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                                                                    EXHIBIT 10.1

                            MURPHY OIL CORPORATION
                        1987 MANAGEMENT INCENTIVE PLAN
                         (As Amended February 7, 1990
                       Retroactive to February 3, 1988)

                            SECTION I.  DEFINITIONS

     Unless the context otherwise indicates, the following definitions shall be
applicable for the purpose of this Management Incentive Plan:

     .  "Company" means Murphy Oil Corporation, a Delaware corporation.

     .  "Board of Directors" means the Board of Directors of the Company.

     .  "Committee" means the Executive Compensation Committee appointed by the
        Board of Directors and composed of not less than three directors of the
        Company. A majority of the members of the Committee shall not be
        employees.

     .  "Subsidiary" means any company more than 50% of the voting stock of
        which is owned directly or indirectly by the Company, except that for
        the purposes of the Plan Ocean Drilling & Exploration Company (ODECO)
        shall not be considered a Subsidiary and for the purpose of the
        Incentive Bonus Plan portion of the Plan Murphy Oil Company Ltd. (MOCL)
        shall not be considered a Subsidiary.

     .  "Company and Consolidated Subsidiaries" means the Company and all the
        Company's subsidiaries, the financial results of which for the year in
        question are consolidated with those of the Company and so included in
        the Company's Annual Report to its stockholders, with the exception of
        ODECO and its subsidiaries and MOCL and its subsidiaries for purposes of
        the Incentive Bonus Plan portion of the Plan.

     .  "Employee" means regular employee, whether or not a director.

     .  "Key Employee" means employee who is a director or officer or in a
        managerial, professional or other key position.

                                  Ex. 10.1-1
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     .  "Eligible Employee" means Key Employee of the Company or of a Subsidiary
        that does not have in effect for its personnel any plan similar to the
        Plan. In addition to Key Employees the Committee may in any year include
        any other Employee who has made some unusual contribution which would
        not be expected of such Employee in the ordinary course of his work.

     .  "Independent Auditors" means the independent auditors appointed by the
        Board of Directors to examine and certify the financial statements of
        the Company and Consolidated Subsidiaries.

     .  "Incentive Award" means an award either paid currently or paid on a
        deferred basis as a result of the operation of the Plan.

     .  "Incentive Award Reserve" or "Reserve" means monies available for
        distribution as Incentive Awards as the result of the operation of the
        Plan.

     .  "Shares," "Shares of Stock," or "Stock" means shares of the Common Stock
        of the Company including shares which have been previously issued and
        reacquired by the Company at such times as the Company may deem
        advisable.

     .  "Plan" means this Management Incentive Plan.

     .  "Beneficiary" means the person designated by an Option Holder by written
        notice to the Company as the person entitled to exercise an option upon
        the death of the Option Holder.

     .  "Normal Termination" means terminate (i) at normal retirement time, (ii)
        for permanent and total disability, or (iii) with Employer approval, and
        without being terminated for cause.

     .  "Option Holder" or "Holder" means an Employee to whom an option has been
        granted.

                                  Ex. 10.1-2
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     .  "Terminate" means cease to be an Employee of the Company or a Subsidiary
        except by death, but a change of employment from the Company or one
        Subsidiary to another Subsidiary or to the Company shall not be
        considered a Termination. For this definition ODECO and MOCL shall be
        considered Subsidiaries.

                          SECTION II.  ADMINISTRATION

     The Plan shall be administered by the Committee.  The Committee shall have
the exclusive right to interpret provisions of the Plan, which interpretation
shall be binding and conclusive upon all persons.  The Committee may promulgate
rules and regulations for the administration of the Plan.  The Committee shall
also have the exclusive right to select Employees eligible for participation in
the Plan, and the amount and extent of such participation in each individual
case shall rest in the Committee's absolute discretion.  No member of the
Committee, while he serves on the Committee, may be granted an Incentive Award
or a Stock Option under the Plan.

     The Board of Directors may from time to time remove members from the
Committee or add members thereto, and vacancies in the Committee, however
caused, shall be filled by action of the Board of Directors.  The Committee
shall select one of its members as chairman, and shall hold its meetings at such
times and places as it may determine.  A majority of its members shall
constitute a quorum.  All determinations of the Committee shall be made by a
majority of its members.  The members of the Committee may receive such
compensation for their services as the Board of Directors may determine.

                        SECTION III.  STOCK OPTION PLAN

1.   Stock Subject to Plan

     Subject to adjustment as provided in subsection 2, the total number of
shares of Common Stock which may be acquired pursuant to options granted under
the Plan shall not

                                  Ex. 10.1-3
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exceed 300,000. Not more than 100,000 of such shares may be optioned to
directors and not more than 30,000 such shares may be optioned to any one
Employee. Shares optioned to an Employee who is not a director shall not be
counted against the limitations on grants to directors, even though such
Employee may have previous been a director or should later be elected a
director. All options granted under this Plan which are outstanding or have been
exercised shall be deducted from the foregoing totals in determining whether
further options may be granted hereunder. For this purpose options which have
expired or lapsed due to the death or Termination of an Option Holder before the
option becomes excisable shall not be considered outstanding.

2.   Adjustments

     The total number of shares which may be acquired pursuant to the Plan and
the total number of shares which may be acquired by directors or by any one
director, as well as the number of shares subject to any outstanding option and
the option price per share with respect to any outstanding option, shall be
appropriately adjusted to take into account any stock split, stock dividend, or
other relevant change in the capitalization of the Company which becomes
effective while this Plan is in effect or any option granted hereunder is
outstanding.

3.   Provisions of Options

     Each option granted hereunder shall be evidenced by a written agreement
between the Company and the Option Holder and shall not be assignable except as
provided in case of death and shall not be subject in whole or in part to
attachment, execution or levy.  Any option or portion thereof which is
exercisable shall be exercisable for the full amount or for any part thereof.

     Each option shall be granted for an option price determined by the
Committee which shall not be less than the fair market value of the Common Stock
subject thereto on the date the option is granted.

                                  Ex. 10.1-4
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     Provided the Option Holder has not died or Terminated, each option shall
become exercisable as to one-half of the shares subject thereto beginning two
years from the date of grant and shall become exercisable as to all of the
shares subject thereto beginning three years from the date of grant provided
that each option shall become exercisable in full immediately if the Company
should propose or become a party to any form of corporate reorganization
requiring a vote of Common Stockholders of the Company, of if there should be a
tender offer for Common Stock of the Company which results in one person or
group of persons acting in concert becoming the owners of as much as 20% of the
outstanding Common Stock of the Company. Each option may be exercised only by
the Option Holder, except that in the event of his death after the option has
become exercisable the option may be exercised by his Beneficiary or, if no
Beneficiary has been designated, the option may be exercised by the executor or
administrator of his estate.

     Each option shall expire and be no longer exercisable as follows:

          A.   If the Option Holder is then living, it shall expire at the
               earliest of the following times:

               (i)   Ten years after it is granted.

               (ii)  Three months after Normal Termination, or

               (iii) Any earlier time provided for in the option agreement.

          B.   If the Option Holder Terminates otherwise than normally, it shall
               expire at the time of Termination.

          C.   If the Option Holder dies, it shall expire:

               (i)   One year after his death, or

               (ii)  Any earlier time provided for in the option agreement.

     At the discretion of the Committee, options may be designated as either
"Stock Options" or "Incentive Stock Options." Options designated as Incentive
Stock options may not

                                  Ex. 10.1-5
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be granted to any employee which would result in Shares of Stock having an
aggregate fair market value at the time of grant in excess of $100,000 first
becoming exercisable in any one calendar year.

4.   Grant of Options

     The Committee shall select Eligible Employees to whom options are to be
granted under this Plan.  Subject to the limitations expressed in subsection 1,
the Committee shall grant options under this Plan for such numbers of shares as
the Committee shall in its discretion determine to be appropriate.

5.   Payment for Options Exercised

     Upon exercise of an option, the purchase price of Shares purchased shall
be paid either in cash or by delivery of Shares of Stock of the Company, which
Shares shall be valued at the fair market value on date of exercise.

6.   Cancellation of Options

     The Committee may in its discretion authorize payment, in cash or in
Shares, or partly in cash and partly in Shares, as the Committee may direct, of
an amount equal to the difference at the time between the fair market value of
all or part of the Shares subject to an option and the option price in
consideration of the cancellation of the option in whole or in part. In such an
event the Shares subject to the option so cancelled shall be charged against the
limitations set forth in subsection 1 of this Section III.

                       SECTION IV.  INCENTIVE BONUS PLAN

1.   Incentive Award Reserve

     In each of the five calendar years after 1987 the Board of Directors may
cause to be credited to the Incentive Award Reserve an amount not exceeding 3%
of the amount by which the Net Income of the Company and Consolidated
Subsidiaries for that year, exclusive of ODECO

                                  Ex. 10.1-6
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and MOCL, exceeds an amount equal to 7% of Capital Employed in the Business of
the Company and Consolidated Subsidiaries, exclusive of ODECO and MOCL. For the
purpose of determining the maximum amount creditable to the Reserve in each year
as above provided:

     A.   "Capital Employed in the Business of the Company and Consolidated
          Subsidiaries" for any year means the amount of (i) Stockholders'
          Equity (which includes Capital Stock, Capital in Excess of Par Value,
          and Retaining Earnings) less the cost of shares reacquired, plus (ii)
          Long-Term Debt having a maturity of more than one year, as reported in
          the financial statements of the Company and Consolidated Subsidiaries
          included in the Company's Annual Report to stockholders as of the end
          of the previous year, exclusive of ODECO and MOCL, with an appropriate
          adjustment for any significant change during the year in the amount of
          issued capital or debt as well as in the amount of earnings reinvested
          and employed in the business resulting from surplus adjustments.

     B.   "Net Income" for any year means the amount reported as "Net Income" in
          the "Statement of Income of the Company and Consolidated Subsidiaries"
          included in the Company's Annual Report to stockholders for that year,
          after eliminating the accounts of ODECO and MOCL from the
          consolidation and after giving effect to such adjustment for any
          unusual or nonrecurring items of income or loss not arising in the
          ordinary course of the business as the Committee in its sole
          discretion may determine, plus (i) interest on long-term debt, reduced
          by interest attributable to debt funds invested in or loaned or
          advanced to ODECO and MOCL, and (ii) amounts credited to the Reserve
          during the year, and less (iii) any dividends received from ODECO and
          MOCL (adjusted in each case by the estimated tax effect applicable
          thereto). In determining the amount of interest attributable to long-
          term debt funds invested in or loaned or advanced to ODECO or MOCL,
          the Company's investments and loans or

                                  Ex. 10.1-7
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          advances to these companies after their elimination from the
          consolidation shall be deemed to have been 40% long-term debt funds,
          and the annual interest rate shall be deemed to be 7%.

             As soon as practicable after the end of each fiscal year, the
          Independent Auditors shall determine, in accordance with the Plan, and
          report to the Board of Directors the maximum amount available for
          credit to the Incentive Award Reserve for that year and the amount of
          any balance in such Reserve credited thereto in prior years and
          currently available for Incentive Awards, and the Board of Directors
          shall rely upon and be bound by such reports.  The Board of Directors
          will determine the amount to be credited to the Reserve and advise the
          Committee the total amount available for Incentive Awards.  In making
          such determination, the Board of Directors may reduce the amount to be
          credited to the Reserve to adjust for the effect of any extraordinary
          or unusual accounting adjustments, such as a writedown of asset
          values.

             No amount shall be credited to the Reserve in any year in which no
          dividends, either in cash, stock, or property, have been declared on
          the Common Stock of the Company.

2.   Allotments to Participants

             In respect of any year the Committee shall select those Employees
to whom Incentive Awards shall be made and its determination of the amount and
method of payment of each such Incentive Award shall be final.

             The Committee shall not be required to award the total amount
creditable to the Reserve for any particular year, and any amount of the Reserve
for any year which the Committee shall not have awarded shall be carried forward
and may be awarded in succeeding years or, if the Committee so determines, may
be restored to net income.

                                  Ex. 10.1-8
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          No allotment to an individual Employee shall exceed 50% of such
Employee's annual salary rate for that year as in effect on the date of the
Incentive Award.

3.   Form of Allotments

          Subject to the limitations of subsection 4, the Committee may in its
absolute discretion make allotments to Employees eligible for participation
wholly in cash or in Shares of Stock, or in a combination of cash or Shares of
Stock.  The number of Shares shall be determined by reference to the closing
price on the New York Stock Exchange on the trading date next preceding the date
of allotment.  Such number of Shares shall be adjusted to give effect to any
stock splits, stock dividends, or other relevant changes in capitalization
occurring after the date of allotment.  Shares allotted under the Plan may be
freely transferable or may be subject to such terms and conditions, including
forfeiture, and to such restrictions against sale, transfer or other disposition
as may be determined by the Committee at the time of making a bonus award.  The
Committee may in its discretion remove, modify or accelerate the release of
restrictions on any Shares in the event of hardship of disability of the
participant while employed, or for such other reasons as the Committee may deem
appropriate in the event that the participant ceases to be an Employee of the
Company or a Subsidiary (including ODECO and MOCL) as the result of death or
otherwise.  In the event of the death of a participant following the transfer of
Shares to him subject to restrictions, the legal representatives of the
participant and the person receiving such Shares under his Will or under the
laws of descent and distribution shall take such Shares subject to the same
restrictions, conditions and provisions in effect at the time of his death, to
the extent applicable.

4.   Settlement of Allotments

          A.   Subject to the provisions of paragraph B of this subsection 4,
               all allotments shall be settled as determined by the Committee in
               individual cases at the time of allotment by payment of cash and
               delivery of Shares either (i) in full as soon as

                                  Ex. 10.1-9
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               practicable after the date of allotment, or (ii) in not more than
               four equal annual installments commencing as soon as practicable
               after date of allotment.

          B.   If any allotment is payable after the death of the participant it
               shall be payable (i) to his designated Beneficiary, or if there
               is no designated Beneficiary, to his personal representative, and
               (ii) either in the same installments as originally provided in
               the allotment or otherwise as the Committee may determine in
               individual cases.

5.   Contribution by Subsidiaries

          To the extent that Employees of Subsidiaries shall participate in the
Plan, each of such Subsidiaries will be charged with the total amount of
allotments made to its Employees in each fiscal year.

6.   Forfeiture Provisions

          All allotments to participants, whether in cash or Shares of Stock,
shall be deemed to be provisional and, to the extent not actually paid to
participants, shall be subject to forfeiture under the following circumstances:

          A.   unless otherwise determined by the Committee, if a participant's
               service is terminated for any reason other than by death,
               disability, retirement at normal retirement age, early retirement
               for the convenience of the Company, or

          B.   if after termination of employment a participant shall engage in
               activities which would be detrimental to the interest of the
               Company or its Subsidiaries.

          A change in employment from the Company or one Subsidiary to another
Subsidiary of the Company shall not be considered a termination.  For purposes
of the preceding sentence ODECO and MOCL shall be considered Subsidiaries.

                                  Ex. 10.1-10
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          Any amounts so forfeited (in the case of forfeited Stock, said amounts
being determined by reference to prices used to determine the amount of the
original allotment) shall be restored to net income in the year of forfeiture.

               SECTION V.  AMENDMENT AND TERMINATION OF THE PLAN

     The Board of Directors may from time to time amend the Plan or any
provision thereof without the consent of the stockholders except that (i) the
number of shares which may be optioned under the Stock Option portion of the
Plan may not be increased nor may the number of shares which may be acquired by
members of the Board or any one member thereof be increased, (ii) the minimum
time provided for an option to become exercisable may not be decreased nor may
the maximum term for options be increased, (iii) the minimum price at which
options may be granted may not be decreased, (iv) the maximum amount which may
be credited to the Bonus Reserve may not be increased, (v) the maximum amount
which may be allotted in any year to any participant in the Incentive Bonus
portion of the Plan may not be increased, and (vi) the Plan may not be amended
to permit participation by members of the Committee.

     The Board of Directors may terminate the Plan in whole or in part at any
time provided that no such termination shall alter the terms of options then
outstanding or of Bonus awards which have been allocated but remain unpaid.

                         SECTION VI.  EFFECTIVE PERIOD

     The Plan has been approved by the Board of Directors but will not become
effective unless and until approved by Common stockholders of the Company at the
annual meeting on May 13, 1987.  If the 1987 Management Incentive Plan is then
approved by stockholders, (i) the Stock Option portion of the existing
Management Incentive Plan shall be terminated except with respect to options
previously granted, (ii) the Stock Option portion of the 1987 Management

                                  Ex. 10.1-11
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Incentive Plan shall become effective immediately and shall remain in effect
until April 30, 1992, and (iii) the Incentive Bonus portion of the 1987
Management Incentive Plan shall be effective for the purposes of accruing
Reserves for the five calendar years 1988 through 1992 and shall continue
thereafter with respect to awards made from Reserves accrued during such years.

                                  Ex. 10.1-12