**Exhibit 10.4**

**VENOCO, INC.**

**2007SENIOR EXECUTIVE BONUS PLAN**

# **SECTION 1ESTABLISHMENT AND PURPOSE**

## 1.1                                 Purpose.  Venoco, Inc. herebyestablishes the Venoco, Inc. 2007 Senior Executive Bonus Plan (the “Plan”).  The Plan is intended to increase stockholdervalue and the success of the Company by motivating key executives (a) toperform to the best of their abilities, and (b) to achieve the Company’sobjectives.  The Plan’s goals are to beachieved by providing such executives with incentive awards based on the achievementof goals relating to the performance of the Company and its individual businessunits.  The Plan is intended to qualifyas performance-based compensation under Section 162(m) of the Code.

## 1.2                                 Effective Date.  ThePlan shall be effective upon its adoption by the Compensation Committee of theBoard, subject to approval by stockholders of the Company at the 2007 AnnualMeeting.  As long as the Plan remains ineffect, it shall be resubmitted to stockholders as necessary to enable the Planto continue to qualify as performance-based compensation underSection 162(m) of the Code.

# **SECTION 2DEFINITIONS**

The following words andphrases shall have the following meanings unless a different meaning is plainlyrequired by the context:

## 2.1                                 “*ActualAward*” means as to any PlanYear, the actual award (if any) payable to a Participant for the PlanYear.  The Actual Award is determined bythe Payout Formula for the Plan Year, subject to the Committee’s authorityunder Section 3.5 to reduce the award otherwise determined by the PayoutFormula.

## 2.2                                 “*BaseSalary*” means as to any PlanYear, 100% of the Participant’s salary he or she earned for the applicable PlanYear.  Such Base Salary shall be beforeboth (a) deductions for taxes or benefits, and (b) deferrals ofcompensation pursuant to Company-sponsored plans.

## 2.3                                 *“Beneficiary”* means the person(s) or entity(ies)designated to receive payment of an Actual Award, in accordance with Section4.5, in the event of a Participant’s death. The Beneficiary designation shall be effective when it is submitted inwriting to and acknowledged by the Committee during the Participant’s lifetimeon the Beneficiary Designation form provided in Appendix A.** **The submission of anew Beneficiary Designation form in accordance with the preceding sentenceshall cancel all prior Beneficiary Designations.

## 2.4                                 “*Board*” means the Company’s Board of Directors.

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## 2.5                                 “*Code*” means the Internal Revenue Code of 1986, asamended.  Reference to a specific Sectionof the Code shall include such Section, any valid regulation promulgatedthereunder, and any comparable provision of any future legislation orregulation amending, supplementing or superseding such Section or regulation.

## 2.6                                 “*Committee*” means the committee appointed by the Boardto administer the Plan.  The Committeeshall consist of no fewer than two members of the Board.  The members of the Committee shall beappointed by, and serve at the pleasure of, the Board.  Each member of the Committee shall qualify asan “outside director” under Section 162(m) of the Code.

## 2.7                                 “*Company*” means Venoco, Inc., a Delaware corporation.

## 2.8                                 “*DeterminationDate*” means as to any PlanYear, the later of (a) the first day of the Plan Year, or (b) thelatest date possible which will not jeopardize the Plan’s qualification asperformance-based compensation under Section 162(m) of the Code.

## 2.9                                 “*MaximumAward*” means as to anyParticipant for any Plan Year, two million dollars ($2,000,000.00).  The Maximum Award is the maximum amount whichmay be paid to a Participant for any Plan Year.

## 2.10                           “*Participant*” means as to any Plan Year, an officer ofthe Company who has been selected by the Committee for participation in thePlan for that Plan Year.

## 2.11                           “*PayoutFormula*” means as to anyPlan Year, the formula or payout matrix established by the Committee pursuantto Section 3.4, in order to determine the Actual Awards (if any) to bepaid to Participants.  The formula ormatrix may differ from Participant to Participant.

## 2.12                           “*PerformanceGoals*” means the goal(s) (orcombined goal(s)) determined by the Committee (in its discretion) to beapplicable to a Participant for a Plan Year. As determined by the Committee, the Performance Goals applicable to eachParticipant shall provide for a targeted level or levels of achievement usingone or more of the following measures: (a) implementation of a strategic plan, (b) stock price, (c) earningsper share, (d) total stockholder return, (e) operating margin, (f) stockprice as a multiple of cash flow, (g) return on equity, (h) return on assets,(i) return on investment, (j) operating income, (k) net operating income,(*l*) pre-tax income, (m) cash flow, (n) revenue,(o) expenses, (p) earnings before interest, taxes and depreciation, (q)economic value added, (r) reserve additions, (s) finding and developmentcosts, (t) drilling and work-over budget, (u) increases in average dailyproduction, (v) return on capital invested, (w) corporate overhead costs,(x) interest coverage ratio, (y) consolidated leverage ratio,(z) ratio of PV 10 reserves to debt, (aa) environmental and safetyprograms, (bb)  stockholders’ equity, and (cc) corporateacquisitions.  The Performance Goals maybe applicable to the Company and/or any of its subsidiaries or individualbusiness units and may differ from Participant to Participant.

## 2.13                           “*PlanYear*” means the fiscal yearof the Company beginning in 2007 and each succeeding fiscal year of theCompany.

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## 2.14                           “*TargetAward*” means the targetaward payable under the Plan to a Participant for the Plan Year, expressed as apercentage of his or her Base Salary or an amount, as determined by theCommittee in accordance with Section 3.3.

2.15                           “*2005 Stock Incentive Plan*” means theVenoco, Inc. Amended and Restated 2005 Stock Incentive Plan, as amended fromtime to time.

# **SECTION 3SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS**

## 3.1                                 Selection of Participants.  Onor prior to the Determination Date, the Committee, in its sole discretion,shall select the officers of the Company who shall be Participants for the PlanYear.  In selecting Participants, theCommittee shall choose officers who are likely to have a significant impact onthe performance of the Company. Participation in the Plan is in the sole discretion of the Committee,and on a Plan Year by Plan Year basis. Accordingly, an officer who is a Participant for a given Plan Year in noway is guaranteed or assured of being selected for participation in anysubsequent Plan Year or Years.

## 3.2                                 Determination of Performance Goals.  Onor prior to the Determination Date, the Committee, in its sole discretion,shall establish the Performance Goals for each Participant for the PlanYear.  Such Performance Goals shall beset forth in writing.

## 3.3                                 Determination of Target Awards.  Onor prior to the Determination Date, the Committee, in its sole discretion,shall establish a Target Award for each Participant.  Each Participant’s Target Award shall bedetermined by the Committee in its sole discretion, and each Target Award shallbe set forth in writing.

## 3.4                                 Determination of Payout Formula or Formulae.  Onor prior to the Determination Date, the Committee, in its sole discretion,shall establish a Payout Formula or Formulae for purposes of determining theActual Award (if any) payable to each Participant.  Each Payout Formula shall (a) be in writing,(b) be based on a comparison of actual performance to the Performance Goals,(c) provide for the payment of a Participant’s Target Award if the PerformanceGoals for the Plan Year are achieved, and (d) provide for an Actual Awardgreater than or less than the Participant’s Target Award, depending upon theextent to which actual performance exceeds or falls below the PerformanceGoals.  Notwithstanding the preceding, noparticipant’s Actual Award under the Plan may exceed the Maximum Award.

## 3.5                                 Determination of Actual Awards*.*  Assoon as administratively practicable, after the end of each Plan Year, theCommittee shall certify in writing the extent to which the Performance Goalsapplicable to each Participant for the Plan Year were achieved or exceeded.  The Actual Award for each Participant shallbe determined by applying the Payout Formula to the level of actual performancewhich has been certified by the Committee. Notwithstanding any contrary provision of the Plan, (a) theCommittee, in its sole discretion, may eliminate or reduce the Actual Awardpayable to any Participant that would otherwise be payable under the PayoutFormula, (b) if a Participant terminates employment with the Company priorto the date the Actual Award for the Plan Year is paid, the Committee shallreduce his or her Actual Award

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## proportionately based on the date oftermination (and subject to further reduction or elimination under clause (a)of this sentence).

# **SECTION 4PAYMENT OF AWARDS**

## 4.1                                 Right to Receive Payment.  EachActual Award that may become payable under the Plan shall be paid solely fromthe general assets of the Company. Nothing in this Plan shall be construed to create a trust or toestablish or evidence any Participant’s claim of any right other than as an unsecuredgeneral creditor with respect to any payment to which he or she may beentitled.

## 4.2                                 Timing of Payment. Payment of each Actual Award shall be made within one (1) month afterthe Committee determines the amount of the Actual Award (if any) under Section 3.5;provided, however, that each payment shall be made in the calendar yearimmediately following the end of the Plan Year for which the Actual Award isdetermined under Section 3.5.

## 4.3                                 Form of Payment.  EachActual Award normally shall be paid in cash (or its equivalent) in a singlelump sum.  However, the Committee, in itssole discretion, may declare any Actual Award, in whole or in part, payable inthe form of a restricted stock bonus granted under the 2005 Stock IncentivePlan or successor equity compensation plan. The number of shares granted shall be determined by dividing the cashamount of the Actual Award by the fair market value of a share of Companycommon stock on the date that the cash payment otherwise would have beenmade.  For this purpose, “fair marketvalue” shall be defined as provided in the 2005 Stock Incentive Plan orsuccessor equity compensation plan.

## 4.4                                 Other Deferral of Actual Awards*.*** **The Committee may establish one or moreprograms under the Plan to permit selected Participants the opportunity toelect to defer receipt of Actual Awards. The Committee may establish the election procedures, the timing of suchelections, the mechanisms for payments of, and accrual of interest or other earnings,if any, on amounts so deferred, and such other terms, conditions, rules andprocedures that the Committee deems advisable for the administration of anysuch deferral program.  Any such deferralprogram implemented pursuant to this Section 4.4 shall comply with Section 409Aof the Code.

## 4.5                                 Payment in the Event of Death.  If aParticipant dies prior to the payment of an Actual Award earned by him or herfor a Plan Year, the Actual Award shall be paid to the Participant’sBeneficiary.  If a Participant fails to designate a Beneficiary or if each persondesignated as a Beneficiary predeceases the Participant or dies prior todistribution of the Participant’s benefits, then the Committee shall direct thedistribution of such benefits to the Participant’s estate.

# **SECTION 5ADMINISTRATION**

## 5.1                                 Committee is the Administrator.  ThePlan shall be administered by the Committee.

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## 5.2                                 Committee Authority.  TheCommittee shall have all discretion and authority necessary or appropriate toadminister the Plan and to interpret the provisions of the Plan, consistentwith qualification of the Plan as performance-based compensation underSection 162(m) of the Code.  Anydetermination, decision or action of the Committee in connection with theconstruction, interpretation, administration or application of the Plan shallbe final, conclusive, and binding upon all persons, and shall be given themaximum deference permitted by law.

## 5.3                                 Tax Withholding.  TheCompany shall withhold all applicable taxes from any payment, including anynon-U.S., federal, state, and local taxes. In the case of payment in the form of a restricted stock bonus pursuantto Section 4.3, the granting and vesting of such restricted stock bonus shallbe subject to Section 10(g) of the 2005 Stock Incentive Plan, or suchcomparable provisions of any successor plan regarding the withholding of taxes.

# **SECTION 6GENERAL PROVISIONS**

## 6.1                                 Nonassignability.  AParticipant shall have no right to assign or transfer any interest under thisPlan.

## 6.2                                 No Effect on Employment.  Theestablishment and subsequent operation of the Plan, including eligibility as aParticipant, shall not be construed as conferring any legal or other rightsupon any Participant for the continuation of his or her employment for any PlanYear or any other period.  Generally,employment with the Company is on an at-will basis only.  Except as may be provided in an employmentcontract with the Participant, the Company expressly reserves the right, whichmay be exercised at any time during a Plan Year, to terminate any individual’semployment without cause and without regard to the effect such terminationmight have upon the Participant’s receipt of an Actual Award under the Plan.

## 6.3                                 No Individual Liability.  Inaddition to such other rights of indemnification as they may have as members ofthe Board or as officers or employees of the Company, members of the Board andany officers or employees of the Company to whom authority to act for theBoard, the Committee or the Company is delegated shall be defended andindemnified by the Company to the extent permitted by law on an after-tax basisagainst all reasonable expenses, including attorneys’ fees, actually andnecessarily incurred in connection with the defense of any claim,investigation, action, suit or proceeding, or in connection with any appealtherein (each a “Claim”), to which they or any of them may be a party by reasonof any action taken or failure to act under or in connection with the Plan andagainst all amounts paid by them in settlement thereof (provided suchsettlement is approved by the Company) or paid by them in satisfaction of ajudgment in any such Claim, except in relation to matters as to which it shallbe adjudged in such claim, investigation, action, suit or proceeding that suchperson is liable for gross negligence, bad faith or intentional misconduct;provided, however, that within thirty (30) days after the institution of suchClaim, such person shall offer to the Company, in writing, the opportunity atthe Company’s expense to defend the same.

## 6.4                                 Severability; Governing Law.  Ifany provision of the Plan is found to be invalid or unenforceable, suchprovision shall not affect the other provisions of the Plan, and the Plan

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## shall be construed in all respects as if suchinvalid provision has been omitted.  Theprovisions of the Plan shall be governed by and construed in accordance withthe laws of the State of Delaware, without giving effect to any choice of lawrule that would cause the application of the laws of any jurisdiction otherthan the internal laws of the State of Delaware.

## 6.5                                 Affiliates of the Company. Requirements referring to employment with the Company or payment ofawards may, in the Committee’s discretion, be performed through the Company orany affiliate of the Company.

6.6                                 Section409A of the Code.  This Plan,including any future amendments thereto which do not expressly amend thisSection 6.6, is designed, and shall be administered and operated, in the goodfaith determination of the Board or the Committee, to comply withSection 409A of the Code.  Althoughthe Company intends to administer the Plan so that it complies with therequirements of Section 409A of the Code, the Company does not warrant that anyActual Award under the Plan will in fact comply with Section 409A or qualifyfor favorable tax treatment under any other provision of federal, state, localor foreign law.  The Company shall not beliable to any Participant for any tax, interest or penalties the Participantmight owe as a result of its participation in the Plan.

6.7                                 SavingsClause.  This Plan is intended tocomply in all respects with applicable laws and regulations.  In case any one or more of the provisions ofthis Plan shall be held invalid, illegal or unenforceable in any respect underapplicable law or regulation, the validity, legality and enforceability of theremaining provisions shall not in any way be affected or impaired thereby andthe invalid, illegal or unenforceable provision shall be deemed null and void;provided, however, to the extent permissible by law, any provision which couldbe deemed null and void shall first be construed, interpreted or revisedretroactively to permit this Plan to be construed in compliance with allapplicable laws so as to foster the intent of this Plan.

# **SECTION 7AMENDMENT AND TERMINATION**

## The Board or a dulyauthorized committee thereof may amend or terminate the Plan at any time andfor any reason; provided, however, that if and to the extent required to ensurethe Plan’s qualification under Section 162(m) of the Code, any such amendmentshall be subject to stockholder approval. Any amendment shall comply with Section 409A of the Code.

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