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                                                                   EXHIBIT 10.43

                                                                  EXECUTION COPY

                       PERFORMANCE STOCK OPTION AGREEMENT

          THIS AGREEMENT, made as of the 7th day of June, 2001 (the "Grant
Date"), between Plains Resources Inc., a Delaware corporation (the "Company"),
and Timothy T. Stephens (the "Optionee").

          WHEREAS, the Company has adopted the Plains Resources Inc. 2001 Stock
Incentive Plan (the "Plan") in order to provide additional incentive to certain
officers and employees of the Company and its Subsidiaries; and

          WHEREAS, the Committee responsible for administration of the Plan has
determined to grant an option to the Optionee as provided herein;

          NOW, THEREFORE, the parties hereto agree as follows:

     1.   Grant of Option.

          1.1  The Company hereby grants, subject to the shareholder approval of
the Plan, to the Optionee the right and option (the "Option") to purchase all or
any part of an aggregate of 83,333 whole Shares subject to, and in accordance
with, the terms and conditions set forth in this Agreement.

          1.2  The Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.

          1.3  This Agreement shall be construed in accordance and consistent
with, and subject to, the provisions of the Plan (the provisions of which are
incorporated herein by reference) and, except as otherwise expressly set forth
herein, the capitalized terms used in this Agreement shall have the same
definitions as set forth in the Plan.

     2.   Purchase Price.

          The price at which the Optionee shall be entitled to purchase Shares
upon the exercise of the Option shall be $25.26 per Share, the Fair Market Value
of a Share on the Grant Date pursuant to the Plan.

     3.   Duration of Option, Vesting and Exercisability.

          3.1  The Option granted hereunder shall vest on the first to occur of
the following:  (A) the day prior to the fifth anniversary of May 17, 2001 (the
"Employment Commencement Date"), (B) with respect to 50% of the shares subject
to the Option, a period of 10 trading days during a period of 20 consecutive
trading days upon which the closing price of the Common Stock equals or exceeds
150% of the exercise price of the Option, (C) with respect to 100% of the shares
subject to the Option, a period of 10 trading days during a period of 20
consecutive trading days upon which the closing price of the Common Stock equals
or exceeds
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200% of the exercise price of the Option, (D) termination of the Optionee's
employment: (1) by the Company for any reason other than Cause, (2) due to the
death of Optionee, or (3) upon the Optionee's resignation for Good Reason (as
defined below), (E) a Change in Control, or (F) at any such time that James C.
Flores is not a member of the Board.

          3.2  If any portion of the Option vests in accordance with clause (A)
of Section 3.1, such portion of the Option shall be exercisable until the eighth
anniversary of the Employment Commencement Date; provided, however, that if
Optionee's employment is terminated for any reason (other than Cause) prior to
such eighth anniversary, the Option shall remain exercisable only until the
first anniversary of the Date of Termination.  If any portion of the Option
vests in accordance with clauses (B) or (C) of Section 3.1, or if any portion
vests under clause (F) of Section 3.1 and the performance goals under either
clause (B) or (C) are later met during the first five years of Optionee's
employment with the Company, the Option, to the extent that the performance
goals have been met under either such clause, shall remain exercisable for a
period of ten years from the Employment Commencement Date, notwithstanding
termination of Optionee's employment for any reason (other than Cause) or the
earlier vesting of the Option in accordance with clause (F) of Section 3.1.  If
the Company terminates Optionee's employment during the first five years of
employment with the Company for any reason (other than Cause or Disability), or
if Optionee resigns for Good Reason, any portion of the Option that has vested
due to such termination shall be exercisable until the later of (A) the fifth
anniversary of the Employment Commencement Date or (B) one year from the Date of
Termination plus six months for each anniversary of the Employment Commencement
Date that has occurred coincident with or prior to the Date of Termination.
Upon termination of Optionee's employment due to death or termination by the
Company due to Disability, any portion of the Option that has vested due to such
termination shall be exercisable until the later of (A) the fifth anniversary of
the Employment Commencement Date or (B) one year from the Date of Termination.
If any portion of the Option vests under clause (E) of Section 3.1, or under
clause (F) of Section 3.1 and the performance goals under clauses (A) or (B) are
not later met during the first five years of Optionee's employment with the
Company, such portion shall remain outstanding until the later of (A) the fifth
anniversary of the Employment Commencement Date or (B) one year from the Date of
Termination for any reason (other than Cause).  The Option shall in no event
remain outstanding for a period greater than ten years from the Grant Date.
Upon a termination of employment for Cause, the Option shall immediately
terminate and be forfeited unless otherwise provided by the Board upon
termination of employment.

          3.3  For purposes of this Agreement, "Good Reason" shall mean (A) the
material breach of any of the Company's obligations under the Letter Agreement
between the Company and Employee, dated as of June 7, 2001 (the "Letter
Agreement"), without Employee's written consent or (B) the occurrence of any of
the following circumstances, as the case may be, without Employee's written
consent:

               (i) the assignment by the Board or the Company's Chief Executive
          Officer to Employee of any duties that materially adversely alter the
          nature or status of Employee's office, title, responsibilities,
          including reporting responsibilities, from those in effect immediately
          prior to such assignment;

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               (ii) the failure by the Company to continue in effect any
          compensation plan in which Employee participates that is material to
          Employee's total compensation unless an equitable arrangement
          (embodied in an ongoing substitute or alternative plan) has been made
          with respect to such plan, or the failure by the Company to continue
          Employee's participation therein (or in such substitute or alternative
          plan) on a basis not materially less favorable to Employee, unless any
          such failure to continue in effect any compensation plan or
          participation relates to a discontinuance of such plans or
          participation on a management-wide or Company-wide basis;

               (iii)  the taking of any action by the Company which would
          directly or indirectly materially reduce or deprive Employee of any
          material pension, welfare or fringe benefit then enjoyed by Employee,
          unless such action relates to a discontinuance of benefits on a
          management-wide or Company-wide basis;

               (iv) the failure of the Company to obtain a satisfactory
          agreement from any successor to assume and agree to perform the Letter
          Agreement; or

               (v) the relocation of the Company's principal executive offices
          outside the greater Houston, Texas metropolitan area, or the Company's
          requiring Employee to relocate anywhere other than the location of the
          Company's principal executive offices, except for required travel on
          the Company's business to an extent substantially consistent with
          Employee's obligations under this Agreement.

          Employee's right to terminate employment for Good Reason shall not be
     affected by Employee's incapacity due to physical or mental illness.  In
     addition, Employee's continued employment following any event, act or
     omission, regardless of the length of such continued employment, shall not
     constitute Employee's consent to, or a waiver of Employee's rights with
     respect to, such event, act or omission constituting a Good Reason
     circumstance hereunder.

     4.   Manner of Exercise and Payment.

          4.1  Subject to the terms and conditions of this Agreement and the
Plan, the Option may be exercised by delivery in person, by telecopy or by mail
of written notice to the Company, at its principal executive office.  Such
notice shall state that the Optionee is electing to exercise the Option and the
number of Shares in respect of which the Option is being exercised and shall be
signed by the person or persons exercising the Option.  If requested by the
Committee, such person or persons shall (i) deliver this Agreement to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and (ii) provide satisfactory proof as to the right of such person or persons to
exercise the Option.

          4.2  The notice of exercise described in Section 4.1 hereof shall be
accompanied by payment of the full purchase price for the Shares in respect of
which the Option

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is being exercised in either of the following forms, (i) cash or (ii) the
transfer of Shares to the Company that have a Fair Market Value on the day
preceding the date of exercise equal to the cash amount for which such Shares
are substituted and have been held by the Optionee for at least six (6) months,
or a combination of cash and the transfer of Shares.

          4.3  Upon receipt of notice of exercise and full payment for the
Shares in respect of which the Option is being exercised, the Company shall,
subject to Section 6 of the Plan, take such action as may be necessary to effect
the transfer to the Optionee of the number of Shares as to which such exercise
was effective.

          4.4  The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to any Shares subject to the Option
until (i) the Option shall have been exercised pursuant to the terms of this
Agreement and the Optionee shall have paid the full purchase price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
shall have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such Shares.

     5.   Nontransferability.

          The Option shall not be transferable other than by will or by the laws
of descent and distribution.  During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee.

     6.   No Right to Continued Employment.

          Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to continuance of
employment by the Company, nor shall this Agreement or the Plan interfere in any
way with the right of the Company to terminate the Optionee's employment at any
time.

     7.   Adjustments.

          In the event of a Change in Capitalization, the Committee may make
appropriate adjustments to the number and class of Shares or other stock or
securities subject to the Option and the purchase price for such Shares or other
stock or securities.  The Committee's adjustment shall be made in accordance
with the provisions of Section 12 of the Plan and shall be effective and final,
binding and conclusive for all purposes of the Plan and this Agreement.

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     8.   Effect of a Merger, Consolidation or Liquidation.

          Subject to Section 3 hereof, upon the effective date of (i) the
liquidation or dissolution of the Company or (ii) a merger or consolidation of
the Company (a "Transaction"), the Option shall continue in effect in accordance
with its terms and the Optionee shall be entitled to receive in respect of all
Shares subject to the Option, upon exercise of the Option, the same number and
kind of stock, securities, cash, property or other consideration that each
holder of Shares was entitled to receive in the Transaction.

     9.   Withholding of Taxes.

          The Company shall have the right to deduct from any distribution of
cash to the Optionee an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to the Option.  If the Optionee is entitled to
receive Shares upon exercise of the Option, the Optionee shall pay the
Withholding Taxes to the Company in cash prior to the issuance of such Shares.
Subject to Section 16(b) of the Exchange Act (if applicable), in satisfaction of
the Withholding Taxes, the Optionee may make a written election (the "Tax
Election") to have withheld a portion of the Shares issuable to him upon
exercise of the Option, having an aggregate Fair Market Value, on the date
preceding the date of such issuance, equal to the Withholding Taxes.

     10.  Optionee Bound by the Plan.

          The Optionee hereby acknowledges receipt of a copy of the Plan and
agrees to be bound by all the terms and provisions thereof.

     11.  Modification of Agreement.

          This Agreement may be modified, amended, suspended, or terminated, and
any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.

     12.  Severability.

          Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.

     13.  Governing Law.

          The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without giving
effect to the conflicts of laws principles thereof.

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     14.  Successors in Interest.

          This Agreement shall inure to the benefit of and be binding upon any
successor to the Company.  This Agreement shall inure to the benefit of the
Optionee's legal representatives.  All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.

     15.  Resolution of Disputes.

          Any dispute or disagreement which may arise under, or as a result of,
or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined by the Committee.  Any determination made
hereunder shall be final, binding and conclusive on the Optionee and Company for
all purposes.

     16.  Shareholder Approval.

          The effectiveness of this Agreement and of the grant of the Option
pursuant hereto is subject to the approval of the Plan by the stockholders of
the Company in accordance with the terms of the Plan.

                                       PLAINS RESOURCES INC.


                                       By: /s/ James C. Flores
                                           ----------------------------------
                                           James C. Flores
                                           Chief Executive Officer



                                        /s/ Timothy T. Stephens
                                       --------------------------------------
                                       Timothy T. Stephens

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