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                                                                    EXHIBIT 10.3

                         EXECUTIVE EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into effective as of July 28, 2003
between PetroQuest Energy, Inc., a Delaware corporation having its principal
executive office at 400 E. Kaliste Saloom Road, Suite 6000, Lafayette, Louisiana
70508 (hereinafter referred to as the "Company"), and Stephen H. Green
(hereinafter referred to as the "Employee").

                              W I T N E S S E T H:

         WHEREAS, the Company desires to employ the Employee in an executive
capacity and the Employee desires to enter the Company's employ.

         NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Employee hereby agree as follows:

1.       Certain Definitions. As used in this Agreement, the following terms
have the meanings prescribed below:

         Affiliate is used in this Agreement to define a relationship to a
person or entity and means a person or entity who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such person or entity.

         Annual Bonus shall have the meaning assigned thereto in Section 4.2
hereof.

         Base Salary shall have the meaning assigned thereto in Section 4.1
hereof.

         Beneficial Owner shall have the meaning assigned thereto in Rule
13(d)-3 under the Exchange Act; provided, however, and without limitation, that
any individual, corporation, partnership, group, association or other person or
entity that has the right to acquire any Voting Stock at any time in the future,
whether such right is (a) contingent or absolute or (b) exercisable presently or
at any time in the future, pursuant to any agreement or understanding or upon
the exercise or conversion of rights, options or warrants, or otherwise, shall
be the Beneficial Owner of such Voting Stock.

         Cause shall have the meaning assigned thereto in Section 5.3 hereof.

         Common Stock means the Company's common stock, par value $.001 per
share.

         Confidential Information shall have the meaning assigned thereto in
Section 8.2 hereof.

         Date of Termination means the earliest to occur of (i) the date of the
Employee's death, (ii) the date on which the Employee terminates this Agreement
for any reason or (iii) the date of receipt

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of the Notice of Termination, or such later date as may be prescribed in the
Notice of Termination in accordance with Section 5.5 hereof.

         Disability means an illness or other disability which prevents the
Employee from discharging his responsibilities under this Agreement for a period
of 180 consecutive calendar days, or an aggregate of 180 calendar days in any
calendar year, during the Employment Period, all as determined in good faith by
the Board of Directors of the Company (or a committee thereof).

         Effective Date means the date of execution hereof.

         Employee means Stephen H. Green whose business address is 400 E.
Kaliste Saloom Road, Suite 6000, Lafayette, Louisiana 70508.

         Exchange Act means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder, all as in effect from time to time during the Employment Period.

         Company means PetroQuest Energy, Inc., a Delaware corporation, the
principal executive office of which is located at 400 E. Kaliste Saloom Road,
Suite 6000, Lafayette, Louisiana 70508.

         Employment Period shall have the meaning assigned thereto in Section 3
hereof.

         Initial Term shall have the meaning assigned thereto in Section 3
hereof.

         Notice of Termination shall have the meaning assigned thereto in
Section 5.5 hereof.

         Termination Agreement means the Termination Agreement dated as of the
Effective Date of this Executive Employment Agreement between the Company and
the Employee.

         Voting Stock means all outstanding shares of capital stock of the
Company entitled to vote generally in an election of directors; provided,
however, that if the Company has shares of Voting Stock entitled to more or less
than one vote per share, each reference to a proportion of the issued and
outstanding shares of Voting Stock shall be deemed to refer to the proportion of
the aggregate votes entitled to be cast by the issued and outstanding shares of
Voting Stock.

         Without Cause shall have the meaning assigned thereto in Section 5.4
hereof.

2.       General Duties of Company and Employee.

         2.1      The Company agrees to employ the Employee, and the Employee
agrees to accept employment by the Company and to serve the Company as Senior
Vice President-Exploration. The authority, duties and responsibilities of the
Employee shall be consistent with those of executive officers in a public
company with a similar title, and such other or additional duties as may from
time to time be assigned to the Employee by the Board of Directors (or a
committee thereof) and agreed to

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by the Employee. While employed hereunder, the Employee shall devote full time
and attention during normal business hours to the affairs of the Company and use
his best efforts to perform faithfully and efficiently his duties and
responsibilities. The Employee may (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (iii) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Employee's duties and responsibilities.

         2.2      The Employee agrees and acknowledges that he owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of the Company and to do no act and to make no statement, oral or
written, which would injure Company's business, its interests or its reputation.

         2.3      The Employee agrees to comply at all times during the
Employment Period with all applicable policies, rules and regulations of the
Company, including, without limitation, the Company's Business Ethics Policy and
the Company's policy regarding trading in the Common Stock, as each is in effect
from time to time during the Employment Period.

3.       Term. Unless sooner terminated pursuant to other provisions hereof, the
Employee's period of employment under this Agreement shall be a period of two
(2) years beginning on the Effective Date (the "Initial Term"). After the
expiration of the Initial Term, the Employee's period of employment under this
Agreement shall be automatically renewed for successive one-year terms on each
anniversary of the Effective Date (the Initial Term and any and all renewals
thereof are referred to herein collectively as the "Employment Period").

4.       Compensation and Benefits.

         4.1      Base Salary. As compensation for services to the Company, the
Company shall pay to the Employee until the Date of Termination an annual base
salary of $180,000.00 (the "Base Salary"). The Board of Directors (or a
committee thereof), in its discretion, may increase the Base Salary based upon
relevant circumstances. The Base Salary shall be payable in equal semi-monthly
installments or in accordance with the Company's established policy, subject
only to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for insurance and
other employee benefit plans.

         4.2      Bonus. In addition to the Base Salary, Employee may be
awarded, for each fiscal year until the Date of Termination, an annual bonus
(either pursuant to a bonus or incentive plan or program of the Company or
otherwise) in an amount to be determined by the Board of Directors (or a
committee thereof), in its sole discretion (the "Annual Bonus"). Each such
Annual Bonus shall be payable at a time to be determined by the Board of
Directors (or a committee thereof) in its sole discretion.

         4.3      Incentive, Savings and Retirement Plans. Until the Date of
Termination, the Employee shall be eligible to participate in and shall receive
all benefits under all executive

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incentive, savings and retirement plans (including 401(k) plans) and programs
currently maintained or hereinafter established by the Company for the benefit
of its executive officers and/or employees.

         4.4      Welfare Benefit Plan. Until the Date of Termination, the
Employee and/or the Employee's family, as the case may be, shall be eligible to
participate in and shall receive all benefits under each welfare benefit plan of
the Company currently maintained or hereinafter established by the Company for
the benefit of its employees. Such welfare benefit plans may include, without
limitation, medical, dental, disability, group life, accidental death and travel
accident insurance plans and programs.

         4.5      Reimbursement of Expenses. The Employee may from time to time
until the Date of Termination incur various business expenses customarily
incurred by persons holding positions of like responsibility, including, without
limitation, travel, entertainment and similar expenses incurred for the benefit
of the Company. Subject to the Company's policy regarding the reimbursement of
such expenses as in effect from time to time during the Employment Period, which
does not necessarily allow reimbursement of all such expenses, the Company shall
reimburse the Employee for such expenses from time to time, at the Employee's
request, and the Employee shall account to the Company for all such expenses.

         4.6      Life Insurance. The Company shall provide to the Employee life
insurance under programs currently maintained or hereafter established by the
Company for the benefit of its executive officer or employees.

         4.7      Relocation. The Company and the Employee agree that if the
Employee is asked to relocate from Lafayette, Louisiana to Houston, Texas, the
Company will provide to Employee reimbursement for out of pocket moving expenses
incurred in connection with such move, and it will also reimburse the Employee
for any loss incurred by the Employee on the sale of his personal residence in
Lafayette, Louisiana, with such loss being calculated on the basis of the
difference between the Employee's actual costs less the net sales price.

         4.8      Vacation. Until the Date of Termination, subject to the
Company's policies regarding vacation as in effect from time to time during the
Employment Period, Employee shall be entitled to five (5) weeks paid vacation
during each one year period commencing on the anniversary date of Employee's
employment with the Company.

         4.9      Additional Agreements. In addition to the rights and
obligations of the Company and Employee under this Agreement, the Company,
Employee or their Affiliates may, from time to time, execute agreements during
the Employment Period which provide Employee certain rights with respect to
particular oil and gas prospects. Such agreements are not part of this Agreement
relating to employment and nothing in such agreements shall confer upon Employee
any right to continue in the employ of the Company or interfere with or restrict
in any way the rights of the Company, which are hereby expressly reserved, to
terminate Employee for any reason, with our without cause.

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5.       Termination.

         5.1      Death. This Agreement shall terminate automatically upon the
death of the Employee.

         5.2      Disability. The Company may terminate this Agreement, upon
written notice to the Employee delivered in accordance with Sections 5.5 and
12.1 hereof, upon the Disability of the Employee.

         5.3      Cause. The Company may terminate this Agreement, upon written
notice to the Employee delivered in accordance with Sections 5.5 and 12.1
hereof, for Cause. For purposes of this Agreement, "Cause" means (i) the
conviction of the Employee of a felony (which, through lapse of time or
otherwise, is not subject to appeal), (ii) the Employee's willful refusal,
without proper legal cause, to perform his duties and responsibilities as
contemplated in this Agreement or (iii) the Employee's willful engaging in
activities which would (A) constitute a breach of any term of this Agreement,
the Company's code of ethics, the Company's policies regarding trading in the
Common Stock or reimbursement of business expenses or any other applicable
policies, rules or regulations of the Company, or (B) result in a material
injury to the business, condition (financial or otherwise), results of
operations or prospects of the Company or its Affiliates (as determined in good
faith by the Board of Directors of the Company or a committee thereof).

         5.4      Without Cause. The Company may terminate this Agreement
Without Cause, upon written notice to the Employee delivered in accordance with
Sections 5.5 and 12.1 hereof. For purposes of this Agreement, the Employee will
be deemed to have been terminated "Without Cause" if the Employee is terminated
by the Company for any reason other than Cause, Disability or death.

         5.5      Notice of Termination. Any termination of this Agreement by
the Company for Cause, Without Cause or as a result of the Employee's Disability
shall be communicated by Notice of Termination to the Employee given in
accordance with this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated and (iii) specifies the
termination date, if such date is other than the date of receipt of such notice
(which termination date shall not be more than 15 days after the giving of such
notice).

6.       Obligations of Company upon Termination.

         6.1      Cause by Employee. If this Agreement shall be terminated
either by the Company for Cause or by the Employee for any reason, the Company
shall pay to the Employee, in a lump sum in cash within 30 days after the Date
of Termination, the aggregate of the Employee's Base Salary (as in effect on the
Date of Termination) through the Date of Termination, if not theretofore paid,
and, in the case of compensation previously deferred by the Employee, all
amounts of such compensation

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previously deferred and not yet paid by the Company. All other obligations of
the Company and rights of the Employee hereunder shall terminate effective as of
the Date of Termination.

         6.2      Death or Disability.

                  (a)      Subject to the provisions of this Section 6.2, if
         this Agreement is terminated as a result of the Employee's death or
         Disability, the Company shall pay to the Employee or his estate, in
         equal semi-monthly installments, the Employee's Base Salary (as in
         effect on the Date of Termination) for 12 months after such Date of
         Termination. The Company may purchase insurance to cover all or any
         part of the obligation contemplated in the foregoing sentence, and the
         Employee agrees to submit to a physical examination to facilitate the
         procurement of such insurance.

                  (b)      Whenever compensation is payable to the Employee
         hereunder during a period in which he is partially or totally disabled,
         and such Disability would (except for the provisions hereof) entitle
         the Employee to Disability income or salary continuation payments from
         the Company according to the terms of any plan or program presently
         maintained or hereafter established by the Company, the Disability
         income or salary continuation paid to the Employee pursuant to any such
         plan or program shall be considered a portion of the payment to be made
         to the Employee pursuant to this Section 6.2 and shall not be in
         addition hereto. If Disability income is payable directly to the
         Employee by an insurance company under the terms of an insurance policy
         paid for by the Company, the amounts paid to the Employee by such
         insurance company shall be considered a portion of the payment to be
         made to the Employee pursuant to this Section 6.2 and shall not be in
         addition hereto.

         6.3      Without Cause. If this Agreement shall be terminated by the
Company Without Cause:

                  (a)      the Company shall pay to the Employee, in a lump sum
         in cash within 30 days after the Date of Termination, the aggregate of
         the following amounts:

                           (1)      if not theretofore paid, the Employee's Base
                  Salary (as in effect on the Date of Termination) through the
                  Date of Termination; and

                           (2)      in the case of compensation previously
                  deferred by the Employee, all amounts of such compensation
                  previously deferred and not yet paid by the Company;

                  (b)      the Company shall, promptly upon submission by the
         Employee of supporting documentation, pay or reimburse to the Employee
         any costs and expenses (including moving and relocation expenses) paid
         or incurred by the Employee which would have been payable under
         Sections 4.5 and 4.7 of this Agreement if the Employee's employment had
         not terminated; and

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                  (c)      for the 12-month period commencing on the Date of
         Termination, the Company shall continue benefits to the Employee and/or
         the Employee's family at least equal to those which would have been
         provided to them under Section 4.4 if the Employee's employment had not
         been terminated; and

                  (d)      the Company shall pay to the Employee, in equal
         semi-monthly installments, the Employee's Base Salary (as in effect on
         the Date of Termination) for 12 months after the Date of Termination.

         6.4      Termination of Employment Following a Change in Control.
Notwithstanding the provisions of Section 6.3 hereof to the contrary, if the
Employee's employment by the Company is terminated by the Company in accordance
with the terms of Section 4 of the Termination Agreement and the Employee is
entitled to benefits provided in Section 5 of the Termination Agreement, the
Company shall pay to the Employee, in a lump sum in cash within 30 days after
the Date of Termination, the aggregate of the Employee's Base Salary (as in
effect on the Date of Termination) through the Date of Termination, if not
theretofore paid, and, in the case of compensation previously deferred by the
Employee, all amounts of such compensation previously deferred and not yet paid
by the Company. Except with respect to the obligations set for forth in the
Termination Agreement, notwithstanding any provisions herein to the contrary,
all other obligations of the Company and rights of the Employee hereunder shall
terminate effective as of the Date of Termination.

7.       Employee's Obligation to Avoid Conflicts of Interest.

         7.1      In keeping with the Employee's fiduciary duties to the
Company, the Employee agrees that he shall not knowingly become involved in a
conflict of interest with the Company, or upon discovery thereof, allow such a
conflict to continue. The Employee further agrees to disclose to the Company,
promptly after discovery, any facts or circumstances which might involve a
conflict of interest with the Company.

         7.2      The Company and the Employee recognize that it is impossible
to provide an exhaustive list of actions or interests which constitute a
"conflict of interest." Moreover, the Company and the Employee recognize that
there are many borderline situations. In some instances, full disclosure of
facts by the Employee to the Company is all that is necessary to enable the
Company to protect its interests. In others, if no improper motivation appears
to exist and the Company's interests have not suffered, prompt elimination of
the outside interest will suffice. In still others, it may be necessary for the
Company to terminate the employment relationship. The Company and the Employee
agree that the Company's determination as to whether or not a conflict of
interest exists shall be conclusive. The Company reserves the right to take such
action as, in its judgment, will end the conflict of interest.

         7.3      In this connection, it is agreed that any direct or indirect
interest in, connection with or benefit from any outside activities,
particularly commercial activities, which interest might in any way adversely
affect the Company or its Affiliates, involves a possible conflict of interest.

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Circumstances in which a conflict of interest on the part of the Employee would
or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:

                  (a)      Ownership of a material interest in any lender,
         supplier, contractor, subcontractor, customer or other entity with
         which the Company does business.

                  (b)      Acting in any capacity, including director, officer,
         partner, consultant, employee, distributor, agent or the like, for any
         lender, supplier, contractor, subcontractor, customer or other entity
         with which the Company does business.

                  (c)      Acceptance, directly or indirectly, of payments,
         services or loans from a lender, supplier, contractor, subcontractor,
         customer or other entity with which the Company does business,
         including, without limitation, gifts, trips, entertainment or other
         favors of more than a nominal value, but excluding loans from publicly
         held insurance companies and commercial or savings banks at market
         rates of interest.

                  (d)      Use of information or facilities to which the
         Employee has access in a manner which will be detrimental to the
         Company's interests, such as use for the Employee's own benefit of
         know-how or information developed through the Company's business
         activities.

                  (e)      Disclosure or other misuse of information of any kind
         obtained through the Employee's connection with the Company.

                  (f)      Acquiring or trading in, directly or indirectly, oil
         and gas properties or interests for his own account or the account of
         his Affiliates without the prior written consent of the Board of
         Directors.

8.       Employee's Confidentiality Obligation.

         8.1      The Employee hereby acknowledges, understands and agrees that
all Confidential Information is the exclusive and confidential property of the
Company and its Affiliates which shall at all times be regarded, treated and
protected as such in accordance with this Section 8. The Employee acknowledges
that all such Confidential Information is in the nature of a trade secret.

         8.2      For purposes of this Agreement, "Confidential Information"
means information, which is used in the business of the Company or its
Affiliates and (i) is proprietary to, about or created by the Company or its
Affiliates, (ii) gives the Company or its Affiliates some competitive business
advantage or the opportunity of obtaining such advantage or the disclosure of
which could be detrimental to the interests of the Company or its Affiliates,
(iii) is designated as Confidential Information by the Company or its
Affiliates, is known by the Employee to be considered confidential by the
Company or its Affiliates, or from all the relevant circumstances should
reasonably be assumed by the Employee to be confidential and proprietary to the
Company or its Affiliates, or (iv) is not generally known by non-Company
personnel. Such Confidential Information

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includes, without limitation, the following types of information and other
information of a similar nature (whether or not reduced to writing or designated
as confidential):

                  (a)      Internal personnel and financial information of the
         Company or its Affiliates, information regarding oil and gas properties
         including reserve information, vendor information (including vendor
         characteristics, services, prices, lists and agreements), purchasing
         and internal cost information, internal service and operational
         manuals, and the manner and methods of conducting the business of the
         Company or its Affiliates;

                  (b)      Marketing and development plans, price and cost data,
         price and fee amounts, pricing and billing policies, bidding, quoting
         procedures, marketing techniques, forecasts and forecast assumptions
         and volumes, and future plans and potential strategies (including,
         without limitation, all information relating to any oil and gas
         prospect and the identity of any key contact within the organization of
         any acquisition prospect) of the Company or its Affiliates which have
         been or are being discussed;

                  (c)      Names of customers and their representatives,
         contracts (including their contents and parties), customer services,
         and the type, quantity, specifications and content of products and
         services purchased, leased, licensed or received by customers of the
         Company or its Affiliates; and

                  (d)      Confidential and proprietary information provided to
         the Company or its Affiliates by any actual or potential customer,
         government agency or other third party (including businesses,
         consultants and other entities and individuals).

         8.3      As a consequence of the Employee's acquisition or anticipated
acquisition of Confidential Information, the Employee shall occupy a position of
trust and confidence with respect to the affairs and business of the Company and
its Affiliates. In view of the foregoing and of the consideration to be provided
to the Employee, the Employee agrees that it is reasonable and necessary that
the Employee make each of the following covenants:

                  (a)      At any time during the Employment Period and
         thereafter, the Employee shall not disclose Confidential Information to
         any person or entity, either inside or outside of the Company, other
         than as necessary in carrying out his duties and responsibilities as
         set forth in Section 2 hereof, without first obtaining the Company's
         prior written consent (unless such disclosure is compelled pursuant to
         court orders or subpoena, and at which time the Employee shall give
         notice of such proceedings to the Company).

                  (b)      At any time during the Employment Period and
         thereafter, the Employee shall not use, copy or transfer Confidential
         Information other than as necessary in carrying out his duties and
         responsibilities as set forth in Section 2 hereof, without first
         obtaining the Company's prior written consent.

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                  (c)      On the Date of Termination, the Employee shall
         promptly deliver to the Company (or its designee) all written
         materials, records and documents made by the Employee or which came
         into his possession prior to or during the Employment Period concerning
         the business or affairs of the Company or its Affiliates, including,
         without limitation, all materials containing Confidential Information.

9.       Disclosure of Information, Ideas, Concepts, Improvements, Discoveries
         and Inventions.

         As part of the Employee's fiduciary duties to the Company, the Employee
agrees that during his employment by the Company and for a period of three years
following the Date of Termination, the Employee shall promptly disclose in
writing to the Company all information, ideas, concepts, improvements,
discoveries and inventions, whether patentable or not, and whether or not
reduced to practice, which are conceived, developed, made or acquired by the
Employee, either individually or jointly with others, and which relate to the
business, products or services of the Company or its Affiliates, irrespective of
whether the Employee used the Company's time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention was
conceived, developed, discovered or acquired by the Employee on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including information, ideas and concepts relating to new types of
services, corporate opportunities, acquisition prospects, the identity of key
representatives within acquisition prospect organizations, prospective names or
service marks for the Company's business activities, and the like.

10.      Ownership of Information, Ideas, Concepts, Improvements, Discoveries
         and Inventions, and all Original Works of Authorship.

         10.1     All information, ideas, concepts, improvements, discoveries
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by the Employee or which are disclosed or made known to the
Employee, individually or in conjunction with others, during the Employee's
employment by the Company and which relate to the business, products or services
of the Company or its Affiliates (including, without limitation, all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customers' organizations or within the
organization of acquisition prospects, marketing and merchandising techniques,
and prospective names and service marks) are and shall be the sole and exclusive
property of the Company. Furthermore, all drawings, memoranda, notes, records,
files, correspondence, manuals, models, specifications, computer programs, maps
and all other writings or materials of any type embodying any of such
information, ideas, concepts, improvements, discoveries and inventions are and
shall be the sole and exclusive property of the Company.

         10.2     In particular regarding the matters identified in Section
10.1, the Employee hereby specifically sells, assigns, transfers and conveys to
the Company all of his worldwide right, title and interest in and to all such
information, ideas, concepts, improvements, discoveries or inventions, and any
United States or foreign applications for patents, inventor's certificates or
other industrial rights

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which may be filed in respect thereof, including divisions, continuations,
continuations-in-part, reissues and/or extensions thereof, and applications for
registration of such names and service marks. The Employee shall assist the
Company and its nominee at all times, during the Employment Period and
thereafter, in the protection of such information, ideas, concepts,
improvements, discoveries or inventions, both in the United States and all
foreign countries, which assistance shall include, but shall not be limited to,
the execution of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution, issuance
or enforcement of any applications for United States or foreign letters patent,
including divisions, continuations, continuations-in-part, reissues and/or
extensions thereof, and any application for the registration of such names and
service marks.

         10.3     In the event the Employee creates, during the Employment
Period, any original work of authorship fixed in any tangible medium of
expression which is the subject matter of copyright (such as, videotapes,
written presentations on acquisitions, computer programs, drawings, maps,
architectural renditions, models, manuals, brochures or the like) relating to
the Company's business, products or services, whether such work is created
solely by the Employee or jointly with others, the Company shall be deemed the
author of such work if the work is prepared by the Employee in the scope of his
employment; or, if the work is not prepared by the Employee within the scope of
his employment but is specially ordered by the Company as a contribution to a
collective work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation or as an instructional
text, then the work shall be considered to be work made for hire, and the
Company shall be the author of such work. If such work is neither prepared by
the Employee within the scope of his employment nor a work specially ordered and
deemed to be a work made for hire, then the Employee hereby agrees to sell,
transfer, assign and convey, and by these presents, does sell, transfer, assign
and convey, to the Company all of the Employee's worldwide right, title and
interest in and to such work and all rights of copyright therein. The Employee
agrees to assist the Company and its Affiliates, at all times, during the
Employment Period and thereafter, in the protection of the Company's worldwide
right, title and interest in and to such work and all rights of copyright
therein, which assistance shall include, but shall not be limited to, the
execution of all documents requested by the Company or its nominee and the
execution of all lawful oaths and applications for registration of copyright in
the United States and foreign countries.

11.      Employee's Non-Competition Obligation.

         11.1     (a) Until the Date of Termination, the Employee shall not,
         acting alone or in conjunction with others, directly or indirectly, in
         any of the business territories in which the Company or any of its
         Affiliates is presently or from time to time during the Employment
         Period conducting business, invest or engage, directly or indirectly,
         in any business which is competitive with that of the Company or accept
         employment with or render services to such a competitor as a director,
         officer, agent, employee or consultant, or take any action inconsistent
         with the fiduciary relationship of an employee to his employer;
         provided, however, that the beneficial ownership by the Employee of up
         to three percent of the Voting Stock of any corporation subject to the
         periodic reporting requirements of the Exchange Act shall not violate
         this Section 11.1(a).

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                  (b)      In addition to the other obligations agreed to by the
         Employee in this Agreement, the Employee agrees that until the Date of
         Termination, he shall not at any time, directly or indirectly, (i)
         induce, entice or solicit any employee of the Company to leave his
         employment, (ii) contact, communicate or solicit any customer or
         acquisition prospect of the Company derived from any customer list,
         customer lead, mail, printed matter or other information secured from
         the Company or its present or past employees or (iii) in any other
         manner use any customer lists or customer leads, mail, telephone
         numbers, printed material or other information of the Company relating
         thereto.

         11.2     (a) If this Agreement is terminated either by the Company for
         Cause or by the Employee for any reason, then for a period of one year
         following the Date of Termination, the Employee shall not, acting alone
         or in conjunction with others, directly or indirectly, in any of the
         business territories in which the Company or any of its Affiliates is
         presently or at the Date of Termination conducting business, invest or
         engage, directly or indirectly, in any business which is competitive
         with that of the Company as of the Date of Termination or accept
         employment with or render services to such a competitor as a director,
         officer, agent, employee or consultant, or take any action inconsistent
         with the fiduciary relationship of an employee to his employer;
         provided, however, that the beneficial ownership by the Employee of up
         to three percent of the Voting Stock of any corporation subject to the
         periodic reporting requirements of the Exchange Act shall not violate
         this Section 11.2(a).

                  (b)      In addition to the other obligations agreed to by the
         Employee in this Agreement, the Employee agrees that if this Agreement
         is terminated either by the Company for Cause or by the Employee for
         any reason, then for a period of one year following the Date of
         Termination, he shall not at any time, directly or indirectly, (i)
         induce, entice or solicit any employee of the Company to leave his
         employment, (ii) contact, communicate or solicit any customer or
         acquisition prospect of the Company derived from any customer list,
         customer lead, mail, printed matter or other information secured from
         the Company or its present or past employees or (iii) in any other
         manner use any customer lists or customer leads, mail, telephone
         numbers, printed material or other information of the Company relating
         thereto.

         11.3     If this Agreement is terminated by the Company Without Cause,
then the Employee shall not be subject to any non-competition obligation.

12.      Miscellaneous.

         12.1     Notices. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when delivered by hand or
mailed by registered or certified mail, return receipt requested, as follows
(provided that notice of change of address shall be deemed given only when
received):

                                       12
<PAGE>

                  If to the Company to:

                  400 E. Kaliste Saloom Road
                  Suite 6000
                  Lafayette, Louisiana 70508

                  If to the Employee to:

                  138 Demas Street
                  Lafayette, Louisiana 70506

or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 12.1.

         12.2     Waiver of Breach. The waiver by any party hereto of a breach
of any provision of this Agreement shall neither operate nor be construed as a
waiver of any subsequent breach by any party.

         12.3     Assignment. This Agreement shall be binding upon and inure to
the benefit of the Company, its successors, legal representatives and assigns,
and upon the Employee, his heirs, executors, administrators, representatives and
assigns; provided, however, the Employee agrees that his rights and obligations
hereunder are personal to him and may not be assigned without the express
written consent of the Company.

         12.4     Entire Agreement; No Oral Amendments. This Agreement, together
with any exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or similar subject matter between the Employee and the
Company and constitutes the entire agreement between the Employee and the
Company with respect to the subject matter of this Agreement. This Agreement may
not be modified in any respect by any verbal statement, representation or
agreement made by any employee, officer, or representative of the Company or by
any written agreement unless signed by an officer of the Company who is
expressly authorized by the Company to execute such document.

         12.5     Enforceability. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.

         12.6     Jurisdiction; Arbitration. The laws of the State of Louisiana
shall govern the interpretation, validity and effect of this Agreement without
regard to the place of execution or the place for performance thereof. Any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration located in Houston, Texas administered
by the American Arbitration Association in accordance with its applicable
arbitration rules, and the judgment on the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof, which judgment shall be
binding upon the parties hereto.

                                       13
<PAGE>

         12.7     Injunctive Relief. The Company and the Employee agree that a
breach of any term of this Agreement by the Employee would cause irreparable
damage to the Company and that, in the event of such breach, the Company shall
have, in addition to any and all remedies of law, the right to any injunction,
specific performance and other equitable relief to prevent or to redress the
violation of the Employee's duties or responsibilities hereunder.

         IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first written above.

                                        PETROQUEST ENERGY, INC.

                                        By:       /s/ CHARLES T. GOODSON
                                            -----------------------------------
                                                  Charles T. Goodson
                                                  Chief Executive Officer

                                        EMPLOYEE:

                                                  /s/ STEPHEN H. GREEN
                                        ----------------------------------------
                                                  Stephen H. Green

                                       14<PAGE>

                                                                    EXHIBIT 10.4

                               FIRST AMENDMENT TO
                      AMENDED AND RESTATED CREDIT AGREEMENT

         THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment") is made and entered into effective as of November 6, 2003, by and
among PETROQUEST ENERGY, L.L.C., a Louisiana limited liability company
("Borrower"); PETROQUEST ENERGY, INC., a Delaware corporation ("Guarantor"):
BANK ONE, NA, a national banking association, ("Bank One"); and UNION BANK OF
CALIFORNIA, N.A., a national banking association, ("UBOC").

                                    RECITALS:

         WHEREAS, Borrower, Guarantor, Bank One and UBOC entered into an Amended
and Restated Credit Agreement dated May 14, 2003 (which as the same may be
amended from time to time is herein called the "Credit Agreement"), pursuant to
which Borrower amended and restated a previously existing credit facility dated
May 11, 2001; and

         WHEREAS, Borrower, Guarantor, Bank One and UBOC desire to amend the
Credit Agreement as herein set forth.

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

         1. Definitions. Except as otherwise provided below, unless the context
hereof indicates otherwise, all capitalized terms used herein shall have the
same meaning as such capitalized terms are defined in the Credit Agreement.

                  (a) Definitions. Article I of the Credit Agreement is hereby
         amended by adding the following new defined terms and their definitions
         in proper alphabetical sequence as follows:

                           "Aggregate Outstanding Debt" means the sum of all (i)
                  Aggregate Outstanding Credit Exposure; and (ii) the amount of
                  loans and advances made to Borrower under the Subordinated
                  Credit Agreement, all of which is part of the Subordinated
                  Indebtedness."

                           "Subordinated Credit Agreement" means that certain
                  $20,000,000 Senior Second Lien Secured Credit Agreement dated
                  November 6, 2003 among the Borrower and Subordinated Lenders,
                  as the same may be amended from time to time.

<PAGE>

                           "Subordinated Lenders" means Macquarie Americas Corp.
                  a Delaware corporation, individually and as agent, and the
                  other financial institutions who are or become lenders under
                  the Subordinated Credit Agreement.

                           "Subordinated Indebtedness" means the obligation to
                  repay the Subordinated Lenders pursuant to the terms of the
                  Subordinated Credit Agreement.

                           "Subordination Agreement" means the Subordination and
                  Intercreditor Agreement dated November 6, 2003 executed among
                  Borrower, Guarantor, Agent, and Subordinated Lenders in favor
                  of the Agent for the ratable benefit of the Lenders, as
                  amended, supplemented, restated or otherwise modified from
                  time to time.

                           "Tax Adjusted Gross Margin" means Borrower's total
                  revenue from any source minus an amount equal to the sum of
                  Borrower's total lease operating expenses, production taxes,
                  state and federal taxes paid in cash and hedge settlements.

                           "Unutilized Availability" means an amount equal to
                  one hundred thirty percent of the Borrowing Base in effect
                  from time to time; minus the Aggregate Outstanding Debt.

                  (b) Definitions. The following defined terms set forth in
         Article I of the Credit Agreement are hereby amended as follows:

                           "Consolidated Current Assets shall mean the total of
                  the consolidated current assets of Borrower and Guarantor,
                  plus Unutilized Availability; provided, however, in
                  determining consolidated current assets, such determination
                  shall not include non-cash gains, losses or charges required
                  (a) under SFAS 133 or (b) under SFAS 143."

                           "Obligations" means all unpaid principal of and
                  accrued and unpaid interest on the Loans, the Rate Management
                  Obligations, all accrued and unpaid fees and all expenses,
                  reimbursements, indemnities and other obligations of the
                  Borrower to the Lenders or to any Lender, the Agent, the LC
                  Issuer or any indemnified party arising under the Loan
                  Documents.

                           "Security Agreement" means that certain Security
                  Agreement (Accounts) now or hereafter executed by the
                  Guarantor, the Borrower or any of their Subsidiaries in favor
                  of the Agent, for the ratable benefit of the Lenders, as they
                  may be amended or modified and in effect from time to time.

         2. Amendments to the Credit Agreement. The Credit Agreement is,
effective the date hereof, and subject to the satisfaction of the conditions
precedent set forth in Section 3 hereof, hereby amended as follows:

                                      -2-
<PAGE>

                  (a) Section 2.21.1 Issuance, of the Credit Agreement is hereby
         amended by deleting the section in its entirety and substituting the
         following:

                           2.21.1 Issuance. Except as provided below, the LC
                  Issuer hereby agrees, on the terms and conditions set forth in
                  this Agreement, to issue standby and commercial letters of
                  credit (each, a "Facility LC") and to renew, extend, increase,
                  decrease or otherwise modify each Facility LC ("Modify," and
                  each such action a "Modification"), from time to time from and
                  including the date of this Agreement and prior to the Facility
                  Termination Date upon the request of the Borrower; provided
                  that an LC Issuer shall not be obligated to issue a Facility
                  LC in favor of any Subordinated Lender; and immediately after
                  each such Facility LC is issued or Modified, (i) the aggregate
                  amount of the outstanding LC Obligations shall not exceed
                  $5,000,000 and (ii) the Aggregate Outstanding Credit Exposure
                  shall not exceed the lesser of (a) the Aggregate Commitment
                  and (b) the Borrowing Base. No Facility LC shall have an
                  expiry date later than the earlier of (x) the fifth Business
                  Day prior to the Facility Termination Date and (y) one year
                  after its issuance; provided, however, that any Facility LC
                  with a one-year tenor may provide for the renewal thereof for
                  additional one-year periods (which shall in no event extend
                  beyond the fifth Business Day prior to the Facility
                  Termination Date) unless the LC Issuer provides prior notice
                  of non-renewal to the beneficiary of such Facility LC.

                  (b) A new Section 5.28 Subordinated Indebtedness is hereby
         added to the Credit Agreement as follows:

                           "5.28. Subordinated Indebtedness, The Obligations
                  constitute senior indebtedness of the Borrower and Guarantor
                  and are entitled to the benefits of the subordination
                  provisions of all outstanding Subordinated Indebtedness."

                  (c) Section 6.2 Use of Proceeds, of the Credit Agreement is
         hereby amended by deleting the section in its entirety and substituting
         the following:

                           "6.2. Use of Proceeds. The Borrower will, and will
                  cause the Guarantor and each of their Subsidiaries to, use the
                  proceeds of the Credit Extensions (x) for the acquisition,
                  development and exploration of Oil & Gas Properties; (y) for
                  working capital requirements; and (z) Letters of Credit. The
                  Borrower will not, and will cause the Guarantor and each of
                  their Subsidiaries not to, use any of the proceeds of the
                  Credit Extensions: (a) to purchase or carry any "margin stock"
                  (as defined in Regulation U) or extend credit to others for
                  the purpose of purchasing or repurchasing or carrying margin
                  stock; and (b) except as permitted hereby, to cancel or make a
                  payment in connection with any obligation arising from the
                  Subordinated Credit Agreement including, without limiting the
                  generality of the foregoing, the repayment of the Subordinated
                  Indebtedness."

                  (d) Section 6.3. Notice of Default, of the Credit Agreement is
         hereby amended by deleting the section in its entirety and substituting
         the following:

                                      -3-
<PAGE>

                           "6.3. Notice of Default. The Borrower will, and will
                  cause each Subsidiary to, give prompt notice in writing to the
                  Lenders of the occurrence of any Default or Unmatured Default
                  and of any other development, financial or otherwise, which
                  could reasonably be expected to have a Material Adverse
                  Effect. Furthermore the Borrower will, and will cause each
                  Subsidiary to, give prompt notice in writing to the Lenders of
                  the occurrence of any "Event of Default" as defined in the
                  Subordinated Credit Agreement."

                  (e) Section 6.11 Indebtedness, of the Credit Agreement is
         hereby amended by deleting the section in its entirety and substituting
         the following:

                           "6.11. Indebtedness. The Guarantor and the Borrower
                  will not, nor will it permit any Subsidiary to, create, incur
                  or suffer to exist any Indebtedness, except:

                                    (i) the Credit Extensions;

                                    (ii) Indebtedness existing on the date
                           hereof and described in Schedule 6.11;

                                    (iii) Indebtedness arising under Rate
                           Management Transactions permitted under Section 6.25;

                                    (iv) Indebtedness among the Guarantor, the
                           Borrower or any of their Subsidiaries;

                                    (v) Indebtedness associated with bonds or
                           surety obligations required by any governmental or
                           regulatory authority or prior owner in connection
                           with owning or operating its Oil and Gas Properties
                           in the ordinary course of business;

                                    (vi) unsecured accounts payable incurred in
                           the ordinary course of Business which remain unpaid
                           after the expiration of ninety (90) days beyond
                           invoice date or are being contested in good faith and
                           as to which such reserve as is required by Agreement
                           Accounting Principles has been made;

                                    (vii) Indebtedness not to exceed at any one
                           time $500,000 related to purchase money financing;

                                    (viii) Indebtedness relating to Capitalized
                           Lease Obligations not to exceed at any one time
                           $500,000;

                                    (ix) Indebtedness relating to net production
                           imbalances not to exceed at any one time $1,000,000;

                                      -4-
<PAGE>

                                    (x) Indebtedness relating to overriding
                           royalties and other interests carved out of
                           production incurred in the ordinary course of oil and
                           gas exploration and development projects;

                                    (xi) Indebtedness associated with the
                           financing of premiums for business insurance of the
                           Guarantor, the Borrower and their Subsidiaries;

                                    (xii) Contingent Obligations of the
                           Guarantor in connection with guarantees of the
                           obligations of the Borrower and its Subsidiaries in
                           connection with owning and operating Oil and Gas
                           Properties in the ordinary course of business.

                                    (xiii) Non-Recourse Indebtedness not to
                           exceed $25,000,000; and

                                    (xiv) the Subordinated Indebtedness."

                  (f) Section 6.15 Liens, of the Credit Agreement is hereby
         amended by deleting the section in its entirety and substituting the
         following:

                           "6.15. Liens. The Borrower will not, nor will it
                  permit any Subsidiary to, create, incur, or suffer to exist
                  any Lien in, of or on the Property of the Borrower or any of
                  its Subsidiaries, except:

                                    (i) Liens for taxes, assessments or
                           governmental charges or levies on its Property if the
                           same shall not at the time be delinquent or
                           thereafter can be paid without penalty, or are being
                           contested in good faith and by appropriate
                           proceedings and for which adequate reserves in
                           accordance with Agreement Accounting Principles shall
                           have been set aside on its books;

                                    (ii) Liens imposed by Law, such as
                           carriers', warehousemen's and mechanics' liens and
                           other similar liens arising in the ordinary course of
                           business which secure payment of obligations not more
                           than ninety (90) days past due, or are being
                           contested in good faith and by appropriate
                           proceedings and for which adequate reserves in
                           accordance with Agreement Accounting Principles shall
                           have been set aside on its books;

                                    (iii) Liens arising out of pledges or
                           deposits under worker's compensation Laws,
                           unemployment insurance, old age pensions, or other
                           social security or retirement benefits, or similar
                           legislation;

                                    (iv) utility easements, building
                           restrictions and such other encumbrances or charges
                           against real property as are of a nature generally
                           existing with respect to properties of a similar
                           character and which do not in any material way affect
                           the marketability of the same or interfere with the
                           use thereof in the business of the Borrower or its
                           Subsidiaries;

                                      -5-
<PAGE>

                                    (v) Liens existing on the date hereof in
                           favor of the Minerals Management Service;

                                    (vi) Liens in favor of the Agent, for the
                           benefit of the Lenders, granted pursuant to any
                           Collateral Document and other Liens expressly
                           permitted under the Collateral Documents;

                                    (vii) Liens in favor of operators and
                           non-operators under joint operating agreements or
                           similar contractual arrangements arising in the
                           ordinary course of the business of the Borrower or
                           its Subsidiaries to secure amounts owing, which
                           amounts are not more than ninety (90) days past due
                           or are being contested in good faith by appropriate
                           proceedings, if such reserve as may be required by
                           Agreement Accounting Principles shall have been made
                           therefor;

                                    (viii) Liens under production sales
                           agreements, division orders, operating agreements,
                           and other agreements customary in the oil and gas
                           business for processing, producing, and selling
                           Hydrocarbons securing obligations not constituting
                           Indebtedness and provided that such Liens do not
                           secure obligations to deliver Hydrocarbons at some
                           future date without receiving full payment therefor
                           within ninety (90) days of delivery.

                                    (ix) Liens in favor of any of the Lenders in
                           connection with Rate Management Transactions; and

                                    (x) Liens in favor of the Subordinated
                           Lenders securing the Subordinated Indebtedness, which
                           are inferior in right and time to the Liens in favor
                           of the Lenders."

                  (g) Section 6.24 General and Administrative Expense Limitation
        of the Credit Agreement is hereby amended by deleting the section in its
        entirety and substituting the following:

                  "6.24. General and Administrative Expense Limitation. Borrower
         will not permit the Consolidated G&A to exceed:

                  (a) four million five hundred thousand dollars ($4,500,000) in
the aggregate for the last six calendar months of 2003; or

                           for each calendar quarter beginning January 1, 2004,
                  the lesser of (i) two million five hundred thousand
                  ($2,500,000) or (ii) thirty-one percent (31%) of the Tax
                  Adjusted Gross Margin; provided, however, if Borrower's
                  Consolidated G&A for any quarter exceed 31% of the Tax
                  Adjusted Gross Margin, the maximum allowable Consolidated G&A
                  for Borrower during the immediately succeeding quarter will be
                  18% of the Tax Adjusted Gross margin; and provided further
                  that a

                                      -6-
<PAGE>

                  breach of clause (ii) of this Section 6.24(b) can only form
                  the basis of a Default if Borrower's Consolidated G&A exceed
                  (x) 31% of the Tax Adjusted Gross Margin during any quarter
                  and (y) 18% of the Tax Adjusted Gross Margin during the
                  immediately succeeding quarter; and provided further that,
                  notwithstanding anything in this Section 6.24(b) to the
                  contrary, the Consolidated G&A of Borrower shall not exceed
                  35% of the Tax Adjusted Gross Margin. "

                  (h) Section 6.25 Rate Management Transactions, of the Credit
         Agreement is hereby amended by deleting the section in its entirety and
         substituting the following:

                           "6.25. Rate Management Transactions. Neither the
                  Borrower nor any Subsidiary will be a party to or in any
                  manner be liable on any Rate Management Transactions except:

                                    (i) contracts entered into with the purpose
                           of fixing prices on oil or gas expected to be
                           produced by the Borrower or its Subsidiaries,
                           provided that at all times: (a) no such contract
                           fixes a price for a term of more than twenty-four
                           (24) months for any such contract to which any Lender
                           or any Affiliate thereof is a counter-party and
                           thirty-six (36) months for any such contract for
                           which any Subordinated Lender or any Affiliate
                           thereof is a counter-party; or (b) the aggregate
                           monthly production covered by all such contracts
                           (determined, in the case of contracts that are not
                           settled on a monthly basis, by a monthly pro-ration
                           acceptable to the Agent) for any single month does
                           not in the aggregate exceed seventy-five percent
                           (75%) of the aggregate Projected Oil and Gas
                           Production of Borrower and its Subsidiaries
                           anticipated to be sold in the ordinary course of such
                           Person's business for such month; (c) each such
                           contract is with a counterparty or has a guarantor of
                           the obligation of the counterparty who (unless such
                           counterparty is a Lender, a Subordinated Lender, or
                           one of their respective Affiliates) at the time the
                           agreement is made has (or whose holding company has)
                           long-term obligations rated AA or AA2 or better,
                           respectively, by either S&P or Moody's or is an
                           investment grade-rated industry participant. As used
                           in this subsection, the term "Projected Oil and Gas
                           Production" means the projected production of oil or
                           gas from the "proved, developed, and producing"
                           category set forth in the most recent Reserve Report
                           (measured by volume unit or BTU equivalent, not sales
                           price) for the term of the contracts or a particular
                           month, as applicable, from Oil and Gas Properties and
                           interests owned by the Guarantor, the Borrower and
                           their Subsidiaries which are located in or offshore
                           of the United States of America and which have
                           attributable to them proved oil or gas reserves, as
                           such production is projected in the most recent
                           report delivered pursuant to Section 6.1, after
                           deducting projected production from any properties or
                           interests sold or under contract for sale that had
                           been included in such report and after adding
                           projected production from any properties or interests
                           that had not been reflected in such report but that
                           are reflected in a separate or supplemental

                                      -7-
<PAGE>

                           reports meeting the requirements of Section 6.1 above
                           and otherwise are satisfactory to the Agent;

                                    (ii) contracts entered into by the Borrower
                           or any Subsidiary with the purpose and effect of
                           fixing interest rates on a principal amount of
                           indebtedness of such Person that is accruing interest
                           at a variable rate, provided that (a) the aggregate
                           notional amount of such contracts never exceeds
                           seventy-five percent (75%) of the anticipated
                           outstanding principal balance of the indebtedness to
                           be hedged by such contracts or an average of such
                           principal balances calculated using a generally
                           accepted method of matching interest swap contracts
                           to declining principal balances, (b) the floating
                           rate index of each such contract generally matches
                           the index used to determine the floating rates of
                           interest on the corresponding indebtedness to be
                           hedged by such contract, and (c) each such contract
                           is with a counterparty or has a guarantor of the
                           obligation of the counterparty who (unless such
                           counterparty is a Lender, a Subordinated Lender, or
                           one of their Affiliates) at the time the contract is
                           made has (or whose company has) long-term obligations
                           rated AA or AA2 or better, respectively, by either
                           S&P or Moody's or is an investment grade-rated
                           industry participant.

                                    (iii) Existing Rate Management Transactions
                           with Credit Lyonnais Rouse Derivatives and
                           Entergy-Koch Trading LP as more particularly
                           described on Schedule 6.25; and

                                    (iv) contracts entered into pursuant to
                           Section 6.17 of the Subordinated Credit Agreement
                           with the purpose of fixing prices on oil or gas
                           expected to be produced by the Borrower or its
                           Subsidiaries.

                           Within ninety (90) days of the date hereof, the
                           Borrower shall establish and shall at all times
                           thereafter maintain Rate Management Transactions
                           consisting of contracts entered into with the purpose
                           of fixing prices on oil or gas expected to be
                           produced by the Guarantor, the Borrower and their
                           Subsidiaries, covering at least fifty percent (50%)
                           of the aggregate volumes of Hydrocarbons listed in
                           the "proved, developed, and producing" category set
                           forth in the most recent Reserve Report, determined
                           on a rolling twelve month basis."

                  (i) A new Section 6.31.4 to the Credit Agreement is hereby
         added as follows:

                           "6.31.4. Limitation on Aggregate Outstanding Debt.
                  The Borrower shall not permit Aggregate Outstanding Debt to be
                  greater than one hundred and thirty percent (130%) of the
                  Borrowing Base in effect from time to time."

                  (j) A new Section 6.32 to the Credit Agreement is hereby added
         as follows:

                                      -8-
<PAGE>
                      "6.32. Subordinated Indebtedness. The Borrower will
                  promptly provide the Agent with copies of all documentation,
                  notices and reports provided by or on behalf of the Borrower,
                  Guarantor or any Subsidiary to the Subordinated Lenders. On or
                  before the tenth (10th) day of each calendar month, the
                  Borrower shall deliver to the Agent a certificate, executed by
                  an Authorized Officer of the Borrower, setting forth the
                  outstanding balance of the Subordinated Indebtedness as of the
                  last day of the preceding month. The Borrower will not, and
                  will not permit the Guarantor or any Subsidiary to, make any
                  (i) payments on the principal amount of any Subordinated
                  Indebtedness; (ii) payments of interest on the Subordinated
                  Indebtedness if (a) the Aggregate Outstanding Credit Exposure
                  of the Borrower exceeds eighty percent (80%) of the Borrowing
                  Base in effect from time to time or (b) after the occurrence
                  of a Unmatured Default or a Default; (iii) amendment or
                  modification to the Subordinated Credit Agreement or any other
                  agreement evidencing or governing any Subordinated
                  Indebtedness without the prior written consent of the Agent;
                  or (iv) directly or indirectly voluntarily prepay, defease or
                  in substance defease, purchase, redeem, retire or otherwise
                  acquire, any portion of the Subordinated Indebtedness without
                  the prior written consent of the Agent."

                  (k) A new Section 6.33 to the Credit Agreement is hereby added
         as follows:

                  "Section 6.33 Change of Operators. If pursuant to the terms of
                  the Subordinated Credit Agreement, the Subordinated Lenders
                  request that the Borrower or any Subsidiary replace or vote to
                  replace the operator of any of the Oil & Gas Properties, the
                  Borrower will not and will not permit any Subsidiary to do so
                  without the prior written consent of Lenders, which consent
                  will not be unreasonably withheld."

                  (l) Section 7.3 of the Credit Agreement is hereby amended by
         deleting the section in its entirety and substituting the following:

                      "7.3. The material breach by the Borrower of any of the
                  terms or provisions of Article VI Sections 6.2, 6.10, 6.11,
                  6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20, 6.24,
                  6.25, 6.26, 6.27, 6.28, 6.29, 6.30, 6.31 or 6.32 and/or the
                  occurrence of an "Event of Default" under the Subordinated
                  Credit Agreement provided, however, any amendment,
                  modification or waiver by the Subordinated Lenders of any such
                  "Event of Default" shall not constitute an amendment,
                  modification or waiver hereunder."

                  (m) A new Section 7.20 to the Credit Agreement is hereby added
         as follows:

                      "7.20 The Borrower shall fail to timely pay any of its
                  obligations to the Subordinated Lender under the Subordinated
                  Credit Agreement or any other default shall occur thereunder."

                  (n) Section 8.1 Acceleration, of the Credit Agreement is
         hereby amended by deleting the section in its entirety and substituting
         the following:

                                      -9-
<PAGE>

                           "(i) If any Default described in Section 7.6, 7.7 or
                  7.20 occurs with respect to the Borrower or any of its
                  Subsidiaries, the obligations of the Lenders to make Loans
                  hereunder and the obligation and power of the LC Issuer to
                  issue Facility LCs shall automatically terminate and the
                  Obligations shall immediately become due and payable without
                  any election or action on the part of the Agent, the LC Issuer
                  or any Lender and the Borrower will be and become thereby
                  unconditionally obligated, without any further notice, act or
                  demand, to pay to the Agent an amount in immediately available
                  funds, which funds shall be held in the Facility LC Collateral
                  Account, equal to the excess of (x) the amount of LC
                  Obligations at such time, over (y) the amount on deposit in
                  the Facility LC Collateral Account at such time which is free
                  and clear of all rights and claims of third parties and has
                  not been applied against the Obligations (such difference, the
                  "Collateral Shortfall Amount"). If any other Default occurs,
                  the Required Lenders (or the Agent with the consent of the
                  Required Lenders) may (a) terminate or suspend the obligations
                  of the Lenders to make Loans hereunder and the obligation and
                  power of the LC Issuer to issue Facility LCs, or declare the
                  Obligations to be due and payable, or both, whereupon the
                  Obligations shall become immediately due and payable, without
                  presentment, demand, protest, notice of intent to accelerate,
                  notice of acceleration or notice of any kind, all of which the
                  Borrower hereby expressly waives, and (b) upon notice to the
                  Borrower and in addition to the continuing right to demand
                  payment of all amounts payable under this Agreement, make
                  demand on the Borrower to pay, and the Borrower will,
                  forthwith upon such demand and without any further notice or
                  act, pay to the Agent the Collateral Shortfall Amount, which
                  funds shall be deposited in the Facility LC Collateral
                  Account.

                           (ii) If at any time while any Default is continuing,
                  the Agent determines that the Collateral Shortfall Amount is
                  greater than zero, the Agent may make demand on the Borrower
                  to pay, and the Borrower will, forthwith upon such demand and
                  without any further notice or act, pay to the Agent the
                  Collateral Shortfall Amount, which funds shall be deposited in
                  the Facility LC Collateral Account.

                           (iii) The Agent may at any time or from time to time
                  after funds are deposited in the Facility LC Collateral
                  Account, apply such funds to the payment of the Obligations or
                  any other amounts as shall from time to time have become due
                  and payable by the Borrower to the Lenders or the LC Issuer
                  under the Loan Documents.

                           (iv) At any time while any Default is continuing,
                  neither the Borrower nor any Person claiming on behalf of or
                  through the Borrower shall have any right to withdraw any of
                  the funds held in the Facility LC Collateral Account. After
                  all of the Obligations have been indefeasibly paid in full and
                  the Aggregate Commitment has been terminated, any funds
                  remaining in the Facility LC Collateral Account shall be
                  returned by the Agent to the Borrower or paid to whomever may
                  be legally entitled thereto at such time.

                                      -10-
<PAGE>

                           (v) If, within ten (10) days after acceleration of
                  the maturity of the Obligations or termination of the
                  obligations of the Lenders to make Loans and the obligation
                  and power of the LC Issuer to issue Facility LCs hereunder as
                  a result of any Default (other than any Default as described
                  in Section 7.6 or 7.7 with respect to the Borrower) and before
                  any judgment or decree for the payment of the Obligations due
                  shall have been obtained or entered, the Required Lenders (in
                  their sole discretion) shall so direct, the Agent shall, by
                  notice to the Borrower, rescind and annul such acceleration
                  and/or termination."

         3. Conditions Precedent to Effectiveness of Amendment. This Amendment
shall become effective when, and only when, the Agent and Lenders shall have
received counterparts of this Amendment executed by Borrower and Guarantor and
Section 2 hereof shall become effective when, and only when, the Agent and
Lenders shall have additionally received all of the following documents, each
document (unless otherwise indicated) being dated the date of receipt thereof by
Lender (which date shall be the same for all such documents), in form and
substance satisfactory to the Lender:

                  (a) Counterparts of this Amendment duly executed by Borrower,
         Guarantor and Lenders;

                  (b) A copy of the resolutions approving this Amendment, and
         authorizing the transactions contemplated herein or therein duly
         adopted by the Managers of Borrower, accompanied by a certificate of
         the duly authorized Secretary of Borrower, that such copy is a true and
         correct copy of the resolutions duly adopted by the Managers of
         Borrower, and that such resolutions constitute all the resolutions
         adopted with respect to such transactions, and have not been amended,
         modified or revoked in any respect and are in full force and effect as
         of the date hereof;

                  (c) A copy of the resolutions approving this Amendment, and
         authorizing the transactions contemplated herein or therein duly
         adopted by the Board of Directors of Guarantor, accompanied by a
         certificate of the duly authorized Secretary of Guarantor, that such
         copy is a true and correct copy of the resolutions duly adopted by the
         Board of Directors of Guarantor, and that such resolutions constitute
         all the resolutions adopted with respect to such transactions, and have
         not been amended, modified or revoked in any respect and are in full
         force and effect as of the date hereof;

                  (d) Copies of all documentation executed by Borrower and
         Guarantor in connection with the Subordinated Credit Agreement and the
         Subordinated Indebtedness, certified by an Authorized Officer of
         Borrower that such documents are true, correct and complete:

                  (e) The Subordination Agreement, duly executed by Borrower,
         Guarantor and the Subordinated Lenders;

                  (f) There shall not have been, in the sole judgment of
         Lenders, any material adverse change in the financial condition,
         business or operations of Borrower or Guarantor;

                                      -11-
<PAGE>

                  (g) Payment by Borrower of the fees and expenses of counsel to
         Lenders in connection with the preparation and negotiation of this
         Amendment and all documents and instruments contemplated hereby;

                  (h) The legal opinion of counsel to Borrower and Guarantor, in
         form and substance satisfactory to the Agent and its counsel;

                  (i) The Security Agreement, executed by Borrower and
         Guarantor, in a form satisfactory to the Agent, the Lenders and their
         counsel with respect to the accounts therein described, which are a
         part of the Collateral; and

                  (j) The execution and delivery of such additional documents
         and instruments which the Agent and its counsel may deem necessary to
         effectuate this Amendment or any document executed and delivered to
         Lenders in connection herewith or therewith.

         4. Representations and Warranties of Borrower. Borrower represents and
warrants as follows:

                  (a) Borrower and Guarantor are each duly authorized and
         empowered to execute, deliver and perform this Amendment and all other
         instruments referred to or mentioned herein to which it is a party, and
         all action on its part requisite for the due execution, delivery and
         the performance of this Amendment has been duly and effectively taken.
         This Amendment, when executed and delivered, will constitute valid and
         binding obligations of Borrower and Guarantor, as the case may be,
         enforceable against such party in accordance with its terms. This
         Amendment does not violate any provisions of the Articles of
         Organization or limited liability agreement of Borrower, the
         Certificate of Incorporation or By-Laws of Guarantor, or any contract,
         agreement, law or regulation to which either Borrower or Guarantor is
         subject, and does not require the consent or approval of any regulatory
         authority or governmental body of the United States or any state;

                  (b) After giving affect to this Amendment, the representations
         and warranties contained in the Credit Agreement, as amended hereby,
         and any other Loan Documents executed in connection herewith or
         therewith are true, correct and complete on and as of the date hereof
         as though made on and as of the date hereof; and

                  (c) After giving affect to this Amendment, no event has
         occurred and is continuing which constitutes a Default or Unmatured
         Default.

         5. Reference to and Effect on the Loan Documents.

                  (a) Upon the effectiveness of Section 2 hereof, on and after
         the date hereof, each reference in the Credit Agreement to "this
         Agreement", "hereunder", "hereof", "herein" or words of like import,
         and each reference in the Loan Documents shall mean and be a reference
         to the Credit Agreement as amended hereby.

                                      -12-
<PAGE>

                  (b) Except as specifically amended above, the Credit Agreement
         and the Note(s), and all other instruments securing or guaranteeing
         Borrower's obligations to Lenders, including the Collateral Documents,
         as amended (collectively, the "Security Instruments") shall remain in
         full force and effect and are hereby ratified and confirmed. Without
         limiting the generality of the foregoing, the Security Instruments and
         all collateral described therein do and shall continue to secure the
         payment of all obligations of Borrower and Guarantor under the Credit
         Agreement and the Note(s), as amended hereby, and under the other
         Security Instruments.

                  (c) The execution, delivery and effectiveness of this
         Amendment shall not, except as expressly provided herein, operate as a
         waiver of any right, power or remedy of Lender under any of the
         Security Instruments, nor constitute a waiver of any provision of any
         of the Security Instruments.

         6. Waiver. As additional consideration for the execution, delivery and
performance of this Amendment by the parties hereto and to induce Lenders to
enter into this Amendment, Borrower and Guarantor each warrants and represents
to Lenders that no facts, events, statuses or conditions exist or have existed
which, either now or with the passage of time or giving of notice, or both,
constitute or will constitute a basis for any claim or cause of action against
Lenders or any defense to (i) the payment of any obligations and indebtedness
under the Note(s) and/or the Security Instruments, or (ii) the performance of
any of its obligations with respect to the Note(s) and/or the Security
Instruments, and in the event any such facts, events, statuses or conditions
exist or have existed, Borrower unconditionally and irrevocably waives any and
all claims and causes of action against Lenders and any defenses to its payment
and performance obligations in respect to the Note(s) and the Security
Instruments.

         7. Costs and Expenses. Borrower agrees to pay on demand all costs and
expenses of Lenders in connection with the preparation, reproduction, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
counsel for Lenders. In addition, Borrower shall pay any and all fees payable or
determined to be payable in connection with the execution and delivery, filing
or recording of this Amendment and the other instruments and documents to be
delivered hereunder, and agrees to save Lenders harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such fees.

         8. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.

         9. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.

                                      -13-
<PAGE>

         10. Final Agreement. THIS WRITTEN AMENDMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -14-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed in multiple counterparts, each of which is an original
instrument for all purposes, all as of the day and year first above written.

                             "BORROWER"

                             PETROQUEST ENERGY, L.L.C.

                             By: /s/ Michael O. Aldridge
                                ------------------------------------------------
                                Michael O. Aldridge, Chief Financial Officer

                             "GUARANTOR"

                             PETROQUEST ENERGY, INC.

                             By: /s/ Michael O. Aldridge
                                ------------------------------------------------
                                Michael O. Aldridge, Chief Financial Officer

                                      -15-
<PAGE>

                                       "LENDERS"

                                       BANK ONE, NA,
                                       As the Agent, a Lender and LC Issuer

                                       By: /s/ Charles Kingswell-Smith
                                          -------------------------------------
                                            Charles Kingswell-Smith
                                            Director

                                      -16-
<PAGE>

                                           UNION BANK OF CALIFORNIA, N.A.
                                           As a Lender

                                           By: /s/ Damien Meiburger
                                               ---------------------------------
                                           Name: Damien Meiburger
                                                 -------------------------------
                                           Title: Senior Vice President
                                                  ------------------------------

                                      -17-

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