Document:

<PAGE>   1

                                  EXHIBIT 10.7

                         EXECUTIVE EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "Agreement") dated effective as of May
1, 1999, (the "Start Date") is between Petsec Energy Inc., a corporation formed
under the laws of Nevada (the "Company"), and Howard H. Wilson, an individual
resident of the State of Louisiana (the "Executive").

                              W I T N E S S E T H:

         WHEREAS, Company and Executive desire to enter into a written agreement
providing for the continued employment of Executive by Company upon the terms
and subject to the conditions set forth herein;

         WHEREAS, Executive will report to the Chief Executive Officer (the
"CEO") of the Company or his designee, and he shall have the right, under the
terms and conditions specified in this Agreement, to recommend to Company's
Board of Directors (the "Company Board") any determination made under the
Agreement;

         NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements herein contained, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which hereby are acknowledged, the parties
agree as follows:

         1.       EMPLOYMENT. Subject to the provisions of this Agreement,
                  Company hereby agrees to employ Executive and Executive hereby
                  agrees to accept such employment with, and to provide to
                  Company the services described in Section 3 below.

         2.       TERM. Executive shall be employed by Company for a period
                  commencing on the Start Date and, except as otherwise provided
                  herein, ending on the third anniversary of the Start Date. The
                  term of this Agreement shall be extended annually without the
                  necessity of any affirmative action by any party for an
                  additional one year term (to make an aggregate three year
                  commitment on the part of Company and Executive) on May 1 of
                  each year that Executive is employed by Company, unless prior
                  to May 1 of each such year Company terminates this Agreement
                  by sending written notice to Executive (in which case, the
                  provisions of Section 8.1 shall apply). The period during
                  which Company employs Executive shall hereinafter be referred
                  to as the "Term of Employment."

         3.       NATURE OF SERVICE. During the Term of Employment, Executive
                  agrees to perform such services as are consistent with his
                  position as Vice-President--Operations or as from time to
                  time shall be assigned to him by the CEO or his designee.
                  Executive

                                      -1-
<PAGE>   2

                  shall devote so much of his time, attention and skills to the
                  business of Company as is necessary to properly perform his
                  duties and responsibilities. Executive shall not, during the
                  Term of Employment, be engaged in, or represent any party
                  other than Company in connection with the provision of any
                  services whatsoever without the prior written consent of the
                  CEO or his designee. Executive shall perform his duties under
                  this Agreement diligently with fidelity and loyalty and in a
                  competent manner consistent with the level of his
                  responsibilities.

         4.       COMPENSATION.

                  4.1.     BASE SALARY. During the Term of Employment, Company
                           shall pay to Executive a base salary payable in equal
                           periodic installments in accordance with the
                           established payroll practices of Company. Initially,
                           the Executive's base salary shall be $170,000 per
                           year. Executive's base salary shall be reviewed
                           annually on or before July 1 by the Remuneration
                           Committee (the "Committee") of the Petsec Energy
                           Ltd's (the "Parent") Board of Directors (the " Parent
                           Board"). (If the Parent no longer has beneficial
                           ownership of at least a majority of the outstanding
                           voting stock of the Company, then the
                           responsibilities of the Committee shall be performed
                           by the Company Board.) The Committee may recommend
                           increases to the Executive's base salary, which if
                           accepted by the Company Board, shall become effective
                           in the manner determined by the Company Board. ("Base
                           Salary," as used hereinafter, shall mean at any
                           particular time the periodic payment last paid to
                           Executive pursuant to this Section 4.1, multiplied by
                           the appropriate factor to arrive at an annualized
                           number.)

                  4.2.     CASH INCENTIVE COMPENSATION. On or before April 1 of
                           each year, the Committee shall recommend to the
                           Company Board the amount, if any, that shall be
                           awarded to all senior executives (including
                           Executive) of the Company who are eligible to
                           participate in the cash incentive compensation
                           program. The Committee shall recommend to the Company
                           Board the cash award, if any, to be paid to Executive
                           up to a maximum of 100% of Executive's Base Salary.
                           The amounts available for distribution under the
                           Company's cash incentive compensation program shall
                           take into account Company financial and operating
                           results. The incentive compensation amount awarded to
                           Executive shall be weighted evenly between Company
                           performance and individual performance to reward both
                           cooperative management efforts to attain Company
                           objectives and individual achievement. Fifty percent
                           of the cash incentive compensation available to
                           Executive shall be based on Company performance and
                           50% shall be based on the individual performance of
                           Executive. Company performance shall be measured
                           subjectively by the Committee with input from the
                           CEO. The Committee shall evaluate individual
                           performance of the Executive with input

                                      -2-
<PAGE>   3

                           from the CEO. The cash incentive compensation, if
                           paid, will be paid to Executive in a lump sum in
                           April of each year.

                  4.3.     TAXES. All taxes and governmentally required
                           withholdings shall be deducted in conformity with
                           applicable laws.

         5.       STOCK OPTIONS.

                  5.1.     GRANT OF OPTION. As additional compensation to
                           Executive, Parent has issued to Executive as of the
                           Start Date options to purchase 375,000 ordinary
                           shares of Parent, and from time to time the Parent
                           may issue additional options (collectively, the
                           "Options"). The Options are governed by the Petsec
                           Energy Ltd Employee Option Plan, as may be amended
                           from time to time and one or more times (the "Option
                           Plan"). Executive agrees that the issue and exercise
                           of the Options are governed by the rules of the Plan,
                           and by the additional terms and conditions set by the
                           Committee and described in the Option Certificates
                           delivered to Executive with respect to the Options.
                           Copies of the Option Certificates are attached hereto
                           as Exhibit A. Award of additional Options to
                           Executive shall be considered annually on or before
                           May 1 of each year by the Committee, and a
                           recommendation with respect thereto made to the
                           Parent Board.

                  5.2.     TAX CONSEQUENCES. Executive shall be responsible for
                           the payment of all income taxes, alternative minimum
                           taxes or other taxes or governmental charges that may
                           accrue on account of the issuance or exercise of the
                           Options or the acquisition or sale by Executive of
                           Parent stock acquired with respect to the Options.
                           Executive should consult his own tax advisor
                           regarding the specific tax consequences of
                           participation in the Plan, including the application
                           of any federal, state and local tax laws and the
                           effect of other state and local laws, including
                           community property laws. Executive agrees to defend
                           and indemnify Company and Parent for any claims made
                           against Company, Parent or Executive by any taxing
                           authority for income or alternative minimum taxes
                           that may be owed by Executive on account of the
                           issuance, exercise or sale of the options or the
                           acquisition or sale by Executive of any Parent stock
                           acquired with respect to any Options.

         6.       BENEFITS. Executive shall receive the employee benefits as may
                  be provided by Company from time to time to employees of
                  Company holding executive offices and positions, all as
                  approved by the Company Board. These benefits shall include:

                  6.1.     VACATION TIME. Executive will be eligible for twenty
                           working days of vacation time per year together with
                           all public holidays recognized by Company. The use
                           and accrual of such vacation time shall be governed
                           by the

                                      -3-
<PAGE>   4

                           Company's vacation policy, as the same may be amended
                           from time to time and one or more times.

                  6.2.     DEATH BENEFIT. The Company shall maintain life
                           insurance for the benefit of the beneficiary(ies) of
                           Executive that shall pay to Executive's
                           beneficiary(ies) a death benefit in an amount equal
                           to at least three times the lowest Base Salary in
                           effect during the twelve months preceding Executive's
                           death.

                  6.3.     DISABILITY BENEFIT. The Company shall maintain
                           disability insurance for the benefit of Executive
                           that is commensurate with the disability policy in
                           place as of the Start Date.

                  6.4.     SEVERANCE BENEFIT. Executive shall receive the
                           severance benefit provided for in Section 8.4.2.

         7.       REIMBURSEMENT OF BUSINESS EXPENSES. Company shall reimburse
                  Executive for all reasonable and proper travel and
                  out-of-pocket expenses (including but not limited to industry
                  association fees and industry entertainment expenses) incurred
                  by him for the purpose of and in connection with the
                  performance of his duties pursuant to this Agreement during
                  the Term of Employment, all in accordance with the policies
                  relating to the allowable amount of such expenses and the
                  provision of itemized reports and receipts with respect
                  thereto that may from time to time be adopted by Company.

         8.       TERMINATION.

                  8.1.     TERMINATION BY COMPANY.

                           8.1.1.   FOR CAUSE. Executive's employment under this
                                    Agreement may be terminated for cause at any
                                    time, effective immediately, after formal
                                    action by the CEO acting at the direction of
                                    the Company Board following a meeting of the
                                    Company Board, duly called for the purpose
                                    of considering the termination of Executive
                                    for "cause," as defined herein. As used in
                                    this Section 8.1.1, "cause" shall mean that
                                    the Company Board in good faith either
                                    determines or has reasonable suspicions that
                                    one or more of the following has occurred:
                                    (1) Executive has engaged in gross
                                    negligence or willful misconduct in the
                                    performance of his duties; (2) Executive has
                                    willfully refused without proper legal
                                    reason to perform his duties and
                                    responsibilities; (3) Executive has
                                    materially breached any material provision
                                    of any agreement between Executive and
                                    Company; (4) Executive has materially
                                    breached any material corporate policy of
                                    the Company; or (5) Executive has engaged in
                                    illegal conduct, or has violated any

                                      -4-
<PAGE>   5

                                    statute, rule or regulation under federal
                                    securities laws, or has engaged in any act
                                    of serious dishonesty which adversely
                                    affects, or reasonably could in the future
                                    adversely affect, Executive's value,
                                    reliability or performance in a material
                                    manner or the business reputation of the
                                    Company. In the event that Company acts to
                                    terminate Executive for cause in accordance
                                    with this Section 8.1.1, Executive shall be
                                    entitled to receive only the compensation
                                    provided for in Section 8.4.1 and any rights
                                    provided under the Option Plan with respect
                                    to the Options.

                           8.1.2.   WITHOUT CAUSE. Company may terminate
                                    Executive's employment under this Agreement
                                    at any time, in which case Executive will be
                                    entitled to receive only the compensation
                                    provided for in Section 8.4.1, the severance
                                    benefit provided for in Section 8.4.2 and
                                    any rights provided under the Option Plan
                                    with respect to the Options.

                  8.2.     TERMINATION BY EXECUTIVE.

                           8.2.1.   FOR CAUSE. Executive may terminate his
                                    employment under this Agreement if Company
                                    does any one or more of the following: (1)
                                    Company makes a material reduction in
                                    Executive's job duties, authority or
                                    responsibilities with the Company from that
                                    exercised by him immediately prior to such
                                    change (however, a reduction in the size of
                                    Company and/or in the number of employees
                                    working under the supervision of Executive,
                                    shall not constitute a material reduction
                                    hereunder); (2) a reduction of more than 10%
                                    in any twelve month period from the Base
                                    Salary paid by the Company to Executive
                                    during the twelve months immediately
                                    preceding such Base Salary reduction; (3) a
                                    change in location of Executive's primary
                                    place of employment by the Company by more
                                    than 30 miles from the location where he was
                                    primarily employed prior to such change; (4)
                                    a material reduction in the value of or
                                    change in the scope or terms of the benefits
                                    to which the Executive, taken as a whole,
                                    was entitled prior to such reduction or
                                    change; or (5) Company otherwise fails to
                                    comply with any material provision of this
                                    Agreement. Before terminating his employment
                                    for cause under this Section 8.2.1,
                                    Executive shall first provide the Company
                                    with written notice specifying in detail the
                                    reasons why Executive believes he has the
                                    right to terminate his employment for cause
                                    and allowing Company ten (10) days to cure
                                    any such default. If Executive provides such
                                    a notice to Company and then fails to
                                    terminate his employment for cause within
                                    five days after the expiration of the (10)
                                    day cure period (because Company has cured
                                    such default, because Executive decides

                                      -5-
<PAGE>   6

                                    he no longer wants to terminate this
                                    Agreement or for any other reason),
                                    Executive shall be deemed to have waived his
                                    right to terminate this Agreement for the
                                    reasons specified in the notice. If
                                    Executive does terminate his employment for
                                    cause under this Section 8.2.1, Executive
                                    will be entitled to receive only the
                                    compensation provided for in Section 8.4.1,
                                    the severance benefit provided for in
                                    Section 8.4.2 and any rights provided under
                                    the Option Plan with respect to the Options.

                           8.2.2.   WITHOUT CAUSE. Executive may terminate his
                                    employment under this Agreement without
                                    cause by giving Company at least sixty (60)
                                    days' prior written notice of the effective
                                    date of his termination of employment. In
                                    the event that Executive terminates his
                                    employment under this Section 8.2.2,
                                    Executive shall be entitled to receive only
                                    the compensation provided for in Section
                                    8.4.1 and any rights provided under the
                                    Option Plan with respect to the Options.
                                    Provided that Executive complies with this
                                    Section, Executive shall not be liable for
                                    any damages to Company on account of such
                                    termination.

                  8.3.     TERMINATION UPON DEATH OR DISABILITY.

                           8.3.1.   If Executive becomes permanently disabled so
                                    as to become eligible for permanent
                                    disability insurance benefits under a long
                                    term disability policy maintained by the
                                    Company for the benefit of Executive, at
                                    such time as Executive is determined to be
                                    permanently disabled, Executive's employment
                                    shall be deemed terminated. In the event
                                    that Executive's employment is terminated
                                    under this Section 8.3.1, Executive shall be
                                    entitled to receive only the compensation
                                    provided for in Section 8.4.1, the benefit
                                    provided under Section 6.3, and any rights
                                    provided under the Option Plan with respect
                                    to the Options.

                           8.3.2.   If Executive dies, his employment shall be
                                    deemed to be terminated as of the date of
                                    his death. In such a case, Executive's heirs
                                    or successors shall be entitled to receive
                                    only the benefit provided for in Section
                                    6.2, the compensation provided for in
                                    Section 8.4.1 and any rights provided under
                                    the Option Plan with respect to the Options.

                  8.4.     DAMAGES TO EXECUTIVE IN THE EVENT OF TERMINATION.

                           8.4.1.   COMPENSATION IN THE EVENT OF TERMINATION.
                                    Upon the termination of Executive's
                                    employment with Company, Company shall pay
                                    to Executive (or Executive's heirs or
                                    successors) all unpaid Base Salary

                                      -6-
<PAGE>   7

                                    for the period through the date of
                                    termination and reimbursement for allowable
                                    expenses incurred by Executive through such
                                    date. Company shall not be obligated to pay
                                    Executive any Base Salary for periods beyond
                                    the date of termination.

                           8.4.2.   SEVERANCE BENEFIT. Upon the termination of
                                    Executive's employment with Company under
                                    circumstances set forth in Sections 8.1.2 or
                                    8.2.1, Company shall pay to Executive in a
                                    lump sum an amount equal to the product of
                                    (a) the number of months (prorated for a
                                    partial month) remaining on the term of this
                                    Agreement (which number shall be greater
                                    than or equal to 24 and less than or equal
                                    to 36) times (b) the quotient of the Base
                                    Salary divided by 12. This lump sum payment
                                    shall be made within five days of the
                                    termination of Executive's employment. The
                                    severance benefit provided for under this
                                    Section 8.4.2 shall be reduced dollar for
                                    dollar by any amount to which Executive is
                                    or may become entitled pursuant to the
                                    Petsec Energy Inc. Change in Control Bonus
                                    and Severance Plan or any similar plan.

                           8.4.3.   OPTIONS. Upon Executive's termination of
                                    employment for any reason, Executive's
                                    rights and Company's obligations with
                                    respect to the Options shall be governed by
                                    the Employee Option Plan.

                  9.       CERTAIN COVENANTS OF EXECUTIVE.

                           9.1.     Executive agrees that during the Term of
                                    Employment, he will not (a) directly or
                                    indirectly engage or invest in any business
                                    other than Company's business without the
                                    prior approval of the CEO or his designee or
                                    (b) otherwise act as a director, officer,
                                    employee, agent, owner, partner or
                                    consultant to any such business. It is
                                    understood and agreed that Executive shall
                                    not be deemed to be in default with respect
                                    to this Section 9.1 as a result of any
                                    investment he may make in not more than five
                                    percent of the outstanding shares or other
                                    units of any security registered pursuant to
                                    Section 12 of the Securities Exchange Act of
                                    1934, as amended (the "1934 Act") or in not
                                    more than fifty percent of the outstanding
                                    shares or other units of any security not
                                    registered pursuant to Section 12 of the
                                    1934 Act.

                  9.2.     Executive will not during his employment or
                           thereafter (except in the course of his duties as
                           authorized by Company or as required by law) use or
                           disclose to any person any confidential information
                           or trade secrets belonging or relating to Company or
                           any person or entity with whom Executive have come
                           into contact as a result of his employment. Upon
                           termination of this Agreement, Executive promptly
                           shall return all originals and copies of such

                                      -7-
<PAGE>   8

                           papers, lists, documents and records that are in his
                           possession, custody or control.

                  9.3.     If the provisions contained in this Section 9 are
                           more restrictive than permitted by applicable law,
                           the parties agree that the covenants contained in
                           this Section 9 shall be enforceable and in force to
                           the extent permitted by law.

         10.      AMENDMENT. This Agreement may not be modified or amended
                  except by a written instrument executed by or on behalf of
                  both Company and Executive.

         11.      WAIVERS. The observance of any term of this Agreement may be
                  waived (either generally or in a particular instance and
                  either retroactively or prospectively) by the party entitled
                  to enforce such term, but except as otherwise expressly
                  provided herein, such waiver shall be effective only if in a
                  writing signed by the party or parties against which such
                  waiver is to be asserted. Except as otherwise expressly
                  provided herein, no delay or omission on the part of any party
                  in exercising any right, power or privilege hereunder shall
                  operate as a waiver thereof, nor shall any waiver on the part
                  of any party of any right, power or privilege hereunder
                  operate as a waiver of any other right, power or privilege
                  hereunder, nor shall any single or partial exercise of any
                  right, power or privilege hereunder preclude any other or
                  further exercise thereof or the exercise of any other right,
                  power or privilege hereunder. All remedies, either under this
                  Agreement or by law or otherwise afforded to any party, shall
                  be cumulative and not alternative.

         12.      ENTIRE AGREEMENT. This Agreement and the documents expressly
                  referred to herein constitute the entire agreement between the
                  parties with respect to the matters covered hereby, and any
                  other prior or contemporaneous oral or written understandings
                  or agreements with respect to the matters covered hereby are
                  expressly superseded by this Agreement, including without
                  limitation, that certain employment agreement dated June 1,
                  1995 as amended from time to time (including without
                  limitation amendments dated July 18, 1996 and April 15, 1998).
                  There are no unwritten or oral agreements between the parties.

         13.      SEVERABILITY. If any provision of this Agreement, or the
                  application of such provision to any person or circumstance,
                  shall be declared judicially to be invalid, unenforceable or
                  void, such decision will not have the effect of invalidating
                  or voiding the remainder of this Agreement or affect the
                  application of such provision to other persons or
                  circumstances, and the parties agree that the part or parts of
                  this Agreement so held to be invalid, unenforceable or void
                  will be deemed to have been stricken here from and the
                  remainder of this Agreement will have the same force and
                  effect as if such part or parts had never been included
                  herein. Any such finding of invalidity or unenforceability
                  shall not prevent the enforcement of such provision in any
                  other jurisdiction to the maximum extent permitted by
                  applicable law.

                                      -8-
<PAGE>   9

         14.      NOTICES. Unless otherwise expressly provided herein, all
                  notices, requests, demands, consents, waivers, instructions,
                  approvals and other communications hereunder shall be in
                  writing and shall be deemed to have been duly given if
                  personally delivered to or mailed, certified mail, return
                  receipt requested, first-class postage paid, or delivered by
                  messenger service with receipt acknowledged, addressed as
                  follows:

                                            If to Company:

                                            Level 13, 1 Alfred Street
                                            Sydney, NSW 1225, Australia
                                            Attn: Terrence N. Fern

                                            If to Executive:

                                            Howard H. Wilson
                                            201 Rue Massie
                                            Broussard, LA  70518

                  or to such other address or to such other individuals as any
                  party shall have last designated by notice to the other party.
                  All notices and other communications given to any party in
                  accordance with the provisions of this Agreement shall be
                  deemed to have been given when delivered to the intended
                  recipient thereof in accordance with the provisions of this
                  Section 14.

         15.      GOVERNING LAW; FORUM; CONSENT TO JURISDICTION. This Agreement
                  shall be construed in accordance with, and the rights of the
                  parties governed by, the laws of the State of Louisiana
                  without regard to the principles of conflict of laws. The
                  parties agree that all disputes in any way relating to,
                  arising under, connected with, or incident to this Agreement,
                  and over which the federal courts have subject matter
                  jurisdiction, shall be litigated exclusively in the United
                  States District Court for the Western District of Louisiana,
                  Lafayette Division, and, if necessary, the corresponding
                  appellate courts. The parties further agree that all disputes
                  in any way relating to, arising under, connected with, or
                  incident to this Agreement, and over which the federal courts
                  do not have subject matter jurisdiction, shall be litigated,
                  if at all, exclusively in the Courts of the State of
                  Louisiana, in Lafayette Parish, and, if necessary, the
                  corresponding appellate courts. The parties expressly submit
                  themselves to the personal jurisdiction of the State of
                  Louisiana.

         16.      SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
                  herein, Executive agrees on behalf of himself and his
                  executors and administrators, heirs, legatees, distributees
                  and any other person or persons claiming any benefits under
                  him by virtue of this Agreement, that this Agreement and the
                  rights, interests and benefits

                                      -9-
<PAGE>   10

                  hereunder shall not be assigned, transferred, pledged or
                  hypothecated in any way by Executive or any executor,
                  administrator, heir, legatee, distributee or person claiming
                  under Executive by virtue of this Agreement and shall not be
                  subject to execution, attachment or similar process. Except as
                  otherwise expressly provided herein, Company agrees that this
                  Agreement shall not be assigned or transferred to any other
                  party; provided, however, a merger or consolidation of Company
                  into a successor entity other than Company shall not be
                  considered a transfer or assignment. Any attempt at
                  assignment, transfer, pledge or hypothecation or other
                  disposition of this Agreement or of such rights, interest and
                  benefits contrary to the foregoing provisions, or the levy of
                  any attachment or similar process thereupon, shall be null and
                  void and without effect.

         17.      THIRD PARTY BENEFICIARIES. This Agreement does not create, and
                  shall not be construed as creating, any rights enforceable by
                  any person or entity not a party to this Agreement (except as
                  otherwise provided in Section 8.3.2 or in Section 16).

         18.      HEADINGS. The section headings in this Agreement are for
                  convenience of reference only and shall not be deemed to alter
                  or affect the meaning or interpretation of any provisions
                  hereof.

         19.      ARBITRATION. Any controversy or claim arising out of or
                  relating to this contract, or the breach thereof, shall be
                  settled by arbitration in Lafayette, Louisiana, in accordance
                  with the applicable Rules of the American Arbitration
                  Association using three (3) impartial arbitrators and judgment
                  upon the award rendered by the arbitrators may be entered in
                  any court having jurisdiction thereof. Each party shall select
                  one arbitrator and the selected arbitrator shall designate a
                  third arbitrator. If unable to agree to a third arbitrator,
                  the presiding judge in the United States District Court for
                  the Western District of Louisiana shall designate the third
                  arbitrator. This Section 19 shall take precedence over the
                  provisions of Section 15.

         20.      COUNTERPARTS. This Agreement may be executed in two or more
                  counterparts, each of which shall be deemed to be an original
                  and all of which together shall be deemed to be one and the
                  same instrument.

         21.      CURRENCY REFERENCES. All references to "$" are to United
                  States currency unless otherwise specifically stated in the
                  Agreement.

                                      -10-
<PAGE>   11

         IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
to be effective as of the date first above written.

WITNESSES:                               COMPANY:

                                         PETSEC ENERGY INC.
Printed Name:
             ---------------------

Printed Name:                            By: /s/ Terrence N. Fern
             ---------------------          -----------------------------------
                                              Terrence N. Fern
                                              Chief Executive Officer

                                         EXECUTIVE:
Printed Name:
             ---------------------
                                         /s/ Howard H. Wilson
                                         --------------------------------------
Printed Name:                            Howard H. Wilson
             ---------------------

                                      -11-<PAGE>   1

                                  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

<PAGE>   2

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.

                                       2
<PAGE>   3

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.

                                       3
<PAGE>   4

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).

                                       4
<PAGE>   5

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.

                                       5
<PAGE>   6

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

                                       6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}]]