EXHIBIT 10.7

Draft

January 3, 2012

[Date]

Atwood Oceanics, Inc. (the “Company”) hereby grants to you, effective as of             , 201     (the “Date of Grant”),             performance units (each a “Performance Unit”) under the Atwood Oceanics, Inc. Amended And Restated 2007 Long-Term Incentive Plan (the “Plan”). The Performance Units represent the opportunity to receive a specified number of shares of Common Stock based on a multiple of the number of Performance Units granted (the “Target Amount”) and the “Payout Percentage” as defined in the Terms and Conditions of Performance Unit Grant, attached hereto as Appendix A (the “Terms and Conditions”). The number of Performance Units is subject to adjustment as provided in Article IX of the Plan.

Except as otherwise provided in Sections 3 or 4 of the Terms and Conditions, the Performance Units shall vest on the third anniversary of the Date of Grant; provided you remain continuously employed by the Company, its subsidiary or an affiliate throughout the three-year period following the Date of Grant.

The grant of Performance Units is governed by the terms and conditions of the Plan, any rules and regulations adopted by the Compensation and Human Resources Committee of the Board of Directors of the Company, and the Terms and Conditions which form a part of this award letter to you (the “Notice”).

[Name of signing officer]

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Appendix A

ATWOOD OCEANICS, INC.

AMENDED AND RESTATED 2007 LONG-TERM INCENTIVE PLAN

TERMS AND CONDITIONS OF

PERFORMANCE UNIT GRANT

The performance units (the “Performance Units”) granted to you on the “Date of Grant” set forth in the award letter to you (the “Award Letter”) by Atwood Oceanics, Inc. (the “Company”) are subject to the Amended and Restated 2007 Long-Term Incentive Plan (the “Plan”), these Terms and Conditions, including Exhibit A hereto, and any rules and regulations adopted by the Committee. Terms used herein and not otherwise defined shall have the meaning set forth in the Plan and the Award Letter.

1. Determination of Earned Performance Units. The exact number of Performance Units that shall actually be earned by and issued to you shall be based upon the achievement by the Company of the performance standards as set forth in Exhibit A hereto over the three-year period beginning on the January 1, 2012 and ending on December 31, 2014 (the “Performance Period”). The determination by the Committee with respect to the achievement of such performance standards shall be made as soon as administratively practicable following the Performance Period after all necessary Company and peer information is available. The specific date on which such determination is formally made and approved by the Committee is referred to as the “Determination Date”. After the Determination Date, the Company shall notify you of the number of Performance Units, if any, that have become “Earned Performance Units” in accordance with Exhibit A and the corresponding number of shares of Common Stock to be issued to you in satisfaction of the award. The shares of Common Stock shall be issued to you on March 15 following the expiration of the Performance Period (the “Settlement Date”).

The performance standards and the number of Performance Units which may be earned are based on your Target Amount specified in the Award Letter and the Company’s Total Shareholder Return compared against the Peer Group. The methodology for calculating the number of Earned Performance Units, including the definitions used therefor, is set forth in Exhibit A hereto.

2. Vesting/Forfeiture. Except as otherwise provided in Sections 3 or 4 below, the Performance Units shall vest on the third anniversary of the Date of Grant, provided you are continuously employed by the Company Group throughout the Performance Period. If your employment with the Company, its subsidiary or an affiliate (collectively, the “Company Group”) terminates for any reason other than by reason of your death or your inability to continue to actively work due to Disability, the Performance Units shall be automatically forfeited on the date of your termination of employment.

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3. Death or Disability. If during the vesting period your employment with the Company Group is terminated by reason of your death or you become unable to continue active employment due to Disability, the Performance Units shall automatically become fully vested and the number of Earned Performance Units shall equal your Target Amount. The shares of Common Stock in respect of the Earned Performance Units shall be issued to you thirty (30) days after your death or Disability, as applicable.

4. Change of Control. Notwithstanding the provisions of Sections 2 or 3 of these Terms and Conditions, in the event of a Change of Control during the vesting period, the Performance Units shall automatically vest and the number of Earned Performance Units shall be equal to your Target Amount. Your shares of Common Stock in respect of the Earned Performance Units shall be issued to you thirty (30) days after the effective date of the Change of Control. For the avoidance of doubt, in the event of a Change of Control, the term “fully earned” in Section 10.5 of the Plan shall mean Earned Performance Units equal to your Target Amount.

5. Dividend Equivalents. You shall not be entitled to receive any cash dividends payable during the period beginning on the Grant Date and ending on the Settlement Date. Any Earned Performance Units shall be subject to adjustment under Article IX of the Plan with respect to dividends or other distributions that are paid in shares of Common Stock.

6. Transferability. You may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the shares of Common Stock subject to the Performance Units until and unless you receive a distribution of shares of Common Stock in respect of the Earned Performance Units.

7. No Right to Continued Employment. The award of Performance Units shall not create any right to remain in the employ of the Company Group. The Company Group retains the right to terminate your employment at will, for due cause or otherwise. Your employment, as it relates to the vesting period, shall be deemed to continue during any leave of absence that has been authorized by the Company Group.

8. Other Plans. Nothing herein contained shall affect your right to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance, profit sharing or other plan or program of the Company Group.

9. Rights as Shareholder. You shall not be entitled to any of the rights or privileges of a shareholder of the Company, including the right to vote in respect of the shares of Common Stock, until and unless you receive a distribution of shares of Common Stock in respect of the Earned Performance Units.

10. Plan Governs. The Performance Units and the Notice are subject to all of the terms and conditions of the Plan, except that no amendment to the Plan shall adversely affect your rights under the Notice. All the terms and conditions of the Plan, as may be amended from time to time, and any rules, guidelines and procedures which may from time to time be established pursuant to the Plan are hereby incorporated into the Notice. In the event of a discrepancy between the Notice and the Plan, the Plan shall govern.

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11. Withholding. Upon the delivery of shares of Common Stock to you, the Company Group may be required to withhold federal or local tax with respect to the realization of compensation. You must satisfy any federal or local tax withholding requirements with respect to the realization of compensation upon the delivery of shares of Common Stock to you by delivering to the Company cash in an amount to be sufficient to satisfy any such withholding requirement or, by default, the surrendering of shares to meet any, and all, tax withholding requirements.

12. Code Section 409A; No Guarantee of Tax Consequences. The award of Performance Units is intended to be (i) exempt from Section 409A of the Code (“Section 409A”), including, but not limited to, by reason of compliance with the short-term deferral exemption as specified in Treas. Reg. § 1.409A-1(b)(4); or (ii) in compliance with Section 409A, and the provisions of the Notice shall be administered, interpreted and construed accordingly. Notwithstanding the foregoing provisions of the Notice, if you are a “specified employee” as such term is defined in Section 409A, any amounts that would otherwise be payable hereunder as nonqualified deferred compensation within the meaning of Section 409A on account of separation from service (other than by reason of death) to you shall not be payable before the earlier of (i) the date that is 6 months after the date of your separation from service, (ii) the date of your death, or (iii) the date that otherwise complies with the requirements of Section 409A. In addition, notwithstanding the provisions of Section 4 of these Terms and Conditions, in the event of a Change of Control that does not meet the requirements of Treas. Reg. §1.409A-3(i)(5), any amounts that would otherwise be payable hereunder as nonqualified deferred compensation within the meaning of Section 409A shall be fully vested at a number of Earned Performance Units equal to your Target Amount but shall be settled on the Settlement Date, or, if earlier, in accordance with the provisions of Section 3 of these Terms and Conditions. To the extent required to comply with Section 409A, you shall be considered to have terminated employment with the Company when you incur a “separation from service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code. The Company makes no commitment or guarantee to you that any federal or state tax treatment shall apply or be available to any person eligible for benefits under the Notice.

13. Governing Law. The Plan and the Notice shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to conflicts of laws. The courts in Harris County, Texas shall be the exclusive venue for any dispute regarding the Plan or the Notice.

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Exhibit A

Methodology for Calculating Earned Performance Units

A. Definitions. For purposes of determining the number of shares of Common Stock issuable to you in respect of the Earned Performance Units, the following definitions shall apply:

B. Committee Methodology. For purposes of determining the number of shares of Common Stock issuable to you in respect of the Earned Performance Units, the Committee shall:

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If any calculation with respect to the Earned Performance Units would result in a fractional share, the number of shares of Common Stock to be issued shall be rounded down to the nearest whole share.

C. Peer Group Changes.

(a) If, as a result of merger, acquisition or a similar corporate transaction, a member of the Peer Group ceases to be publicly traded (an “Affected Peer Company”)

(i) prior to July 1, 2013, the Affected Peer Company shall not be included in the Seven Company Payout Schedule and the following alternative schedules shall be used in its place:

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(ii) on or subsequent to July 1, 2013, the Affected Peer Company shall remain in the Peer Group and its Ending Share Price shall be determined by assuming that its performance for the remainder of the Performance Period was equivalent to the arithmetic average (up or down) of the remaining members of the Peer Group over the remainder of the Performance Period.

(b) If a member of the Peer Group declares bankruptcy, it shall be deemed to remain in the Peer Group until the Performance End Date and shall occupy the lowest ranking in the Payout Schedule.

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