THIRD AMENDMENT TO AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT

This THIRD AMENDMENT TO AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT (“ Amendment ”), dated effective as of __________, 2009 (the “ Effective Date ”), is by and among Energy XXI Gulf Coast, Inc., a Delaware corporation (the “ Borrower ”), the lenders party to the First Lien Credit Agreement described below (the “ Lenders ”), and The Royal Bank of Scotland plc, as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”), and the other parties in the capacities herein identified.

WHEREAS, the Borrower, the Lenders, the Administrative Agent and certain other Persons are parties to the Amended and Restated First Lien Credit Agreement, dated as of June 8, 2007, as modified by the Consent Regarding Amended and Restated First Lien Credit Agreement dated as of July 27, 2007, as amended by that certain First Amendment to Amended and Restated First Lien Credit Agreement dated effective as of November 19, 2007, and as amended by that certain Waiver, Consent and Second Amendment to Amended and Restated First Lien Credit Agreement dated effective as of December 1, 2008 (as so modified, and as amended, supplemented, amended and restated or otherwise modified from time to time, the “ First Lien Credit Agreement ”); and

WHEREAS, the parties hereto desire to amend the First Lien Credit Agreement in certain other respects as set forth herein.

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

Section 1.   Definitions .  Capitalized terms used herein but not defined herein shall have the meanings as given them in the First Lien Credit Agreement, unless the context otherwise requires.

Section 2.   Amendments to First Lien Credit Agreement .  The First Lien Credit Agreement is hereby amended as follows:

(a)   Section 1.1 .

(1)   Section 1.1 of the First Lien Credit Agreement is hereby amended by adding the following definition(s) in the proper alphabetical order:

“ EXXI, Inc. ” means Energy XXI, Inc., a Delaware corporation.

“ Pledged Notes Sales Contribution ” is defined in the Third Amendment.

“ Pledged Notes Security Agreement ” is defined in the Third Amendment.

“ PP Notes Letter Agreement ” is defined in the Third Amendment.

“ Qualified PP Debt Interest ” means, without duplication and with respect to any applicable period, any interest on the Pledged Notes (as defined in the Third Amendment) actually paid during such period by the Borrower to EXXI, Inc., as holder of the Pledged Notes (as defined in the Third Amendment), but solely to the extent that (a) EXXI, Inc. has contributed (or caused to be contributed through Intermediate Holdco) an amount equal to such interest payment to the Borrower as a capital contribution during such period; and (b) the amount of such capital contribution are deposited into one of the Deposit Accounts specified in the Disclosure Schedule or a Deposit Account subject to a Control Agreement in favor of the Administrative Agent (and, at the time of entry into such Control Agreement, maintained with a depositary institution reasonably acceptable to the Administrative Agent).

“ Secured Debt ” means, on any date and without duplication, the Indebtedness of the Borrower and its Subsidiaries that is secured by a Lien on any property and/or assets of the Borrower and/or its Subsidiaries (including without limitation, second lien financing, if any).  For the avoidance of doubt, “Secured Debt” includes, but is not limited to, amounts of Indebtedness outstanding under the First Lien Credit Agreement (including Letter of Credit Outstandings), any put premium financing under Hedging Agreements with a counterparty that is a Secured Party, any secured obligations of the Borrower or its Subsidiaries to pay any deferred premiums on any Hedge Agreement, and Capital Lease Liabilities (if any).

“ Secured Debt Leverage Ratio ” means, as of the last day of any Fiscal Quarter, the ratio of

(a)  Secured Debt outstanding on the last day of such Fiscal Quarter

to

(b)  EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters;

provided , however , that for purposes of calculating “Secured Debt Leverage Ratio”, any calculation of EBITDA hereunder for any applicable period shall be made using an EBITDA for such applicable period calculated on a pro forma basis (inclusive of any acquisitions and/or divestitures, if any, of assets or equity interests made during such applicable period as if such acquisitions or divestitures had been made at the beginning of such applicable period).

“ Third Amendment ” means that certain Third Amendment to Amended and Restated First Lien Credit Agreement dated effective as of __________, 2009, by and among the Borrower, the Lenders parties thereto, the Administrative Agent, and the other parties thereto in the capacities therein specified.

(2)   The definition of “Applicable Margin” in Section 1.1 of the First Lien Credit Agreement is hereby amended and restated as follows:

“ Applicable Margin ” means, for any day and with respect to all Loans maintained as LIBO Rate Loans or Base Rate Loans, the applicable percentage set forth below corresponding to the Borrowing Base Utilization Percentage:

provided , that the applicable percentages set forth in the foregoing table shall be increased by 0.15% during any period commencing with the date that a 90% Hedging Position shall have occurred and ending on the date that is the later of (a) ninety (90) days after the occurrence of such 90% Hedging Position or (b) the date that (i) such 90% Hedging Position shall no longer be existing and (ii) the Borrower shall have delivered a certificate of an Authorized Officer of the Borrower certifying as to the same in form and substance reasonably satisfactory to the Administrative Agent.

If at any time the Borrower fails to deliver a Reserve Report pursuant to Section 2.8.2 or 2.8.3 , then the “ Applicable Margin ” means the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level until such time as such Reserve Report has been delivered.

(3)   The definition of “Interest Expense” in Section 1.1 of the First Lien Credit Agreement is hereby amended and restated as follows:

“ Interest Expense ” means, for any applicable period, the aggregate cash interest expense (both accrued and paid and net of interest income paid during such period to the Borrower and its Subsidiaries) of the Borrower and its Subsidiaries for such applicable period, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense, but excluding one-time write-offs of unamortized upfront fees associated with this Agreement and the other Loan Documents, the Existing Credit Agreement and the “Loan Documents” thereunder and the PP Debt Documents; provided , however , that solely for purposes of determining compliance with Section 7.2.4(b) for any applicable period, “Interest Expense” to the extent used in calculating the Interest Coverage Ratio shall exclude any Qualified PP Debt Interest for such period.

(4)   The definition of “Obligor” in Section 1.1 of the First Lien Credit Agreement is hereby amended and restated as follows:

“ Obligor ” means, as the context may require, the Borrower and each other Person (other than (a) a Secured Party and (b) the Parent to the extent the obligations in respect of the Loan Documents arise solely by reason of the PP Notes Letter Agreement) obligated under any Loan Document; provided , however , that for purposes of Article VI and Article VII of the First Lien Credit Agreement and Sections 4.6 , 5.1 , 8.1.5 , 8.1.6 and 8.2 of the First Lien Credit Agreement, the term “Obligor” shall exclude EXXI, Inc. to the extent such Person’s obligations under the Loan Documents arise solely by reason of its being a party to the PP Notes Letter Agreement and the Pledged Notes Security Agreement.

(b)   Section 7.1.16(b) .  Section 7.1.16(b) of the First Lien Credit Agreement is hereby amended and restated in its entirety as follows:

“(b)           During each period from July 1 ^st to October 31 ^st of each calendar year, the Borrower will not permit the aggregate Credit Exposures of all Lenders to exceed an amount equal to (i) the lesser of the Loan Commitment Amount or the Borrowing Base then in effect minus (ii) $25,000,000.”

(c)   Section 7.2.4 .  Section 7.2.4 of the First Lien Credit Agreement is hereby amended and restated in its entirety as follows:

“SECTION 7.2.4                                            Financial Conditions and Operations . The Borrower will not permit any of the events specified below to occur:

(a)           The Borrower will not permit the Total Leverage Ratio (i) as of the last day of the Fiscal Quarter ending June 30, 2007, to be greater than 3.75 to 1.00, (ii) as of the last day of any Fiscal Quarter thereafter (commencing with the Fiscal Quarter ending September 30, 2007) to and including the Fiscal Quarter ending March 31, 2009, to be greater than 3.50 to 1.00, (iii) as of the last day of any Fiscal Quarter thereafter (commencing with the Fiscal Quarter ending June 30, 2009) to and including the Fiscal Quarter ending December 31, 2009, to be greater than 4.50 to 1.00, (iv) as of the last day of any Fiscal Quarter thereafter (commencing with the Fiscal Quarter ending March 31, 2010) to and including the Fiscal Quarter ending June 30, 2010, to be greater than 4.25 to 1.00, (v) as of the last day of any Fiscal Quarter thereafter (commencing with the Fiscal Quarter ending September 30, 2010) to and including the Fiscal Quarter ending December 31, 2010, to be greater than 4.00 to 1.00, and (vi) as of the last day of any Fiscal Quarter thereafter (commencing with the Fiscal Quarter ending March 31, 2011), to be greater than 3.75 to 1.00.

(b)           The Borrower will not permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter to be less than 3.00 to 1.00.

(c)           The Borrower will not permit the Current Ratio as of the last day of any Fiscal Quarter to be less than 1.00 to 1.00.

(d)           The Borrower will not permit the Secured Debt Leverage Ratio as of the last day of any Fiscal Quarter (commencing with the