FORM 10-K CONTANGO OIL & GAS COMPANY

CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)
The Company accounts for employee stock-based compensation under the fair value method prescribed in
SFAS 123. Prior to the adoption of SFAS 123(R), we presented all tax benefits resulting from the exercise of stock
options as operating cash flows in the Consolidated Statement of Cash Flows. SFAS 123(R) requires that cash
flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative
compensation cost (excess tax benefits) be classified as financing cash flows. For the fiscal years ended June 30,
2009, 2008 and 2007, approximately $0.3 million, $1.1 million and $0.2 million, respectively, of such excess tax
benefits were classified as financing cash flows. See Note 2 – Summary of Significant Accounting Policies.
All employee stock option grants are expensed over the stock options vesting period based on the fair value
at the date the options are granted. The fair value of each option is estimated as of the date of grant using the Black-
Scholes options-pricing model. During the fiscal year-ended June 30, 2009, 2008 and 2007, the Company recorded
stock option expense of $1.1 million, $1.2 million and $1.3 million, respectively.
As of June 30, 2009, we have approximately $1.5 million of total unrecognized compensation cost related
to non-vested awards granted under our various share-based plans, which we expect to recognize over an average
period of three years.
The aggregate intrinsic values of the options exercised during fiscal years 2009, 2008 and 2007 were
approximately $12.2 million, $1.9 million and $1.9 million, respectively.
On November 11, 2008, the Company awarded a total of 3,088 shares of restricted stock under the 1999
Plan to its board of directors. Of these 3,088 shares of restricted stock, 1,544 shares vest on the date of grant, and
the remaining 1,544 shares vest one year thereafter. The fair value of restricted stock was approximately $144,000.
On November 14, 2007, the Company awarded a total of 4,140 shares of restricted stock under the 1999 Plan to its
board of directors. Of these 4,140 shares of restricted stock, 2,070 shares vest on the date of grant, and the
remaining 2,070 shares vest one year thereafter. The fair value of restricted stock was approximately $180,000. On
November 16, 2006, the Company’ awarded a total of 8,416 shares of restricted stock under the 1999 Plan to its
board of directors. Of these 8,416 shares of restricted stock, 4,208 shares vest on the date of grant, and the
remaining 4,208 shares vest one year thereafter. The fair value of restricted stock was approximately $144,000.
For the year ended June 30, 2009, 2008 and 2007, the Company recognized $240,581, $252,435 and
$153,979, respectively, in compensation expense relating to restricted stock awards. A summary of the Company’s
restricted stock as of June 30, 2009, is as follows:
Weighted
Average
Number of Fair Value
Shares Per Share
Nonvested balance at June 30, 2007……………………………… 15,375 $ 15.04
Granted…………………………………………………………… 4,471 42.95
Vested…………………………………………………………… (12,192) 20.80
Forfeited…………………………………………………………… - -
Nonvested balance at June 30, 2008……………………………… 7,654 $ 22.16
Granted…………………………………………………………… 3,088 46.75
Vested…………………………………………………………… (9,198) 26.29
Forfeited…………………………………………………………… - -
Nonvested balance at June 30, 2009……………………………… 1,544 $ 46.75
DB2/21043537.7 F-22