Exhibit
10.4


MARATHON OIL CORPORATION


2007
INCENTIVE COMPENSATION PLAN


PERFORMANCE UNIT AWARD AGREEMENT


2007-2009
PERFORMANCE CYCLE


Pursuant to this Award Agreement and the Marathon Oil
Corporation 2007 Incentive Compensation Plan (the “Plan”), MARATHON OIL
CORPORATION (the “Corporation”) hereby grants to [NAME] (the “Participant”), an employee of the Corporation
or a Subsidiary, on May 30, 2007,
[NUMBER] performance units  (“Performance Units”), conditioned upon the
Corporation’s TSR Percentile Ranking for the 2007-2009 Performance Cycle.  The Performance Units are subject to the
following terms and conditions:


1.                                      Relationship
to the Plan.


This grant of Performance Units is subject to all of
the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, that have been adopted by the Committee.
Except as defined herein (including in Paragraph 13 of this Award Agreement),
capitalized terms shall have the same meanings ascribed to them under the Plan.
To the extent that any provision of this Award Agreement conflicts with the
express terms of the Plan, the terms of the Plan shall control and, if
necessary, the applicable provisions of this Award Agreement shall be hereby
deemed amended so as to carry out the purpose and intent of the Plan.
References to the Participant also include the heirs or other legal
representatives of the Participant.


2.             Determination
of Payout Percentage.  As soon as practical following the close of
the 2007-2009 Performance Cycle, the Committee shall determine the TSR
Percentile Ranking.  Thereafter, the
Committee shall determine the Payout Percentage as follows:


(a)            If the TSR Percentile Ranking is below the 25th percentile, the Payout Percentage shall be
zero.


(b)           If the TSR Percentile Ranking is at or above the 25th percentile, the Payout Percentage shall be
equal to or less than the TSR Percentile Ranking multiplied by 2.


(c)            Notwithstanding anything herein to the contrary, the
Committee has sole and absolute authority and discretion to reduce the Payout
Percentage as it may deem appropriate.


3.             Vesting
of Performance Units.  Unless the Participant’s right to the
Performance Units is previously forfeited or vested in accordance with
Paragraphs 4, 5, 6, or 7, following the Committee’s determinations pursuant to
Paragraph 2, the Participant shall vest in and be entitled to receive a cash
payment equal to the product of (i) the number of Performance Units granted
hereunder and (ii) the Payout Value. 
Such cash payment shall be made as soon as administratively feasible
following the Committee’s determination under Paragraph 2 and, in any event,
during the calendar year following the close of the 2007-2009 Performance
Cycle.  If, in accordance with the
Committee’s determination under Paragraph 2, the Payout Value is zero, the
Participant shall immediately forfeit any and all rights to the Performance
Units.  Upon the vesting and/or
forfeiture of the Performance Units pursuant to this Paragraph 3 and the making
of the related cash payment, if 



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any, the rights of the Participant and the obligations
of the Corporation under this Award Agreement shall be satisfied in full.


4.             Termination
of Employment.  If Participant’s Employment is terminated
prior to the close of the 2007-2009 Performance Cycle for any reason (including
non-Mandatory Retirement) other than death or Mandatory Retirement, the
Participant’s right to the Performance Units shall be forfeited in its entirety
as of such termination, and the rights of the Participant and the obligations
of the Corporation under this Award Agreement shall be terminated.


5.             Termination
of Employment due to Death. 
If Participant’s Employment is
terminated by reason of death prior to the close of the 2007-2009 Performance
Cycle, the Participant’s right to receive the Performance Units shall
vest in full as of the date of death and the Payout Percentage shall be
100%.  A cash payment equal to the vested
value of the Performance Units shall be made in accordance with Paragraph 3 on
the first day of the third month following the death of the Participant.  Such vesting shall satisfy the rights of the
Participant and the obligations of the Corporation under this Award Agreement
in full.


6.             Termination of Employment due to Mandatory
Retirement.  In the event of the Mandatory Retirement of
the Participant on or after July 1, 2008, the Participant’s Performance Units
may be considered for vesting following the close of the 2007-2009 Performance
Cycle.  At the discretion of the
Committee, the Participant may vest in and be entitled to receive a cash
payment equal to the product of (i) the percentage equal to the days of
Participant’s Employment during the 2007-2009 Performance Cycle divided by the
total days in the 2007-2009 Performance Cycle, (ii) the number of Performance
Units granted hereunder, and (iii) the Payout Value.  Such cash payment shall be made as soon as
administratively feasible following the Committee’s determination under
Paragraph 2 and, in any event, during the calendar year following the close of
the 2007-2009 Performance Cycle.  If, in
accordance with the Committee’s determination under Paragraph 2, the Payout
Value is zero, the Participant shall immediately forfeit any and all rights to
the Performance Units.  Upon the vesting
and/or forfeiture of the Performance Units pursuant to this Paragraph 6 and the
making of the related cash payment, if any, the rights of the Participant and
the obligations of the Corporation under this Award Agreement shall be
satisfied in full.  The death of the
Participant following Mandatory Retirement but prior to the close of the
2007-2009 Performance Cycle shall have no effect on this Paragraph 6.


7.             Vesting
Upon a Change of Control. 
Notwithstanding anything herein to the contrary, upon the occurrence of
a Change in Control prior to the end of the 2007-2009 Performance Cycle, the
Participant’s right to receive the Performance Units, unless previously
forfeited pursuant to Paragraph 4, shall vest in full and the Payout Percentage
shall be 100%.  A cash payment equal to
the vested value of the Performance Units shall be made in accordance with
Paragraph 3 on the first day of the third month following the Change in
Control.  Such vesting shall satisfy the
rights of the Participant and the obligations of the Corporation under this
Award Agreement in full.


8.             Taxes.  Pursuant
to Section 13 of the Plan, the Corporation or its designated representative
shall have the right to withhold applicable taxes from the cash otherwise
payable to the Participant, or from other compensation payable to the
Participant, at the time of the vesting and delivery of such cash payment.



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9.             No
Shareholder Rights.  The Participant shall in no way be entitled to
any of the rights of a shareholder as a result of this Award Agreement.


10.          Nonassignability.  Upon the Participant’s death, the Performance
Units may be transferred by will or by the laws governing the descent and
distribution of the Participant’s estate. 
Otherwise, the
Participant may not sell, transfer, assign, pledge or otherwise encumber any
portion of the Performance Units, and any attempt to sell, transfer, assign,
pledge, or encumber any portion of the Performance Units shall have no effect.


11.           No
Employment Guaranteed. 
Nothing in this Award
Agreement shall give the Participant any rights to (or impose any obligations
for) continued Employment by the Corporation or any Affiliate thereof or
successor thereto, nor shall it give such entities any rights (or impose any
obligations) with respect to continued performance of duties by the
Participant.


12.           Modification
of Agreement.  Any
modification of this Award Agreement shall be binding only if evidenced in
writing and signed by an authorized representative of the Corporation, provided
that no modification may, without the consent of the Participant, adversely
affect the rights of the Participant hereunder.


13.           Definitions.  For purposes of this Award Agreement:


“2007-2009
Performance Cycle”  means the
period from January 1, 2007 to December 31, 2009.


“Beginning
Stock Price” means the average of the daily closing price of
common stock for each trading day of the calendar month preceding the
commencement of the 2007-2009 Performance Cycle, historically adjusted, if
necessary, for any stock split, stock dividend, recapitalizations, or similar
corporate events that occur during the measurement period.


“Change
in Control,” unless
otherwise defined by the Committee, means a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended, whether or not the Corporation is then subject to such reporting
requirement; provided, that, without limitation, such a change in control shall
be deemed to have occurred if:


(i)            any person (as defined
in Sections 13(d) and 14(d) of the Exchange Act) (a “Person”) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation (not including in the amount of
the securities beneficially owned by such person any such securities acquired
directly from the Corporation or its affiliates) representing twenty percent
(20%) or more of the combined voting power of the Corporation’s then
outstanding voting securities; provided, however, that for purposes of this
Plan the term “Person” shall not include (A) the Corporation or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under an
employee benefit plan of 



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the
Corporation or any of its subsidiaries, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (D) a corporation
owned, directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the Corporation;
and provided, further, however, that for purposes of this paragraph (i), there
shall be excluded any Person who becomes such a beneficial owner in connection
with an Excluded Transaction (as defined in paragraph (iii) below);


(ii)           the following individuals
cease for any reason to constitute a majority of the number of Directors then
serving:  individuals who, on the date
hereof, constitute the Board and any new Director (other than a Director whose
initial assumption of office is in connection with an actual or threatened
election contest including but not limited to a consent solicitation, relating
to the election of Directors of the Corporation) whose appointment or election
by the Board or nomination for election by the Corporation’s stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were Directors on the date hereof or whose
appointment, election or nomination for election was previously so approved; or


(iii)          there is consummated  a merger or consolidation of the Corporation
or any direct or indirect subsidiary thereof with any other corporation, other
than a merger or consolidation (an “Excluded Transaction”) which would result
in the holders of the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
corporation or any parent thereof) at least 50% of the combined voting power of
the voting securities of the entity surviving the merger or consolidation (or
the parent of such surviving entity) immediately after such merger or
consolidation, or the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation, or there is consummated the sale or
other disposition of all or substantially all of the Corporation’s assets.


Notwithstanding any other provision to the contrary, in no event shall
the transfer of ownership interests in the Corporation in and of itself
constitute a Change in Control under this Award Agreement.


“Cumulative
Dividends” means the sum of all cash dividends paid on a
share of common stock during the 2007-2009 Performance Cycle.  The Participant shall not be entitled to
receive any dividend payments in conjunction with this award of Performance
Units.


“Employment”
means employment with the Corporation or any of its Subsidiaries.  For purposes of this Award Agreement,
Employment shall also include any period of time during which the Participant is
on Disability status.


“End
Stock Price” means the average of the daily closing price of
common stock for each trading day of the calendar month ending on the last day
of the 2007-2009 Performance Cycle.


“Mandatory
Retirement” means termination of Employment as a result of
the Corporation’s policy, if any, requiring the mandatory retirement of
officers and/or other 



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employees upon reaching a
certain age or milestone.


“Payout
Percentage” means the percentage (between 0% and 200%)
determined by the Committee in accordance with the procedures set forth in
Paragraph 2, which shall be used to determine the value of each Performance
Unit.


“Payout
Value” means, for each Performance Unit, the product of the
Payout Percentage and $1.00.


“Peer
Group” means the companies
that are members of the AMEX Oil Index as of the last business day of the
2007-2009 Performance Cycle, or such other group of companies as selected by
the Committee at its discretion.


“Total
Shareholder Return” or “TSR” means the number derived using
the following formula:


(End Stock Price — Beginning Stock Price) + Cumulative
Dividends


   Beginning
Stock Price.


“TSR Percentile Ranking”
means the relative ranking of the Corporation’s Total Shareholder Return for
the 2007-2009 Performance Cycle as compared to the Total Shareholder Return of
the Peer Group companies during the 2007-2009 Performance Cycle, expressed as a
percentile ranking.


	
  

  	
   

  	
  Marathon Oil
  Corporation

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
  

  
	
   

  	
   

  	
  Authorized
  Officer

  



 



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