AMENDMENT NO. 2
                                     TO THE
                             CAIRN ENERGY USA, INC.
                        1993 DIRECTORS STOCK OPTION PLAN

         The Board of  Directors  and  Stockholders  Cairn  Energy USA,  Inc., a
Delaware corporation (the  "Corporation"),  have voted to amend the Cairn Energy
USA,  Inc.  Directors  1993 Stock  Option  Plan (the  "Plan")  in the  following
respects only:

     FIRST:  Section  2.1 of the Plan was amended to  increase  from  150,000 to
     270,000  the number of shares  issuable  pursuant  to the  exercise  of all
     Options granted under the Plan, and to read in its entirety as follows:

                           2.1.   DESCRIPTION   OF  STOCK  AND  MAXIMUM   SHARES
                  ALLOCATED.  The Stock which may be issued upon the exercise of
                  an Option  may  either be  unissued  or  reacquired  shares of
                  Stock, as the Board of Directors may, in its sole and absolute
                  discretion, from time to time determine.

                           Subject to the adjustments provided in PARAGRAPH 6.4,
                  the aggregate  number of shares of Stock to be issued pursuant
                  to the  exercise  of all  Options  granted  under the Plan may
                  equal but shall not exceed 270,000 shares of Stock.


     SECOND:  The foregoing  amendments to the Plan were effective as of May 22,
     1996.

                                               CAIRN ENERGY USA, INC.



                                            By:/s/ Susan H. Rader
                                               -------------------
                                               Susan H. Rader, Secretary

CORPDAL:62511.1  15467-00006