Hostile Areas Exploration Incentive Act of 1987

Hostile Areas Exploration Incentive Act of 1987 - Amends the Internal Revenue Code to allow nonrefundable income tax credits for costs incurred in the exploration and production of oil or gas in areas on the outer continental shelf where the water depth is at least 600 feet (domestic frontier areas) and areas located north of the 49th parallel (Arctic areas).

Sets the rates of the credits as follows; (1) for the exploration credit, 15 percent of the exploration and drilling costs incurred; and (2) for the production credit, $5 per barrel or barrel-of-oil equivalent. Reduces the credit for exploration or production in water depths between 600 and 1,199 feet. Limits the amount of each credit based on the average price of domestic crude oil. Provides for inflation adjustments to such limitation.

Allows a three-year carryback and 15-year carryover of any unused credits.