<PAGE>
 
                                                                    Exhibit 10.4



                             AMENDED AND RESTATED
                              GUARANTY AGREEMENT


                           Dated as of July 8, 1998


                                      by

                              Ocean Energy, Inc.,
                            a Delaware corporation,


                                  in favor of



                      The Chase Manhattan Bank of Canada,
                           as Administrative Agent,


                                      and


         The Lenders Now or Hereafter Parties To The Credit Agreement
<PAGE>
 
                                 TABLE OF CONTENTS

<TABLE>
<S>                                                                                       <C> 
                                                                                          Page
                                                                                          ----
                          Article I Definitions and Accounting Matters

     Section 1.01  Terms Defined In Recitals..............................................   1
     Section 1.02  Certain Definitions....................................................   1
     Section 1.03  Credit Agreement Definitions...........................................   2

                                  Article II The Guaranty
     Section 2.01  Obligations Guaranteed.................................................   2
     Section 2.02  Nature of Guaranty.....................................................   2
     Section 2.03  Lenders' Rights........................................................   2
     Section 2.04  Guarantor's Waivers....................................................   3
     Section 2.05  Maturity of Obligations; Payment.......................................   3
     Section 2.06  Lenders' Expenses......................................................   3
     Section 2.07  Obligation.............................................................   3
     Section 2.08  Events and Circumstances Not Reducing or Discharging the Guarantor's
                     Obligations..........................................................   3
     Section 2.09  Subrogation............................................................   5

                            Article III Representations and Warranties
     Section 3.01  By the Guarantor.......................................................   5

                             Article IV Subordination of Indebtedness
     Section 4.01  Subordination of All Guarantor Claims..................................   6
     Section 4.02  Claims in Bankruptcy...................................................   6
     Section 4.03  Payments Held in Trust.................................................   6
     Section 4.04  Liens Subordinate......................................................   7
     Section 4.05  Notation of Records....................................................   7

                                     Article V Miscellaneous
     Section 5.01  Successors and Assigns.................................................   7
     Section 5.02  Notices................................................................   7
     Section 5.03  Authority of Administrative Agent......................................   7
     Section 5.04  CONSTRUCTION...........................................................   8
     Section 5.05  Waivers................................................................   8
     Section 5.06  Judgment Currency......................................................   8
     Section 5.07  Amendment and Restatement..............................................   9
     Section 5.08  Survival of Obligations................................................   9
     Section 5.09  Subject to the Intercreditor Agreement.................................   9
     Section 5.10  Status as Specified or Designated Senior Indebtedness..................   9
</TABLE>
                                       i
<PAGE>
 
                                 AMENDED AND RESTATED
                                 GUARANTY AGREEMENT

          This Amended and Restated Guaranty Agreement dated as of July 8, 1998,
is by Ocean Energy, Inc., a corporation duly organized and validly existing
under the laws of the state of Delaware ("Guarantor"), in favor of each of the
following: each of the financial institutions that is now or hereafter a party
to the Credit Agreement (as defined below) (individually, a "Lender" and,
collectively, the "Lenders"); and The Chase Manhattan Bank of Canada, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").

                                 Recitals

     A.  Ocean Energy Resources Canada, Ltd., a company continued under the laws
of the Province of British Columbia (the "Company"), the Administrative Agent
and the Lenders have executed that certain Amended and Restated Credit Agreement
of even date herewith (such credit agreement, as amended, the "Credit
Agreement").

     B.  One of the terms and conditions stated in the Credit Agreement for the
making of the loans and extensions of credit described in the Credit Agreement
is the execution and delivery to the Administrative Agent and the Lenders of
this Guaranty Agreement.

     C.  NOW, THEREFORE, (i) in order to comply with the terms and conditions of
the Credit Agreement, (ii) to induce the Lenders to enter into the Credit
Agreement, and (iii) for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Guarantor hereby agrees as
follows:

                                   Article I
                      DEFINITIONS AND ACCOUNTING MATTERS
 
     SECTION 1.01  TERMS DEFINED IN RECITALS.  As used in this Guaranty
Agreement, the terms defined in the Recitals shall have the meanings indicated
in the Recitals.

     SECTION 1.02  CERTAIN DEFINITIONS.  As used in this Guaranty Agreement,
including the Recitals, the following terms shall have the following meanings,
unless the context otherwise requires:

     "Guarantor Claims" shall have the meaning indicated in Section 4.01.

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

     "Obligations" shall mean (a) the payment and performance of all present and
future indebtedness, obligations and liabilities of the Company and/or the
Guarantor to the Administrative Agent and the Lenders under the Credit
Agreement, including but not limited to, (i) the full and punctual payment of
the Notes issued thereunder, and any and all promissory notes given in
substitution for such Notes or in modification, renewal, extension or
rearrangement thereof in whole or in part, and (ii) the Acceptance Exposure
under all Bankers Acceptances now outstanding or hereafter issued under the
Credit Agreement; (b) all obligations of the Guarantor under this Guaranty
Agreement; and (c) all 

                                      -1-
<PAGE>
 
interest (whether pre- or post petition), charges, expenses, reasonable
attorneys' or other fees and any other sums payable to the Administrative Agent
and the Lenders in connection with the execution, administration or enforcement
of any of their rights and remedies hereunder or any other Loan Document.

     SECTION 1.03  CREDIT AGREEMENT DEFINITIONS.  Unless otherwise defined
herein, all terms beginning with a capital letter which are not defined herein
shall have the meaning ascribed such terms in the Credit Agreement and in the
Amended and Restated Global Credit Agreement dated of even date herewith among
Guarantor, each of the financial institutions that is now or hereafter a party
thereto (collectively, the "U.S. Lenders"); Chase Bank of Texas, National
Association, as administrative agent for the U.S. Lenders, Morgan Guaranty Trust
Company of New York, as syndication agent for the U.S. Lenders, Barclays Bank
PLC, as documentation agent for the U.S. Lenders, and ABN Amro Bank, N.V., Bank
of America National Trust & Savings Association, Paribas, NationsBank, N.A.,
Societe Generale, Southwest Agency and Wells Fargo Bank (Texas), N.A., , as co-
agents for the U.S. Lenders.

                                  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 Company need be given to the
Guarantor.  The guaranty evidenced hereby is joint and several with all other
guarantees of the Obligations.  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 Company, the
Administrative Agent and the Lenders may modify, alter, rearrange, extend for
any period and/or renew from time to time, the Obligations and the
Administrative Agent and the Lenders may waive any Defaults or Events of Default
without notice to the Guarantor and in such event the Guarantor will remain
fully bound hereunder on the Obligations.  Subject to the terms of the Credit
Agreement, this Guaranty Agreement may be enforced by the Administrative Agent
and/or 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.
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
Administrative Agent and the Lenders being conclusively presumed by their
request for this Guaranty Agreement and delivery of the same to the
Administrative Agent.

     SECTION 2.03  LENDERS' RIGHTS.  Subject to the terms of the Credit
Agreement, the Guarantor authorizes the Lenders (or the Administrative Agent on
behalf of the Lenders), without notice or demand and without affecting the
Guarantor's obligation hereunder, to take and hold agreed-upon security for the
payment of the Obligations, and exchange, enforce, waive and release any such
security; and to 

                                      -2-
<PAGE>
 
apply such security and direct the order or manner of sale thereof as the
Administrative Agent and the Lenders in their 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 Administrative Agent and the Lenders to (a) proceed against the
Company or any other Person liable on the Obligations, (b) enforce their rights
against any other guarantor of the Obligations, (c) proceed or enforce their
rights against or exhaust any security given to secure the Obligations, (d) have
the Company joined with the Guarantor in any suit arising out of this Guaranty
Agreement and/or the Obligations, or (e) pursue any other remedy whatsoever.
Neither the Administrative Agent nor the Lenders shall 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 Company or any other
guarantor of the Obligations, and shall remain liable hereon regardless of
whether the Company or any other guarantor be found not liable thereon for any
reason.

     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,
forthwith upon notice from the Administrative Agent of the Company's failure to
pay the Obligations at maturity, pay to the Administrative Agent for the benefit
of the Administrative Agent and the Lenders at the Administrative Agent's
Principal Office, the amount due and unpaid by the Company and guaranteed
hereby.  The failure of the Administrative Agent to give this notice shall not
in any way release the Guarantor hereunder.

     SECTION 2.06  LENDERS' EXPENSES.  If the Guarantor fails to pay the
Obligations after notice from the Administrative Agent of the Company's failure
to pay any Obligations at maturity (whether by acceleration or otherwise), and
if the Administrative Agent or the Lenders obtain the services of an attorney
for collection of amounts owing by the Guarantor hereunder, or obtain advice of
counsel in respect of any of their rights under this Guaranty Agreement, or if
suit is filed to enforce this Guaranty Agreement, or if proceedings are had in
any bankruptcy, 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 Administrative Agent at its Principal Office the
reasonable attorneys' fees of the Administrative Agent and the Lenders.

     SECTION 2.07  OBLIGATION.  It is expressly agreed that the obligation 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:

                                      -3-
<PAGE>
 
     (a) Modifications, etc.  Any renewal, extension, modification, or increase
in the amount of the Aggregate Commitments as in effect on the Effective Date,
decrease, alteration or rearrangement of all or any part of the Obligations, any
Loan Document or any instrument executed in connection therewith, or any
contract or understanding between the Company, any Agent and/or  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 Administrative Agent or the Lenders to the
Company or the Guarantor or any Person liable on the Obligations;

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

     (d) Invalidity of Obligations.  The invalidity, illegality or
unenforceability of all or any part of the Obligations or any Loan Document,
including the Notes, 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 any Loan Document or otherwise creating
the Obligations acted in excess of their authority, the Obligations violate
applicable usury laws, the Company has valid defenses, claims or offsets
(whether at law, in equity or by agreement) which render the Obligations wholly
or partially uncollectible from the Company, 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 have been forged or
otherwise are irregular or not genuine or authentic;

     (e) Release of Obligors.  Any full or partial release of the obligation of
the Company 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 Company will be liable to perform the Obligations, or
that the Administrative Agent and the Lenders will look to other parties to
perform the Obligations;

     (f) Security.  The taking or accepting of any 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;

                                      -4-
<PAGE>
 
     (h) Care and Diligence.  The failure of any Agent or any Lender 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 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, collectability or value of any of the collateral
for the Obligations;

     (j) Payments Rescinded.  Any payment by the Company to any Agent or Lender
is held to constitute a preference under the bankruptcy laws, or for any reason
an Agent or Lender is required to refund such payment or pay such amount to the
Company 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 or the other Loan Documents, 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 Company 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 any other Person against the
Company.  The Guarantor further waives any benefit of any right to participate
in any security now or hereafter held by the Administrative Agent and/or the
Lenders.

                                 Article III 
                        REPRESENTATIONS AND WARRANTIES
 
     SECTION 3.01  BY THE GUARANTOR.  In order to induce the Administrative
Agent and the Lenders to accept this Guaranty Agreement, the Guarantor
represents and warrants to the Lender Group (which representations and
warranties will survive the creation of the Obligations and any extension of
credit thereunder) that:

     (a) Benefit to the Guarantor.  The Company 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 Company.

                                      -5-
<PAGE>
 
     (b) Solvency.  It (i) is not insolvent as of the date hereof and will not
be rendered insolvent as a result of this Guaranty Agreement or the transactions
contemplated by the Credit Agreement or the making of the Loans or issuance of
Bankers Acceptances thereunder, (ii) is not engaged in a business or a
transaction, or about to engage in a business or a transaction, for which any
Property or assets remaining with the Guarantor constitute unreasonably small
capital, and (iii) does not intend to incur, or believe it will incur, debts
that will be beyond its ability to pay as such debts mature.

     (c) No Representation by Administrative Agent or Lenders.  Neither any
Agent, Lender 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.

                                  Article IV
                         SUBORDINATION OF INDEBTEDNESS
 
     SECTION 4.01  SUBORDINATION OF ALL GUARANTOR CLAIMS.  As used herein, the
term "Guarantor Claims" shall mean all debts and obligations of the Company to
the Guarantor, whether such debts and obligations now exist or are hereafter
incurred or arise, or whether the obligation be direct, contingent, primary,
secondary, several, joint and several, or otherwise, and irrespective of whether
such debts or obligations be evidenced by note, contract, open account, or
otherwise, and irrespective of the Person or Persons in whose favor such debts
or obligations may, at their inception, have been, or may hereafter be created,
or the manner in which they have been or may hereafter be acquired by the
Guarantor.  Except for payments permitted by the Credit Agreement, until the
Obligations shall be paid and satisfied in full, the Aggregate Commitments are
terminated and the Guarantor shall have performed all of its obligations
hereunder and the Loan Documents to which it is a party, the Guarantor shall not
receive or collect, directly or indirectly, from the Company any amount upon the
Guarantor Claims.

     SECTION 4.02  CLAIMS IN BANKRUPTCY.  In the event of receivership,
bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency
proceedings involving the Company, the Administrative Agent on behalf of the
Administrative Agent and the Lenders shall have the right to prove their claim
in any proceeding, so as to establish their rights hereunder and receive
directly from the receiver, trustee or other court custodian, dividends and
payments which would otherwise be payable upon Guarantor Claims.  The Guarantor
hereby assigns such dividends and payments to the Administrative Agent for the
benefit of the Administrative Agent and the Lenders.  Should any Agent or Lender
receive, for application upon the Obligations, any such dividend or payment
which is otherwise payable to the Guarantor, and which, as between the Company
and the Guarantor, shall constitute a credit upon the Guarantor Claims, then
upon payment in full of the Obligations, the Guarantor shall become subrogated
to the rights of the Administrative Agent and the Lenders to the extent that
such payments to the Administrative Agent and the Lenders on the Guarantor
Claims have contributed toward the liquidation of the Obligations, and such
subrogation shall be with respect to that proportion of the Obligations which
would have been unpaid if the Administrative Agent and the Lenders had not
received dividends or payments upon the Guarantor Claims.

     SECTION 4.03  PAYMENTS HELD IN TRUST.  In the event that notwithstanding
Sections 4.01 and 4.02, the Guarantor should receive any funds, payments, claims
or distributions which is prohibited by such Sections, the Guarantor agrees (a)
to hold in trust for the Administrative Agent and the Lenders an amount equal to
the amount of all funds, payments, claims or distributions so received, and (b)
that it shall have absolutely no dominion over the amount of such funds,
payments, claims or distributions 

                                      -6-
<PAGE>
 
except to pay them promptly to the Administrative Agent, for the benefit of the
Administrative Agent and the Lenders; and the Guarantor covenants promptly to
pay the same to the Administrative Agent.

     SECTION 4.04  LIENS SUBORDINATE.  The Guarantor agrees that, until the
Obligations are paid in full and the Aggregate Commitments terminated, any Liens
upon the Company's assets securing payment of the Guarantor Claims shall be and
remain inferior and subordinate to any Liens upon the Company's assets securing
payment of the Obligations, regardless of whether such encumbrances in favor of
the Guarantor, any Agent or Lender presently exist or are hereafter created or
attach.  Without the prior written consent of the Administrative Agent, the
Guarantor, during the period in which any of the Obligations are outstanding or
the Aggregate Commitments are in effect, shall not (a) exercise or enforce any
creditor's right it may have against the Company, or (b) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceeding
(judicial or otherwise, including without limitation the commencement of or
joinder in any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any Lien, mortgages, deeds of trust, security
interest, collateral rights, judgments or other encumbrances on assets of the
Company held by the Guarantor.

     SECTION 4.05  NOTATION OF RECORDS.  All promissory notes and, upon the
request of the Administrative Agent, all accounts receivable ledgers or other
evidence of the Guarantor Claims accepted by or held by the Guarantor shall
contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Guaranty Agreement.

                                   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
Administrative Agent and the Lenders and is and shall always be fully binding
upon the legal representatives, 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 or other event affecting either the Company or 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 the manner and to the
address of the Guarantor as provided for in the Credit Agreement.

     SECTION 5.03  AUTHORITY OF ADMINISTRATIVE AGENT.  The Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Guaranty Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative Agent
of any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Guaranty Agreement shall, as between
the Administrative Agent and the Lenders, be governed by the Credit Agreement
and by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Administrative Agent and the Guarantor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting; and
the Guarantor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.

                                      -7-
<PAGE>
 
     SECTION 5.04  CONSTRUCTION.  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 PROVINCE OF ALBERTA, CANADA.

     SECTION 5.05  WAIVERS.  THE GUARANTOR AND EACH LENDER AND THE
ADMINISTRATIVE AGENT BY ITS ACCEPTANCE HEREOF HEREBY (I) IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY AGREEMENT OR ANY LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE, 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) CERTIFY
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV)
ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS GUARANTY AGREEMENT, THE
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION
5.05.

     SECTION 5.06  JUDGMENT CURRENCY.  This is an international loan
transaction in which the specification of Canadian Dollars or U.S. Dollars is of
the essence, and the stipulated currency shall in each instance be the Currency
of account and payment in all instances.  A payment obligation in one Currency
hereunder (the "Original Currency") shall not be discharged by an amount paid in
another currency (the "Other Currency"), whether pursuant to any judgment
expressed in or converted into any Other Currency or in another place except to
the extent that such tender or recovery results in the effective receipt by the
payee of the full amount of the Original Currency payable to it under this
Guaranty Agreement.  If for the purpose of obtaining judgment in any court it is
necessary to convert a sum due hereunder in the Original Currency into the Other
Currency, the rate of exchange that shall be applied shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase Original Currency at the Principal Office with the Other Currency on
the Business Day next preceding the day on which such judgment is rendered.  The
obligation of the Guarantor in respect of any such sum due from it to the
Administrative Agent or any Lender hereunder or under any other Loan Document
(in this Section 5.06 called an "Entitled Person") shall, notwithstanding the
rate of exchange actually applied in rendering such judgment, be discharged only
to the extent that on the Business Day following receipt by such Entitled Person
of any sum adjudged to be due hereunder in the Other Currency such Entitled
Person may in accordance with normal banking procedures purchase and transfer
the Original Currency to Toronto with the amount of the judgment currency so
adjudged to be due; and the Guarantor hereby, as a separate obligation and
notwithstanding any such judgment, agrees jointly and severally to indemnify
such Entitled Person against, and to pay such Entitled Person on demand, in the
Original Currency, the amount (if any) by which the sum originally due to such
Entitled Person in the Original Currency hereunder exceeds the amount of the
Original Currency so purchased and transferred.

                                      -8-
<PAGE>
 
     SECTION 5.07  AMENDMENT AND RESTATEMENT.  This Amended and Restated
Guaranty Agreement amends, restates, supersedes and replaces that certain
Guaranty Agreement dated as of March 27, 1998, by and among the parties hereto,
and such Guaranty Agreement shall be void and have no further effect.

     SECTION 5.08  SURVIVAL OF OBLIGATIONS.  To the extent that any payments on
the Obligations or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Obligations so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Administrative Agent's and the Lenders' Liens, rights,
powers and remedies under this Guaranty Agreement and each Loan Document shall
continue in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Guarantor shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.

     SECTION 5.09  SUBJECT TO THE INTERCREDITOR AGREEMENT.  This Guaranty
Agreement is subject to the terms of the Intercreditor Agreement which (a)
subjects the ability of the Lender Group to pursue remedies hereunder to the
prior consent of the U.S. Lenders and (b) sets forth a priority for the
application of proceeds upon any disposition of amounts received hereunder.

     SECTION 5.10  STATUS AS SPECIFIED OR DESIGNATED SENIOR INDEBTEDNESS.  The
Guarantor hereby acknowledges and confirms that:

     (a) this Guaranty Agreement and the obligations of the Guarantor hereunder
are "Senior Indebtedness" and "Specified Senior Indebtedness" under and for
purposes of the 95 Indenture; and

     (b) this Guaranty Agreement and the obligations of the Guarantor hereunder
are "Senior Indebtedness" and "Designated Senior Indebtedness" under and for
purposes of the 96 Indenture, the 97 Indenture and the 98 Senior Subordinated
Indenture;

and that as such, the Lender Group is entitled to the rights and privileges
afforded holders of Senior Indebtedness, Specified Senior Indebtedness or
Designated Senior Indebtedness, as applicable, under each of such Indentures.

     WITNESS THE EXECUTION HEREOF, effective as of the date first written above.


                              OCEAN ENERGY, INC., a Delaware corporation


                              By:
                                    Jonathan M. Clarkson
                                    Executive Vice President
                                    Chief Financial Officer

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