of non-payment,
protest and notice of protest and dishonor, notice of Event of Default, notice
of intent to accelerate the maturity and notice of acceleration of the maturity
and any other notice in connection with the Obligations, and also notice of
acceptance of this Guaranty Agreement, acceptance on the part of the Lenders
being conclusively presumed by their request for this Guaranty Agreement and
delivery of the same to the Agent.

       Section 2.03  Lenders' Rights.  The Guarantor authorizes the Agent,
without notice or demand and without affecting the Guarantor's liability
hereunder, to take and hold security for the payment of this Guaranty Agreement
and/or the Obligations, and exchange, enforce, waive and release any such
security; and to apply such security and direct the order or manner of sale
thereof as the Agent in its discretion may determine; and to obtain a guaranty
of the Obligations from any one or more Persons and at any time or times to
enforce, waive, rearrange, modify, limit or release any of such other Persons
from their obligations under such guaranties.

       Section 2.04  Guarantor's Waivers.  The Guarantor waives any right to
require the Lenders to (a) proceed against the Borrower or any other person
liable on the Obligations, (b) enforce its rights against any other guarantor
of the Obligations (c) proceed or enforce its rights against or exhaust any
security given to secure the Obligations (d) have the Borrower joined with the
Guarantor in any suit arising out of this Guaranty Agreement and/or the
Obligations, or (e) pursue any other remedy in the Lenders' powers whatsoever.
The Lenders shall not be required to mitigate damages or take any action to
reduce, collect or enforce the Obligations.  The Guarantor waives any defense
arising by reason of any disability, lack of corporate authority or power, or
other defense of the Borrower or any other guarantor of the Obligations, and
shall remain liable hereon regardless of whether the Borrower or any other
guarantor be found not liable thereon for any reason.  Whether and when to
exercise any of the remedies of the Lenders under any of the Loan Documents
shall be in the sole and absolute discretion of the Lenders, and no delay by
the Agent in enforcing any remedy, including delay in conducting a foreclosure
sale, shall be a defense to the Guarantor's liability under this Guaranty
Agreement.  To the extent allowed by applicable law, the Guarantor hereby
waives any good faith duty on the part of the Agent or the Lenders in
exercising any remedies provided in the Loan Documents.

       Section 2.05  Maturity of Obligations; Payment.  The Guarantor agrees
that if the maturity of the Obligations is accelerated by bankruptcy or
otherwise, such maturity shall also be deemed accelerated for the purpose of
this Guaranty Agreement without demand or notice to the Guarantor.  The
Guarantor will, within five (5) days after notice from the Agent of the
Borrower's failure to pay the Obligations at maturity, pay to the Agent, for
its benefit and the benefit of the Lenders, the amount due and unpaid by the
Borrower and guaranteed hereby.  The failure of the Agent to give this notice
shall not in any way release the Guarantor hereunder.

       Section 2.06  Lenders' or Agent's Expenses.  If the Guarantor fails to
pay the Obligations after notice required under Section 2.05 from the Agent of
the Borrower's failure to pay any Obligations at maturity, and if the Lenders
obtain the services of an attorney for collection of amounts owing by the
Guarantor hereunder, or obtaining advice of counsel in respect of any of their
rights under the guaranty, or if suit is filed to enforce this Guaranty
Agreement, or if proceedings are had in any bankruptcy,





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probate, receivership or other judicial proceedings for the establishment or
collection of any amount owing by the Guarantor hereunder, or if any amount
owing by the Guarantor hereunder is collected through such proceedings, the
Guarantor agrees to pay to the Agent for its benefit and the benefit of the
Lenders the Lenders' reasonable attorneys' fees.

       Section 2.07  Liability.  It is expressly agreed that the liability of
the Guarantor for the payment of the Obligations guaranteed hereby shall be
primary and not secondary.

       Section 2.08  Events and Circumstances Not Reducing or Discharging the
Guarantor's Obligations.  The Guarantor hereby consents and agrees to each of
the following to the fullest extent permitted by law, agrees that its
obligations under this Guaranty Agreement shall not be released, diminished,
impaired, reduced or adversely affected by any of the following, and waives any
rights (including without limitation rights to notice) which it might otherwise
have as a result of or in connection with any of the following:

       (a)    Modifications, etc.  Any renewal, extension, modification,
increase, decrease, alteration or rearrangement of all or any part of the
Obligations, the aggregate Commitments, the Notes, or the Credit Agreement or
any instrument executed in connection therewith, or any contract or
understanding between the Borrower and the Lenders, or any other Person,
pertaining to the Obligations;

       (b)    Adjustment, etc.  Any adjustment, indulgence, forbearance or
compromise that might be granted or given by the Lenders to the Borrower or the
Guarantor or any Person liable on the Obligations;

       (c)    Condition of Borrower or the Guarantor.  The insolvency,
bankruptcy arrangement, adjustment, composition, liquidation, disability,
dissolution, death or lack of power of the Borrower or the Guarantor or any
other Person at any time liable for the payment of all or part of the
Obligations; or any dissolution of the Borrower or the Guarantor, or any sale,
lease or transfer of any or all of the assets of the Borrower or the Guarantor,
or any changes in the shareholders, partners, or members of the Borrower or the
Guarantor; or any reorganization of the Borrower or the Guarantor;

       (d)    Invalidity of Obligations.  The invalidity, illegality or
unenforceability of all or any part of the Obligations, or any document or
agreement executed in connection with the Obligations, for any reason
whatsoever, including without limitation the fact that the Obligations, or any
part thereof, exceed the amount permitted by law, the act of creating the
Obligations or any part thereof is ultra vires, the officers or representatives
executing the documents or otherwise creating the Obligations acted in excess
of their authority, the Obligations violate applicable usury laws, the Borrower
has valid defenses, claims or offsets (whether at law, in equity or by
agreement) which render the Obligations wholly or partially uncollectible from
the Borrower, the creation, performance or repayment of the Obligations (or the
execution, delivery and performance of any Loan Document) is illegal,
uncollectible, legally impossible or unenforceable, or the Credit Agreement,
the Notes or other Loan Documents pertaining to the Obligations have been
forged or otherwise are irregular or not genuine or authentic;

       (e)    Release of Obligors.  Any full or partial release of the
liability of the Borrower on the Obligations or any part thereof, of any
co-guarantors, or any other Person now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Obligations or any part thereof, it
being recognized, acknowledged and agreed by the Guarantor that the Guarantor
may be required to pay the Obligations in full without assistance or support of
any other Person, and the Guarantor has not been induced to enter into this
Guaranty Agreement on the basis of a contemplation, belief, understanding or
agreement that other parties other than the Borrower





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<PAGE>   9
will be liable to perform the Obligations, or the Agent and the Lenders will
look to other parties to perform the Obligations;

       (f)    Other Security.  The taking or accepting of any other security,
collateral or guaranty, or other assurance of payment, for all or any part of
the Obligations;

       (g)    Release of Collateral, etc.  Any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment (including without
limitation negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, Property or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the Obligations;

       (h)    Care and Diligence.  The failure of the Agent or any other Person
to exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of such
collateral, Property or security;

       (i)    Status of Liens.  The fact that any collateral, security or Lien
contemplated or intended to be given, created or granted as security for the
repayment of the Obligations shall not be properly perfected or created, or
shall prove to be unenforceable or subordinate to any other security interest
or Lien, it being recognized and agreed by the Guarantor that the Guarantor is
not entering into this Guaranty Agreement in reliance on, or in contemplation
of the benefits of, the validity, enforceability, collectibility or value of
any of the collateral for the Obligations.  Notwithstanding the foregoing, the
Guarantor does not hereby waive or release (expressly or impliedly) any right
to be subrogated to the rights of the Lenders in any collateral or security for
the Obligations, after payment in full of the Obligations; the Guarantor's
rights of subrogation are, however, subordinate to the rights, claims and Liens
of the Agent and the Lenders;

       (j)    Payments Rescinded.  Any payment by the Borrower to the Lenders
is held to constitute a preference under the bankruptcy laws, or for any reason
the Agent and the Lenders are required to refund such payment or pay such
amount to the Borrower or someone else; or

       (k)    Other Actions Taken or Omitted.  Any other action taken or
omitted to be taken with respect to the Credit Agreement, and Loan Document,
the Obligations, or the security and collateral therefor, whether or not such
action or omission prejudices the Guarantor or increases the likelihood that
the Guarantor will be required to pay the Obligations pursuant to the terms
hereof; it being the unambiguous and unequivocal intention of the Guarantor
that the Guarantor shall be obligated to pay the Obligations when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not
otherwise or particularly described herein, except for the full and final
payment and satisfaction of the Obligations.

       Section 2.09  Subrogation.  Until the Obligations have been paid in full
and the Aggregate Commitments terminated, the Guarantor hereby waives any
claim, right or remedy which the Guarantor may now have or hereafter acquire
against the Borrower which arises out of this Guaranty Agreement or from the
performance by the Guarantor hereunder, including without limitation, any
claim, remedy or right of subrogation, reimbursement, exoneration,
indemnification, or participation in any such claim, right or remedy of the
Agent or any Lender against the Borrower.  Until the Obligations have been paid
in full and the Aggregate Commitments terminated, the Guarantor further waives
any benefit of any right to participate in any security now or hereafter held
by the Agents and/or the Lenders.





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<PAGE>   10
                                  ARTICLE III
                   Representations and Warranties; Covenants

       Section 3.01  Representations and Warranties.  In order to induce the
Agent and the Lenders to accept this Guaranty Agreement, the Guarantor
represents and warrants (which representations and warranties will survive the
creation of the Obligations and any extension of credit thereunder) that:

       (a)    Benefit to the Guarantor.  The Borrower is a Wholly Owned
Subsidiary of the Guarantor; and the Guarantor's guaranty pursuant to this
Guaranty Agreement reasonably may be expected to benefit, directly or
indirectly, the Guarantor; and the Guarantor has determined that this Guaranty
Agreement  is necessary and convenient to the conduct, promotion and attainment
of the business of the Guarantor and the Borrower.

       (b)    Corporate Existence. The Guarantor (i) is a corporation duly
organized, legally existing and in good standing under the laws of the State of
Delaware; (ii) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a Material Adverse Effect.

       (c)    Financial Condition.

       (i)    The audited consolidated balance sheet of the Guarantor and its
       Restricted Subsidiaries as at December 31, 1996 and the related
       consolidated statement of operations, stockholders' equity and cash flow
       of the Guarantor and its Restricted Subsidiaries for the fiscal year
       ended on said date, with the opinion thereon of Arthur Andersen LLP
       heretofore furnished to each of the Lenders, and the unaudited
       consolidated balance sheet of the Guarantor and its Restricted
       Subsidiaries as at June 30, 1997 and their related consolidated
       statement of operations and cash flow of the Guarantor and its
       Restricted Subsidiaries for the 6-month period ended on such date
       heretofore furnished to each of the Lenders are complete and correct and
       fairly present, in all material respects, the consolidated financial
       condition of the Guarantor as at said dates and the results of its
       operations for the fiscal year and the 6-month period ending on said
       dates, all in accordance with GAAP, as applied on a consistent basis
       (subject, in the case of the interim financial statements, to normal
       year-end adjustments).

       (ii)   The Guarantor has, on the Closing Date, no material Debt,
       contingent liabilities, liabilities for taxes, unusual forward or long-
       term commitments or unrealized or anticipated losses from any
       unfavorable commitments, except as referred to or reflected or provided
       for in the Financial Statements.  Since December 31, 1996, there has
       been no change or event having a Material Adverse Effect.

       (d)    Litigation.  As of the Closing Date, there is no litigation,
legal, administrative or arbitral proceeding, investigation or other action of
any nature pending or, to the knowledge of the Guarantor threatened against or
affecting the Guarantor which involves the possibility of any judgment or
liability against the Guarantor not fully covered by insurance (except for
normal deductibles), and which would have a Material Adverse Effect.

       (e)    No Breach.  Neither the execution and delivery of the Loan
Documents nor compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent





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which has not been obtained as of the Closing Date under, the respective
charter or by-laws of the Guarantor or any Governmental Requirement or any
agreement or instrument to which the Guarantor is a party or by which it is
bound or to which it or its Properties are subject, or constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any Lien upon any of the revenues or assets of the Guarantor pursuant to the
terms of any such agreement or instrument other than the Liens created by the
Loan Documents.

       (f)    Authority.  The Guarantor has all necessary corporate power and
authority to execute, deliver and perform the obligations under the Loan
Documents to which it is a party; the execution, delivery and performance by
the Guarantor of the Loan Documents to which it is a party, have been duly
authorized by all necessary corporate action; and the Loan Documents to which
the Guarantor is a party constitute its legal, valid and binding obligations
enforceable in accordance with their terms.

       (g)    Approvals.  No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority are necessary for the
execution, delivery or performance by the Guarantor of the Loan Documents to
which it is a party or for the validity or enforceability thereof.

       (h)    Taxes.  Except as set out in Schedule I, the Guarantor has filed
all United States Federal income tax returns and, to the best of its knowledge,
all other tax returns which are required to be filed by it and has paid all
material taxes due pursuant to such returns or pursuant to any assessment
received by it.  The charges, accruals and reserves on the books of the
Guarantor in respect of taxes and other governmental charges are, in the
opinion of the Guarantor, adequate.  No tax lien has been filed and, to the
knowledge of the Guarantor, no claim is being asserted with respect to any such
tax, fee or other charge.

       (i)    No Material Misstatements.  No written information, statement,
exhibit, certificate, document or report furnished to the Agent and the Lenders
(or any of them) by the Guarantor or any of its Subsidiaries in connection with
the negotiation of this Guaranty Agreement or any Loan Document contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially misleading in
the light of the circumstances in which made and with respect to the Guarantor
and/or the Borrower.  There is no fact peculiar to the Guarantor or the
Borrower which has a Material Adverse Effect or in the future is reasonably
likely to have (so far as the Guarantor can now foresee) a Material Adverse
Effect and which has not been set forth in this Guaranty Agreement or the other
documents, certificates and statements furnished to the Agent by or on behalf
of the Guarantor or any of its Subsidiaries prior to, or on, the Closing Date
in connection with the transactions contemplated hereby.

       (j)    Defaults.  Neither the Guarantor nor any of its Subsidiaries is
in default nor has any event or circumstance occurred which, but for the
expiration of any applicable grace period or the giving of notice, or both,
would constitute a default under any material agreement or instrument to which
the Guarantor or any of its Subsidiaries is a party or by which the Guarantor
or any of its Subsidiaries is bound which default would have a Material Adverse
Effect.

       (k)    Solvency.  The Guarantor hereby represents that (i) it is not
insolvent as of the date hereof and will not be rendered insolvent as a result
of this Guaranty Agreement, (ii) it is not engaged in business or a
transaction, or about to engage in a business or a transaction, for which any
Property or assets remaining with the Guarantor is unreasonably small capital,
and (iii) it does not intend to incur, or believe it will incur, debts that
will be beyond its ability to pay as such debts mature.





                                       8
<PAGE>   12
       (l)    Copies of Subordinated Indentures.  The Guarantor has delivered
to the Agent true and complete copies of each of the Agreements evidencing the
Subordinated Debt, the Subordinated Indentures and the Subordinated Notes.

       (m)    Receipt of Credit Agreement; No Representation by Agent or
Lenders.  The Guarantor has received a copy of the Credit Agreement and is
familiar with the terms thereof.  Neither the Agent nor any other Person has
made any representation, warranty or statement to the Guarantor in order to
induce the Guarantor to execute this Guaranty Agreement.

       (n)    Subsidiaries.  Except as set forth on Schedule II, the Guarantor
has no Subsidiaries.  Except as indicated on Schedule II, the Guarantor has no
Unrestricted Subsidiaries.

       (o)    Environmental Matters.  Except as could not reasonably be
expected to have a Material Adverse Effect, (i) neither any Property of the
Guarantor nor the operations conducted thereon violate any order or requirement
of any court or Governmental Authority or any Environmental Laws; and (ii) the
Guarantor has no known contingent liability in connection with any release or
threatened release of any oil, hazardous substance or solid waste into the
environment.

       Section 3.02  Covenants.  The Guarantor covenants and agrees that, so
long as any of the Commitments are in effect and until payment in full of all
Loans thereunder, all interest thereon and all other amounts payable by the
Borrower under the Credit Agreement:

       (a)    Financial Statements.  The Guarantor shall deliver, or shall
cause to be delivered, to the Agent with sufficient copies of each for the
Lenders:

       (i)    As soon as available and in any event within 120 days after the
       end of each fiscal year of the Guarantor, the audited consolidated and
       consolidating statements of operations, stockholders' equity, changes in
       financial position and cash flow of the Guarantor and its Restricted
       Subsidiaries for such fiscal year, and the related consolidated and
       consolidating balance sheets of the Guarantor and its Restricted
       Subsidiaries as at the end of such fiscal year, and setting forth in
       each case in comparative form the corresponding figures for the
       preceding fiscal year, and accompanied by the related opinion of
       independent public accountants of recognized national standing
       acceptable to the Agent which opinion shall state that said financial
       statements fairly present, in all material respects, the consolidated
       and consolidating financial condition and results of operations of the
       Guarantor and its Restricted Subsidiaries as at the end of, and for,
       such fiscal year and that such financial statements have been prepared
       in accordance with GAAP except for such changes in such principles with
       which the independent public accountants shall have concurred and such
       opinion shall not contain a "going concern" or like qualification or
       exception, and a certificate of such accountants stating that, in making
       the examination necessary for their opinion, they obtained no knowledge,
       except as specifically stated, of any Default.

       (ii)   As soon as available and in any event within 60 days after the
       end of each of the first three fiscal quarterly periods of each fiscal
       year of the Guarantor, consolidated and consolidating statements of
       operations, changes in financial position and cash flow of the Guarantor
       and its Restricted Subsidiaries for such period and for the period from
       the beginning of the respective fiscal year to the end of such period,
       and the related consolidated and consolidating balance sheets as at the
       end of such period, and setting forth in each case in comparative form
       the corresponding figures for the corresponding period in the preceding
       fiscal year, accompanied by





                                       9
<PAGE>   13
       the certificate of a Responsible Officer, which certificate shall state
       that said financial statements fairly present, in all material respects,
       the consolidated and consolidating financial condition and results of
       operations of the Guarantor and its Restricted Subsidiaries in
       accordance with GAAP, as at the end of, and for, such period (subject to
       normal year-end audit adjustments).

       (iii)  Promptly after the Guarantor knows that any Default or any
       Material Adverse Effect has occurred, a notice of such Default or
       Material Adverse Effect, describing the same in reasonable detail and
       the action the Guarantor proposes to take, or cause the Borrower to
       take, with respect thereto.

       (iv)   Promptly upon receipt thereof, a copy of each other report or
       letter submitted to the Guarantor by its independent accountants in
       connection with any annual, interim or special audit made by them of the
       books of the Guarantor and a copy of any response by the Guarantor or
       its Board of Directors to such letter or report.

       (v)    Promptly upon its becoming available, each financial statement,
       report, notice or proxy statement sent by the Guarantor to its
       stockholders generally and each regular or periodic report and any
       registration statement, prospectus or written communication (other than
       transmittal letters) in respect thereof filed by the Guarantor with or
       received by the Guarantor in connection therewith from any securities
       exchange or the SEC or any successor agency.

       (vi)   Promptly after the furnishing thereof, copies of any statement,
       certificate, report or notice furnished to the holders of the
       Subordinated Notes, the trustee under either Subordinated Indenture, or
       any other Person pursuant to the terms of any indenture, loan or credit
       or other similar agreement, other than the Credit Agreement or this
       Guaranty Agreement and not otherwise required to be furnished to the
       Agent and/or the Lenders pursuant to any other provision of this Section
       3.02 or the Credit Agreement.

       (vii)  From time to time such other information regarding the business,
       affairs or financial condition of the Guarantor as the Agent may
       reasonably request.

       The Guarantor will furnish to the Agent, at the time it furnishes each
set of financial statements pursuant to clauses (i) or (ii) above, a
certificate substantially in the form of Exhibit A hereto executed by a
Responsible Officer (x) certifying as to the matters set forth therein and
stating that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail), and (y)
setting forth in reasonable detail the computations necessary to determine
whether the Guarantor is in compliance with Sections 3.03(a), (b), (c), (d) and
(e) of this Guaranty Agreement as of the end of the respective fiscal quarter
or fiscal year.

       (b)    Litigation.  The Guarantor shall promptly give to the Agent
notice of: (i)  all legal or arbitral proceedings, and of all proceedings
before any Governmental Authority affecting the Guarantor, except proceedings
which, if adversely determined, would not have a Material Adverse Effect, and
(ii) of any litigation or proceeding affecting the Guarantor in which the
amount involved is in excess of $5,000,000 and not covered by insurance, or in
which injunctive or similar relief is sought.  The Guarantor will promptly
notify the Agent (who shall promptly notify each of the Lenders) of any claim,
judgment, Lien or other encumbrance affecting any of its Property if the value
of the claim, judgment, Lien, or other encumbrance affecting such Property
shall individually or in the aggregate exceed $5,000,000.





                                       10
<PAGE>   14
       (c)    Maintenance.  The Guarantor shall preserve and maintain its
corporate existence and all of its material rights, privileges and franchises;
keep books of record and account in which full, true and correct entries will
be made of all dealings or transactions in relation to its business and
activities; comply with all Governmental Requirements if failure to comply with
such requirements will have a Material Adverse Effect; pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or on its
income or profits or on any of its Property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by proper proceedings
and against which adequate reserves are being maintained; upon reasonable
notice, and permit representatives of the Agent or any Lender, during normal
business hours, to examine, copy and make extracts from its books and records,
to inspect its Properties, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by such Lender or the Agent
(as the case may be).

       (d)    Further Assurances.  The Guarantor will cure promptly any defects
in the execution and delivery of the Loan Documents to which it is party and
will, at its expense, promptly execute and deliver to the Agent upon its
request all such other documents, agreements and instruments to comply with or
accomplish the covenants and agreements of the Guarantor in this Guaranty
Agreement or to correct any omissions herein or to state more fully the
obligations set out herein.

       (e)    Restricted Subsidiaries.

       (i)    The Guarantor shall not create, acquire or otherwise suffer to
       exist any Restricted Subsidiaries other than the Borrower which are not
       also Subsidiaries of the Borrower.   The Guarantor will not invest, loan
       or advance at any one time an aggregate amount of more than $15,000,000
       to or in any of its Unrestricted Subsidiaries.  The Guarantor shall not
       permit any of its Restricted Subsidiaries to issue any preferred stock
       (other than to the Guarantor and/or one or more Wholly Owned Restricted
       Subsidiaries) and shall not permit any other Person (other than to the
       Guarantor and/or one or more Wholly Owned Restricted Subsidiaries) to
       own any Capital Stock of any Restricted Subsidiary; provided however
       that this Section 3.02(e) shall not prohibit the ownership by directors
       of director's qualifying shares or the ownership by foreign nationals of
       Capital Stock of any Restricted Subsidiary to the extent mandated by
       applicable law.

       (ii)   Upon the creation or acquisition of any Restricted Subsidiary
       which is organized under the laws of the United States or any state
       thereof, the Guarantor shall (1) cause such Restricted Subsidiary shall
       execute and deliver to the Agent a Subsidiary Guaranty Agreement, (2)
       the Guarantor shall pledge or cause to be pledged to the Agent 100% of
       the capital stock of such Restricted Subsidiary and shall execute and
       deliver or cause to be executed and delivered pledge agreements, stock
       powers and other instruments to effect such pledge, and (3) if the Oil
       and Gas Properties of such Restricted Subsidiary are to be included in
       the Borrowing Base, cause such Restricted Subsidiary to grant to the
       Agent Liens on its Oil and Gas Properties included in the Borrowing
       Base.  Upon the creation or acquisition of any Restricted Subsidiary
       which is not organized under the laws of the United States or any state
       thereof, the Guarantor shall pledge or cause to be pledged to the Agent
       the maximum percentage of the Capital Stock of such Subsidiary which may
       be pledged to the Agent without constituting an investment of earnings
       in U.S. Property under Section 956 (or any successor provision) of the
       Code that would trigger an increase in the gross income of the Guarantor
       pursuant to Section 951 (or any successor provision) of the Code or such
       lesser percentage as may be acceptable to the Agent in its sole
       discretion.  The Guarantor shall or shall cause to be executed and
       delivered pledge agreements, stock powers and other instruments to
       effect such pledge.





                                       11
<PAGE>   15
       (f)    Modification or Repayment of Debt.  The Guarantor will not amend,
supplement or modify the Subordinated Indentures or the Subordinated Notes or
prepay, redeem, offer to purchase, purchase or defease any of the Subordinated
Debt, without the prior written consent of the Majority Lenders.

       (g)    Environmental Matters.  The Guarantor will promptly notify the
Agent (who shall promptly notify each of the Lenders) in writing of any
threatened action, investigation or inquiry by any Governmental Authority of
which the Guarantor has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.  The Guarantor will not cause
or permit any of its Property to be in violation of, or do anything or permit
anything to be done which will subject any such Property to any remedial
obligations under any Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and circumstances, if
any, pertaining to such Property where such violations or remedial obligations
would have a Material Adverse Effect.

       Section 3.03  Financial Covenants.  The Guarantor covenants and agrees
that, so long as any of the Commitments are in effect and until payment in full
of all Loans thereunder, all interest thereon and all other amounts payable by
the Borrower under the Credit Agreement:

       (a)    Current Ratio.  The Guarantor shall not permit its ratio of (i)
consolidated current assets plus unused availability under the Aggregate
Commitments to (ii) consolidated current liabilities (excluding current
maturities of the Notes) to be less than 1.0 to 1.0 as of the last day of each
of the last two consecutive fiscal quarters.

       (b)    Tangible Net Worth.  The Guarantor shall not permit its Tangible
Net Worth to be less than an amount equal to the sum of (i) $________ [to be
80% of Tangible Net Worth as of September 30, 1997], plus (ii) an amount equal
to 80% of the amount of any future issuance or sale of any Capital Stock (or
securities convertible into Capital Stock), plus (iii) 50% of positive
Consolidated Net Income for the period from June 30, 1997 to the date of
determination, taken as a single accounting period (and in no event shall the
amount calculated under clause (iii) be less than 0).

       (c)    Interest Coverage Ratio.  The Guarantor shall not permit its
Interest Coverage Ratio as of the end of any fiscal quarter (calculated
quarterly at the end of each fiscal quarter) to be less than 2.5 to 1.0 for any
fiscal quarter.

       (d)    Leverage Ratio.  The Guarantor shall not permit its ratio of Debt
to EBITDA of the Guarantor as of the end of the preceding four fiscal quarter
period (calculated quarterly at the end of each fiscal quarter) to be greater
than 4.0 to 1.0.

       (e)    Dividends, Distributions and Redemptions.  The Guarantor shall
not declare or pay any dividend, purchase, redeem or otherwise acquire for
value any of its Capital Stock now or hereafter outstanding, return any capital
to its stockholders or make any distribution of its assets to its stockholders;
provided that the Guarantor may pay cash dividends if (i) the aggregate amount
of all such dividends does not exceed $25,000,000 plus 50% of positive
Consolidated Net Income for the period from June 30, 1997 to the date of
determination, taken as a single accounting period (and in no event shall the
amount calculated under clause be less than 0) and (ii) no Default or
Deficiency has occurred and is continuing and such payment shall not cause a
Default or Deficiency.





                                       12
<PAGE>   16
                                   ARTICLE IV
                                    Security

       Section 4.01  Grant of Security Interest.  As security for the
Guarantor's obligations hereunder, the Guarantor hereby grants to the Agent for
its benefit and the benefit of the Lenders a security interest in, a general
lien upon and/or right of set-off against the following (herein referred to as
the "Collateral"):  the balance of every deposit account, now or hereafter
existing, of the Guarantor with any of the Lenders and any other claim of the
Guarantor against the Agent and/or any of the Lenders, now or hereafter
existing, and all money, instruments, securities, documents, chattel paper,
credits, claims, demands and any other Property, rights and interest of the
Guarantor, which at any time shall come into the possession or custody or under
the control of the Agent or any of the Lenders or any of their agents or
Affiliates, for any purpose, and shall include the Collateral in transit to or
set apart for them.

       Section 4.02  Financing Statements.  The right is expressly granted to
the Agent, at its discretion, to file one or more financing statements or a
copy of this Guaranty Agreement under the Uniform Commercial Code naming the
Guarantor as Debtor and the Agent as Secured Party and indicating therein the
types or describing the items of Collateral.

       Section 4.03  Remedies.  During the continuation of an Event of Default,
the Agent may sell or cause to be sold in one or more sales or parcels, at such
price as the Agent may deem best, and for cash or on credit or for future
delivery, without assumption of any credit risk, all or any of the Collateral
at any broker's board or at public or private sale, without demand or
performance or notice of intention to sell or of time or place of sale (except
such notice as is required by applicable statute and cannot be waived), and the
Lenders or anyone else may be the purchaser of any or all of the Collateral so
sold and thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any equity of redemption of the Guarantor, any such
demand, notice or right and equity being hereby expressly waived and released.

       Section 4.04  Rights.  The grant of the above Lien shall not in anyway
limit or be construed as limiting the Lenders to collect payment of the
Guarantor's obligations hereunder only out of the Collateral, but it is
expressly understood and provided that all such obligations shall constitute
the absolute and unconditional obligations of the Guarantor.  The Agent shall
not be required to take any steps necessary to preserve any rights against
prior parties to any of the Collateral.

                                   ARTICLE V
                                 Miscellaneous

       Section 5.01  Successors and Assigns.  This Guaranty Agreement is and
shall be in every particular available to the successors and assigns of the
Agent and the Lenders and is and shall always be fully binding upon the legal
representatives, heirs, successors and assigns of the Guarantor,
notwithstanding that some or all of the monies, the repayment of which this
Guaranty Agreement applies, may be actually advanced after any bankruptcy,
receivership, reorganization, disability or other event affecting the
Guarantor.

       Section 5.02  Notices.  Any notice or demand to the Guarantor under or
in connection with this Guaranty Agreement may be given and shall conclusively
be deemed and considered to have been given and received in accordance with
Section 12.02 of the Credit Agreement, addressed to the Guarantor at the
address on the signature page hereof or at such other address provided to the
Agent in writing.





                                       13
<PAGE>   17
       Section 5.03  Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.

       (A)    THIS GUARANTY AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

       (B)    ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY
AGREEMENT SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS GUARANTY AGREEMENT, THE GUARANTOR HEREBY ACCEPTS
FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  THE
GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN THE STATE OF NEW YORK.  THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE THE GUARANTOR FROM
OBTAINING JURISDICTION OVER OTHER PARTIES IN ANY COURT OTHERWISE HAVING
JURISDICTION.

       (C)    FOR THE PURPOSES OF THIS GUARANTY AGREEMENT AND MATTERS RELATING
TO THIS GUARANTY AGREEMENT (BUT FOR NO OTHER PURPOSE), THE GUARANTOR HEREBY
IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM LOCATED AT 1633 BROADWAY, NEW
YORK, NEW YORK  10019, AS THE DESIGNEE, APPOINTEE AND AGENT OF THE GUARANTOR TO
RECEIVE, FOR AND ON BEHALF OF THE GUARANTOR, SERVICE OF PROCESS IN THE STATE OF
NEW YORK IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY
AGREEMENT.  IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT
WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO THE GUARANTOR AT ITS ADDRESS
SET FORTH UNDER ITS SIGNATURE BELOW, BUT THE FAILURE OF THE GUARANTOR TO
RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.  THE
GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE GUARANTOR AT
ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING.

       (D)    NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER
OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN
ANY OTHER JURISDICTION.

       (E)    THE GUARANTOR HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTY AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN; (II) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (III) CERTIFIES THAT NEITHER THE GUARANTOR NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR THE GUARANTOR HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, OR IMPLIED THAT THE GUARANTOR WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS GUARANTY AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 5.03.





                                       14
<PAGE>   18
       Section 5.04  NO ORAL AGREEMENTS.  THIS GUARANTY AGREEMENT EMBODIES THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF.  THIS GUARANTY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

       Section 5.05  Prior Guaranty.  This Guaranty Agreement supersedes and
replaces the Prior Guaranty Agreement.





                                       15
<PAGE>   19
       WITNESS THE EXECUTION HEREOF, as of the 15th day of October, 1997.



                                           OCEAN ENERGY, INC.



                                           By:
                                              ---------------------------------
                                                  Robert L. Belk
                                                  Executive Vice President and
                                                  Chief Financial Officer

                                           Address:

                                           8440 Jefferson Highway
                                           Suite 420
                                           Baton Rouge, Louisiana  70809

                                           Telecopier No.:(504) 927-1454
                                           Telephone No.: (504) 927-1450
                                           Attention: Robert L. Belk


                                           with a copy to:

                                           Ocean Energy, Inc.
                                           3861 Ambassador Caffery Parkway
                                           Suite 500
                                           Lafayette, Louisiana  70503

                                           Attn:  Robert K. Reeves

                                           Telecopier No.:      (318) 993-4319
                                           Telephone No.:       (318) 993-4328





                                       16
<PAGE>   20
                                   Exhibit A
                                   [Form of]
                             Officer's Certificate

       The undersigned hereby certify that he is the ____________________ of
OCEAN ENERGY, INC., a Delaware corporation (the "Guarantor"), and that as such
he is authorized to execute this certificate on behalf of the Guarantor.  This
Certificate is delivered pursuant to Section 3.02 of that certain Second
Amended and Restated Guaranty Agreement (as amended or supplemented from time
to time, the "Guaranty Agreement") dated as of October 15, 1997 by the
Guarantor in favor of THE CHASE MANHATTAN BANK, AS AGENT (the "Agent"), and the
Lenders.  All capitalized terms not defined herein shall have the meaning
assigned such terms in the Guaranty Agreement and in that certain Second
Amended and Restated Credit Agreement dated as of October 15, 1997 among OCEAN
ENERGY, INC., a Louisiana corporation (the "Borrower"), the Agent and the
Lenders (as amended or supplemented from time to time, the "Credit Agreement"),
as such terms are incorporated by reference into the Guaranty Agreement.

       The undersigned hereby represents and warrants as follows:

       (a)    No Default has occurred and is continuing under the Credit
Agreement, the Guaranty Agreement or any of the Loan Documents [or if a Default
exists, specify the nature and status thereof and the Guarantor's or the
Borrower's proposed response].

       (b)    The Guarantor is in compliance with the following negative
covenants:

              (i)    Current Ratio.  (Show Calculation)

              (ii)   Tangible Net Worth. (Show Calculation)

              (iii)  Interest Coverage Ratio.  (Show Calculation)

              (iv)   Leverage Ratio.  (Show Calculation)

              (v)    Dividends, Distributions and Redemptions. (Show Amount of
                     Dividends and Calculation)

       (c)    [If quarterly borrowings exceed $130,000,000 at any time, show
calculations for each of the Indenture and the Subordinated Indenture
demonstrating the foregoing:

9-3/4% SUBORDINATED INDENTURE:  PERMITTED INDEBTEDNESS

I.     Greater of:

       (A)    $100,000,000 or

       (B)    $30,000,000 plus [$____________] (such amount being 20% of
              Adjusted Consolidated Net Tangible Assets as of the date of the
              proposed borrowing);

minus





                                  Exhibit A-1
<PAGE>   21
II.    [$______________] (such amount being the amount of Asset Sales applied
       to permanent reduction of Indebtedness)

equals

III.   $___________________.

AGGREGATE AMOUNT OF LOANS AND LC EXPOSURE PLUS AMOUNT TO BE BORROWED OR LC
EXPOSURE TO BE INCURRED MUST NOT EXCEED III.

EXECUTED AND DELIVERED this ____ day of ______________, 199__.



                                           GUARANTOR:

                                           OCEAN ENERGY, INC.



                                           By: 
                                              ---------------------------------
                                           Name:
                                           Title:





                                  Exhibit A-2