EXHIBIT 10.7

NEWFIELD EXPLORATION COMPANY
AMENDED AND RESTATED 2003 INCENTIVE COMPENSATION PLAN

      This Amended and Restated 2003 Incentive Compensation (this “Plan”) of
Newfield Exploration Company (the “Company”) was adopted by the Board of the
Company effective as of January 1, 2005.

Recitals:

      WHEREAS, effective for the Performance Period beginning on January 1,
1993, the Board adopted the 1993 Plan, which plan had a purpose substantially
similar to this Plan;

      WHEREAS, upon adoption of this Plan, the Board terminated the 1993 Plan
effective as of December 31, 2002;

      WHEREAS, notwithstanding such termination of the 1993 Plan, Awards were
granted for the Performance Period that ended on December 31, 2002 pursuant to
and in accordance with the 1993 Plan;

      WHEREAS, except as specifically provided in this Plan, such termination of
the 1993 Plan will have no effect on unpaid Deferred Incentive Compensation
Awards (as defined in, and granted pursuant to, the 1993 Plan), which Awards
will continue to be governed by the terms of the 1993 Plan;

      WHEREAS, in considering the termination of the 1993 Plan and the adoption
of this Plan, the Board took into account the value of the overriding royalty
interests dedicated to the Employee Incentive Override Pool (as defined in the
1993 Plan) under the 1993 Plan from and after the date of termination of the
1993 Plan (the “1993 ORRI Value”) and determined that such value was
incorporated into this Plan;

      WHEREAS, effective January 1, 2005, the Board adopted Amendment No. 1 to
this Plan to provide for the termination of this Plan upon a change of control,
to conform this Plan and the 1993 Plan to recent legislation affecting deferred
compensation arrangements and to amend this Plan and the 1993 Plan in other
respects and amended and restated this Plan; and

      WHEREAS, in considering the amendment to this Plan to provide for its
termination upon a change of control, the Board took into account the remaining
1993 ORRI Value from and after the adoption of such amendment and determined
that such value has been incorporated into other plans and benefits, including
this Plan as amended and the Change of Control Severance Agreements to be
entered into with certain executives in connection with the amendment to this
Plan and the Change of Control Severance Plan for employees in general to be
adopted in connection with the amendment to this Plan;

      NOW, THEREFORE, in consideration of the foregoing and for the purpose
described below, the Board has adopted, effective as of the date first written
above, the terms and provisions governing this Plan as follows:

 

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I.
Purpose

      This Plan is intended to provide a means whereby employees of the Company
and its Subsidiaries may develop a sense of proprietorship and personal
involvement in the development and financial success of the Company and its
consolidated subsidiaries, to attract and retain employees of outstanding
competence and ability and to encourage them to remain with and devote their
best efforts to the business of the Company and its Subsidiaries, and to reward
such employees for outstanding performance, thereby advancing the interests of
the Company and its stockholders.

II.
Definitions

      Where the following words and phrases appear in this Plan, they shall have
the respective meanings set forth below unless their context clearly indicates
to the contrary:

      (a) “1993 Plan” means the Newfield Employee 1993 Incentive Compensation
Plan, as amended.

      (b) “Adjusted Net Income” means, with respect to a particular Performance
Period, the consolidated net income of the Company and its Subsidiaries
determined in accordance with generally accepted accounting principles, except
(i) without reduction for (A) income taxes and (B) Awards granted or to be
granted pursuant to this Plan (ii) without the effects of unrealized gains or
losses associated with SFAS No. 133 and (iii) as adjusted for extraordinary or
other unusual items and other items not contemplated at the time this Plan was
adopted by the Board (such as changes in generally accepted accounting
principles, ceiling test writedowns and other non-recurring items) as determined
by the Committee in its sole discretion.

      (c) “Awards” means Current Awards and Deferred Awards.

      (d) “Board” means the Board of Directors of the Company.

      (e) “Cause” means (i) with respect to Awards granted prior to January 1,
2005, termination of employment because of (A) conviction of a felony or of a
misdemeanor involving moral turpitude (which, through lapse of time or
otherwise, is not subject to appeal); (B) willful refusal without proper legal
cause to perform the duties and responsibilities of the employee to the Company
or any Subsidiary; (C) willful conduct which the employee has reason to know is
materially injurious to the Company or Subsidiary; or (D) gross negligence or
willful misconduct in the performance of the employee’s duties and
responsibilities with respect to the Company or any Subsidiary and (ii) with
respect to Awards granted on or after January 1, 2005, any termination of
employment because of (A) conviction of or entering of a plea of nolo contendre
to a felony or a misdemeanor involving moral turpitude; (B) willful refusal
without proper legal cause to perform the duties and responsibilities of the
employee to the Company or any Subsidiary; (C) willful conduct which the
employee has reason to know is materially injurious to the Company or any
Subsidiary; (D) gross negligence or willful misconduct in the performance of the
employee’s duties and responsibilities with respect to the Company or any
Subsidiary; or (E) material breach of any material policy of the Company or any
Subsidiary.

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      (f) “Change of Control” means the occurrence of any of the following
events: (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity other than a previously wholly owned subsidiary of the Company); (ii) the
Company sells, leases or exchanges all or substantially all of its assets to any
other person or entity (other than a wholly owned subsidiary of the Company);
(iii) the Company is to be dissolved and liquidated; (iv) any person or entity,
including a “group” as contemplated by Section 13(d)(3) of the Exchange Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company’s voting stock
(based upon voting power); or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board.

      (g) “Code” means the Internal Revenue Code of 1986, as amended.

      (h) “Committee” means the Compensation Committee of the Board.

      (i) “Company” means Newfield Exploration Company and its successors.

      (j) “Current Award” means an Award granted to an Eligible Employee
pursuant to Article V that is payable on or before the March 1 following the
Performance Period.

      (k) “Deferred Award” means an Award granted to an Eligible Employee
pursuant to Article V the payment of which is deferred and subject to forfeiture
as provided in Article VII.

      (l) “Deferred Award Account” means the account maintained on the books of
the Company for each employee who has been granted a Deferred Award under this
Plan.

      (m) “Designated Rate” means simple interest at an initial rate per annum
equal to 6%. Each February, beginning February 2004, the Committee may, in its
sole discretion, set a different rate that shall be effective beginning on the
March 1 immediately following such determination and shall remain in effect
until such time as the Committee sets a different rate pursuant this sentence.

      (n) “Effective Date” means January 1, 2003.

      (o) “Eligible Employee” means, with respect to a particular Performance
Period, each employee of the Company or a Subsidiary who was (i) employed by the
Company or a Subsidiary on both October 1 and December 31 of such Performance
Period and (ii) recommended by the Chief Executive Officer of the Company to
receive an Award.

      (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

      (q) “Final Financial Information” means, with respect to a particular
Performance Period, the financial information filed by the Company with the
Securities and Exchange Commission pursuant to the Exchange Act with respect to
such Performance Period.

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      (r) “Grandfathered Employee” means an employee who (i) commenced
employment with the Company prior to January 1, 1993 and (ii) has been
continually employed by the Company or a Subsidiary since such date.

      (s) “Incentive Pool” means the aggregate amount to be awarded with respect
to a particular Performance Period as determined pursuant to Article IV.

      (t) “Participation Agreement” means an agreement by and between the
Company and a third party that defines terms on which the party participates in
one or more of the Company’s exploration and acquisition activities if such
agreement provides for Overriding Royalty Interests, as defined therein, or with
the approval of the Committee, some other promote or financial consideration, to
fund the Incentive Pool.

      (u) “Performance Period” means any calendar year beginning on or after
January 1, 2003.

      (v) “Plan” means the 2003 Incentive Compensation Plan, as amended from
time to time.

      (w) “Redetermined Incentive Pool” means, with respect to a particular
Performance Period, (i) if the Committee used financial information other than
Final Financial Information to determine the Incentive Pool for such Performance
Period, the amount the Incentive Pool would have been if the Committee had used
Final Financial Information to determine the Incentive Pool for such Performance
Period and (ii) if the Committee used Final Financial Information to determine
the Incentive Pool for such Performance Period, the amount the Incentive Pool as
so determined.

      (x) “Retiring Employee” means any employee whose employment with the
Company is being terminated by reason of retirement if such employee is at such
time qualified for benefits under the Company’s early retirement program.

      (y) “SFAS No. 133” means SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended (i) by SFAS No. 137, “Accounting
for Derivative Instruments and Hedging Activities – Deferral of the Effective
Date of FASB Statement No. 133, an amendment of FASB Statement No. 133,” (ii) by
SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133,” and (iii) from time to time
after the Effective Date.

      (z) “Subsidiary” means any entity that is consolidated with the Company
for financial accounting purposes in accordance with generally accepted
accounting principles.

III.
Administration of Plan

      This Plan shall be administered by the Committee. The Committee is
authorized to interpret this Plan and may from time to time adopt such rules and
regulations, consistent with the provisions of this Plan, as it may deem
advisable to carry out this Plan. All determinations

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made by the Committee under this Plan, and all interpretations of this Plan by
the Committee, shall be final and binding on all interested parties.

IV.
Determination of Incentive Pool

      (a) The amount of the Incentive Pool for a particular Performance Period
shall be equal to:

     (i) 5% of Adjusted Net Income for the Performance Period; plus

     (ii) an amount equal to the revenues or other amounts that have been
designated for the Incentive Pool pursuant to each Participation Agreement; plus

     (iii) the amount of any Deferred Awards forfeited during the Performance
Period pursuant to paragraph (b) of Article VII; plus

     (iv) the amount of any Deferred Incentive Compensation Awards (as defined
in the 1993 Plan) forfeited pursuant to Article VIII of the 1993 Plan after
December 31, 2002; plus

     (v) the amount, if any, by which the Redetermined Incentive Pool for the
immediately preceding Performance Period exceeded the aggregate amount of Awards
granted with respect to such immediately preceding Performance Period; minus

     (vi) in the discretion of the Committee, the amount (or any portion
thereof) by which the aggregate amount of Awards granted with respect to any
previous Performance Period exceeded the amount of the Redetermined Incentive
Pool for such Performance Period, but only if any such amount has not previously
reduced an Incentive Pool pursuant to this clause (vi).

      (b) As soon as administratively feasible after the end of a Performance
Period, the Committee shall determine the amount of the Incentive Pool with
respect to such Performance Period. If the financial information for such
Performance Period is not final at the time that the Committee meets to
determine the amount of the Incentive Pool, the Committee may use the then best
available estimates of such financial information to determine the amount of the
Incentive Pool. Such determination shall be in writing and shall be filed with
the appropriate records of the Company.

V.
Grant of Awards

      (a) Subject to Article VIII(a), the aggregate amount of Awards granted to
Eligible Employees with respect to a particular Performance Period shall be
equal to the lesser of (i) the amount of the Incentive Pool for such Performance
Period and (ii) an amount recommended by the Chief Executive Officer of the
Company that is no less than 85% of the amount of the Incentive Pool for such
Performance Period.

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      (b) At any time and from time to time after the determination of the
Incentive Pool with respect to a Performance Period and prior to the February 28
following the end of the such Performance Period, the Committee shall grant
Awards to those Eligible Employees that the Committee, in its discretion,
determines should receive Awards. Subject to paragraph (a) above, the amount of
such Awards shall be determined by the Committee in its discretion. The
Committee shall consider the recommendations of the Chief Executive Officer of
the Company in making such determinations.

      (c) Each Award shall be designated as a Current Award or a Deferred Award.
An Eligible Employee may be granted both a Current Award and a Deferred Award
with respect to a single Performance Period.

VI.
Deferred Award Accounts

      (a) The Company shall maintain a separate Deferred Award Account for each
employee who has been granted a Deferred Award under this Plan. If an employee
receives more than one Deferred Award, a separate Deferred Award Account shall
be maintained for each Award. An employee’s Deferred Award Account shall be
debited and credited as provided in this Article VI and in Article VII.

      (b) Promptly after the determination by the Committee of the amount of any
Deferred Award to an Eligible Employee, there shall be credited to the Deferred
Award Account of such employee the amount of such award.

      (c) The balance in each Deferred Award Account shall accrue interest,
beginning on the March 1 following the Performance Period for which the related
Deferred Award was granted and continuing for so long as any balance remains in
such Deferred Award Account, at the Designated Rate from time to time in effect.
Interest shall be computed on a daily basis using a 365 or 366 day year, as the
case may be, applied to the balance in such Deferred Award Account. Interest
shall be credited to Deferred Award Accounts as of November 30 of each year
unless otherwise provided by this Plan.

VII.
Payment of Deferred Awards

      (a) Subject to paragraph (b) below, each Deferred Award shall be paid in
four annual installments, with each installment consisting of 25% of such
Deferred Award plus interest credited to the applicable Deferred Award Account
with respect to such amount. The first installment shall be paid on the next
December 1 following the end of the Performance Period with respect to which the
Award was granted (the “First Installment Date”). The second, third and fourth
installments shall be paid on the first, second and third anniversaries,
respectively, of the First Installment Date. The applicable Deferred Award
Account shall be debited for all amounts paid pursuant to this paragraph (a).

      (b) If an employee terminates employment with the Company or any
Subsidiary prior to receiving payment of all Deferred Awards granted to such
employee (together with any

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interest credited with respect thereto), the following provisions shall govern
the payment or forfeiture of such amounts:

     (i) Each Grandfathered Employee who voluntary terminates employment or who
is involuntarily terminated other than for Cause shall be vested in the full
amount (including interest to the date of payment) remaining, if any, in all
Deferred Award Accounts for such employee at the time of such employee’s
termination of employment.

     (ii) Each Retiring Employee shall be vested in the full amount (including
interest to the date of payment) remaining, if any, in all Deferred Award
Accounts at the time of such employee’s retirement.

     (iii) Unless otherwise expressly provided by the Committee, each employee
who (A) is not a Grandfathered Employee or a Retiring Employee who terminates
employment with the Company or any Subsidiary for any reason other than death or
permanent disability or (B) is a Grandfathered Employee who is involuntarily
terminated for Cause shall forfeit any and all Deferred Awards remaining to be
paid to such employee under this Plan and any credited but unpaid interest in
any Deferred Award Account for such employee and such employee shall not be
entitled to receive any further payments under this Plan.

     (iv) If an employee’s employment with the Company or any Subsidiary
terminates by reason of such employee’s death or permanent disability, the
Company shall pay to the estate of such employee or to such employee, as the
case may be, the full amount (including interest to the date of payment of such
amount) remaining, if any, in all Deferred Award Accounts for such employee at
the time of such employee’s death or permanent disability. Such payment shall be
made within 90 days after the Company is notified of such employee’s death or
permanent disability.

     (v) If a former employee dies while still eligible to receive payment for
Deferred Awards, the Company shall pay to the estate of such former employee the
full amount (including interest to the date of payment of such amount)
remaining, if any, in all Deferred Award Accounts for such employee at the time
of such employee’s death. Such payment shall be made within 90 days after the
Company is notified of such employee’s death.

     (vi) A leave of absence authorized by the Company or any Subsidiary shall
not be considered a termination of employment for purposes of this Article VII
or the definition of Grandfathered Employee.

     (vii) All affected Deferred Award accounts shall be debited for all amounts
paid or forfeited pursuant to this paragraph (b).

     (viii) Any amount remaining in any Deferred Award Account for a former
employee not forfeited pursuant to clause (iii) above shall be paid no later
than the time that such amount would have been paid pursuant to paragraph
(a) above but may, at the option of the Company, be paid (together with interest
to the date of payment) earlier.

      (c) All amounts (including interest to the date of payment of such
amounts) remaining, if any, in each Deferred Award Account at the time of a
Change of Control shall

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(i) automatically vest, (ii) not be subject to forfeiture pursuant to paragraph
(b) above and (iii) be paid to the employee to which each such Deferred Award
Account relates at the time of such Change of Control.

      (d) An employee may provide the Company with a written designation of a
beneficiary or beneficiaries to receive any payments of Awards that would
otherwise be paid to such employee’s estate hereunder. Any such designation may
be changed or revoked by written notice to the Company.

VIII.
Duration, Amendment and Termination

      (a) The Board shall have the right to amend this Plan from time to time,
to terminate it entirely or to direct the discontinuance of Awards either
temporarily or permanently. The Board may make any amendment to any outstanding
Award that it believes is necessary or helpful to comply with any applicable law
including, without limitation, Section 409A of the Code. However, no amendment,
discontinuance or termination of this Plan shall operate to annul an outstanding
Award unless otherwise provided by the terms of this Plan. The term of this Plan
shall be from its Effective Date until terminated by the Board.

      (b) In furtherance, and not in limitation, of paragraph (a) above, at any
time determined by the Board, this Plan may be restructured by the Board to,
among any other alterations or changes determined by the Board in its sole
discretion, (i) alter the eligibility requirements for awards under such plan,
(ii) provide for a Performance Period that is shorter or longer, (iii) change
the provisions regarding the forfeiture of Deferred Awards, (iv) change the
definition of Adjusted Net Income, (v) change the percentage of Adjusted Net
Income included in the Incentive Pool or (vi) provide that less than all of the
Incentive Pool must be paid in Awards to Eligible Employees.

      (c) Notwithstanding any provision of this Plan to the contrary, on the
date of a Change of Control (as defined in paragraph (f) of Article II and
without regard to Article X), (i) all Plan bonus obligations accrued to such
date on the books of the Company that are not the subject of previous Awards
shall be paid in cash to such employees of the Company and its Subsidiaries, and
in such amounts with respect to each such employee, as the Committee shall
determine in its sole discretion based upon recommendations from the Chief
Executive Officer of the Company and (ii) upon payment of all such Plan
obligations, this Plan shall terminate.

IX.
Miscellaneous

      (a) Neither this Plan nor any grant of Awards under this Plan shall confer
on any employee the right to continued employment by the Company or any
Subsidiary, or affect in any way the right of the Company or such Subsidiary to
terminate the employment of such employee at any time. Any question as to
whether and when there has been a termination of an employee’s employment and
the cause of such termination shall be determined by the Committee, and its
determination shall be final.

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      (b) Except to the extent set forth herein as to the rights of the estates
or beneficiaries of employees to receive payments, Awards under this Plan are
non-assignable and non-transferable and are not subject to anticipation,
adjustment, alienation, encumbrance, garnishment, attachment or levy of any
kind.

      (c) None of the establishment of this Plan, the granting of Awards or the
establishment of Deferred Award Accounts shall be deemed to create a trust. This
Plan and all unpaid awards shall constitute an unfunded, unsecured liability of
the Company to make payments in accordance with the provisions of this Plan, and
no person or entity shall have any security or other interest in any assets of
the Company, in any Deferred Award Account or otherwise.

      (d) The existence of this Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to authorize or consummate any merger or consolidation of the Company,
the dissolution or liquidation of the Company or any sale, lease, exchange or
other disposition of all or any part of its assets or business or any other
corporate act or proceeding.

      (e) Neither the officers nor the directors of the Company nor the members
of the Committee shall under any circumstances have any liability with respect
to this Plan or its administration except for gross and intentional malfeasance.
The officers and directors of the Company and the members of the Committee may
rely upon opinions of counsel as to all matters, including the creation,
operation and interpretation of this Plan.

      (f) No portion of this Plan shall be effective at any time when such
portion violates an applicable state or federal law, regulation or governmental
order or directive which is subject to sanctions, whether direct or indirect.

X.
Compliance with Code Section 409A

Notwithstanding any provision of this Plan to the contrary, with respect to
Awards granted under this Plan after December 31, 2004, and with respect to
Deferred Awards granted under this Plan prior to January 1, 2005 and Deferred
Incentive Compensation Awards granted under the 1993 Plan, that are subject to
Section 409A of the Code, the following provisions shall apply:

      (a) For purposes of this Plan, the defined term “Change of Control” means
a change in the ownership or effective control of the Company, or in the
ownership of a substantial portion of the assets of the Company, as provided
under Section 409A(a)(2)(A)(v) of the Code and any regulations or other
administrative guidance issued thereunder.

      (b) Payment of Deferred Award Accounts may not be accelerated at the
option of the Company as provided in clause (viii) of paragraph (b) of
Article VII of this Plan.

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      (c) References in this Plan and in the 1993 Plan to the “permanent
disability” of an employee mean that such employee has become “disabled” within
the meaning of Section 409A(a)(2)(C) of the Code.

      (d) The Board may make any amendment to the 1993 Plan or with respect to
any Award (as defined in the 1993 Plan) granted under the 1993 Plan that it
believes is necessary or helpful to comply with any applicable law including,
without limitation, Section 409A of the Code.

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