Exhibit 10.3

NOBLE ENERGY, INC.
2004 LONG-TERM INCENTIVE PROGRAM

PERFORMANCE UNITS AGREEMENT

     THIS AGREEMENT, made and entered into as of                          , by
and between NOBLE ENERGY, INC., a Delaware corporation (the “Company”), and
                                         (“Employee”),

WITNESSETH THAT:

     WHEREAS, the Compensation, Benefits and Stock Option Committee of the
Company’s Board of Directors (the “Committee”), acting under the Company’s 2004
Long-Term Incentive Program adopted on January 28, 2004 (the “LTIP”), has the
authority to award LTIP performance units to certain employees of the Company or
one of its affiliates; and

     WHEREAS, pursuant to the LTIP the Committee has determined to make such an
award to Employee on the terms and conditions and subject to the restrictions
set forth in this Agreement, and Employee desires to accept such award;

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

     1. Definitions. For the purposes of this Agreement:

     (a) “Affiliate” means any entity that is directly or indirectly controlled
by the Company or in which the Company has a significant equity interest, as
determined by the Committee in its discretion.

     (b) A discharge by the Company or an Affiliate for “Cause” means any
termination of Employee’s employment with the Company or an Affiliate by reason
of Employee’s (1) conviction of a felony or misdemeanor involving moral
turpitude, (2) engagement in conduct involving misuse of the funds or other
property of the Company or an Affiliate, (3) engagement in a business activity
which is in conflict with the business interests of the Company or an Affiliate,
(4) gross negligence or willful misconduct, or (5) engagement in conduct which
is in violation of the safety rules or standards of the Company or an Affiliate
or which otherwise may cause or causes injury to another person.

     (c) A “Change in Control” shall be deemed to have occurred if:

     (1) individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the “Incumbent Board”) cease for any reason to
constitute at least fifty-one percent (51%) of the Board of Directors of the

 

--------------------------------------------------------------------------------

 

Company, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company’s stockholders
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board;

     (2) the stockholders of the Company shall approve a reorganization, merger
or consolidation, in each case, with respect to which persons who were the
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own outstanding voting securities
representing at least fifty-one percent (51%) of the combined voting power
entitled to vote generally in the election of directors (“Voting Securities”) of
the reorganized, merged or consolidated company;

     (3) the stockholders of the Company shall approve a liquidation or
dissolution of the Company or a sale of all or substantially all of the stock or
assets of the Company; or

     (4) any “person,” as that term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than the
Company, any of its subsidiaries, any employee benefit plan of the Company or
any of its subsidiaries, or any entity organized, appointed or established by
the Company for or pursuant to the terms of such a plan), together with all
“affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the
Exchange Act) of such person (as well as any “Person” or “group” as those terms
are used in Sections 13(d) and 14(d) of the Exchange Act), shall become the
“beneficial owner” or “beneficial owners” (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of securities of the Company
representing in the aggregate twenty-five percent (25%) or more of either
(A) the then outstanding shares of common stock, par value $3.33-1/3 per share,
of the Company (“Common Stock”) or (B) the Voting Securities of the Company, in
either such case other than solely as a result of acquisitions of such
securities directly from the Company. Without limiting the foregoing, a person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares the power to vote, or to direct the
voting of, or to dispose, or to direct the disposition of, Common Stock or other
Voting Securities of the Company shall be deemed the beneficial owner of such
Common Stock or Voting Securities.

     Notwithstanding the foregoing, a “Change in Control” of the Company shall
not be deemed to have occurred for purposes of subparagraph (4) of this Section
1(c) solely as the result of an acquisition of securities by the Company which,
by reducing the number of shares of Common Stock or other Voting Securities of
the Company outstanding, increases (i) the proportionate number of shares of
Common Stock beneficially owned by any person to twenty-five percent (25%) or
more of the shares of Common Stock then outstanding or (ii) the proportionate
voting power represented by the

- 2 -

--------------------------------------------------------------------------------

 

Voting Securities of the Company beneficially owned by any person to twenty-five
percent (25%) or more of the combined voting power of all then outstanding
Voting Securities; provided, however, that if any person referred to in clause
(i) or (ii) of this sentence shall thereafter become the beneficial owner of any
additional shares of Common Stock or other Voting Securities of the Company
(other than a result of a stock split, stock dividend or similar transaction),
then a Change in Control of the Company shall be deemed to have occurred for
purposes subparagraph (4) of this Section 1(c).

     (d) The “Disability” of Employee means that Employee is disabled within the
meaning of Section 409A(a)(2)(C) of the Internal Revenue Code of 1986, as
amended, as determined by the Committee in its discretion.

     (e) “Performance Period” means the period of time commencing on January 1,
          , and ending on December 31,           .

     (f) “Performance Unit” means a fictional deferred compensation unit used
solely for the purpose of determining the amount of compensation (if any) to be
paid to Employee in cash pursuant to this Agreement.

     (g) “Peer Group” means the group of companies consisting of each of the
following companies that is in existence at the end of the Performance Period:

[Peer Group to be selected by Compensation Committee]

     (h) “Three-Year Debt Adjusted Compound Annual Growth in Production” means
the compound annual growth rate of production per outstanding share of Company
common stock, with the number of shares adjusted to include the number of
incremental shares that would be required to eliminate the change in the
Company’s annual average net debt (the sum of long-term debt, short-term debt
less net working capital) calculated on a quarterly basis. The growth for the
Performance Period shall be determined by calculating the debt adjusted
production per share in the final year of the Performance Period less the debt
adjusted production per share for the year immediately preceding the Performance
Period.

     (i) “Three-Year Debt Adjusted Compound Annual Growth in Reserves” means the
compound annual growth rate of reserves per outstanding share of Company common
stock during the Performance Period, with the number of shares adjusted to
include the number of incremental shares that would be required to eliminate the
change in net debt (the sum of long-term debt, short-term debt, less net working
capital) of the Company outstanding at the beginning and end of the Performance
Period.

     (j) “Total Shareholder Return” for the Company and the other Peer Group
companies shall be determined on the basis of the total investment performance
that would have resulted as of the end of the Performance Period from investing
$100 in the

- 3 -

--------------------------------------------------------------------------------

 

common stock of the Company and each of the other companies in the Peer Group,
using a beginning stock price and an ending stock price equal to the average
closing price for the first twenty (20) trading days in the Performance Period
and the last twenty (20) trading days in the Performance Period, respectively,
and with all dividends reinvested.

     (k) Transfers of employment without interruption of service between or
among the Company and its Affiliates shall not be considered a termination of
employment.

     2. Award of Performance Units. Solely for the purpose of determining the
amount of compensation (if any) to be paid to Employee in cash pursuant to this
Agreement, the Company hereby awards to Employee, and Employee hereby accepts,
                   Performance Units on the terms and conditions and subject to
the restrictions, including forfeiture, set forth in this Agreement.

     3. Total Shareholder Return Performance Goal. Subject to the provisions of
Section 6 of this Agreement, at the end of the Performance Period Employee shall
earn the following amount with respect to each Performance Unit awarded to
Employee pursuant to Section 2 hereof, depending upon the Company’s Total
Shareholder Return compared to the Total Shareholder Returns of the companies in
the Peer Group as of the end of the Performance Period:

          Company’s Total       Shareholder Return Relative   Amount   to Peer
Group Companies   Earned  
Maximum level:       percentile or above
  $ 1.00  
Target level:       percentile
  $ 0.50  
Threshold level: 25th percentile
  $ 0.25  
Below 25th percentile
  None

     If the percentile level of the Company’s Total Shareholder Return is
between two levels indicated on the foregoing schedule, the amount earned under
such schedule shall be determined on the basis of a straight-line interpolation
between such levels.

     4. Growth in Reserves Performance Goal. Subject to the provisions of
Section 6 of this Agreement, at the end of the Performance Period Employee shall
earn the following amount with respect to each Performance Unit awarded to
Employee pursuant to Section 2 hereof, depending upon the level of the Company’s
Three-Year Debt Adjusted Compound Annual Growth in Reserves compared to the
Three-Year Debt Adjusted Compound Annual Growth in Reserves of the companies in
the Peer Group as of the end of the Performance Period:

- 4 -

--------------------------------------------------------------------------------

 

          Three-Year       Debt Adjusted Compound       Annual Growth in
Reserves   Amount   Relative to Peer Group Companies   Earned  
Maximum level:       percentile or above
  $ 0.50  
Target level:       percentile
  $ 0.25  
Threshold level: 25th percentile
  $ 0.125  
Less than 25th percentile
  None

If the percentile level of the Company’s Three-Year Debt Adjusted Compound
Annual Growth in Reserves is between two levels indicated on the foregoing
schedule, the amount earned under such schedule shall be determined on the basis
of a straight-line interpolation between such levels.

     5. Growth in Production Performance Goal. Subject to the provisions of
Section 6 of this Agreement, at the end of the Performance Period Employee shall
earn the following amount with respect to each Performance Unit awarded to
Employee pursuant to Section 2 hereof, depending upon the Company’s Three-Year
Debt Adjusted Compound Annual Growth in Production compared to the Three-Year
Debt Adjusted Compound Annual Growth in Production of the companies in the Peer
Group as of the end of the Performance Period:

          Three-Year       Debt Adjusted Compound       Annual Growth in
Production   Amount   Relative to Peer Group Companies   Earned  
Maximum level:       percentile or above
  $ 0.50  
Target level:       percentile
  $ 0.25  
Threshold level: 25th percentile
  $ 0.125  
Less than 25th percentile
  None

If the percentile level of the Company’s Three-Year Debt Adjusted Compound
Annual Growth in Production is between two levels indicated on the foregoing
schedule, the amount earned under such schedule shall be determined on the basis
of a straight-line interpolation between such levels.

     6. Vesting, Forfeiture and Payment for Performance Units.

     (a) During the Performance Period, the Performance Units shall be subject
to being forfeited by Employee to the Company as provided in this Agreement, and
Employee may not sell, assign, transfer, discount, exchange, pledge or otherwise
encumber or dispose of any of the Performance Units.

     (b) If Employee remains employed by the Company or one of its Affiliates
from the date hereof through the end of the Performance Period, then on the
July 31 immediately following the end of the Performance Period the Company
shall pay to Employee (or in the event of Employee’s death, to Employee’s
estate) an amount in cash equal to the sum of the amounts earned by Employee as
of the end of the Performance Period under Sections 3, 4 and 5 of this
Agreement.

- 5 -

--------------------------------------------------------------------------------

 

     (c) If Employee’s employment with the Company or an Affiliate terminates
during the Performance Period by reason of Employee’s death, Disability or
Retirement (as defined in the Company’s 1992 Stock Option and Restricted Stock
Plan) or discharge by the Company or an Affiliate other than for Cause, then on
the July 31 immediately following the end of the Performance Period the Company
shall pay to Employee (or in the event of Employee’s death, to Employee’s
estate) an amount in cash equal to (i) the sum of the amounts earned by Employee
as of the end of the Performance Period under Sections 3, 4 and 5 of this
Agreement, multiplied by (ii) a fraction, (1) the numerator of which is the
number of whole months of employment with the Company or an Affiliate that
Employee completed during the Performance Period, and (2) the denominator of
which is 36; provided, however, that the Committee in its discretion may reduce
or eliminate any payment to be made to or with respect to Employee pursuant to
this Section 6(c).

     (d) All of the Performance Units shall be forfeited by Employee if the
employment of Employee by the Company or an Affiliate terminates during the
Performance Period for any reason other than Employee’s death, disability,
Retirement or discharge by the Company or an Affiliate without Cause.

     (e) If a Change in Control occurs during the Performance Period and while
Employee is employed by the Company or an Affiliate, then any provision of this
Agreement to the contrary notwithstanding, in lieu of and in full satisfaction
and discharge of all of the obligations of the Company to make payments to or
with respect to Employee pursuant to this Agreement, as soon as practicable
after the occurrence of such Change in Control the Company or its successor
shall pay to Employee an amount in cash equal to one dollar ($1.00) for each
Performance Unit awarded to Employee pursuant to Section 2 of this Agreement. If
a Change in Control occurs after the end of the Performance Period but prior to
payment being made for such period, the payment based on actual performance that
is otherwise due to be paid pursuant to this Section 6 on the July 31
immediately following the end of such period shall be paid to Employee (or in
the event of Employee’s death, to Employee’s estate) as soon as practicable
after the occurrence of such Change in Control.

     7. Withholding Taxes. The payments made to or with respect to Employee
pursuant to this Agreement shall be subject to all applicable requirements for
the withholding of federal, state and local taxes.

     8. Effect on Employment. Nothing contained in this Agreement shall confer
upon Employee the right to continue in the employment of the Company or an
Affiliate, or affect any right which the Company or an Affiliate may have to
terminate the employment of Employee.

     9. Assignment. The Company may assign all or any portion of its rights and
obligations under this Agreement. The Performance Units and the rights and
obligations of Employee under this Agreement may not be sold, assigned,
transferred, discounted,

- 6 -

--------------------------------------------------------------------------------

 

exchanged, pledged or otherwise encumbered or disposed of by Employee other than
by will or the laws of descent and distribution.

     10.  Binding Effect. This Agreement shall be binding upon and inure to the
benefit of (i) the Company and its successors and assigns, and (ii) Employee,
and Employee’s heirs, devisees, executors, administrators and personal
representatives.

     11. Amendment. This Agreement may be amended or terminated at any time by
an instrument in writing to such effect executed by both parties.

     12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to its principles
of conflict of laws.

     13. Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision shall be deemed to be so limited and shall
be enforceable by limitation thereof, then the provision shall be so limited and
shall be enforceable to the maximum extent permitted by applicable law.

     14. Entire Agreement. This Agreement and LTIP set forth the entire
agreement between the parties with respect to the subject matter hereof, and
supersede all prior agreements and understandings, whether written or oral,
between the parties with respect to the subject matter hereof.

     15. Subject to LTIP. The Performance Units and this Agreement are subject
to all of the terms and conditions of the LTIP as amended from time to time. In
the event of any conflict between the terms and conditions of the LTIP and those
set forth in this Agreement, the terms and conditions of the LTIP shall control.

     16. Counterparts. This Agreement may be executed by the parties hereto in
any number of counterparts, each of which shall be deemed an original, and all
of which shall constitute one and the same agreement.

     17. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only, do not constitute a part of this Agreement, and
shall not affect in any manner the meaning or interpretation of this Agreement.

     18. References. The words “this Agreement,” “herein,” “hereof,” “hereby,”
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited.

[SIGNATURE PAGE TO FOLLOW]

- 7 -

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Company and Employee have executed this Agreement
as of the date first written above.

     

    NOBLE ENERGY, INC.
 
   

  By:

 

--------------------------------------------------------------------------------

  Name:

 

--------------------------------------------------------------------------------

  Title:

 

--------------------------------------------------------------------------------

 
   

    EMPLOYEE
 
   

 

--------------------------------------------------------------------------------

  Employee Signature
 
   

 

--------------------------------------------------------------------------------

  Employee Printed Name

- 8 -