Document:

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                                                                   EXHIBIT 10.28

                      THIRD AMENDMENT TO CREDIT AGREEMENT

          THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment"), dated as
of October 29, 1999 (the "Effective Date") among Miller Oil Corporation, a
corporation formed under the laws of the State of Michigan (the "Borrower"),
Miller Exploration Company (the "Parent"), each of the lenders that is a
signatory, or which becomes a signatory, to the Credit Agreement referred to
below (individually, together with its successors and assigns, a "Lender" and
collectively, the "Lenders") and Bank of Montreal, a foreign bank formed under
the laws of Canada in its individual capacity as a Lender and as agent for
Lenders under the Credit Agreement referred to below (in its capacity as agent,
together with its successors and assigns in such capacity, the "Agent").

                                    RECITALS

          WHEREAS, the Borrower, the Parent, the Lenders and the Agent are
parties to that certain Credit Agreement, dated as of February 9, 1998, as
amended by that certain First Amendment to Credit Agreement, dated as of June
24, 1998 and as amended by that certain Second Amendment to Credit Agreement
dated as of April 14, 1999 (as so amended, the "Credit Agreement"); and

          WHEREAS, the Borrower has advised the Lenders and the Agent that it
desires to amend certain provisions of the Credit Agreement, and the Borrower
has requested that the Lenders and the Agent agree to amend certain provisions
of the Credit Agreement; and

          WHEREAS, the Lenders and the Agent have agreed to so amend certain
provisions of the Credit Agreement upon the terms and subject to the conditions
and limitations of this Third Amendment;

          NOW, THEREFORE, in consideration of the premises, covenants and
agreements contained herein, the parties hereto hereby agrees as follows:

          Section 1. Definitions. Capitalized terms used and not otherwise
defined herein are used with the meanings ascribed thereto in the Credit
Agreement. The following capitalized terms shall have the following respective
meanings when used herein:

          A. "Lending Relationship" shall refer to the Credit Agreement and the
other Loan Documents, including, without limitation, this Third Amendment,
together with any and all negotiations, discussions, acts, omissions, renewals,
extensions, and other agreements or events related to the Credit Agreement and
such other Loan Documents, the parties' obligations thereunder and the
transactions contemplated thereby, including, without limitation, any such
negotiations, discussions, acts, omissions, renewals, extensions, other
agreements or events that (a) occurred prior to the date
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hereof, (b) may occur on the date hereof, or (c) occurred prior to the execution
of this Third Amendment and the instruments and documents executed and delivered
in connection herewith or relating hereto.

          B. "Supplemental Mortgages" shall mean, collectively, all those
mortgages and supplements to mortgages necessary to grant to the Agent for the
benefit of the Lenders a first priority perfected Lien on the Oil and Gas
Properties owned by the Parent, the Borrower or any Subsidiary including those
Oil and Gas Properties acquired by the Parent, the Borrower or any Subsidiary
after February 9, 1998, and including without limitation, those properties
listed on Schedule III hereto and those properties located in the State of
Montana, all such mortgages and supplements to mortgages to be delivered within
thirty (30) days of the date hereof in accordance with Section 7.

          C. "Released Claims" shall mean any and all claims (including without
limitation any liabilities, damages, demands and causes of action arising
therefrom), whether (a) at law or in equity, (b) on the alleged commission of a
tort, (c) on the alleged breach (or anticipatory breach or repudiation) of any
contract, duty, or warranty (whether oral or written, express or implied), (d)
on the alleged violation of any statute, tariff, or regulation (whether
promulgated by the United States, any state thereof, any foreign state or
country, or any other governmental agency or entity, wherever located), or (e)
on any other factual, legal or equitable theory, including, without limitation,
any claim for damages of any type or nature, for injunctive or other relief, for
attorneys' fees, interest or any other liability whatsoever on any theory,
including without limitation any loss, cost or damage in connection with or
based upon "lender liability", unfair dealing, duress, coercion, control or
undue influence, extortion or commercial bribery, breach of an implied covenant
or duty of good faith and fair dealing, material misrepresentation or omission,
overreaching, unconscionability, conflict of interest, bad faith, malpractice,
disparate bargaining position, detrimental reliance, promissory estoppel,
estoppel by deed, waiver, laches, or any other equitable theory, equitable
subordination, breach of fiduciary duty or any other duty, or tortious
inducement to commit such breach, tortious interference with contract or
prospective business relations, negligent performance of contractual
obligations, or other theories of negligence, negligent or intentional
infliction of emotional distress, slander, libel, other defamation, fraudulent
transfer, conversion, trespass to (or clouding the title of) property, usury,
violations of the Racketeer Influenced and Corrupt Organizations Act, deceptive
trade practices, conspiracy, or any theory of liability as partners or joint
venturers, that any Releasing Party may have as of the date hereof against any
Released Party with respect to the Lending Relationship.

          D. "Released Party" shall mean each of the Agent, the Lenders and
their respective predecessors, successors, assigns, directors, officers,
partners, employees, agents, attorneys, principals and Affiliates and all other
Persons liable or who might be claimed to be liable on their behalf
(collectively, the "Released Parties").

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          E. "Releasing Party" shall mean each of the Borrower and the
Guarantors and their respective predecessors, successors, assigns, directors,
officers, partners, employees, agents, attorneys, principals, Affiliates and all
other Persons who might have a claim against any Released Party (collectively,
the "Releasing Parties").

          Section 2. Amendments to Credit Agreement. The Credit Agreement is
amended hereby as follows:

          A. Section 1.02 is amended hereby:

                (i)    by inserting the reference "and the Third Amendment"
after the reference "Second Amendment" in the definition of the term
"Agreement";

                (ii)   by deleting the references "October 15, 1999" and
"$37,000,000" in the definition of "Aggregate Maximum Credit Amounts" and
substituting the references "April 15, 2000" and "$25,468,000".

                (iii)  by deleting the reference "(i) the sixth anniversary of
the Closing Date," in the definition of the term "Final Maturity Date" and
substituting the following therefor "(i) January 1, 2001,".

                 (iv)  by adding the following definition where alphabetically
appropriate:

                 "Third Amendment Effective Date" shall mean the "Effective
                 Date" as such term is defined in the Third Amendment.

                 B.  Section 2.07 of the Credit Agreement is amended hereby as
               follows:

                 (i) by deleting subsection (b)(i) in its entirety and
substituting therefor the following new subsection (b)(i):

                "(i)  The Borrower shall make prepayments as set forth below:

                            A.  The Borrower shall prepay the Loans as follows:

                                      (1) On or before October 31, 1999, after
                                application of any prepayments made pursuant to
                                subsection C. below, the amount of $750,000;

                                      (2) On or before November 30, 1999, after
                                application of any prepayments made pursuant to
                                subsection C. below, the amount of $750,000;

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                                      (3) On or before December 31, 1999, after
                                application of any prepayments made pursuant to
                                subsection C. below, the amount of $750,000;

                                      (4) On or before January 31, 2000, after
                                application of any prepayments made pursuant to
                                subsection C. below, the amount of $4,000,000;
                                and

                                      (5) On or before February 29, 2000, after
                                application of any prepayments made pursuant to
                                subsection C. below, the amount of $750,000;

                            B.  In addition to the prepayments required by
               subsections 2.07(b)(i)A. and C., upon any Transfer of Property
               that would be included in the Borrowing Base, the Borrower shall
               prepay the Loans in an amount equal to 100% of the net cash
               proceeds of any such Transfer, and any net cash proceeds in
               excess of the value attributable to such Property in the
               Borrowing Base determined by the Agent in its sole discretion at
               the time of the Transfer shall be credited against the
               prepayments required under subsection 2.07(b)(i)(A);

                            C.  Upon any Transfer of Property that would not be
               included in the Borrowing Base, the Borrower shall prepay the
               Loans in an amount equal to 100% of the net cash proceeds of any
               such Transfer, which prepayments shall be credited against the
               prepayments required under subsection 2.07(b)(i)(A);

                            D.  The entire amount of any prepayment made
               pursuant to this subsection shall be applied to reduce the
               Aggregate Maximum Credit Amounts pro rata to each Lender based on
               its Percentage Share."

          C. Section 2.08 of the Credit Agreement is amended hereby by as
follows:

                (i)  by deleting the reference "October 15, 1999" in subsection
(d) and substituting therefor the reference "April 15, 2000"; and

                (ii) by deleting the first sentence of subsection (d) in its
entirety and substituting the following therefor:

              "On April 15, 2000 (or such earlier time as the Borrower shall
          request in writing to the Agent, provided that the Borrower timely
          delivers a Reserve Report as required by Section 8.07 hereof) and, so
          long as any of the

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          Commitments are in effect and until payment in full of all
          Loans hereunder, on or around the first Business Day of each May and
          November, commencing November, 2000 (each being a "Scheduled
          Redetermination Date"), the Lenders shall redetermine the amount of
          the Borrowing Base in accordance with Section 2.08(b)."

          D. Section 8.07 of the Credit Agreement is amended hereby as follows:

                (i)  by deleting the first sentence of subsection (a) in its
entirety and substituting the following therefor:

          "On April 1, 2000 (or, if the Borrower requests a Borrowing Base
          redetermination prior to April 15, 2000 in accordance with Section
          2.08 hereof, not less than 15 days prior to the date of such
          redetermination) and on or before each November 1 and April 1
          thereafter, commencing November 1, 2000, the Borrower shall furnish to
          the Agent a Reserve Report."

          E. Section 9.12 of the Credit Agreement is amended hereby by deleting
the reference "December 31, 1999" and substituting the reference "October 1,
2000."

          F. Section 9.14 of the Credit Agreement is amended hereby by deleting
the reference "$24,000,000" and substituting the reference "$20,000,000."

          Section 3.  Covenants.

          A.   Covenants of the Borrower and the Parent. The Borrower or the
Parent, as the case may be, covenants and agrees that during the period from the
Third Amendment Effective Date through and including April 15, 2000 (or, if
earlier, the date of the next redetermination of the Borrowing Base in
accordance with Section 2.08(d) of the Credit Agreement as amended hereby):

                (i)  Every two weeks the Parent shall deliver cash budgets in
     form and substance reasonably satisfactory to the Agent and cash flow
     statements in form and substance reasonably satisfactory to the Agent with
     variance analysis to budget (including accounts receivables and accounts
     payables reporting) not later than the Friday following the last week to
     which such budgets and statements relate.

                (ii) The Borrower shall not spud any wells or conduct any other
     drilling operations (other than with respect to wells identified on
     Schedule II hereto and routine workovers normally expensed in accordance
     with past practice) without the prior written consent of the Agent and the
     Lenders, and shall not, without the prior written consent of the Agent and
     the Lenders, use any amounts to acquire acreage, leases, seismic data, or
     for any drilling costs and expenses other than to acquire, extend or renew

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the Leases identified on Schedule I hereto or to pay the drilling costs or
expenses identified on Schedule II hereto.

                (iii) The Borrower shall use its best efforts to raise capital,
whether through debt, equity or consummation of asset sales to achieve Borrowing
Base compliance, provided that the Lenders shall not require proceeds raised
through debt or equity offerings to be used for debt prepayments.

                (iv)  The Borrower shall provide to the Agent from time to time
upon request by the Agent the certificate of a Responsible Officer of the
Borrower stating that, except as disclosed in a schedule thereto, the Borrower
has not received written notice that any mechanics' liens have been filed or
will be filed on the Mortgaged Properties; provided that mere receipt of an
invoice for services rendered shall not constitute written notice that a
mechanics' lien will be filed.

          B. The Lenders and the Agent Covenants. Each of the Lenders and the
Agent, as the case may be, covenants and agrees that during the period from the
Third Amendment Effective Date through and including April 15, 2000 (or, if
earlier, the date of the next determination of the Borrowing Base in accordance
with Section 2.08(d) of the Credit Agreement as amended hereby):

                (i) the Agent will release any Lien that it may have on assets
     of the Borrower sold by the Borrower in one or more arms length
     transactions for fair value by the Borrower in accordance with the terms of
     the Credit Agreement as amended hereby, the net cash proceeds of which
     sales are paid to the Bank pursuant to Section 2.07(b)(i) of the Credit
     Agreement as amended hereby.

          Section 4. Conditions Precedent. This Third Amendment shall become
binding upon receipt by the Agent of the following documents and satisfaction of
the other conditions provided in this Section 4, each of which must be
satisfactory to the Agent in form and substance:

          A.  counterparts of this Amendment executed by the Borrower, the Agent
and the Lenders;

          B.  certificates of the Secretary or an Assistant Secretary of the
Borrower and the Guarantor setting forth for each of them (i) the resolutions of
its board of directors or managers (or if such Guarantor is a partnership,
resolutions of the general partner of such partnership), as applicable, with
respect to the authorization to execute and deliver this Amendment and
consummate the transactions contemplated hereby; (ii) the Responsible Officer of
such entity authorized to sign this Amendment, and (iii) the signature of such
authorized Responsible Officer of such entity;

          C.  a Consent and Acknowledgement executed by each of the Guarantors;

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          D.  an opinion of counsel to Borrower substantially in the form
attached hereto as Exhibit A;

          E.  payment to the Agent for the ratable benefit of the Lenders of all
accrued and unpaid Interest outstanding under the Credit Agreement and the
Notes; F. payment of the fees and expenses of the Agent and the Lenders
including the payment of the Amendment Fee provided in Section 8.A. of the
Second Amendment; and

          G.  such other documents as the Agent may reasonably request.

          Section 5.  Representations and Warranties.

          A.  The Borrower hereby reaffirms that the representations and
warranties made by the Borrower and the Parent in the Credit Agreement were true
and correct when made and, except as to be described in writing to the Agent as
of the date hereof, are true and correct as though made on and as of the date
hereof, and further, the Borrower represents that,

              (i)    as of the date hereof, no Default or Material Adverse
Effect has occurred and is continuing except as previously disclosed to the
Agent in writing or as set forth in Schedule IV hereto;

              (ii)   neither the Borrower, the Parent nor any Subsidiary has
acquired any additional Oil and Gas Properties since April 14, 1999 except as
identified on Schedule III hereto; and

              (iii)  the execution, delivery and performance by the Borrower or
any Guarantor of this Third Amendment and the other Loan Documents and all
instruments and documents to be delivered by the Borrower or such Guarantor, to
the extent a party thereto, hereunder and thereunder and the creation of all
Liens provided for herein and therein: (a) are within the Borrower's or such
Guarantor's corporate power; (b) have been duly authorized by all necessary or
proper corporate action, including the consent of stockholders, members and/or
partners therein or thereof; (c) are not in contravention of any provision of
the Borrower's or such Guarantor's certificate of incorporation, bylaws or
similar organizational and/or governing documents; (d) will not violate (1) any
law or regulation or (2) any order or decree of any court or governmental
instrumentality; (e) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Borrower or such Guarantor is a party or by which the
Borrower or such Guarantor or any of their respective property is bound; (f)
will not result in the creation or imposition of any Lien upon any of the
property of the Borrower or such Guarantor other than those in favor of the
Agent pursuant to the terms of this Third Amendment and the other Loan Documents

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to be delivered in connection herewith; and (g) do not require the consent or
approval of any governmental body, agency, authority or any other Person that
has not been duly obtained, made or complied with prior to the date hereof.  At
or prior to the date hereof, each of this Third Amendment and the other Loan
Documents to be delivered in connection herewith shall have been duly executed
and delivered for the benefit of or on behalf of the Borrower or such Guarantor,
in each case to the extent a party thereto, and each shall then constitute a
legal, valid and binding obligation of the Borrower or such Guarantor,
enforceable against it in accordance with its terms.

          B.  Each of the Borrower and such Guarantor further represents and
warrants, for itself only that he or it (i) is executing this Third Amendment
after consultation with counsel of his or its own choosing, (ii) has read and
understands the release granted by Section 6 hereof, (iii) desires to execute
this Third Amendment and (iv) has the requisite authority to enter into and be
bound by this Third Amendment, including the release granted by Section 6
hereof.

          Section 6.  Release.

          A.  Each of the Releasing Parties desires and intends fully to
compromise, release and settle any and all of the Released Claims; and each of
the Releasing Parties hereby covenants, warrants and represents unto each of the
Released Parties that such Releasing Party does hereby FOREVER RELEASE, ACQUIT,
WAIVE AND DISCHARGE each of the Released Parties of and from the Released Claims
and each of the Releasing Parties hereby declares the same FOREVER RELEASED,
ACQUITTED, WAIVED, SETTLED AND DISCHARGED. This release is effective without
regard to whether (i) such Released Claims are known or unknown, (ii) damages
arising out of such Released Claims have yet accrued, (iii) such Released Claims
arose collaterally, directly, derivatively, or otherwise between the parties
hereto or (iv) an ordinary person in the same or similar circumstances would or
would not, through the exercise of due care, have discovered such claims by the
date of this Amendment. In connection with the foregoing release:

          B.  The Borrower and each Guarantor represents and warrants that it
has the full power and authority to perform the release granted in this Section
6 and that it has not in any manner made any assignment of any Released Claim to
any third party.

          C.  The release granted in this Section 6 will be effective upon
execution of this Third Amendment by all of the parties hereto.

          D.  Each party executing this Amendment understands and agrees that
the release granted in this Section 6 is a full, final and complete release of
the Released Claims and that such release may be pleaded as an absolute and
final bar to any or all suits which may hereafter be filed or prosecuted by any
one or more of the Releasing Parties or anyone claiming by, through or under any
one or more of the Releasing Parties in respect of any of the matters released
hereby, and that no recovery on account of the

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Released Claims may hereafter be had from any of the Released Parties; and that
the consideration given for such release is not an admission of liability or
fault on the part of any of the Released Parties (it being the express intent of
the parties hereto to obtain peace of mind and avoid the expense and uncertainty
of potential litigation), and that none of the Releasing Parties or those
claiming by, through or under any of them will ever claim that it is.

          E.  The parties hereto acknowledge that the release granted by this
Section 6 does not have any effect with respect to relationships between the
Borrower and each Guarantor and the Lenders and the Agent other than in
connection with the Lending Relationship.

          Section 7.  Events of Default and Remedies.

          A.  The occurrence of the following event (regardless of the reason
therefor) shall constitute an "Event of Default" hereunder:

                (i)  The Borrower shall fail to deliver within thirty (30) days
after closing the Supplemental Mortgages and the other documents required under
Section 8.09 of the Credit Agreement (including, without limitation, the legal
opinion), granting to the Agent a first priority Lien interest (subject only to
Excepted Liens) on the Borrower's, the Parent's, or any Subsidiary's interest in
any additional Oil and Gas Property listed on Schedule III hereto.

          B. The occurrence and continuation of an Event of Default hereunder
shall constitute an Event of Default under the Credit Agreement as amended
hereby.

          Section 8.  Payment of Fees and Expenses; Form of Payment.

          A. The Borrower agrees to pay to the Agent for the ratable benefit of
the Lenders a fee (the "Amendment Fee") in an amount equal to two percent (2%)
on the outstanding balance of the Loans as of April 15, 2000, payable on April
15, 2000.

          B. The Borrower agrees, whether or not the transactions contemplated
hereby are consummated, to pay all reasonable expenses of the Agent and the
Lenders (including, without limitation, all reasonable fees and disbursements of
counsel and other outside consultants for the Agent and/or the Lenders) in
connection with the negotiation, investigation, preparation, execution and
delivery of, recording and filing of, preservation of rights under and
enforcement of this Amendment and the other Loan Documents to be delivered in
connection herewith.

          C. All payments to be made by the Borrower under this Amendment shall
be made in Dollars, in immediately available funds, to the Agent at such account
as the Agent shall specify by notice in accordance with Section 4.01 of the
Credit Agreement.

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          Section 9.  Limitations. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
of the other Loan Documents, or (b) prejudice any right or rights that the
Lenders or the Agent may have at any time under or in connection with the Credit
Agreement as amended hereby or any of the other Loan Documents. Except as
expressly supplemented, amended or modified hereby, the terms and provisions of
the Credit Agreement or any other Loan Documents are and shall remain in full
force and effect. In the event of a conflict between this Amendment and any of
the foregoing documents, the terms of this Amendment shall be controlling.

          Section 10. Non-Reliance on Agent and Other Lenders.  Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own decision to enter into this Amendment, and that
it will, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Amendment or the Credit Agreement.  The Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrower of this Amendment or any other Loan Document or any other document
referred to or provided for herein or therein or to inspect the properties or
books of the Borrower.  Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder and under the Credit Agreement, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of the Agent or any of its
Affiliates.  In this regard, each Lender acknowledges that Weil, Gotshal &
Manges LLP is acting in this transaction as special counsel to the Agent only.
Each Lender will consult with its own legal counsel to the extent that it deems
necessary in connection with this Amendment and the matters contemplated herein.

          Section 11. Governing Law.  This Amendment and the rights and
obligations of the parties hereunder and under the Credit Agreement shall be
construed in accordance with and be governed by the laws of the State of Texas
and the United States of America.

          Section 12. Descriptive Headings, etc. The descriptive headings of the
several Sections of this Amendment are inserted for convenience only and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.

          Section 13. Counterparts. This Amendment may be executed in any number
of counterparts and by different parties on separate counterparts and all of
such counterparts shall together constitute one and the same instrument.

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first written above.

              NOTICE PURSUANT TO TEX. BUS. & COMM. CODE (Section)26.02

          THIS AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF TOGETHER
CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL
AGREEMENT BETWEEN THE PARTIES.

BORROWER:                                 MILLER OIL CORPORATION

                                          By:    /s/ Kelly E. Miller
                                             --------------------------------
                                          Name:  Kelly E. Miller
                                               ------------------------------
                                          Title: President
                                                -----------------------------

PARENT:                                   MILLER EXPLORATION COMPANY

                                          By:    /s/ Kelly E. Miller
                                             --------------------------------
                                          Name:  Kelly E. Miller
                                               ------------------------------
                                          Title: President & CEO
                                                -----------------------------

LENDER AND AGENT:                         BANK OF MONTREAL

                                          By:   /s/ Thomas E. McGraw
                                             --------------------------------
                                             Thomas E. McGraw
                                             Director<PAGE>

                                                                   EXHIBIT 10.29

                                 EMPLOYMENT AGREEMENT

          THIS IS AN EMPLOYMENT AGREEMENT (the "Agreement") between MILLER
EXPLORATION COMPANY, a Delaware corporation ("Company") and Lew P. Murray
("Employee").  The parties agree as follows:

    1.   Effective Date and Term. This Agreement will take effect as of February
9, 1998. The initial term of this Agreement will be three (3) years following
its effective date. If the Employment terminates at any time before expiration
of this Agreement, then notwithstanding such expiration the parties will remain
obligated to comply with their respective obligations under Paragraph 6. The
Employee's obligations and the Company's rights under Paragraphs 8, 9 and 10
shall survive expiration of this Agreement, and shall continue in full force and
effect.

    2.   Employment. The Employee will serve as Vice President of Exploration of
the Company, or in other positions assigned by the Company (the "Employment").
The Employee's duties will be those assigned by the Company's Board of Directors
or the President or Chief Executive Officer, as the case may be. The Employment
will be full time, and the Employee's entire business time and best efforts will
be devoted to the performance of Employee's duties for the Company during the
term of the Employment, provided that, except as otherwise provided in this
Agreement, nothing in this Paragraph shall prevent the Employee from engaging in
additional activities in connection with personal investments and community
affairs that do not compromise the Company's assets and are not inconsistent
with the Employee's duties under this Agreement. Employee will comply with the
Company's employment policies.

    3.   Termination of Employment.  During the term of this Agreement, the
Employment may be terminated as provided in Paragraph 5.  After expiration of
this Agreement, either party may terminate the Employment at will.

    4.   Compensation.  The Employee will be compensated during the Employment
as follows:

         a.  Salary.  The Employee will be paid an initial annual salary of at
    least $140,000, subject to adjustment as provided below, which will be
    payable in equal periodic installments according to the Company's customary
    payroll practices, but no less frequently than monthly. The Employee's
    salary will be reviewed by the Company's Compensation Committee not less
    frequently than annually, and may be adjusted upward or downward in the sole
    discretion of the Board of Directors, but in no event will the salary be
    less than $112,000 per year, except upon approval of employee.

          b.  Stock Options.  Employee has been granted options to purchase
    100,000 shares of the Company's common stock at the initial public offering
    price of $8.00 per share. The options will have a 10-year term and will
    vest in cumulative annual increments of one-fifth of the total number of
    shares subject to the options,
<PAGE>

    beginning on the first anniversary of the date of grant (February 4, 1999).
    The options have been granted pursuant to a separate stock option agreement
    between the Company and Employee, and the options will be subject to any
    restrictions and other terms set forth in that agreement and in any plan
    under which the options may be granted, including the Company's Stock Option
    and Restricted Stock Plan of 1997. In addition, the stock and other stock
    options granted in the future, will vest upon a Change in Control of the
    Company, as defined in Paragraph 15, (which definition shall modify and
    supersede any definition of a "Change in Control" or comparable term in the
    stock option plan or the agreement referenced in the preceding sentence.)
    Employee may participate in future option programs as determined by the
    Board of Directors.

          c.  Restricted Stock.  Employee has been issued 15,000 shares of
    restricted common stock that will vest in cumulative annual increments of
    one-half of the total number of restricted shares granted, beginning on the
    first anniversary of the date of grant. In addition, the stock and other
    restricted stock granted in the future, will vest upon a change in control
    of the Company, as referenced in Paragraph 15, (which definition shall
    modify and supersede any definition of a "Change in Control" or comparable
    term in the restricted stock plan or the agreement referenced in the
    following sentence.) The restricted stock has been granted pursuant to the
    Company's Stock Option and Restricted Stock Plan of 1997 agreement between
    the Company and Employee, and the restricted stock will be subject to any
    restrictions and other terms set forth in that agreement and in any plan
    under which the restricted stock may be granted, including the Company's
    Stock Option and Restricted Stock Plan of 1997. Employee may participate in
    future restricted stock programs as determined by the Board of Directors.

          d.  Bonus.  The Employee will be eligible to participate in any bonus
    program covering the position in which the Employee serves, on the terms set
    forth in such bonus program. The terms of any present or future bonus
    programs are subject to revision from time to time in the Company's
    discretion.

          e.  Benefits. The Employee will, during the term of Employment, be
    permitted to participate in such pension, 401(k), profit sharing, life
    insurance, health insurance, and other employee benefit plans of the Company
    that may be in effect from time to time, to the extent the Employee is
    eligible under the terms of those plans (collectively, the "Benefits"). In
    addition, Employee will be eligible to receive twenty (20) days of vacation.

          f.  Business Expenses.  The Company will reimburse the Employee for
    reasonable ordinary and necessary business expenses incurred in the
    performance of duties on behalf of the Company, subject to Employee's
    prompt submission of proper

                                   2 of 13
<PAGE>

    documentation for tax and accounting purposes and, if applicable, subject
    to the approval of the respective Supervisor.

        g.  Plan Terms and Changes.  The terms of applicable insurance
    policies and benefit plans in effect from time to time will govern with
    regard to specific issues of coverage and benefit eligibility. It is
    understood that all benefit programs are subject to change or cancellation
    in the discretion of the Company.

    5.  Termination of Employment. During the term of this Agreement, Employee's
Employment may be terminated in the following circumstances:

        a.  Death.  The Employment will terminate automatically in the event
    of Employee's death.

        b.  Disability.  If Employee becomes "disabled", the Company may elect
    to terminate Employee's Employment due to such disability. For the purposes
    of this Agreement, the Employee will be deemed to be "disabled" if the
    Employee is unable to perform the essential functions of the Employee's
    duties under this Agreement, due to physical or mental illness, for 120
    consecutive days, or 180 days during any twelve-month period, as determined
    in accordance with this Paragraph. The disability of the Employee will be
    determined by a medical doctor selected by written agreement of the Company
    and the Employee upon the request of either party by notice to the other. If
    the Company and the Employee cannot agree on the selection of a medical
    doctor, each of them will select a medical doctor and the two medical
    doctors will select a third medical doctor who will determine whether the
    Employee is disabled. The determination of the medical doctor selected under
    this Paragraph will be binding on both parties.

        c.   Termination by Company for Cause.  The Company may terminate the
    Employment immediately for Cause, defined as Employee's: (i) material breach
    of this Agreement, including but not limited to, continued poor performance
    of duties after warning and reasonable opportunity to correct performance
    deficiencies; (ii) willful failure to substantially perform properly
    assigned job duties; (iii) misappropriation of Company property, intentional
    damage to Company property, activities in aid of a competitor,
    insubordination, conviction of a crime involving moral turpitude, or
    performance of any act (including any dishonest or fraudulent act or
    statement) that is willfully detrimental to the interests of the Company.

        d.  Termination by Employee for Good Reason.  Employee may terminate
    the Employment for Good Reason if:

             (i)  Either

                                    3 of 13
<PAGE>

                    (A)  the Company materially breaches its obligations to
                         Employee under this Agreement; or
                    (B)  the Company fails to assign or a Successor fails to
                         assume this Agreement as provided in Paragraph 14; or
                         the Successor reduces Employee's salary, reduces
                         Employee's bonus opportunity, or materially reduces the
                         overall value of Employee's fringe benefits.

               (ii)  Employee notifies the Board of Directors in writing, within
          60 days after the act or omission in question, asserting that the act
          or omission in question constitutes Good Reason and explaining why
          such act or omission constitutes a material breach; and

               (iii) the Company fails, within 30 days after such notification,
          to take all steps necessary to cure the breach; and

               (iv)  Employee resigns by written notice within 30 days after
          expiration of the 30 day period under (iii) above.

          If Employee terminates the Employment for Good Reason, Employee will
     be paid Severance Pay as provided in Paragraph 6.  Employee's failure to
     object to a material breach as provided above will not waive Employee's
     right to resign with Good Reason after following the above procedure with
     regard to any future material breach.

          e.  Discretionary Termination by Employee.  Employee may terminate the
     Employment at will, with at least 45 days advance written notice, and
     Employee agrees not to leave the Employment with Company without giving
     such notice.

          f.  Discretionary Termination by Company.  Company may terminate the
     Employee's Employment at will, but if it does so it will pay Employee
     Severance Pay as provided in Paragraph 6.

          Employee agrees to cooperate during the 90-day period following any
termination of the Employment by consulting upon request to assist in
transition of Employee's duties and knowledge about the Company's business, such
consulting to be performed at Employee's reasonable convenience by telephone,
and the Company agrees to pay a consulting fee computed as Employee's weekly
salary divided by 40 for each hour of consultation (unless Employee is receiving
Severance Pay under Paragraph 6).

      6.  Payments After Termination of Employment.

                                    4 of 13
<PAGE>

          a.  Upon termination of Employee's Employment, Employee shall not be
     entitled to any further compensation from Company or any Affiliate, except:
     (i) unpaid salary installments through the end of the week in which the
     Employment terminates; and (ii) any vested benefits accrued prior to the
     date the Employment terminates under the terms of any written Company
     benefit plan that expressly calls for payments or rights after termination
     of employment;  (iii) COBRA continuation coverage at Employee's expense, if
     Employee is eligible under applicable law; and (iv) Severance Pay (if any)
     becoming due under Paragraph 6 or Paragraph 15.

          b.  The Company will pay Employee the Severance Pay described in this
     Paragraph if the Company terminates the Employee's Employment during the
     term of this Agreement other than as permitted under Paragraph 5(b)
     ("Disability") or 5(c) ("Cause"), except that no Severance Pay will be
     owing from the Company  by reason of the sale of the Company's business, if
     this Agreement is assigned to and assumed by a Successor Company, as
     provided in Paragraph 14.  A purported termination of the Employment under
     Paragraph 5(c) ("Termination by Company for Cause") or Paragraph 5(b)
     ("Disability") that is ultimately found to have been improper under such
     paragraph shall be deemed to have been a termination under Paragraph 5(f)
     ("Discretionary Termination by Company").  The Company will also pay
     Employee the Severance Pay described in this Paragraph if the Employee
     terminates his Employment during the term of this Agreement for Good
     Reason, as provided in Paragraph 5(d) ("Termination by Employee for Good
     Reason").

          c.  Amount and Duration of Severance Pay.  Subject to the other
     provisions of this Paragraph 6, the Severance Pay will consist of:

               (i)  continuation of Employee's initial weekly salary (or current
          salary, whichever is greater) for 26 weeks;

               (ii) continuation during the Severance Pay Period, at Company's
          expense, of Employee's existing benefits employee and dependent
          health, dental and prescription drug coverage, life insurance if
          possible under the policy for the remaining term of this Agreement
          (without affecting Employee's right to elect COBRA continuation
          coverage beginning on the expiration date of this Agreement), subject
          to Employee's continuing payment of the normal employee contribution;
          and

               (iii)  if Employee dies during Severance Pay period, Severance
          Pay will continue for the benefit of the Employee's designated
          beneficiary.

          In addition, upon Employee's becoming entitled to Severance Pay, all
     options and restricted stock previously granted to Employee will vest.

                                    5 of 13
<PAGE>

          d.  Conditions to Severance Pay.  In order to be eligible for the
     Severance Pay, Employee must meet the following conditions:

               (i)   Employee must comply with Employee's obligations under
          Paragraphs 8, 9 and 10 of this Agreement;

               (ii)  Employee must not claim unemployment compensation for any
          week for which Employee receives Severance Pay;

               (iii) Employee must promptly sign and continue to honor a
          general release form acceptable to the Company and Employee of any and
          all claims against Company and its affiliates (defined for purposes of
          this Agreement as entities having an ownership interest in the
          Company, and subsidiaries and other entities in which the Company has
          an ownership interest), and all of their officers, directors,
          employees and agents.  The release will not waive the Employee's right
          to any payments due under this Paragraph 6 or Employee's rights to any
          vested benefits accrued prior to the date of termination of Employment
          under the terms of the applicable written benefit plans of the
          Company, or any right of Employee to indemnification or liability
          insurance coverage or Employee's rights to previously granted stock
          options and/or restricted stock.  If Employee ever seeks to make a
          claim against the Company contrary to the general release, it is
          understood that Employee must return the severance pay to company
          before doing so.  If the company successfully enforces the general
          release, the Severance Pay will be returned to the Employee less the
          Company's cost of enforcement.

               (iv)  Employee must resign, upon written request by Company, from
          all positions with or representing Company or any Affiliate, including
          but not limited to membership on boards of directors; and

               (v)   Employee must provide the Company during the Severance Pay
          Period (without additional compensation) with consulting services
          regarding matters within the scope of Employee's former duties, upon
          request by the Board of Directors, provided that Employee will only be
          required to provide such services by telephone at Employee's
          reasonable convenience, and not for more than forty (40) hours in any
          month.

          e.  Offsets to Severance Pay.  The Severance Pay due to Employee for
     any week will be reduced by any disability benefits received by Employee
     for the same period under any Workmen's Compensation law, or under the
     Federal Social Security act Disability Benefits Provisions, or under any
     disability insurance policy provided to Employee by Company as a fringe
     benefit.
                                    6 of 13
<PAGE>

     7.  Conflicts of Interest. During the Employment, the Employee will not
acquire, directly or indirectly, any financial interest in, accept gifts or
favors from, or establish any relationship other than on behalf of the Company
with, any customer, supplier, distributor, or other person who does or seeks to
do business with the Company, unless Employee has disclosed the financial
interest, gift, favor, or relationship to the Company's Board of Directors, in
writing, and has received the written approval of the Board of Directors for
such activity or transaction. The Employee is not otherwise precluded from
participating in the management of personal or family holdings, even though they
may offset the Company's operations.

     8.  Loyalty and Confidentiality; Company Property. The Employee will be
loyal to the Company during the Employment and will forever hold in strictest
confidence and will not use or disclose any information regarding the Company's
techniques, processes, developmental or experimental work, prospects, trade
secrets, customer or prospect names or information, or proprietary or
confidential information relating to the current or planned areas of activity,
prospects, areas of interest, services, sales, employees or business of the
Company, except as such disclosure or use may be required in connection with the
Employee's work for the Company. Upon termination of the Employment, the
Employee will deliver to the Company any and all materials relating to the
Company's business, including without limitation all customer lists and
information, keys, financial information, business notes, business plans,
Company provided autos or other equipment, credit cards, memoranda, prospects,
seismic information, specifications and documents, except as reasonably
necessary to ensure and verify the Company's compliance with this Agreement. All
Company property will be returned promptly and in good condition except for
normal wear. The Employee agrees not to retain any copies, reproductions or
summaries of any such materials. This covenant will continue in effect after
termination of the Employment and shall survive expiration of this Agreement.

     9.  Ideas, Concepts and Inventions Relating to Company's Business. All
business ideas and concepts and all inventions, improvements and developments
made or conceived by the Employee, either solely or in collaboration with
others, during the Employment, whether or not during working hours, and relating
to the Company's business or any aspect thereof, or to any business, product,
prospect, areas of activity or areas of interest the Company is considering
entering or developing, shall become and remain the exclusive property of the
Company, its successors and assigns. The Employee shall disclose promptly in
writing to the Company all such inventions, improvements and developments, and
will cooperate in confirming, protecting and obtaining legal protection of the
Company's ownership rights, and leasehold interest. This provision shall
continue in effect after termination of the Employment and shall survive
expiration of this Agreement as to ideas, concepts, inventions, improvements,
developments, and prospects made or conceived in whole or in part prior to the
date the Employment terminates.

     The Employee understands and agrees that the ideas, concepts, prospects,
production, areas of activity, areas of interest, inventions, improvements,
developments which the Employee invented, conceived or participated in prior to
becoming employed by the Company, and to which the Employee, or any assignee of
the Employee, now claims title, are available for development,

                                    7 of 13
<PAGE>

exploration, and can be capitalized upon, utilized by the Company for its own
gain. Any exceptions are completely described on an exhibit signed by the
parties and attached to this Agreement. If no such exhibit is attached, then
Employee represents and warrants that there are no such inventions,
improvements, developments or prospects to which the Company would be
restricted.

     10.  Covenant Not to Compete. During the Employment, and for one (1) year
after termination of the Employment, the Employee will not compete directly with
the Company. Competing directly with the Company shall be defined as purchasing
leases in an area defined by the Company as a Prospect for purposes of buying
leases, or divulging proprietary information about said area. It is expressly
understood and agreed that Employee shall in no way be restricted from acting as
a consultant or consulting in such areas as long as Employee does not use
proprietary information in such activity. Should the Company enter into
operations directly affecting the Employee's previously existing interests,
immediate family, relatives, or otherwise, the Employee will abstain from making
decisions or recommendations that materially adversely affect Company
operations. In the event that the Company should sell a working interest,
leasehold interest, any other such interest to the Employee, or his or her
immediate family, relatives, or otherwise, either corporately or individually,
the Employee will have the full rights and liberties associated to represent
said sale.

     11.  Entire Agreement. No agreements or representations, oral or otherwise,
express or implied, with respect to the Employee's Employment with the Company
or any of the subjects covered by this Agreement have been made by either party
which are not set forth expressly in this Agreement, and this Agreement
supersedes any pre-existing employment agreements and any other agreements on
the subjects covered by this Agreement. Other Company policies and practices not
addressed in this Agreement may be addressed in the Company's Employee Manual,
as may be modified from time to time.

     12.  Amendment and Waiver; Authority. No provisions of this Agreement may
be amended, modified, waived or discharged, and no additional obligations may be
imposed on the Company or the Employee, unless such waiver, modification,
discharge or obligation is (a) agreed to in a written agreement signed by an
officer of the Company authorized by the Board of Directors and the Employee and
(b) the terms of such written agreement are expressly approved by the Board of
Directors. No waiver by either party at any time of any breach or non-
performance of this Agreement by the other party shall be deemed a waiver of any
prior or subsequent breach or non-performance. No employee, officer or agent of
the Company other than the Board of Directors has any authority to offer
employment other than employment terminable at will by the Company, or to limit
the Company's right to terminate employment at will in any way.

     13.  Severability. The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any other
provision of this Agreement, which will remain in full force and effect. If a
court of competent jurisdiction ever determines that any provision of this
Agreement (including but not limited to all or any part of the non-competition
covenant in Paragraph 10) is unenforceable as written, it is the intent of the
parties that such

                                    8 of 13
<PAGE>

provision shall be deemed narrowed or revised in such jurisdiction (as to
geographic scope, duration, or any other matter) to the extent necessary to
allow its enforcement.  Such revision shall thereafter govern in such
jurisdiction, subject only to any allowable appeals of such court decision.

     14.  Assignability. This Agreement contemplates personal services by the
Employee, and Employee may not transfer or assign Employee's rights or
obligations under this Agreement, except that Employee may designate
beneficiaries for Severance Pay in the event of Employee's death during the
Severance Pay Period, and may designate beneficiaries for benefits as allowed by
the Company's benefit programs. This Agreement may be assigned by the Company to
any subsidiary or parent corporation or a division of such corporation;
(however, the Company must obtain final approval by the Employee for such an
assignment of said Agreement, which will not be unreasonably withheld), or to
any entity which succeeds to all or substantially all of the Company's
businesses ("Successor Company").

     15.  Provisions Relating to Change in Control. For purposes of this
Agreement, the following definitions shall apply:

                     1.  Definition

     (a) "Change in Control" shall mean (i) the failure of the Continuing
     Directors at any time to constitute at least a majority of the members of
     the Corporation's Board of Directors; (ii) the acquisition by any Person
     (as defined in Section 13(d) and 14(d)(2) of the Securities Exchange Act of
     1934 (the "Act")) other than an Excluded Holder of beneficial ownership
     (within the meaning of Rule 13d-3 promulgated under the Act) of twenty
     percent (20%) or more of the outstanding Common Stock or the combined
     voting power of the Corporation's outstanding securities entitled to vote
     generally in the election of directors; (iii) the approval by the
     stockholders of the Corporation of a reorganization, merger or
     consolidation, unless with or into a Permitted Successor; or (iv) the
     approval by the stockholders of the Corporation of a complete liquidation
     or dissolution of the Corporation or the sale or disposition of all or
     substantially all of the assets of the Corporation other than to a
     Permitted Successor.

          (b) "Continuing Directors" mean the individuals constituting the
     Corporation's Board of Directors as of the date of this Agreement and any
     subsequent directors whose election or nomination for election by the
     Corporation's stockholders was approved by a vote of two-thirds (2/3) of
     the individuals who are then Continuing Directors, but specifically
     excluding any individual whose initial assumption of office occurs as a
     result of either an actual or threatened election contest (as the term is
     used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Corporation's Board of Directors.

          (c) "Excluded Holder" means the Corporation, a Subsidiary, any
     employee benefit plan (i.e., any plan or program established by the
     Corporation or a Subsidiary for the

                                    9 of 13

<PAGE>

     compensation or benefit of employees of the Corporation or any of its
     Subsidiaries) of the Corporation or a Subsidiary or any trust holding
     Common Stock or other securities pursuant to the terms of an employee
     benefit plan, or any member of the Miller Group.

          (d) "Miller Group" means (i) C.E. Miller, Kelly E. Miller, David A.
     Miller, Daniel R. Miller, Sue Ellen Bell and their respective spouses,
     lineal descendants and spouses of such descendants (collectively, the
     "Miller Family"), (ii) the estate of any member of the Miller Family, (iii)
     any trust established for the benefit of any member of the Miller Family,
     (iv) any trust of which the power to vote, dispose or direct the voting or
     disposition of any Common Stock of the Corporation included in the corpus
     of such trust is controlled by one or more members of the Miller Family,
     (v) without limiting the generality of the preceding clauses (iii) and
     (iv), the Kelly E. Miller Retained Annuity Trust #1, the David A. Miller
     Retained Annuity Trust #1, the Daniel R. Miller Retained Annuity Trust #1,
     the Sue Ellen Bell Retained Annuity Trust #1, the Kelly E. Miller Trust,
     the David A. Miller Trust, the Daniel R. Miller Trust and the Sue E. Bell
     Trust, (vi) any corporation of which a majority of the outstanding shares
     of capital stock entitled to vote generally for directors is beneficially
     owned by, or a partnership of which a majority of the partnership interests
     with voting rights are beneficially owned by, or a limited liability
     company of which a majority of the membership interests with voting rights
     are beneficially owned by, any of the individuals or entities identified in
     clauses (i) through (v) above, including without limitation Eagle
     Investments, Inc., Eagle International, Inc., Oak Shores Investments, Inc.,
     Double Diamond Enterprises, Inc., and Frontier Investments, Inc.

          (e) "Permitted Successor" means a corporation which, immediately
     following the consummation of a transaction specified in clauses (iii) and
     (iv) of the definition of "Change in Control" above, satisfies each of the
     following criteria:  (A) sixty percent (60%) or more of the outstanding
     common stock of the corporation and the combined voting power of the
     outstanding securities of the corporation entitled to vote generally in the
     election of directors (in each case determined immediately following the
     consummation of the applicable transaction) is beneficially owned, directly
     or indirectly, by all or substantially all of the Persons who were the
     beneficial owners of the Corporation's outstanding Common Stock and
     outstanding securities entitled to vote generally in the election of
     directors (respectively) immediately prior to the applicable transaction,
     (B) no Person other than an Excluded Holder beneficially owns, directly or
     indirectly, twenty percent (20%) or more of the outstanding common stock of
     the corporation or the combined voting power of the outstanding securities
     of the corporation entitled to vote generally in the election of directors
     (for these purposes the term Excluded Holder shall include the corporation,
     any Subsidiary of the corporation and any employee benefit plan of the
     corporation or any such Subsidiary or any trust holding common stock or
     other securities of the corporation pursuant to the terms of any such
     employee benefit plan), and (C) at least a majority of the Board of
     Directors is comprised of Continuing Directors.

                                   10 of 13
<PAGE>

          (f) "Person" means any individual, corporation (including any non-
     profit corporation), general or limited partnership, limited liability
     company, joint venture, estate, trust, association, organization or other
     entity or governmental body.

          (g) "Subsidiary" means any corporation or other entity of which fifty
     percent (50%) or more of the outstanding voting stock or voting ownership
     interest is directly or indirectly owned or controlled by the Corporation
     or by one or more Subsidiaries of the Corporation.

               2.   Effect of Change in Control

          If there is a Change in Control of the Company, or the Employee
     terminates the employment for Good Reason as permitted under Paragraph
     5(d), then the Employee shall receive the Lump Sum Payment described in the
     Severance Pay provided under Paragraph 6, and in addition all unvested
     stock options and restricted stock described in Paragraphs 4(b) and 4(c)
     above will vest immediately.

               3.   Special Tax Provision

          If any payment or payments to be made to the Employee by the Company
     following the termination of the Employee's employment, whether such
     payments are to be made under this Agreement or otherwise, would result in
     Employee incurring any excess parachute payment excise tax under IRC
     Sections 280G and 4999, then those payments that are to be made to
     Employee under this Agreement and that constitute "parachute payments" (as
     that term is defined under IRC Section 280G) shall be reduced or delayed to
     the extent necessary to eliminate any "excess parachute payments" (as that
     term is defined under IRC Section 280G) to Employee; provided, however,
     that  such reductions or delays shall be made if, and only if (A), below,
     is greater than (B), below, where: (A) equals  the present value as of the
     date of termination of Employee's employment of the total payments to be
     made to the Employee after such reductions or delays; and (B) equals the
     present value as of the date of termination of the Employee's employment of
     the  total payments to be made to  the Employee in the absence of such
     reduction and after application of the 20% excise tax on excess parachute
     payments. If such reductions or delays are to be made, the Employee shall
     determine which payments shall be reduced or delayed. Employee's
     determination as to whether reductions or delays are called for under this
     Paragraph shall be final and binding, if reasonable. If the Company  fails
     to accept any reasonable determination of Employee under this Paragraph,
     the Company shall reimburse Employee for all expenses and losses (including
     but not limited to attorney fees and any  additional taxes or interest or
     penalties on unpaid taxes) incurred by Employee as a result of the
     Company's failure to accept such determinations.

                                   11 of 13
<PAGE>

     16.  Notices.  Notices to a party under this Agreement must be
personally delivered First Class mail, Facsimile, or sent by certified mail
(return receipt requested) and will be deemed given upon post office delivery or
attempted delivery to the recipient's last known address. Notices to the Company
must be sent to the attention of the Company's Board of Directors.

     17.  Headings. The Paragraph and other headings in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

     18.  Arbitration. The Company and the Employee agree that the sole and
exclusive method for resolving any dispute between them regarding this Agreement
or its interpretation application or its termination shall be arbitration under
the procedures set forth in this Paragraph; provided, however, that nothing in
this Paragraph prohibits a party from seeking preliminary or permanent
injunctive relief from a court of competent jurisdiction, or from seeking
judicial enforcement of the arbitration award. If either party demands
arbitration of a dispute covered by this Paragraph, an arbitrator shall be
selected, and the arbitrator shall hold a hearing at which both parties may
appear, with or without counsel, and present evidence and argument. Pre-hearing
discovery shall be allowed in the discretion of and to the extent deemed
appropriate by the arbitrator, and the arbitrator shall have subpoena power. The
procedural rules for an arbitration hearing under this Paragraph, and the
selection of the arbitrator shall be pursuant to the rules of the American
Arbitration Association for Commercial Arbitration Hearings and such rules as
the arbitrator may determine. The hearing shall be held in Houston, Texas. The
award of the arbitrator(s) shall be final and binding and may be enforced by and
certified as a judgment of any court of competent jurisdiction. The fees and
expenses of the arbitrator shall be paid equally by the Company and the
Employee. The attorney fees and expenses incurred by the parties shall be paid
by the losing party.

     19.  Governing Law. The validity, interpretation, and construction of
this Agreement are to be governed by the laws of the State of Texas, without
regard to principles of conflicts of law.

                                   12 of 13

                     *     *     *     *     *     *     *
<PAGE>

     The parties have signed this Agreement as of the date and year first
above written.

                                         /s/ Lew P. Murray
                                        --------------------------------------
                                        Lew P. Murray
                                                                   "Employee"

                                        MILLER EXPLORATION COMPANY

                                        By  /s/ Kelly E. Miller
                                          ------------------------------------

                                        Its    President
                                           -----------------------------------

                                                                   "Company"

                                   13 of 13

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