EMPLOYMENT AGREEMENT

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is entered into by and between Energy Partners, Ltd. (“ EPL ” or the “ Company ”), and GARY HANNA (“ Executive ”). EPL and Executive may hereinafter be referred to jointly as the “Parties.”

The Parties to this Agreement, in consideration of the mutual covenants contained herein, agree upon the following terms of employment of Executive by the Company:

1. Effective Date and Term . Executive’s employment with the Company subject to this Agreement shall commence on the effective date (the “ Effective Date ”) of the Second Amended Joint Plan of Reorganization of Energy Partners, Ltd. and Certain of its Subsidiaries under Chapter 11 of the Bankruptcy Code, as Modified as of July 31, 2009 (the “ Plan of Reorganization ”). Subject to the terms and conditions herein, the Company hereby employs Executive, and Executive hereby accepts employment for a term commencing on the Effective Date and continuing for a period of three (3) years (the “ Term ”); provided, however, that the Term may be terminated prior to the expiration thereof in accordance with Paragraph 4 . The term “ Term of Employment ” means the period from the Effective Date until the expiration or termination of the Term pursuant to this Paragraph 1 or in accordance with Paragraph 4 of this Agreement.

2. Duties . Executive will serve the Company in the capacity of Chief Executive Officer and, in that capacity, Executive will perform his duties to the best of his abilities, subject to the oversight of the Company’s Board of Directors (the “ Board ”). The Company agrees that Executive shall have duties and responsibilities consistent with the position set forth above in a company the size and of the nature of EPL and shall at all times have such discretion and authority as is required in the carrying out of Executive’s duties in a proper and efficient manner, subject to such limits as the Board may impose through the Company’s authorizing resolutions or otherwise.

During the Term of Employment, Executive shall devote all of his professional attention, on a full time basis, to the business and affairs of the Company and shall use his best efforts to advance the best interest of the Company. It is acknowledged that Executive lives in Houston, Texas, and that, unless and until Executive moves to New Orleans, Louisiana, Executive will commute to New Orleans, Louisiana (if the Company’s primary offices remain in New Orleans); provided, however, that, for up to one year after the Effective Date, the Company shall pay for Executive to commute to New Orleans, Louisiana, as set forth below.

During the Term of Employment, Executive shall not, without the prior approval of the Board, which approval will not be unreasonably withheld, (a) directly or indirectly render services to, or otherwise act in a business or professional capacity on behalf of or for the benefit of, any other “ Person ” (as defined below) as an employee, advisor, member of a board or similar governing body, independent contractor, agent, consultant, representative or otherwise, whether or not compensated, or (b) accept appointment to or work in any capacity for any charitable or not-for-profit organization (except as provided below); and, in the case of clauses (a) and (b), to the extent Board approval is granted for Executive’s engagement in any such activity, Executive shall only engage in such activity to the extent that such activity does not unreasonably conflict

or interfere with the performance of Executive’s duties to the Company. Notwithstanding the foregoing, Executive shall be entitled to manage his personal investments and affairs, to engage in public speaking, and to serve, from time to time, on the board of directors (or in a comparable position) of up to two (2) charitable organizations selected by Executive, provided that such activities do not unreasonably conflict or interfere with the performance of Executive’s duties. “ Person ” or “ person ” as used in this Agreement means any individual, partnership, limited partnership, corporation, limited liability company, trust, estate, cooperative, association, organization, proprietorship, firm, joint venture, joint stock company, syndicate, company, committee, government or governmental subdivision or agency, or other entity.

3. Compensation .

(a) Salary . For all duties to be performed by Executive in any capacity hereunder, Executive shall be paid a base salary (“ Base Salary ”) at an annual rate, to be determined by the Board, of not less than $400,000.00 per year, payable in accordance with the normal payroll practices and procedures of the Company and subject to normal withholdings.

(b) Bonus Compensation . During the Term of Employment, Executive shall be entitled to receive, in addition to his Base Salary, an annual bonus (each, an “ Annual Bonus ”) awarded at the discretion of the Board upon recommendation of the Compensation Committee and based upon Executive’s performance. Each Annual Bonus will be paid in a grant of the Company’s common stock. The Executive’s target Annual Bonus for each year shall be between 25% and 125% (inclusive) of Executive’s Base Salary in effect for the calendar year to which such Annual Bonus relates (the “ Target Bonus ”). The establishment of any Target Bonus and the determination and payment of any Annual Bonus shall be governed by the Energy Partners, Ltd. 2009 Long Term Incentive Plan (the “ LTIP ”) or such other plan as adopted by the Company governing annual incentive awards; provided, however, that any stock grant made to pay any Annual Bonus shall not be made subject to any forfeiture provisions, transfer restrictions (other than those required by law) or repurchase provisions (other than the Company’s right under the LTIP to repurchase all or any portion of the common stock awarded pursuant to such stock grant if such common stock is not required to be registered under Section 12 of the Securities Exchange Act of 1934, as amended). For any partial year of employment, the amount of such Annual Bonus shall be pro-rated for the portion of the year that Executive was in the employ of the Company. To the extent payable pursuant to any applicable plan of the Company, Executive’s Annual Bonus will be paid to Executive no later than March 15 of the calendar year following the calendar year to which the Annual Bonus relates.

(c) Other Benefits . During the Term of Employment, Executive shall be eligible for participation in and to receive all benefits under welfare benefit plans, practices, policies and programs of the Company, including the Company’s medical, dental, vision, disability, and 401(k) plans as may be in effect from time to time for other similarly situated executives of the Company (“ Employee Benefits ”). Executive shall be entitled to four weeks of paid vacation and sick leave in accordance with the Company’s prevailing policy for its executives. Unused vacation days will not be carried over into the following calendar year.

(d) Expense Reimbursement . Executive shall be entitled to reimbursement of all reasonable and necessary expenses incurred on behalf of the Company during the Term of

EMPLOYMENT AGREEMENT

Employment in accordance with the Company’s standard policies and procedures, which provide an objectively determinable nondiscretionary definition of the expenses eligible for reimbursement. Notwithstanding any provision of this Agreement to the contrary, the amount of expenses for which Executive is eligible to receive reimbursement during any calendar year shall not affect the amount of expenses for which Executive is eligible to receive reimbursement during any other calendar year within the Term of Employment. Reimbursement of expenses under this Paragraph 3(d) with respect to which the Company’s standard policies and procedures have been followed shall be made on or before the last day of the month following the month in which the Executive has requested reimbursement and submitted documentation for such expenses in accordance with the Company’s standard policies and procedures. Executive is not permitted to receive a payment or other benefit in lieu of reimbursement under this Paragraph 3(d) .

(e) Stock Options . Executive shall receive an initial award of stock options to be granted on the Effective Date (the “ Initial Stock Options ”) and will be entitled to participate annually thereafter in any additional awards of stock options (together with the Initial Stock Options, the “ Stock Options ”) by the Company as determined by the Board in its discretion. The Initial Stock Options shall be in an amount representing the right to purchase 68,116 shares of the Company’s common stock, with an exercise price of $10.00 per share or, if greater, the Market Value Per Share (as defined in the LTIP) of the stock on the date of grant. The terms of the Stock Options shall be governed by the LTIP and one or more separate stock option agreements by and between the Company and Executive; provided, however, that the stock option agreement relating to the Initial Stock Options shall reflect the following:

(i) The Initial Stock Options shall vest ratably on a monthly basis over a 36-month period beginning on the Effective Date (the “ Vesting Period ”); provided, however, that the vesting for the first six months of the Vesting Period (the “ Initial Period ”) shall be deferred until the end of the Initial Period such that (A) the portion of the Initial Stock Options that would have otherwise vested during the Initial Period will automatically vest on the first day following the expiration of the Initial Period and (B) any remaining unvested Initial Stock Options shall vest ratably on a monthly basis over the remainder of the Vesting Period.

(ii) Any vested Initial Stock Options shall remain exercisable by Executive for a period of 30 months following the vesting date of such Initial Stock Options.

(iii) If Executive’s employment is terminated in an Involuntary Termination as defined in Paragraph 4(b) of this Agreement or a For Good Reason Termination as defined in Paragraph 4(d) of this Agreement, the portion of the Initial Stock Options that would have vested during the six months immediately following the Date of Termination will automatically vest and become non-forfeitable and the entire vested portion of the Initial Stock Option shall remain exercisable by Executive for a period of not less than 30 months following the Date of Termination.

(iv) Upon the occurrence of a Change in Control, all remaining unvested Initial Stock Options will automatically vest and become non-forfeitable and

EMPLOYMENT AGREEMENT

the entire vested portion of the Initial Stock Option shall remain exercisable by Executive for a period of not less than 30 months following the Change in Control. For purposes of this Agreement, a “ Change in Control ” shall mean a Change in Control as defined in the LTIP;

(v) Any of the Company’s common stock issued upon the exercise of any of the Initial Stock Options shall not be subject to any forfeiture provisions, transfer restrictions (other than those required by law) or repurchase provisions (other than the Company’s right under the LTIP to repurchase all or any portion of such common stock if such common stock is not required to be registered under Section 12 of the Securities Exchange Act of 1934, as amended).

(f) Commuting Expenses . For the first year of the Initial Term, Executive will be reimbursed for the following costs of commuting from Houston, Texas, to the Company’s offices in New Orleans, Louisiana:

(i) One round-trip coach-class airline ticket per week, and

(ii) Reasonable other travel expenses ( e.g. , parking) supported by appropriate documentation and submitted pursuant to Paragraph 3(d) of this Agreement.

Further, the Company shall provide Executive with a housing allowance in the amount of $5,000 per month for the first year of the Initial Term. Following the first year of the Initial Term, if the Company’s primary offices remain in New Orleans, Executive may relocate to New Orleans, Louisiana. Upon such relocation, the Company shall reimburse Executive for moving expenses and normal closing costs (fees, appraisal, commissions, etc.) related to the sale of Executive’s current residence in Houston, Texas. The total amount of such relocation expenses reimbursable pursuant to this Paragraph 3(f) shall not exceed $100,000; provided, however, that the Company shall not be obligated to reimburse Executive for any such relocation expenses unless Executive (i) has taken steps toward relocating to New Orleans on or before the first anniversary of the Effective Date, and (ii) does in fact relocate in New Orleans within a reasonable time thereafter.

(g) Other Benefits . This Agreement governs the rights and obligations of Executive and Company with respect to Executive’s Base Salary and certain other perquisites of employment. Except as expressly provided herein, Executive’s rights and obligations both during the Term of Employment and thereafter with respect to Stock Options, incentive compensation, and other benefits under the plans and programs maintained by Company shall be governed by the separate agreements, plans and other documents and instruments governing such matters.

4. Termination . Unless otherwise agreed to in writing by the Company and Executive, Executive’s employment hereunder may be terminated under the following circumstances:

(a) For Cause Termination . The Board may terminate Executive’s employment with the Company for Cause, as defined in the following sentence. For purposes of this Agreement, (i) “ Cause ” means: (A) Executive’s material breach of this Agreement or

EMPLOYMENT AGREEMENT

Executive’s willful failure to perform his required duties and responsibilities (if such failure to perform has not been cured within ten business days following receipt of notice from the Company), (B) Executive’s indictment for, or conviction of (1) a misdemeanor involving fraud, dishonest or moral turpitude or (2) any felony, (C) dishonesty on the part of Executive directly related to the performance of Executive’s duties, (D) wrongful and intentional disclosure of confidential information by Executive, a conflict of interest on the part of Executive that is undisclosed and not approved by the Board, (E) Executive’s material violation of any Company policy available to all employees that materially and adversely affects the Company (if such material violation has not been cured within ten business days following receipt of notice from the Company), or (F) Executive’s engaging in any manner, directly or indirectly, in a business that competes with the business of the Company, unless first disclosed to and approved by the Board in all material respects; and (ii) a “ For Cause Termination ” is any termination for Cause in accordance herewith.

(b) Involuntary Termination . The Board may, at any time, terminate Executive’s employment with the Company without Cause through an Involuntary Termination. An “Involuntary Termination” is any termination of Executive’s employment by the Board that does not meet the definition of a For Cause Termination and does not include a termination by reason of Executive’s death or Disability.

(c) Voluntary Termination . Executive may terminate his employment with the Company for any reason or no reason (a “ Voluntary Termination ”) upon giving the Company not less than thirty days’ written notice in advance of any proposed Date of Termination (as defined in Paragraph 4(g) ).

(d) Good Reason . Executive may terminate his employment with the Company for Good Reason as defined in the following sentence. For purposes of this Agreement, (i) “ Good Reason ” means the occurrence of any of the following: (A) Company’s material breach of the Agreement, (B) a material reduction in Executive’s Base Salary, (C) a material diminution in Executive’s authority, duties or responsibilities that are normally associated with the position of Chief Executive Officer, (D) a requirement by the Company that Executive be required to relocate outside of New Orleans or Houston, or (E) a Change in Control; (ii) a “ For Good Reason Termination ” is any termination for Good Reason in accordance herewith. Notwithstanding the foregoing provisions of this Paragraph 4(d) or any other provision in this Agreement to the contrary, any assertion by Executive of a termination of employment for “ Good Reason ” shall not be effective unless all of the following conditions are satisfied: (i) the condition giving rise to Executive’s termination of employment must have arisen without Executive’s consent; and (ii) (A) Executive must provide written notice to the Company of such condition in accordance with Paragraph 4(f) within 90 days of the initial existence of the condition, (B) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Company and (C) the date of Executive’s termination of employment must occur within 30 days after the expiration of the cure period set forth in (ii)(B) above. This definition of “ Good Reason ” shall be construed and administered in accordance with the requirements of Treasury Regulation Section 1.409A-1(n)(2).

(e) Death or Disability . Executive’s employment will automatically terminate upon Executive’s death or upon a determination that he has incurred a “ Disability .” For the

EMPLOYMENT AGREEMENT

purposes of this Agreement, “Disability” means, as reasonably determined by the Board, Executive’s physical or mental incapacity that renders him unable to perform the essential functions of Executive’s duties to the Company for sixty consecutive days or eighty days in any twelve month period, even with reasonable accommodation.

(f) Notice of Termination . Any termination occurring in accordance with the terms of this Paragraph 4 (other than by reason of Executive’s death) shall be communicated by a Notice of Termination to the other Party delivered in accordance with Paragraph 7 of this Agreement. For purposes of this Agreement, a “ Notice of Termination ” means a written notice that (i) indicates the specific termination provision of this Agreement relied upon; (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for the termination; and (iii) specifies the date such termination shall be effective (the “ Date of Termination ”). The failure of a Party to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of the basis for termination shall not waive any right of such Party hereunder or later preclude such Party from asserting such fact or circumstance in enforcing its rights hereunder.

(g) Date of Termination/Disability . “ Date of Termination ” means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided, however, that if Executive’s employment is terminated by reason of his death, the Date of Termination shall be the date of death of Executive; provided further that, in the case of a termination due to Executive’s Disability, the Date of Termination is the end of any sixty day period or the eighty first day in any twelve month period that Executive is absent from work by reason of Disability.

5. Obligations of the Company in the Event of Termination .

(a) Upon termination of Executive’s employment hereunder by the Company For Cause or by Executive without Good Reason, Executive shall be entitled to receive:

(i) Executive’s Base Salary through the Date of Termination.

(ii) Any Annual Bonus earned but unpaid as of the Date of Termination for any fiscal year completed prior to the Date of Termination.

(iii) Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with this Agreement prior to the Date of Termination.

(iv) Such Employee Benefits, if any, as to which Executive may be entitled pursuant to the terms governing such Employment Benefits and any applicable law.

(b) Upon termination of Executive’s employment hereunder by the Company in an Involuntary Termination, by Executive for Good Reason or upon death or Disability of Executive, Executive shall be entitled to receive:

(i) Executive’s Base Salary through the Date of Termination.

EMPLOYMENT AGREEMENT

(ii) Any Annual Bonus earned but unpaid as of the Date of Termination for any fiscal year completed prior to the date of termination.

(iii) Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with this Agreement prior to the Date of Termination.

(iv) Such Employee Benefits, if any, as to which Executive may be entitled pursuant to the terms governing such Employment Benefits and any applicable law.

(v) A “ Severance Amount ” equal to Executive’s aggregate Base Salary for the lesser of (i) six months and (ii) the remainder of the Term of this Agreement (the “ Severance Period ”). Such Severance Amount shall be payable in a lump sum within thirty days of the Date of Termination (or, if later, five business days after Executive executes and delivers the Release Agreement, as defined below) in accordance with normal payroll practices.

(vi) For the duration of the Severance Period, Executive, his spouse and his dependents shall be entitled to continuation coverage under the Company’s group medical, dental and vision insurance plans comparable to the level of coverage in effect at the time of termination, provided Executive, his spouse and such dependents were enrolled in such plans immediately prior to the termination of Executive’s employment. Such benefits shall be provided pursuant to the Consolidated Omnibus Budget Reconciliation Act (“ COBRA ”). The Company shall reimburse Executive during the Severance Period for the portion of the COBRA premium equal to the amount the Company pays for similarly situated executives who are actively employed by the Company. Executive shall be entitled to such COBRA coverage beyond the Severance Period as is required by law.

(c) In light of the difficulties in estimating the damages for an early termination of Executive’s employment under this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this Paragraph 5 shall be received by Executive as liquidated damages.

(d) Notwithstanding anything herein to the contrary, the Company shall not be obligated to make any payment or provide any benefit under Paragraph 5(b) unless (i) Executive executes and delivers to the Company a release agreement in the form attached hereto as Exhibit A (the “ Release Agreement ”) and (ii) Executive does not revoke such Release Agreement during any applicable revocation period.

6. Indemnification; Directors’ and Officers’ Liability Insurance . As and to the extent provided in the Company’s bylaws, Executive will be entitled to the indemnification provided to other executive officers and directors of the Company. In addition, the Company agrees to include Executive as a covered person on a directors’ and officers’ liability insurance policy or policies covering Executive to the same extent that the Company provides such coverage for its other executive officers and directors.

EMPLOYMENT AGREEMENT

7. Notices . Any and all notices required or permitted under this Agreement shall be in writing and shall be personally delivered, or mailed by expedited overnight delivery service, or sent by facsimile (provided that the sender confirms the facsimile by sending an original confirmation copy thereof by certified or registered mail or expedited delivery service within two business days after transmission thereof) to the respective Parties at the following addresses unless and until a different address has been designated by written notice to the other Party, as follows:

Notices to the Company :

Energy Partners, Ltd.

201 St. Charles Ave., Suite 3400

New Orleans, Louisiana, 70170-1026

Facsimile No.: (504) 569-1874

Notices to Executive :

Gary Hanna

3771 Carlon St.

Houston, Texas 77005

Facsimile No.: (504) 535-2704

Any notice shall be deemed to have been given at the time of personal delivery or, in the case of facsimile, upon transmission (provided confirmation is sent as descri