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                                  EXHIBIT 10.8




PERSONAL AND CONFIDENTIAL


                                                              October 15, 1999



Board of Directors of Petsec Energy Inc.
143 Ridgeway Drive, Suite 113
Lafayette, Louisiana 70503-3402
Attn:  Mr. James E. Slatten III

Dear Mr Slatten:

This letter (the "Agreement") confirms the terms of the engagement of Gordian
Group, L.P. ("Gordian"), by Petsec Energy Inc. (the "Company") to provide
certain financial advisory services, as described below.

Gordian's services hereunder shall be the traditional investment banking
services relating to a capital restructuring including, without limitation, (i)
advising and making oral and written recommendations to the Board of Directors
of the Company, which the Company, in the exercise of its sole discretion, may
make available (subject to the following paragraph) to its direct parent, Petsec
(U.S.A.) Inc. ("PUSA"), and its indirect parent, Petsec Energy Ltd ("PEL", and
together with PUSA, singularly an "Affiliate," and collectively the
"Affiliates") in connection with a potential financial restructuring of the
Company and possibly one or more affiliates, or in connection with one or more
financial transactions (each a "Financial Transaction") with another entity or
entities (a "Financial Partner"); (ii) assisting in the development, negotiation
and implementation of potential financial restructurings, (iii) assisting in
valuing the Company (or as necessary in connection with a restructuring of
Company, Affiliates) and/or, as appropriate, the Company's (and, as necessary to
effect a restructuring of Company, PEL's) assets or operations; (iv) providing
expert advice and testimony in any legal proceeding relating to financial
matters involving the restructuring, including the feasibility of any potential
Financial Transaction, the valuation of any securities issued in connection with
a potential Financial Transaction, and any other matters with respect to which
Gordian is rendering services hereunder; (v) advising the Company as to
potential mergers or acquisitions and the sale or other disposition of any of
the Company's assets and businesses; (vi) preparing proposals to and assisting
the Company in negotiation with creditors, employees, shareholders and other
parties-in-interest in connection with any potential Financial Transaction;
(vii) providing, if requested, a single opinion (fairness, valuation or
solvency), in connection with the services provided by Gordian hereunder (which
opinion shall, when requested by the Company, be addressed also to Affiliates
and on which Affiliates shall have the right to fully rely, subject to the
following paragraph, and the nature, scope, substance and form of any such
opinion shall be such as we consider appropriate); and (viii) assisting in the
determination of an appropriate capital structure for the Company. Financial


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Partners shall include, without limitation, the existing creditors of the
Company. A Financial Transaction includes a restructuring of, or other
transaction involving, some or all of the financial obligations of the Company
(possibly in connection with a joint venture or other business association and
possibly involving one or more affiliates), the sale or other distribution by
the Company or PEL of any debt or equity securities of the Company, any other
financing for the Company, the sale of all or a portion of the assets or
securities of the Company (by way of merger or otherwise), or other transaction
of such nature involving the Company; provided, however, that notwithstanding
the foregoing a Financial Transaction shall exclude (i) any transaction entered
into solely with an Affiliate; (ii) any transfer of a partial interest in a
field when a substantial portion of the consideration given by the Financial
Partner is a commitment to drill one or more wells in order to earn an interest
in such field; and (iii) the sale of securities owned by PEL in Climax Mining
Ltd.

The Company acknowledges that a conflict of interest may exist or arise between
the Company and its Board of Directors, on the one hand, and one or more of the
Affiliates, on the other hand, with respect to matters covered by this
engagement. The Company acknowledges that, unless expressly stated otherwise in
writing, all services, advice, and opinions rendered by Gordian pursuant to this
engagement, regardless of to whom addressed, shall be rendered exclusively with
the objective of assisting the Company and the Company's Board of Directors in
carrying out its responsibilities with respect to the Company. Any Affiliate to
whom services, advice, or opinions are rendered or made available by Gordian
shall not rely on such services, advice, or opinions as reflecting the interests
of any Affiliate to the extent such interests are in actual or potential
conflict with the interests of the Company.

In the event the Company, its Affiliates or their management receive or initiate
an inquiry or other contact concerning a Financial Transaction, the Company will
promptly inform Gordian of such inquiry or contact with such prospective
Financial Partner, in order that Gordian can assist the Company in any resulting
negotiations in such manner as directed by the Company.

For Gordian's services in connection with the engagement, the Company shall pay,
or cause to be paid in cash to Gordian, the monthly fees stated below, payable
on the 15th day of each month of Gordian's engagement hereunder (the "Monthly
Fee"):

                  First month:                     $100,000
                  Second month:                     $75,000
                  Third month:                      $75,000
                  Subsequent months                 $65,000

In addition to the Monthly Fee, the Company shall pay Additional Fees, as
defined below. One-half (50%) of all Monthly Fees received by Gordian shall be
creditable against any Additional Fees. The Company shall pay, or cause to be
paid in cash, to Gordian the following Additional Fees: 1% of the Aggregate
Consideration (as defined below) that is paid or payable in connection with any
Financial Transaction, except for any equity or equity-related (such as
convertible securities or partnership interests) securities issued or new debt
procured (including new debt to replace existing debt), in which case the
applicable percentage shall be 3% in respect of such securities.


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The aggregate total of all fees paid to Gordian (both Monthly Fees and
Additional Fees) for services rendered hereunder shall be limited to $1,500,000.

For purposes of this letter agreement, Aggregate Consideration, for purposes of
calculating the Additional Fees, shall be deemed to be the total amounts paid to
or for the benefit of the Company, its security holders and/or its creditors in
connection with a Financial Transaction (and any transactions related thereto),
after netting out customary transaction costs other than the Additional Fees
with respect to such Financial Transaction (and any transactions related
thereto). Aggregate Consideration shall include without limitation, the
principal amount of any debt or obligations directly or indirectly assumed,
repaid, restructured (including but not limited to, any alteration of the terms
of the Company's public debt), renegotiated, refinanced or retired (as set forth
on the most recent balance sheet of the Company in connection with a sale or
sales thereof), the amount of any new debt and/or equity financing raised (or
the value realized from a sale of all or a part of the Company) in connection
with any Financial Transaction, any amounts paid into escrow and any amounts
paid in connection with the retirement or cancellation of any outstanding
options, stock appreciation rights or other derivative securities of the
Company. The Additional Fees shall be paid in full simultaneously with the
closing of a Financial Transaction (and in no event later than the receipt of
any portion of the Aggregate Consideration); provided that if the Aggregate
Consideration may be increased, pursuant to the terms of the Financial
Transaction, by contingent or deferred payments related to future earnings or
operations or other matters, the portion of the Additional Fees relating thereto
shall be calculated and paid to Gordian when and as such contingent or deferred
payments are made.

In the event that the Aggregate Consideration comprises securities, in whole or
in part, the value of such securities, for purposes of calculating the
Additional Fees, shall be the fair market value thereof, as the parties hereto
shall mutually agree, on the day prior to the public announcement of such
Financial Transaction; provided, however, that if such securities consist of
securities with an existing public trading market, the value thereof shall be
determined by the average of the last sales prices for such securities on the
five (5) trading days ending five (5) days prior to the consummation of the
Financial Transaction in question.

Gordian does not represent or guarantee any specific result from this
engagement. Further, Gordian does not make any representation regarding or
guaranty of the accuracy of any projection, other view or advice Gordian
provides regarding the Company's future. The Company acknowledges that all
future matters are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected or otherwise addressed
by Gordian.

Gordian's role shall be solely as financial advisor to the Company's management
and the Board of Directors (except that any opinion rendered by Gordian shall,
if requested, also be addressed to Affiliates, who shall have the right to rely
on same, again subject to the third paragraph of this letter); the Company's
management and Board of Directors shall remain fully responsible for all
decisions and matters as to which Gordian's advice is sought. Gordian's
obligations to you and the Company are contractual in nature as expressly set
forth in this letter agreement and neither Gordian nor any of its affiliates nor
the respective partners, directors, officers, employees and agents of Gordian or
its affiliates have any fiduciary obligations to the Company or any other person
in respect hereof. Gordian's obligations hereunder are advisory in nature, and
Gordian is assuming no management responsibility with respect to the Company of
any nature whatsoever.


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The Company understands that Gordian does not represent that any particular
Gordian professional will be solely responsible for Gordian's work product
completed pursuant to Gordian's engagement and that junior Gordian professionals
likely will be working on this engagement with senior Gordian professionals.
Notwithstanding the foregoing, Gordian represents that Peter Kaufman and Henry
Owsley will be primarily responsible to provide the services described hereunder
and will devote such time and effort as is customarily required to perform all
material obligations of Gordian hereunder.

Any advice, written or oral, provided by Gordian pursuant to this letter will be
solely for the information and assistance of the Company (and, to the extent
expressly provided for herein, the Affiliates, subject to the third paragraph
of this letter) in connection with its consideration of its financial
restructuring. Except to the extent legally required, none of: (i) the name of
Gordian; (ii) any advice rendered by Gordian to the Company or the fact that
Gordian is rendering advice to the Company; or (iii) any communication from
Gordian to the Company or from the Company to Gordian in connection with the
services performed by Gordian pursuant to this Agreement will be quoted or
referred to orally or in writing in any public form or forum or document by
either Gordian or Company, or their agents, without the other party's prior
written authorization, which shall not be unreasonably withheld. In this
connection, it is expressly agreed that except to the extent expressly set forth
in writing by Gordian, no third party shall be entitled to rely upon Gordian's
advice for any purpose whatsoever (other than the Affiliates and the Boards of
Directors of the Affiliates in accordance with the provisions expressly set
forth herein, including the third paragraph of this letter). Moreover, Gordian
shall bear no responsibility whatsoever for the accuracy or completeness of the
Company's disclosure of Gordian's advice to any third parties.

Gordian shall have the right to rely on the accuracy and completeness of all
information provided by the Company or any of its officers, directors,
affiliates, employees, counsel and auditors without independent verification
thereof. The Company understands that in Gordian's rendering of services
hereunder, Gordian will be relying, without independent verification, on the
accuracy and completeness of all information that is or will be furnished to
Gordian by or on behalf of the Company or any other party or potential party to
any transaction contemplated by this Agreement, and Gordian will not in any
respect be responsible for the accuracy or completeness thereof;

The Company represents and warrants to Gordian that all information it furnishes
to Gordian in connection with this engagement will be true and accurate in all
material respects, and, to the best of the Company's knowledge, complete and not
misleading.

In addition to the fees described above, Gordian shall be reimbursed upon
invoice for all of its reasonable out-of-pocket expenses (including travel,
telephone,facsimile and counsel fees) incurred in connection with our engagement
hereunder; reimbursement of counsel fees shall be subject to a $10,000 cap, and
Gordian must receive the Company's permission, which shall not be unreasonably
withheld, to exceed the cap, and in any event Gordian shall provide notice to
the Company when counsel fees are incurred. The obligations of the Company
pursuant to this letter shall survive any completion or termination of this
engagement (with respect to expenses incurred prior to such completion or
termination).


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The Company agrees to indemnify Gordian and its partners, officers, directors
and employees (each an "Indemnified Party") to the full extent lawful from and
against, and that each Indemnified Person shall have no liability to the Company
or its affiliates, creditors or security holders for, any losses, claims,
expenses, damages or liabilities related to or arising out of Gordian's
engagement under this letter, or any conduct in connection therewith, except to
the extent that any such loss, claim, expense, damage or liability is finally
judicially determined to have resulted solely from the gross negligence or
willful misconduct of Gordian in performing the services that are the subject of
this letter. If for any reason the foregoing indemnification is unavailable to
any Indemnified Party or insufficient to hold it harmless, then the Company
shall contribute to the amount paid or payable by each Indemnified Party as a
result of such loss, claim, expense, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by the Company
on the one hand and the Indemnified Party on the other hand, but also the
relative fault of the Company and the Indemnified Party, as well as any other
relevant equitable considerations. The Company agrees to reimburse each
Indemnified Party periodically for its reasonable legal and other out-of-pocket
expenses (including the cost of any investigation, preparation or provision of
evidence) incurred in connection with any pending or threatened action, claim or
proceeding (regardless of whether Gordian is a party thereto) in respect of
which indemnification or contribution may be sought hereunder or in enforcing
this agreement. The reimbursement, indemnity, and contribution agreements of the
Company under this paragraph shall be in addition to any liability which the
Company otherwise may have and to any rights that Gordian may otherwise have,
and shall extend upon the same terms and conditions to any affiliate of Gordian
and the partners, directors, employees and controlling persons (if any) of
Gordian and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, Gordian, and such
affiliate and any such person. The provisions of this and the following four
paragraphs shall survive the completion or termination of Gordian's services
pursuant to this letter.

The Company acknowledges and agrees that its engagement of Gordian hereunder is
not intended to confer rights upon any person not a party hereto (including any
security holders or creditors of the Company) other than the Affiliates to the
extent provided for herein, as against Gordian, its affiliates, or the
respective partners, directors, officers, employees and agents of Gordian or its
affiliates. THIS LETTER AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS PRINCIPLES OF
CONFLICT OF LAW). THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN
CONNECTION WITH ANY DISPUTES ARISING HEREUNDER. Solely for the purposes of the
indemnification provisions above, the Company hereby consents to venue and
jurisdiction in any court in which Gordian (or other Indemnified Person
hereunder) is sued or otherwise found or brought. Except as provided in the
foregoing sentence, any dispute arising under this letter or in connection with
this engagement shall be finally settled by arbitration conducted in Houston,
Texas by one arbitrator in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The arbitration award entered in
accordance with this Agreement shall be in writing and shall be final and
binding on the parties, except to the extent it may be appealed to a court of
competent jurisdiction in accordance with applicable laws governing
appealability of arbitration awards. The award may include an award of costs,
including reasonable attorneys' fees and disbursements. Judgment upon the award
may be entered by any court having jurisdiction over the parties or their
assets.


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Gordian will not during the term of this engagement or thereafter (except as
required by law after prior notice to Company) use or disclose to any person any
confidential information or trade or business secrets relating to the Company,
its affiliates, or any other person of which Gordian becomes possessed in
connection with its services hereunder except when authorized to do so by the
Company in writing to a person bound by a confidentiality obligation.

This engagement may be terminated by the Company or Gordian at any time with or
without cause, effective upon receipt of written notice to that effect by the
other party; provided, however, that Gordian shall be entitled to Additional
Fees (subject to the $1,500,000 maximum limitation on all fees) on a Financial
Transaction consummated after the termination of this agreement by the Company
provided that both: (a) at the date of termination less than 70% of the
Company's bonds have been restructured and (b) within nine months from the date
of such termination definitive documentation is entered into so long as, with
respect to any such Financial Transaction, Gordian interacted during the
pendency of its engagement hereunder with any Financial Partner participating in
any such Financial Transaction. In any event, the Company shall remain liable
for any Monthly Fees and/or expenses owed to Gordian prior to termination
pursuant to its engagement hereunder.
Neither party may assign this Agreement.

Please confirm that the foregoing is in accordance with your understanding by
signing and returning to us the duplicate of this letter attached hereto, which
shall thereupon constitute a binding agreement.

                                   Sincerely yours,
                                   GORDIAN GROUP, L.P.

                                   By:      Blue Claw Capital, Inc.,
                                            General Partner of
                                            Gordian Group, L.P.

                                   By:      /s/ Peter Kaufman
                                            ------------------------------------
                                            Peter S. Kaufman
                                            Managing Director of
                                            the General Partner

AGREED TO AND ACCEPTED:
PETSEC ENERGY INC.


By:  /s/ James E. Slatten III
     ------------------------------------
     James E. Slatten III
     Vice-President, Land & Legal, and Director


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