Exhibit 10.3

SECOND AMENDMENT TO

PLAINS EXPLORATION & PRODUCTION COMPANY

2002 STOCK INCENTIVE PLAN

WHEREAS, Plains Exploration & Production Company (the “Company”) maintains the
Plains Exploration & Production Company 2002 Stock Incentive Plan (the “Plan”)
for the benefit of certain eligible persons as set forth in the Plan; and

WHEREAS, all words with initial capital letters shall have the same meaning
herein as ascribed thereto in the Plan; and

WHEREAS, the Company desires to amend the Plan, effective as set forth below,
and

WHEREAS, in Section 17 of the Plan, the Board reserved the right to amend or
modify the Plan and any Agreement issued thereunder subject to the limitations
set forth therein; and

WHEREAS, the Board has authorized appropriate officers of the Company to amend
the Plan and Agreements to effect the changes generally described above and as
specifically set forth in the amendment below.

NOW, THEREFORE, effective as of September 13, 2006, the Plan is hereby amended
as follows:

1. Section 2.9 of the Plan is hereby amended to read as follows:

2.9 “Change in Capitalization” means any increase or reduction in the number of
Shares, or any change (including, but not limited to, in the case of a spin-off,
dividend or other distribution in respect of Shares, a change in value) in the
Shares or exchange of Shares for a different number or kind of shares or other
securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, extraordinary cash dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.

2. Section 14(a) of the Plan is hereby amended to read as follows:

(a) In the event of a Change in Capitalization, the aggregate number and class
of securities available under the Plan and issued pursuant to any outstanding
Options or Awards shall be equitably adjusted by the Committee as necessary to
ensure that after a Change in Capitalization the shares subject to the Plan and
each Participant’s proportionate interest shall be maintained substantially as
before the occurrence of such event. Subject to any required action by the Board
or the stockholders, the Committee shall, in such manner as it may deem
equitable, adjust (i) the number and type of shares of common stock of the
Company or any Affiliate with respect to which Options or Awards may be granted
under the Plan, (ii) the maximum number of shares that may be covered by Options
or Awards granted under the Plan during any period, (iii) the maximum number of
shares that may be covered by Options or Awards to any single individual during
any calendar year, (iv) the number of shares subject to outstanding Options or
Awards, and (v) the grant or exercise price with respect to an Option or Award.
Such adjustment in an outstanding Option shall be made (i) without change in the
total price applicable to the Option or any unexercised portion of the Option
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices) and (ii) with any necessary corresponding adjustment
in exercise price per share; provided, however, the Committee shall not take any
action otherwise authorized under this Section 14(a) to the extent that such
action would materially reduce the benefit or result in adverse tax consequences
to the Participant without the consent of the Participant. The Committee’s
determinations shall be final, binding and conclusive with respect to the
Company and all other interested persons.