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                                                                   EXHIBIT 10(h)

                               ENERGEN CORPORATION
                            1997 STOCK INCENTIVE PLAN
                     (As Amended Effective October 1, 2001)

         The purpose of this Plan is to provide a means whereby Energen
Corporation may, through the use of stock and stock related compensation,
attract and retain persons of ability as employees and motivate such employees
to exert their best efforts on behalf of Energen Corporation and its
subsidiaries.

         1.       DEFINITIONS. As used in the Plan, the following terms have
meanings indicated:

         "Award" means any grant or award under the Plan of Incentive Stock
Options, Nonqualified Stock Options, Restricted Stock and/or Performance Shares
granted under the Plan.

         "Award Period" means the 4-year period (Energen fiscal years)
commencing with the first day of the fiscal year in which the applicable
Performance Share Award is granted, except as otherwise determined by the
Committee at the time of grant and subject to the other provisions of this Plan.

         "Board" means the Board of Directors of Energen.

         "Cause" means any of the following:

                           (1)      The willful and continued failure by a
                  Participant to substantially perform such Participant's duties
                  with Energen or a Subsidiary (other than any such failure
                  resulting from such Participant's incapacity due to physical
                  or mental illness) after a written demand for substantial
                  performance is delivered to the Participant specifically
                  identifying the manner in which such Participant has not
                  substantially performed such Participant's duties.

                           (2)      The engaging by a Participant in willful,
                  reckless or grossly negligent misconduct which is demonstrably
                  injurious to Energen or a Subsidiary monetarily or otherwise;
                  or

                           (3)      The conviction of a Participant of a felony.

         "Change in Control" means: the occurrence of any one or more of the
following:

                                    (1)      The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule
13(d)-3 promulgated under the Exchange Act) of 25% or more of either (i) the
then outstanding shares of common stock of Energen (the "Outstanding Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of Energen entitled to vote generally in the election of directors
(the "Outstanding Voting Securities"); provided, however, that for purposes of
this subsection (1) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by Energen or any corporation controlled by
Energen shall not constitute a Change in Control;

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                                    (2)      Individuals who, as of October 1,
1999, constitute the Board of Directors of Energen (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board of Directors of
Energen (the "Board of Directors"); provided, however that any individual
becoming a director subsequent to such date whose election, or nomination for
election by Energen's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board of Directors;

                                    (3)      Consummation of a reorganization,
merger or consolidation, or sale or other disposition of all or substantially
all of the assets, of Energen (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
75% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Energen or all or
substantially all of Energen's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Common Stock
and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding
any corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of Energen or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board of
Directors, providing for such Business Combination;

                                    (4)      Any transaction or series of
transactions which is expressly designated by resolution of the Board of
Directors to constitute a Change in Control for purposes of this Agreement.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

         "Committee" means the Officers Review Committee of the Board or such
other Committee of two or more directors as may be determined by the Board.

         "Energen" means Energen Corporation and any successor corporation by
merger or other reorganization.

         "Employee" means any employee of one or more of Energen and the
Subsidiaries.

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         "Exchange Act" means the Securities Exchange Act of 1934.

         "Exercise Date" means the date on which a notice of option exercise is
delivered to Energen pursuant to Section 6.2(c) or a notice of option
cancellation is delivered to Energen pursuant to Section 6.2(i).

         "Expiration Date" means the last day on which an option issued under
the Plan may be exercised, as such date may be extended pursuant to Section
6.2(a).

         "Fair Market Value" means, with respect to a share of Stock, the
closing price of the Stock on the New York Stock Exchange (or such other
exchange or system on which the Stock then trades or is quoted) or, if there is
no trading of the Stock on the relevant date, then the closing price on the most
recent trading date preceding the relevant date. With respect to other
consideration, the term Fair Market Value means fair market value as may be
reasonably determined by the Committee.

         "Incentive Stock Options" means options granted under the Plan to
purchase Stock which at the time of grant qualify as "incentive stock options"
within the meaning of Section 422 of the Code.

         "Independent Auditor" means the firm of certified public accountants
which at the time of the Change in Control had been most recently engaged by
Energen to render an opinion on Energen's consolidated financial statements, or
any other firm of certified public accountants mutually agreeable to Energen and
at least eighty percent of the Participants holding Awards outstanding as of the
date of the Change in Control.

         "Interim Period" means a 1, 2 or 3 year period within a Performance
Share Award Period for which the Committee determines that there shall be
Interim Periods.

         "Measurement Value" means the average of the daily closing prices for a
share of Stock for the 20 trading days ending on the fifth business day prior to
the date of payment of Performance Shares for an Award Period or an Interim
Period, as the case may be, on the Composite Tape for the New York Stock
Exchange -- Listed Stocks, or, if the stock is not listed on such Exchange, on
the principal United States securities exchange registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), on which the stock is
listed, or, if the stock is not listed on any such Exchange, the average of the
daily closing bid quotations with respect to a share of the stock for such 20
trading days on the National Association of Securities Dealers, Inc., Automated
Quotations System or any system then in use, or, if no such quotations are
available, the fair market value of a share of Stock as determined by a majority
of the Board of Directors; provided, however that if a Change in Control shall
have occurred, then if no such quotations are available, such determination
shall be made by a majority of the Incumbent Board (as defined in the Change in
Control definition above).

         "Nonqualified Stock Options" means options granted under the Plan to
purchase Stock which are not Incentive Stock Options.

         "Participant" means an Employee who is selected by the Committee to
receive an Award.

         "Performance Measures" has the meaning set forth in Section 10.

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         "Performance Share" means the value equivalent of one share of Stock.

         "Plan" means this Energen Corporation 1997 Stock Incentive Plan.

         "Restricted Stock" means Stock granted to a Participant under Section 7
of the Plan with respect to which the applicable Restrictions have not lapsed or
been removed.

         "Restrictions" means the transfer and other restrictions set forth in
Section 7.2(a).

         "Stock" means the common stock, par value $.01 per share, of Energen as
such stock may be reclassified, converted or exchanged by reorganization, merger
or otherwise.

         "Subsidiary" means any corporation, the majority of the outstanding
voting stock of which is owned, directly or indirectly by Energen Corporation.

         "Ten Percent Stockholder" means an individual who, at the time of
grant, owns stock possessing more than 10 percent of the total combined voting
power of all classes of stock of Energen.

         2.       SHARE LIMITATIONS.

                  2.1      SHARES SUBJECT TO THE PLAN. Subject to adjustment in
accordance with Section 3, an aggregate of 1,300,000 shares of Stock are
available for issuance (including shares transferred from treasury) under the
Plan (reflects the original 650,000-share authorization adjusted for the 1998
stock split). Shares of Stock allocable to an Award or portion of an Award that
is canceled by forfeiture, expiration or for any other reason (excepting
pursuant to a stock appreciation right election under Section 6.2(i)) shall
again be available for additional Awards. If any option granted under the Plan
shall be canceled as to any shares of Stock pursuant to Section 6.2(i) (stock
appreciation rights), then such shares of Stock shall not be available for the
grant of another Award.

                  2.2      INDIVIDUAL LIMITATION. Subject to adjustment in
accordance with Section 3, the maximum aggregate number of shares of Stock
represented by all Awards of options and Performance Shares granted under the
Plan to any one Participant shall not exceed 300,000 (reflects the original
150,000-share limitation adjusted for the 1998 stock split).

         3.       ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK. In the event
of any change in the Stock by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or rights offering to purchase Stock at a price substantially below fair
market value, or of any similar change affecting the Stock, the number and kind
of shares which thereafter may be available for issuance under the Plan, the
terms of outstanding Awards shall be appropriately adjusted consistent with such
change in such manner as the Committee may deem equitable to prevent dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan. If the adjustment would result in fractional shares with respect to an
Award, then the Committee may make such further adjustment (including, without
limitation, the use of consideration other than Stock or rounding to the nearest
whole number of shares) as the Committee shall deem appropriate to avoid the
issuance of fractional shares.

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         4.       ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Committee. No member of the Committee shall be eligible to participate in
the Plan while serving as a member of the Committee. Subject to the provisions
of the Plan, the Committee shall have the exclusive authority to select the
Employees who are to be Participants in the Plan, to determine the Award to be
made to each Participant, and to determine the conditions subject to which
Awards will become payable under the Plan. The Committee shall have full power
to administer and interpret the Plan and to adopt such rules and regulations
consistent with the terms of the Plan as the Committee deems necessary or
advisable in order to carry out the provisions of the Plan. The Committee's
interpretation and construction of the Plan and of any conditions applicable to
Awards shall be conclusive and binding on all persons, including Energen and all
Participants. Any action which can be taken, or authority which can be
exercised, by the Committee with respect to the Plan, may also be taken or
authorized by the Board.

         5.       PARTICIPATION. Participants in the Plan shall be selected by
the Committee from those Employees who, in the judgment of the Committee, have
significantly contributed or can be expected to significantly contribute to
Energen's success.

         6.     OPTIONS

         6.1    GRANT OF OPTIONS. Subject to the provisions of the Plan, the
Committee may (a) determine and designate from time to time those Participants
to whom options are to be granted and the number of shares of Stock to be
optioned to each employee; (b) authorize the granting of Incentive Stock
Options, Nonqualified Stock Options, or combination of Incentive Stock Options
and Nonqualified Stock Options; (c) determine the number of shares subject to
each option; (d) determine the time or times when each Option shall become
exercisable and the duration of the exercise period; and (e) determine whether
and, if applicable, the manner in which each option shall contain stock
appreciation rights and/or dividend equivalents; provided, however, that (i) no
Incentive Stock Option shall be granted after the expiration of ten years from
the effective date of the Plan specified in Section 15 and (ii) the aggregate
Fair Market Value (determined as of the date the option is granted) of the Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any employee during any calendar year (under all plans of Energen and its
Subsidiaries) shall not exceed $100,000.

         6.2    TERMS AND CONDITIONS OF OPTIONS. Each option granted under the
Plan shall be evidenced by a written agreement. Such agreement shall be subject
to the following express terms and conditions and to such other terms and
conditions as the Committee may deem appropriate:

                  (a)      Option Period. Each option agreement shall specify
         the period for which the option thereunder is granted and shall provide
         that the option shall expire at the end of such period. The Committee
         may extend such period provided that, in the case of an Incentive Stock
         Option, such extensions shall not in any way disqualify the option as
         an Incentive Stock Option. In no case shall such period for an
         Incentive Stock Option, including any such extensions, exceed ten years
         from the date of grant, provided, however that, in the case of an
         Incentive Stock Option granted to a Ten Percent Stockholder, such
         period, including extensions, shall not exceed five years from the date
         of grant.

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                  (b)      Option Price. The option price per share shall be
         determined by the Committee at the time any option is granted, and
         shall be not less than (i) the Fair Market Value, or (ii) in the case
         of an Incentive Stock Option granted to a Ten Percent Stockholder, 110
         percent of the Fair Market Value, (but in no event less than the par
         value) of one share of Stock on the date the option is granted, as
         determined by the Committee.

                  (c)      Exercise of Option. No part of any option may be
         exercised until the optionee shall have remained in the employ of
         Energen or of a Subsidiary for such period, if any, as the Committee
         may specify in the option agreement, and the option agreement may
         provide for exercisability in installments. The Committee shall have
         full authority to accelerate for any reason it deems appropriate the
         vesting schedule of all or any part of any option issued under the
         Plan. Each option shall be exercisable in whole or part on such date or
         dates and during such period and for such number of shares as shall be
         set forth in the applicable option agreement. An optionee electing to
         exercise an option shall give written notice to Energen of such
         election and of the number of shares the optionee has elected to
         purchase and shall at the time of exercise tender the full purchase
         price of the shares the optionee has elected to purchase plus any
         required withholding taxes in accordance with Sections 6.2(d) and 9.

                  (d)      Payment of Purchase Price upon Exercise. The
         purchase price of the shares as to which an option shall be exercised
         shall be paid to Energen at the time of exercise (i) in cash, (ii) in
         Stock already owned by the optionee having a total Fair Market Value
         equal to the purchase price and not subject to any lien, encumbrance or
         restriction on transfer other than pursuant to federal or state
         securities laws, (iii) by election to have Energen withhold (from the
         Stock to be delivered to the optionee upon such exercise) shares of
         Stock having a Fair Market Value equal to the purchase price or (iv) by
         any combination of such consideration having a total Fair Market Value
         equal to the purchase price; provided that the use of consideration
         described in clauses (ii), (iii) and (iv) shall be subject to approval
         by the Committee. In addition the Committee in its discretion may
         accept such other consideration or combination of consideration as the
         Committee shall deem to be appropriate and to have a total Fair Market
         Value equal to the purchase price. In each case, Fair Market Value
         shall be determined as of the Exercise Date.

                  (e)      Exercise in the Event of Death or Termination of
         Employment. If an optionee's employment by Energen and all Subsidiaries
         shall terminate for Cause, then all options held by the terminated
         Employee shall immediately expire. If an optionee's employment by
         Energen and all Subsidiaries shall terminate because of the optionee's
         (i) death or (ii) disability or retirement in accordance with the terms
         of Energen's applicable tax-qualified disability or retirement plans,
         then all options held by the optionee shall be immediately and fully
         vested and may be exercised on or prior to the applicable Expiration
         Dates. If an optionee's employment by Energen and all Subsidiaries
         shall terminate for any reason other than those set forth in the
         preceding sentences, then all of the optionee's unvested options shall
         expire as of the termination date and all of the optionee's vested
         options shall expire ninety days following the date of termination of
         employment, provided that the Committee shall have the authority to
         extend such option expiration date up to the original Expiration Date.
         Without limiting the generality of Section 5(c), the Committee shall
         have full authority to accelerate the vesting schedule of all or any
         part of any option issued under the Plan and held by an employee who
         has terminated or plans to terminate his or her employment, such that a

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         terminated employee, his heirs or personal representatives may exercise
         (at such time or times on or prior to the applicable Expiration Dates
         as may be specified by the Committee) any part or all of any unvested
         option under the Plan held by such employee at the date of his or her
         termination of employment. The foregoing notwithstanding, the Committee
         may at the time of grant provide for different or supplemental terms
         and conditions with respect to termination of employment and any such
         terms and conditions expressly provided in the written option agreement
         shall be controlling with respect to that option.

                  (f)      Nontransferability. Except as may otherwise be
         provided in this Section 5(f), no option granted under the Plan shall
         be transferable other than by will or by the laws of descent and
         distribution and, during the lifetime of the optionee, an option shall
         be exercisable only by the optionee. The foregoing notwithstanding, the
         optionee may transfer Nonqualified Stock Options to (i) the optionee's
         spouse or natural, adopted or step-children or grandchildren (including
         the optionee, "Immediate Family Members"), (ii) a trust for the benefit
         of one or more of the Immediate Family Members, (iii) a family
         charitable trust established by one or more of the Immediate Family
         Members, or (iv) a partnership in which the only partners are (and,
         except as may be otherwise agreed by the Committee, will remain during
         the option period) one or more of the Immediate Family Members. Any
         options so transferred shall not be further transferable except in
         accordance with the terms of this Plan, shall remain subject to all
         terms and conditions of the Plan and the applicable option agreement,
         and may be exercised by the transferee only to the extent that the
         optionee would have been entitled to exercise the option had the option
         not been transferred.

                  (g)      Investment Representation. To the extent reasonably
         necessary to assure compliance with all applicable securities laws,
         upon demand by the Committee for such a representation, the optionee
         shall deliver to the Committee at the time of any exercise of an option
         or portion thereof or settlement of stock appreciation rights or
         dividend equivalents a written representation that the shares to be
         acquired upon such exercise are to be acquired for investment and not
         for resale or with a view to the distribution thereof. Upon such
         demand, delivery of such representation prior to the delivery of any
         shares issued upon exercise of an option and prior to the expiration of
         the option period shall be a condition precedent to the right of the
         optionee or such other person to purchase any shares.

                  (h)      Incentive Stock Options. Each option agreement which
         provides for the grant of an Incentive Stock Option to a participant
         shall contain such terms and provisions as the Committee may determine
         to be necessary or desirable in order to qualify such option as an
         "incentive stock option" within the meaning of Section 422 of the Code,
         or any amendment thereof or substitute therefor. Energen, in its
         discretion, may retain possession of any certificates for Stock
         delivered in connection with the exercise of an Incentive Stock Option
         or appropriately legend such certificates during the period that a
         disposition of such Stock would disqualify the exercised option from
         treatment as an incentive stock option under Section 422 of the Code (a
         "422 Option"). Subject to the other provisions of the Plan, Energen
         shall cooperate with the optionee should the optionee desire to make a
         disqualifying disposition. Any Incentive Stock Option which is
         disqualified from treatment as a 422 Option for whatever reason, shall
         automatically become a Nonqualified Stock Option. No party has any
         obligation or responsibility to maintain an Incentive Stock Option's
         status as a 422 Option. The optionee shall, however, immediately notify
         Energen of any disposition of Stock which would cause an Incentive
         Stock Option to be disqualified as a 422 Option.

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                  (i)      Stock Appreciation Right. Each option agreement may
         provide that the optionee may from time to time elect, by written
         notice to Energen, to cancel all or any portion of the option then
         subject to exercise, in which event Energen's obligation in respect of
         such option shall be discharged by payment to the optionee of an amount
         in cash equal to the excess, if any, of the Fair Market Value as of the
         Exercise Date of the shares subject to the option or the portion
         thereof so canceled over the aggregate purchase price for such shares
         as set forth in the option agreement or, if mutually agreed by the
         Committee and the optionee, (i) the issuance or transfer to the
         optionee of shares of Stock with a Fair Market Value as of the Exercise
         Date equal to any such excess, or (ii) a combination of cash and shares
         of Stock with a combined value as of the Exercise Date equal to any
         such excess.

                  (j)      Dividend Equivalents. Each option agreement may
         provide that upon (i) exercise of all or part of an option, (ii)
         cancellation of all or part of such option pursuant to paragraph 5(i),
         or (iii) the occurrence of an Expiration Date, for no additional
         consideration, the optionee shall be paid an additional amount equal to
         the aggregate amount of cash dividends which would have been paid on
         the shares of Stock purchased upon such exercise or with respect to
         which such cancellation or expiration occurs, if such shares had been
         issued and outstanding during the period commencing with the option
         grant date and ending on the date of option exercise, cancellation or
         expiration, plus an amount equal to the interest that such dividends
         would have earned from the respective dividend payment dates if
         deposited in an account bearing interest, compounded quarterly on each
         April 1, July 1, October 1 and January 1, at a rate calculated as
         follows. For purposes of the preceding sentence, the assumed interest
         rate in effect for a calendar quarter shall be the announced prime rate
         of AmSouth Bank of Alabama (or such comparable rate of a comparable
         institution as the Committee may from time to time determine) in effect
         on the first day of such calendar quarter. Such additional amount shall
         be paid by cash, or if mutually agreed by the Committee and the
         optionee, by the issuance of Stock or a combination of cash and shares
         of Stock having an aggregate Fair Market Value as of the applicable
         Expiration or Exercise Date, equal to any such excess.

                  (k)      No Rights as Shareholder. No optionee shall have any
         rights as a shareholder with respect to any shares subject to the
         optionee's option prior to the date of issuance to the optionee of a
         certificate or certificates for such shares.

                  (l)      Delivery of Certificates. Subject to Section 6.2(h),
         as soon as reasonably practicable after receipt of an exercise notice
         and full payment, Energen shall deliver to the optionee, registered in
         the optionee's name, certificates for the appropriate number of shares
         of Stock.

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         7.     RESTRICTED STOCK

         7.1      GRANT OF RESTRICTED STOCK. The Committee may make grants of
Restricted Stock to Participants. Each restricted Stock Award shall be evidenced
by a written agreement setting forth the number of shares of Restricted Stock
granted and the terms and conditions to which the Restricted Stock is subject.
Restricted Stock may be awarded by the Committee in its discretion with or
without cash consideration.

         7.2      TERMS AND CONDITIONS OF RESTRICTED STOCK.

                  (a)      Restrictions. No shares of Restricted Stock may be
         sold, assigned, transferred, pledged, hypothecated, or otherwise
         encumbered or disposed of (the "Restrictions") until the Restrictions
         on such shares have lapsed or been removed.

                  (b)      Lapse. The Committee shall establish as to each Award
         of Restricted Stock the terms and conditions upon which the
         Restrictions shall lapse, which terms and conditions may include,
         without limitation, a required period of service, Performance Measures,
         or any other individual or corporate performance conditions.

                  (c)      Termination of Employment. Exercise in the Event of
         Death or Termination of Employment. If a Participant's employment by
         Energen and all Subsidiaries shall terminate because of the
         Participant's (i) death or (ii) disability or retirement in accordance
         with the terms of Energen's applicable tax-qualified disability or
         retirement plans, then all restrictions on the Participant's
         outstanding Restricted Stock shall immediately lapse. Should a
         Participant's employment with Energen and all Subsidiaries terminate
         for any reason other than those set forth in the preceding sentence,
         any shares of the Participant's Stock which remain subject to
         Restrictions, shall be forfeited and returned to Energen. The foregoing
         notwithstanding, the Committee may at the time of grant provide for
         different or supplemental terms and conditions with respect to
         termination of employment and any such terms and conditions expressly
         provided in the written Restricted Stock agreement shall be controlling
         with respect to that grant of Restricted Stock.

                  (d)      Lapse at Discretion of Committee. The Committee may
         at any time, in its sole discretion, accelerate the time at which any
         or all Restrictions on a Restricted Stock Award will lapse or remove
         any and all such Restrictions; provided that the Committee may not
         accelerate the lapse of or remove Restrictions which require the
         attainment of a Performance Measure except as may be permitted by the
         performance-based exception to Section 162(m) of the Code.

                  (e)      Rights with respect to Restricted Stock. Upon the
         acceptance by a Participant of an award of Restricted Stock, such
         Participant shall, subject to the restrictions set forth in paragraph
         (b) above, have all the rights of a shareholder with respect to such
         shares of Restricted Stock, including, but not limited to, the right to
         vote such shares of Restricted Stock and the right to receive all
         dividends and other distributions paid thereon. Certificates
         representing Restricted Stock may be held by Energen until the
         restrictions lapse and shall bear such restrictive legends as Energen
         shall deem appropriate.

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                  (f)      No Section 83(b) Election. Unless otherwise expressly
         agreed in writing by Energen, a Participant shall not make an election
         under Section 83(b) of the Code with respect to a Restricted Stock
         Award and upon the making of any such election, all shares of
         Restricted Stock subject to the election shall be forfeited and
         returned to Energen.

         8.       PERFORMANCE SHARES

         8.1      GRANT OF PERFORMANCE SHARES

                  (a)      The Committee may from time to time select employees
         to receive Performance Shares under the Plan. An Employee may be
         granted more than one Performance Share Award under the Plan. In its
         discretion at the time of grant, the Committee may determine that an
         Interim Period or Interim Periods should be established for payment
         with respect to Performance Share Awards. Whenever Interim Periods are
         established, the terms and conditions with respect to payment after the
         end of such Interim Period shall be those set by the Committee.

                  (b)      A Performance Share Award shall not entitle a
         Participant to receive any dividends or dividend equivalents on
         Performance Shares; no Participant shall be entitled to exercise any
         voting or other rights of a stockholder with respect to any Performance
         Share Award under the Plan; and no Participant shall have any interest
         in or rights to receive any shares of Stock prior to the time when the
         committee determines the form of payment of Performance Shares pursuant
         to Section 8.2.

                  (c)      Payment of a Performance Share Award to any
         Participant shall be made in accordance with Section 8.2 and shall be
         subject to such conditions for payment as the Committee may prescribe
         at the time the Performance Share Award is made. The Committee may
         prescribe conditions such that payment of a Performance Share Award may
         be made with respect to a number of shares of Stock greater than the
         number of Performance Shares awarded. The Committee may prescribe
         different conditions for different Participants.

                  (d)      Each Performance Share Award shall be made in writing
         and shall set forth the terms and conditions set by the Committee for
         payment of such Performance Share Award.

         8.2      PAYMENT OF PERFORMANCE SHARE AWARDS

         Each Participant granted a Performance Share Award shall be entitled to
payment on account thereof as of the close of the applicable Award Period, but
only if the Committee has determined that the conditions for payment of the
Award set by the Committee have been satisfied. Participants granted Awards with
Interim Periods shall be entitled to partial payment on account thereof as of
the close of the Interim Period, but only if the Committee has determined that
the conditions for partial payment of the Award set by the Committee have been
satisfied. Performance Shares paid to a Participant for an Interim Period need
not be repaid to the Corporation, notwithstanding that, based on the conditions
set for payment at the end of the Award Period, such Participant would not have
been entitled to payment of any portion of such Award. Any Performance Shares
paid to a Participant for the Interim Period during an Award Period shall be
deducted from the Performance Shares to which such Participant is entitled at
the end of the Award Period.

                                       10
<PAGE>
At the time it determines whether the conditions for payment have been
satisfied, the Committee, in its discretion, shall determine whether the Awards
will be paid all in cash, or in some combination of cash and shares of Stock,
except and provided that the Committee must pay in cash an amount equal to the
federal, state and other taxes which the Corporation is required to withhold,
and further provided that payment in shares of Stock shall be subject to the
aggregate share limitation set forth in Section 2. Payment of Awards shall be
made by the Corporation as promptly as possible after the determination by the
Committee that payment has been earned and upon a date fixed by the Committee to
permit calculation of Measurement Value of the Common Stock. The portion of the
Award paid in Stock shall be equal to the number of Performance Shares being
paid in Stock, and the balance shall be an amount of cash equal to the
Measurement Value of the remaining Performance Shares to be paid.

         8.3      TERMINATION OF EMPLOYMENT

         Except in the case of a Qualified Termination (as defined below) if,
prior to the close of the Award Period with respect to a Performance Share
Award, a Participant's employment with Energen and all Subsidiaries terminates,
then any unpaid portion of such Participant's Performance Share Award shall be
forfeited. In the case of a Qualified Termination (as defined below), the
Participant shall remain entitled to payout of any outstanding Performance Share
Awards (subject to the retirement reduction described below) at the end of the
applicable Award Period in accordance with the terms of this Plan including
without limitation applicable performance conditions.

         Qualified Termination. "Qualified Termination" means termination of a
Participant's employment with Energen and all subsidiaries under any one of the
following circumstances:

                  (i)      An involuntary termination by Energen and the
                           Subsidiaries, as applicable, other than for Cause.

                  (ii)     Expressly agreed in writing by the Participant and
                           Energen and/or a subsidiary to constitute a Qualified
                           Termination for purposes of this Plan.

                  (iii)    A result of the Participant's death or disability.

                  (iv)     A result of Participant's retirement under the
                           Energen Corporation Retirement Income Plan, as
                           amended from time to time.

                  (v)      A voluntary termination by the Participant for Good
                           Reason. The term "Good Reason" means with respect to
                           an Award and a Participant, the occurrence subsequent
                           to the grant of such Award of (A) a reduction in the
                           Participant's aggregate rate of monthly base pay from
                           Energen and the Subsidiaries, as applicable, or (B)
                           the termination or materially adverse modification of
                           the Energen Annual Incentive Compensation Plan
                           without substitution of new short-term incentives
                           providing comparable compensation opportunities for
                           the Participant.

                                       11
<PAGE>

                  (vi)     A voluntary termination by the Participant during the
                           period commencing with the earliest date that a
                           Change in Control occurs and ending on the last day
                           of the thirty-sixth calendar month following the
                           calendar month during which such Change in Control
                           occurs.

         Retirement. If the Participant's termination satisfies only that part
of the Qualified Termination definition related to retirement (clause (v)), then
this paragraph applies. If the Participant, having reached Retirement Date as
defined under the Energen Corporation Retirement Income Plan, as amended from
time to time, retires prior to the end of the first twelve months of an Award
Period (the "Initial Fiscal Year"), the number of Performance Shares for such
Award shall be reduced. The reduced Award shall equal the number of Performance
Shares originally granted multiplied by a fraction the numerator of which is the
number of Initial Fiscal Year months which occur prior to retirement and the
denominator of which is 12. For example, if the original Award was for 1,000
Performance Shares and the Participant retired on January 1 of the Initial
Fiscal Year, the size of the Award would be reduced by 75% to 250 Performance
Shares, with the payment of such 250 Performance Shares remaining subject to the
applicable Performance Conditions for the full Award Period and the remaining
750 Performance Shares being forfeited.

         8.4      CONSULTING, NON-COMPETE AND CONFIDENTIALITY

         A Participant's entitlement, if any, to payout of Performance Share
Awards subsequent to termination of employment with Energen and all Subsidiaries
shall continue so long as the Participant is in compliance with the following
requirements. Failure to comply shall result in forfeiture of all then
outstanding Performance Share Awards.

                  (a)      Consulting Services. For a period of three years
         following the termination of the Participant's employment ("Date of
         Termination"), Participant will fully assist and cooperate with
         Energen, the Subsidiaries and their representatives (including outside
         auditors, counsel and consultants) with respect to any matters with
         which the Participant was involved during the course of employment,
         including being available upon reasonable notice for interviews,
         consultation, and litigation preparation. Except as otherwise agreed by
         Participant, Participant's obligation under this Section 8(a) shall not
         exceed 80 hours during the first year and 20 hours during each of the
         following two years. Such services shall be provided upon request of
         Energen and the Subsidiaries but scheduled to accommodate Participant's
         reasonable scheduling requirements. Participant shall receive no
         additional fee for such services but shall be reimbursed all reasonable
         out-of-pocket expenses.

                  (b)      Non-Compete. For a period of twelve months following
         the Date of Termination, the Participant shall not Compete, (as defined
         below) or assist others in Competing with Energen and the Subsidiaries.
         For purposes of this Agreement, "Compete" means (i) solicit in
         competition with Alabama Gas Corporation ("Alagasco") any person or
         entity which was a customer of Alagasco at the Date of Termination;
         (ii) offer to acquire any local gas distribution system in the State of
         Alabama; or (iii) offer to acquire any coalbed methane interest in the
         State of Alabama. Employment by, or an investment of less than one
         percent of equity capital in, a person or entity which Competes with
         Energen or the Subsidiaries does not constitute Competition by
         Participant so long as Participant does not directly participate in,
         assist or advise with respect to such Competition.

                                       12
<PAGE>

                  (c)      Confidentiality. Participant agrees that at all times
         following the Date of Termination, Participant will not, without the
         prior written consent of Energen, disclose to any person, firm or
         corporation any confidential information of Energen or the Subsidiaries
         which is now known to Participant or which hereafter may become known
         to Participant as a result of Participant's employment, unless such
         disclosure is required under the terms of a valid and effective
         subpoena or order issued by a court or governmental body; provided,
         however, that the foregoing shall not apply to confidential information
         which becomes publicly disseminated by means other than a breach of
         this Agreement.

         8.5      NO ASSIGNMENT OF INTEREST

         The interest of any person in the Plan shall not be assignable, either
by voluntary assignment or by operation of law, and any assignment of such
interest, whether voluntary or by operation of law, shall render the Award void.
Amounts payable under the Plan shall be transferable only by will or by the laws
of descent and distribution.

         9.       WITHHOLDING. Each Participant shall, no later than the date as
of which the value of an Award first becomes includable in the gross income of
the Participant for Federal income tax purposes, pay to Energen and
Subsidiaries, or make arrangements satisfactory to the Committee, in its sole
discretion, regarding payment of, any Federal, FICA, state, or local taxes of
any kind required by law to be withheld with respect to the Award. The
obligations of Energen under the Plan shall be conditional on such payment or
arrangements. Energen and, where applicable, its Subsidiaries shall, to the
extent permitted by law, have the right to deduct any such taxes owed hereunder
by a Participant from any payment of any kind otherwise due to said Participant.
The Committee may permit Participants to elect to satisfy their Federal, and
where applicable, FICA, state and local tax withholding obligations with respect
to all Awards by the reduction, in an amount necessary to pay all said
withholding tax obligations, of the number of shares of Stock or amount of cash
otherwise issuable or payable to said Participants in respect of an Award.

         10.      PERFORMANCE MEASURES. At its discretion, the Committee may
make the Awards subject to the attainment of one or more Performance Measures
designed to qualify for the performance-based exceptions from Section 162(m) of
the Code.

Unless and until Energen's shareholders approve a change in the Performance
Measures set forth in this Section 10, the Performance Measures to be used for
purposes of such Awards shall be chosen from among the following alternatives,
as measured with respect to Energen and/or any one or more of the Subsidiaries,
with or without comparison to a peer group:

                  (a)      return on shareholder's equity;

                  (b)      return on assets;

                  (c)      net income;

                  (d)      earnings per common share;

                                       13
<PAGE>

                  (e)      total shareholder return;

                  (f)      oil and/or gas reserve additions;

                  (g)      utility customer number, volume and/or revenue
                           growth; and

                  (h)      such other criteria as may be established by the
                           Committee in writing and which meets the requirements
                           of the performance-based exception to Section 162(m)
                           of the Code.

In the event that the performance-based exception to Section 162(m) or its
successor is amended such that the performance-based exception permits the
employer to alter the governing performance measures without obtaining
shareholder approval of such changes, the Committee shall have discretion to
make such changes without obtaining shareholder approval.

         11.      NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Award
granted under the Plan shall not confer upon any Participant any right with
respect to continuance of employment by Energen or any Subsidiary or any right
to further Awards under the Plan, nor shall they interfere in any way with the
right of Energen or any Subsidiary by which a Participant is employed to
terminate the Participant's employment at any time.

         12.      COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the
grant and fulfillment of Awards thereunder, and the obligations of Energen to
sell, issue, release and/or deliver shares of Stock shall be subject to all
applicable federal and state laws, rules, and regulations and to such approvals
by any government or regulatory agency as may be required. Energen shall not be
required to issue or deliver any certificates for shares of Stock prior to (a)
the listing of such shares on any stock exchange on which the Stock may then be
listed and (b) the completion of any registration or qualification of such
shares under any federal or state law, or any ruling or regulation of any
government body which Energen shall, in its sole discretion, determine to be
necessary or advisable.

         13.      CHANGE IN CONTROL.

                  13.1     OPTIONS, RESTRICTED STOCK. Except as may be otherwise
         expressly provided in the applicable Award agreement, upon the
         occurrence of a Change in Control all outstanding Incentive Stock
         Options and Nonqualified Stock Options shall be immediately and fully
         vested and exercisable and all restrictions on all outstanding
         Restricted Stock shall immediately lapse. Except as may be otherwise
         expressly provided in the applicable Award Agreement, if a
         Participant's employment by Energen and all subsidiaries is terminated
         during a Pre-Closing Period (defined below) (i) involuntarily by
         Energen other than for Cause, or (ii) voluntarily by the Participant
         for Good Reason (defined below), then all of the Participant's
         outstanding Incentive Stock Options and Nonqualified Stock Options
         shall be immediately and fully vested and exercisable and all
         restrictions on all of the Participant's outstanding Restricted Stock
         shall immediately lapse. A "Pre-Closing Period" commences upon Energen
         shareholder approval of a transaction which upon consummation will
         constitute a Change in Control and

                                       14
<PAGE>

         ends upon the first to occur of (i) the closing of such transaction or
         (ii) a determination by the Board that such Change in Control will not
         be consummated. "Good Reason" means with respect to a Participant (i) a
         reduction in Participant's aggregate rate of monthly base pay from
         Energen and all subsidiaries or (ii) the termination or materially
         adverse modification of the Energen Annual Incentive Compensation Plan
         without substitution of new short-term incentives providing comparable
         compensation for the Participant.

                  13.2     PERFORMANCE SHARES.

                           (a)      Acceleration Event. For purposes of this
                  Section 13.2, "Acceleration Event" means the occurrence of a
                  Change in Control unless following such Change in Control at
                  least a majority of the members of the Board of Directors of
                  the corporation resulting from such Change in Control were
                  members of the Incumbent Board (as defined in the Section 1
                  definition of Change in Control) at the time of the execution
                  of the initial agreement, or of the action of the Board
                  providing for such Change in Control.

                           (b)      Payment Acceleration. If an Acceleration
                  Event occurs, all outstanding Performance Share Awards shall
                  be valued as soon after the date of such Acceleration Event as
                  practicable. Valuation of the Performance Share awards shall
                  be based on satisfaction of the applicable performance
                  conditions measured as if all Award Periods had ended at the
                  close of Energen's last whole fiscal year prior to the date of
                  the Acceleration Event, provided that for purposes of any
                  performance conditions involving the price of the Common Stock
                  or payment of dividends, stock shall be priced equal to its
                  Measurement Value based on the twenty trading days immediately
                  preceding the date of such Acceleration Event and the period
                  for dividend measurement shall extend to and include the day
                  immediately prior to the date of the Acceleration Event. As
                  soon as practicable following the completion of such
                  valuation, all outstanding Performance Share Awards shall be
                  paid based on such valuation.

                           (c)      Independent Auditor. Following an
                  Acceleration Event, all calculations with respect to
                  performance measurement and Award payment shall be made by the
                  Independent Auditor at the expense of Energen. The Independent
                  Auditor shall resolve any procedural ambiguities discovered in
                  making such calculations using its own judgment and discretion
                  in light of the purposes of the Plan and past practices in
                  calculating Performance Share Award payments.

                  13.3     PAYMENT OF PROFESSIONAL FEES AND EXPENSES. If a
Change in Control occurs, Energen shall pay promptly as incurred all legal,
accounting and other professional fees and expenses (collectively, "Professional
Fees") which a Participant may reasonably incur as a result of any contest
(regardless of the outcome thereof) by Energen, Participant or others of the
validity or enforceability of, or liability under, any provision of the Plan
(including as a result of any contest by Executive about the amount of any
payment pursuant to the Plan), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code. In addition Energen shall promptly pay to Participant an additional amount
(the "Tax Reimbursement Payment") such that the net amount retained by the
Participant with respect to all payments made under this paragraph 4 after
deduction of Taxes, shall be equal to the amount of the Professional Fees
reimbursement plus applicable interest. For purposes of this Section 13.3
"Taxes" means all federal, state and local, employment and income taxes payable
or withheld with respect to Professional Fees reimbursement

                                       15
<PAGE>

payments (excluding interest) and Tax Reimbursement payments. The Independent
Auditor, at Energen's expense, shall make all calculations with respect to the
Tax Reimbursement Payment and in making such calculations shall assume that
Participant is subject to the highest marginal tax rates.

         14.      AMENDMENT AND DISCONTINUANCE. The Board of Directors of
Energen may from time to time amend, suspend or discontinue the Plan. Without
the written consent of a Participant, no amendment or suspension of the Plan
shall alter or impair any Award previously granted to a Participant under the
Plan.

         15.      EFFECTIVE DATE OF THE PLAN. The effective date of the Plan
shall be November 25, 1997, the date of its adoption by the Board, subject to
approval by shareholders of Energen holding not less than a majority of the
shares present and voting at its January 1998 Annual Meeting. Awards may be
granted under the Plan by the Committee as provided herein prior but subject to
such subsequent shareholder approval of the Plan.

         16.      NAME. The Plan shall be known as the "Energen Corporation 1997
Stock Incentive Plan."

         17.      1997 DEFERRED COMPENSATION PLAN. If and to the extent
permitted under the Energen Corporation 1997 Deferred Compensation Plan (the
"Deferred Compensation Plan"), a Participant may elect, pursuant to the Deferred
Compensation Plan, to defer receipt of part or all of any shares of Stock or
other consideration deliverable under an Award and upon such deferral shall have
no further right with respect to such deferred Award other than as provided
under the Deferred Compensation Plan. In the event of such a deferral election,
certificates for such shares of Stock as would have otherwise been issued under
the Plan but for the deferral election, may at the discretion of Energen be
delivered to the Trustee under the Deferred Compensation Plan and registered in
the name of the Trustee or such other person as the Trustee may direct.
Regardless of whether such deferred shares of Stock are issued to the Trustee,
they shall constitute "issued" shares for purposes of the Plan's maximum number
of shares limitation set forth in Section 2.

         As approved by the Energen Corporation Board of Directors on November
25, 1997, and shareholders on January 28, 1998, and amended by the Board on
October 27, 1999 (effective as of October 1, 1999), October 25, 2000 and October
24, 2001 (effective as of October 1, 2001).

                                             Assistant Secretary

                                       16<PAGE>
                                                                   EXHIBIT 10(k)

                               ENERGEN CORPORATION
                       ANNUAL INCENTIVE COMPENSATION PLAN
                      As amended effective October 1, 2001

<TABLE>
<CAPTION>
Article                                Description                              Page
-------                                -----------                              ----
<S>                                    <C>                                      <C>

      I.                        Purpose                                          1

      II.                       Policy                                           1

      III.                      Scope                                            1

      IV.                       Terms and Definitions                            1

      V.                        Control Responsibility                           3

      VI.                       Plan Design                                      4

      VII.                      Deferral Arrangements                            5

      VIII.                     Participant Eligibility and                      5
                                       Partial Year Awards

      IX.                       Taxes and Effect on Other Benefits               6

      X.                        Termination and/or Amendments                    6

      XI.                       Assignments or Transfers                         6

      XII.                      Payment of Awards                                7

      Attachment         Fiscal Year Potential Incentive

</TABLE>
<PAGE>

                               ENERGEN CORPORATION
                       ANNUAL INCENTIVE COMPENSATION PLAN

I.       PURPOSE: Attract, retain and motivate key management personnel for
         Energen and its subsidiaries while promoting a team spirit and the pay
         for performance concept.

II.      POLICY: It is the policy of Energen and its subsidiaries to provide an
         incentive compensation plan which rewards superior performance that
         benefits:

         -        Stockholders (earnings plus capital appreciation)

         -        Customers (quality service and products)

         -        Management (income)

III.     SCOPE: This Incentive Compensation Plan is applicable to key executive
         management personnel of Energen and its subsidiaries as recommended by
         the CEO and approved by the ORC.

IV.      TERMS AND DEFINITIONS

         4.01 Attachment - For each Plan Year, an attachment to this Plan
         setting forth for such Plan Year the Participants, the Base Incentive
         Factor, Potential Bonus Pool, Maximum, and such other items as may be
         approved by the ORC.

         4.02 Base Incentive Factor - A number expressed in terms of "percent of
         salary" that each Participant is potentially eligible to receive based
         on Energen Performance (see Attachment).

         4.03 Board of Directors - The Board of Directors of Energen.

         4.04 CEO - The Chief Executive Officer of Energen.

         4.05 Competitive - The Energen financial median performance objective.

                                       1
<PAGE>

         4.06 Energen - Energen Corporation

         4.07 Energen Performance - The Energen financial performance objectives
         approved by the ORC.

         4.08 Incentive Award - The annual cash incentive payment based on
         Energen, subsidiary and individual performance, as applicable.

         4.09 Individual Performance Factor - An adjustment to the Base
         Incentive Factor based on measurement of individual Participant
         performance.

         4.10 Maximum - The maximum is controlled by the individual maximum caps
         (see Section 6.05 and Attachment) and Energen net income (see Incentive
         Pool footnote on Attachment).

         4.11 ORC - The Officer Review Committee of the Board of Directors.

         4.12 Participant - An executive employee of Energen and/or an Energen
         subsidiary recommended by the CEO and approved by the ORC to
         participate in the Plan (see Attachment).

         4.13 The Plan - This Annual Incentive Compensation Plan as amended from
         time to time.

         4.14 Plan Year - Fiscal year October 1 through September 30.

         4.15 Potential Incentive Pool - The potential amount of money available
         for distribution for different levels of Energen performance results
         (see Attachment).

         4.16 Salary - The actual salary earned by the Participant during the
         applicable Plan Year. Salary shall be determined without reduction for
         salary amounts deferred by the Participant pursuant to the Energen
         Corporation 1997 Deferred Compensation Plan and without increase for
         any amounts distributed to the Participant under said Deferred
         Compensation Plan.

         4.17 Subsidiary Performance Factor - An adjustment to the Base
         Incentive Factor based on measurement of selected performance
         objectives (earnings and other) for a subsidiary.

         4.18 Target - The Energen financial performance "stretch" objective

         4.19 Threshold - The Energen financial performance objective below
         which no incentive awards will be made regardless of subsidiary or
         individual performance.

                                       2
<PAGE>

V.       CONTROL RESPONSIBILITY

         5.01 The Board of Directors will approve Energen Performance objectives
         on recommendation of the ORC on an annual basis.

         5.02 The ORC will administer the Plan, which will include approval of:

              a.       Participants

              b.       Energen Performance Objectives

              c.       Potential Incentive Pool

              d.       Subsidiary Performance Factor results

              e.       Individual Performance Factor results and individual
                       incentive award results for the CEO and all
                       Participants directly reporting to the CEO

         5.03 The Energen CEO will approve:

              a.       The establishment of Subsidiary Performance Factor
                       objectives in conjunction with the subsidiary presidents.

              b.       The Individual Performance Factor objectives and the
                       individual incentive awards for all other Participants.

VI.      PLAN DESIGN

         6.01 Potential Incentive Pool - The Potential Incentive Pool is
         expressed as a pool of dollars available for distribution based on
         Energen Performance as covered in Section 6.02 (see Attachment).

         6.02 Energen Performance - Base Incentive Factor - Energen Performance
         includes financial objectives for Threshold, Competitive, Target, and
         Maximum award levels. Energen Performance therefore dictates the Base
         Incentive Factor (see Attachment) which is used in the following
         formula to determine the individual incentive award:

                                       3

<PAGE>

      Incentive Award  = Salary  X  Base Incentive Factor  X
                                    ---------------------
                         Subsidiary Performance Factor X
                         Individual Performance Factor

      If a Subsidiary Performance Factor or Individual Performance Factor is not
      applicable to a Participant's individual incentive award then it shall be
      measured as 1.0 for purposes of the Incentive Award formula.

      6.03 Subsidiary Performance - The CEO in consultation with the subsidiary
      presidents may establish criteria for evaluating subsidiary performance.
      In determining the individual incentive award for a Participant, the Base
      Incentive Factor is adjusted for subsidiary performance. The subsidiary
      Performance Factor will typically range from 0.50 to 1.50 although
      individual components may have tighter or broader ranges.

      6.04 Individual Performance - Participants may be required to meet or
      exceed certain individual performance criteria prior to earning an
      incentive award. Participants may be required to establish with their
      supervisor key objectives, both strategic and operational, for the fiscal
      year. Incentive Awards will be adjusted based on Individual Performance
      Factor measurement of the achievement of these objectives.

      Typically, each individual performance objective will be assigned a weight
      and the sum will be equal to 100. At the end of the plan year the
      Participant's overall performance on such objectives will be rated as
      follows:

             a.  Unacceptable          -        0
             b.  Effective             -      1.0
             c.  Highly Effective      -      1.5
             d.  Outstanding           -      2.0

      The Individual Performance Factor is calculated as follows:

      Sum Total of  = Objective Weight  X  Rating
                      ---------------------------
                                           100

      The Attachment may also provide for by the ORC to set an Individual
      Performance Factor using such objective or subjective criteria as it
      may select in its discretion.

      6.05 Control Measure - Individual Maximum Bonus Potential - Maximum
      individual awards will be established for each group of Participants
      (see Attachment).

                                       4
<PAGE>
VII.  DEFERRAL ARRANGEMENTS:

      A Participant may elect to defer an award payment in accordance with the
      terms of the Energen Corporation 1997 Deferred Compensation Plan and upon
      such deferral shall have no further right to such award other than as
      provided under said Deferred Compensation Plan.

VIII. PARTICIPANT ELIGIBILITY AND PARTIAL YEAR AWARDS

      8.01 A Participant in this Plan will be a key executive of the Company
      recommended by the CEO and approved by the ORC.

      8.02 An individual is a Participant for a Plan Year only if he or she
      has been recommended by the CEO and approved by the ORC for that Plan
      Year.

      8.03 A Participant who vacates an eligible position during the plan
      year due to retirement, disability or death will be included in the
      Plan on a pro rata basis (number of months worked during the year
      divided by 12). No Payments will be made to Participants who otherwise
      vacate an eligible position during a Plan Year except as may otherwise
      be determined by the ORC in its discretion.

      8.04 Payments for partial year Participants under Section 8.03 will be
      made at the end of the Plan Year in conjunction with all other awards.

IX.   TAXES AND EFFECT ON OTHER BENEFITS

      9.01 Any award shall be considered as compensation for tax purposes and
      there shall be deducted from the payment the amount of any tax required by
      any governmental authority.

      9.02 Incentive award payments will not be considered as wages, salaries or
      compensation under any of the employee fringe benefit plans of Energen or
      its subsidiaries, except as otherwise expressly provided in an applicable
      plan document.

                                       5

<PAGE>

X.    TERMINATION AND/OR AMENDMENTS

      10.1 The Board of Directors may terminate the Plan at any time and may
      from time to time amend the Plan.

XI.   ASSIGNMENTS OR TRANSFER

      11.1 Neither the Participant, Participant's beneficiary, nor the
      Participant's personal representative shall have any rights to commute,
      sell, assign, transfer or otherwise convey the right to receive any
      payments or awards under this Plan. Such payments or awards are
      non-assignable and non-transferable and any attempt to assign or transfer
      payments or awards shall be void and have no effect.

XII.  PAYMENT OF AWARDS

12.1  At the end of the Plan Year the annual Incentive Awards will be paid by
      payroll check as soon as practicable after all evaluations and approvals
      are complete, provided that any amounts, the payment of which has been
      deferred by the Participant under the Energen Corporation 1997 Deferred
      Compensation Plan, shall be payable in accordance with the terms of that
      plan.

--------------------------------------------------------------------------------

As adopted April 1986, and subsequently amended May 1990, October 1993, April
25, 1997, and October 24, 2001, effective as of October 1, 2001.

                                              ----------------------------------
                                                        Assistant Secretary

                                       6

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