EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated as of April 4, 2005 (this "Agreement")

between Dune Energy, Inc., a Delaware corporation having its principal place of

business at 3050 Post Oak Blvd., Suite 695, Houston, Texas 77056 (the "Employer"

or the "Company"), and Hugh Idstein, an individual residing in the State of

Texas (the "Executive").

WHEREAS, the Company and Executive desire that Executive's

relationship with the Company be governed by this Agreement and by the exhibits

annexed hereto;

NOW, THEREFORE, in consideration of the mutual covenants and

agreements set forth herein, and for other good and valuable consideration, the

parties agree as follows:

1. Employment: The Employer hereby employs the Executive and the Executive

hereby accepts employment upon the terms and conditions hereinafter set forth.

2. Title; Responsibilities; Reporting: During the Term of this Agreement,

the Executive shall diligently and faithfully: (a) serve the Company in the

capacity of Chief Financial Officer, and/or in whatever similar executive

capacities as shall from time to time be assigned to the Executive by the

Company's Board of Directors or by such other person(s) as directed by the Board

of Directors; (b) report directly to the Company's Board of Directors; (c)

discharge and carry out all duties and responsibilities as may from time to time

be assigned, and such directions as may from time to time be given, to the

Executive by the Company's Board of Directors and (d) abide by and carry out the

policies and programs of the Company in existence or as the same may be changed

from time to time.

3. Exclusivity: All services to be provided by the Executive under this

Agreement shall be performed by the Executive personally. During the term of

this Agreement, the Executive shall devote substantially all of the Executive's

business time, attention and energies and all of his skills, learnings and best

efforts to the business of Company. At all times during the term of this

Agreement, the services required of Executive and the location at which he

performs such services shall not require that he reside outside of Houston,

Texas, except for travel in the ordinary course of business.

4. Term: The initial term of this Agreement shall commence as of April 4,

2005 (the "Commencement Date") and shall end on April 4, 2006, unless sooner

extended by agreement of the parties or terminated in accordance with the

provisions of this Agreement. The date on which this Agreement is scheduled to

expire (i.e. April 4, 2006 or such later date to which this Agreement may be

extended by agreement of the parties) is referred to as the "End Date". No more

than one hundred twenty (120) nor less than and sixty (60) days prior to the an

End Date (each such sixty (60) day period is referred to as a "Renegotiation

Period"), the Company and the Executive may agree in writing to extend this

Agreement for an additional term. If during any Renegotiation Period the Company

and Executive fail to agree upon an extension of this Agreement, this Agreement

shall terminate as of the End Date of the then current term notwithstanding the

provision of services by Executive after the end of the then current term. The

term of this Agreement, whether as originally scheduled, extended by agreement

or shortened pursuant to a termination in accordance herewith is referred to as

the "Term."

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5. Base Compensation: The Employer shall pay to the Executive a base

salary at the rate of $135,000 per year, subject to increase at the discretion

of the Board of Directors of the Company. The salary shall be paid in monthly

installments on the first day of each month and shall be subject to such

deductions by the Employer as are required to be made pursuant to law,

government regulations or order. The Executive understands and agrees that the

Executive is an exempt Executive as that term is applied for purposes of Federal

or State wage and hour laws, and further understands that the Executive shall

not be entitled to any compensatory time off or other compensation for overtime.

6. Performance Bonus: Upon the completion of his initial term hereunder,

the Executive shall be entitled to a performance bonus equal to 15% of his base

compensation. In addition, Executive may be entitled to an additional

performance bonus up to an additional 15% of his base compensation, solely at

the discretion of the Company's Board of Directors. Performance bonuses earned

hereunder shall be payable in cash thirty (30) days after delivery by the

Company's auditors of audited financial statements for such fiscal year, but in

no event later than sixty (60) days after the end of the applicable fiscal year.

Where the Executive's employment hereunder is terminated prior to the end of a

fiscal year by reason of death, "Disability" (as defined in Section 12 below),

expiration of the term hereof, "Termination Without Cause" (as defined in

Section 17 below), or "Resignation for Good Reason" (as defined in Section 16

below), then the Executive shall still be eligible for payment of a performance

bonus for such fiscal year, provided that the amount of such performance bonus

shall equal the product of (i) the amount of the performance bonus that would

have been payable for the entire fiscal year had the Executive remained employed

for the entire fiscal year and (ii) a fraction, the numerator of which shall

equal the number of days the Executive was employed hereunder during such fiscal

year and the denominator of which shall equal 365.

7. Fringe Benefits: During the Term of this Agreement, the Executive shall

be entitled to major medical and full hospital insurance for the Executive, his

spouse and immediate dependents, provided that the Executive and his family are

insurable at "standard rates". The Executive shall also be entitled to such

disability, life insurance, and other similar benefits as may be made available

to other senior officers of the Company under such group benefit plans and/or

programs as may be maintained by the Company from time to time, subject to any

eligibility, copayment and waiting period requirements under or applicable to

any such benefit plans and/or programs. The Executive acknowledges and agrees

that the Company has the right, in its sole discretion, to amend, modify or

terminate any such benefit plan or program at any time and for any reason or for

no reason. The Executive's entitlement to such benefits shall end upon the

termination of his employment with the Company, however caused, except as

provided (a) by applicable law or (b) by the express terms of any such group

benefit plan or program maintained by the Company. As soon as practicable

following the execution hereof, the Company shall add Executive to the Company's

D&O insurance policy and to such other plans that the Company may acquire for

its senior management. Executive shall be eligible to participate in such plans.

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8. Vacation, Etc.: During the Term of this Agreement, the Executive shall

be entitled to four (4) weeks paid vacation to be taken at such time or times as

shall be consistent with the proper performance by the Executive of his duties,

and which shall accrue ratably during the fiscal year. No unused vacation,

holidays, sick leave or personal days may be carried forward from year to year.

In the event that the Executive's employment terminates by virtue of

"Termination Without Cause", "Resignation for Good Reason", death or disability,

then the Executive shall be entitled to payment for any accrued but unused

vacation days during the year such termination occurs.

9. Expense Reimbursement; Travel Policy: The Company shall provide the

Executive with such reasonable business lodging and travel expense

reimbursements as are consistent with the Company's policies in effect from time

to time as they pertain to senior officers of the Company. All reimbursements by

the Company provided for in this Agreement are conditioned upon the Executive's

submission to the Company of reasonably satisfactory documentation and an

itemized account for such expenses within a reasonable period after they are

incurred. Expense reports and requests for reimbursement which are submitted

later than two months after the expense is incurred will not be reimbursed

without the approval of the Company's Chief Executive Officer.

10. Grant of Stock Option: Effective as of the date hereof, the Company

shall grant to the Executive, a stock option to acquire up to 75,000 shares of

the Company's common stock, at an exercise price of $2.56 per share (the

"Option"). Such Option shall be immediately exercisable with respect to 25,000

shares. The Option may be exercised for an additional 25,000 shares on each of

the first and second anniversary dates of this Agreement, provided that

Executive remains employed by the Company.

11. Death of Executive: In the event of the Executive's death during the

Term of this Agreement, the Employer's obligations and agreements under this

Agreement shall automatically terminate as of the date of such death, and in

full satisfaction thereof, the Company shall pay to the Executive's estate any

base salary and pro rata performance bonus earned and unpaid through the date of

such death and any business expenses or other fringe benefits or otherwise due

to Executive. The Executive's estate shall also be entitled to payment for (i)

any bonus earned in the year preceding such termination but not yet paid and

(ii) accrued but unused vacation days during the year such termination occurs.

Such event shall not be deemed a "Termination Without Cause" as defined below.

12. Disability of Executive: If the Executive shall, during the term of

this Agreement, suffer a "Disability," (as defined, from time to time, in a

disability plan that the Company may maintain for the benefit of its senior

officers (a "Disability Plan") or, whenever no such Disability Plan exists, as

defined in accordance with the meanings on Exhibit A hereto), then the Employer

shall have the right to terminate this Agreement by written notice of such

Disability to the Executive, whereupon the Employer's obligations and agreements

under this Agreement shall automatically terminate as of the date of such

notice, and in full satisfaction thereof, the Company shall pay to the Executive

any base salary and pro rata performance bonus earned and unpaid through the

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date of such notice (less any payments received by the Executive under a

Disability Plan) and any business expenses or other fringe benefits otherwise

due to Executive. Executive shall also be entitled to payment for (i) any bonus

earned in the year preceding such termination but not yet paid and (ii) accrued

but unused vacation days during the year such termination occurs. No such

termination shall be deemed a "Termination Without Cause" as defined below. All

other obligations of the Employer under this Agreement shall automatically

cease, and the Executive shall not be entitled to any other salary, payments or

benefits otherwise payable under this Agreement, except as otherwise required by

law.

13. Resignation Notice; Termination: The Executive agrees to give sixty

(60) days' prior written notice to the Company of any decision by the Executive

to resign during the term of this Agreement (such notice hereinafter referred to

as a "Resignation Notice"), provided, however, that in the case of the

Executive's resignation for "Good Reason" as defined in Section 16 below, only

fourteen (14) days' prior written notice shall be required. The Executive

acknowledges and understands that these notice periods are for the exclusive

benefit of the Company, and do not confer any employment obligation on the

Company. If the Company receives any such Resignation Notice, the Company may

elect, in its sole discretion and for any reason or for no reason, to terminate

the Executive's employment, either immediately or at any point during the period

indicated in such notice.

14. Post-Resignation Actions: If the Executive decides to resign from the

Executive's employment with the Company, the Executive agrees to make no public

announcement and no statement to persons or entities doing business with the

Company, without the written consent of the Company, and to continue faithfully

performing and discharging the Executive's duties and responsibilities for the

Company from the date of such Resignation Notice until such termination date.

15. Post-Resignation Obligations: Except as provided below with respect to

resignations for "Good Reason," no such resignation (or termination by the

Company following a Resignation Notice) shall be deemed to be or treated as if

it was a "Termination Without Cause" as defined below. The Executive agrees and

understands that, in the event of any such resignation (or termination by the

Company following a Resignation Notice), the Executive shall be entitled to

receive the Executive's base salary from the Employer at the rate provided in

this Agreement through the date of termination of the Executive's employment and

any business expenses otherwise due to Executive. The Executive shall also be

entitled to payment for any (i) bonus earned in the year preceding such

resignation but not yet paid and, in the event of a "Resignation for Good

Reason", accrued but unused vacation days during the year such resignation

occurs. All other obligations of the Employer under this Agreement shall

automatically cease, and the Executive shall not be entitled to any other

salary, payments or benefits otherwise payable under this Agreement, except as

otherwise required by law. The parties further agree and understand that, in the

event of any such resignation (or termination by the Company following a

Resignation Notice), the Executive's obligations and agreements under Sections

20 through 23 hereof shall continue in full force and effect in the manner and

on the terms set forth herein.

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16. Resignation for Good Reason: If the Executive resigns for "Good

Reason" (as defined below), then such a resignation (a "Resignation for Good

Reason") shall be treated hereunder as if it were a "Termination Without Cause"

as defined in Section 17 below. "Good Reason" means any of the following

failures or conditions which shall remain uncured twenty (20) days after written

notice of such failure or condition is received by the Company from the

Executive: (i) the failure of the Company to continue the Executive in the

position of the Chief Financial Officer of the Company (or such other senior

executive position as may be offered by the Company and which the Executive in

his sole discretion may accept); (ii) material diminution by the Company of the

Executive's responsibilities, duties, or authority in comparison with the

responsibilities, duties and authority held during the six month period

following the Commencement Date, or assignment to the Executive of any duties

inconsistent with the Executive's position as a senior executive officer of the

Company (or such other senior executive position as may be offered by the

Company and which the Executive in his sole discretion may accept); (iii)

failure by the Company to pay and provide to the Executive the compensation and

benefits provided for in this Agreement; or (iv) the requirement that the

Executive relocate his residence outside of Houston, Texas.

17. Termination Without Cause: The Executive's employment under this

Agreement may be terminated at any time by the Company, without cause, upon

fourteen (14) days' written notice to the Executive (such termination referred

to throughout this Agreement as a "Termination Without Cause"). In the event of

any such Termination Without Cause, the Company agrees to pay to the Executive

as severance pay, an amount equal to six (6) months' base salary (at the then

current rate), pro rata performance bonus earned and unpaid through the date of

such termin