Ophir Energy plc Annual Report and Accounts 2011

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74 Ophir Energy plc Annual Report 2011 Notes to the financial statements continued 7 Share-based compensation (a) Employee incentive share plans Ophir Energy Company Foundation Incentive Scheme Ophir Energy Company Foundation Incentive Scheme was established on 12 May 2004 shortly after the formation of the Company to attract new employees on start up. The plan provided for a total of 1,450,000 options to acquire ordinary shares at 1p per share to be issued to eligible employees. The Scheme was terminated on 24 November 2005 and all options issued under the scheme have fully vested. Ophir Energy Company 2006 Share Option Plan On 5 April 2006 the Board resolved to establish the Ophir Energy Company Limited 2006 Share Option Plan. Any employee of the Company or any Subsidiary or any Director of the Company or any subsidiary who is required to devote substantially the whole of his working time to his duties is eligible to participate under the Plan. At the grant date the Board of Directors determine the vesting terms, if any, subject to the proviso that no more than one half of the options become exercisable on the first and second anniversaries of the date of grant and any performance conditions are satisfied. Options have an exercise period of 10 years from the date of grant. Ophir Energy 2011 Long-term Incentive Share Option Plan On 26 May 2011 the Board resolved to establish the Ophir Energy 2011 Long-term Incentive Share Option Plan. This was introduced to give awards to Directors and senior staff subject to outperforming a comparator group of similarly focused oil and gas exploration companies in terms of shareholder return over a three year period. The Plan awards a number of shares to Directors and staff based on a multiple of salary. However, these shares only vest after a three year period and the full award is made only if Ophir has performed in the top quartile when compared against a selected peer group of upstream oil and gas companies. The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, share options during the period for the above schemes. These are denominated in Pounds Sterling and have been translated to US Dollars using the closing exchange rate for presentation purposes. 2011 Number 2011 WAEP 2010 Number 2010 WAEP Outstanding options beginning of year 7,460,580 US$2.50/£1.62 8,498,080 US$2.60/£1.63 Granted during the year 5,525,980 US$2.24/£1.45 – – Exercised during the year (729,320) US$1.27/£0.82 (320,000) US$0.004/£0.0025 Lapsed during the year (505,000) US$3.86/£2.50 (717,500) US$3.87/£2.50 Outstanding options at end of year 11,752,240 US$2.37/£1.53 7,460,580 US$2.50/£1.62 Exercisable at end of year 11,752,240 US$2.40/£1.55 7,460,580 US$2.50/£1.62 5,525,980 options were granted (2010: Nil) during the year and 729,320 options were exercised (2010: 320,000) during the year or during the subsequent period up to the date of these financial statements. The weighted average fair value of options granted during the year was US$2.24. The range of exercise prices for options outstanding at the end of the year was US$0.00 to US$3.86 (2010: US$0.0040 to US$3.87) with a remaining exercise period in the range of 3 to 9 years. The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking into account the terms and conditions upon which the options were granted. The table below lists the inputs to the model used for the year ended 31 December 2011. (No options were granted during 2010.) 2006 Share Option Plan 2011 Long-term Incentive Plan 2011 2010 2011 2010 Dividend yield (%) – n/a – n/a Exercise Price £2.50 (US$3.86) n/a Nil n/a Share Volatility (%) 45% n/a 45% n/a Risk-free interest rate (%) 1.0% n/a 0.8% n/a Expected life of option (years) 4.00 n/a 4.00 n/a Weighted average share price £2.50 (US$3.86) n/a £2.50 (US$3.86) n/a
75 Ophir Energy plc Annual Report 2011 7 Share-based compensation continued The comparator group consisted of Afren PLC, Bowleven PLC, Cairn Energy PLC, Chariot Oil and Gas Ltd, Cobalt International Energy Inc, Cove Energy PLC, EnQuest PLC, Essar Energy PLC, Faroe Petroleum PLC, Gulf Keystone Petroleum Ltd, Heritage Oil PLC, Ithaca Energy Inc, JKX Oil and Gas PLC, Kosmos Energy Ltd, Melrose Resources PLC, Premier Oil PLC, Rockhopper Exploration PLC, Salamander Energy PLC, SOCO International PLC and Tullow Oil PLC. (b) Share-based payments to suppliers of goods and services 2011 Number 2011 WAEP 2010 Number 2010 WAEP Outstanding options and warrants at beginning of year 5,794,346 US$1.76 (£1.11) 5,794,346 US$1.76 (£1.11) Granted during the year – – Exercised during the year (4,697,173) US$1.84 (£1.19) – Outstanding options and warrants at end of year (all exercisable) 1,097,173 US$1.13 (£0.73) 5,794,346 US$1.76 (£1.11) 4,697,173 options were exercised (2010: Nil) during the year. The fair value of options granted to suppliers of goods and services is determined by reference to the fair value of goods or services at the date they are received. No options or warrants were granted during the year or prior year. The range of exercise prices of options and warrants outstanding at the end of the year was US$0.0039 to US$3.55 (2010: US$0.0040 to US$3.56) with a remaining contractual life in the range of six months. (c) Share-based payments to Directors During the year a total of 1,834,674 Nil cost options and 1,000,000 options at a price of £2.50 to acquire ordinary shares under the 2011 Ophir Energy Long-term Incentive Plan and the Ophir Energy Company Limited 2006 Share Option Plan respectively, were granted to Directors. Of the 1,000,000 options granted to Directors, 500,000 options lapsed upon resignation of the relevant Director on 2 December 2011 No options were exercised during the year. A total of 2,334,674 options were held by Directors as at 31 December 2011. 8 Taxation (a) Income tax expense Year ended 31 Dec 2011 US$’000 Group Year ended 31 Dec 2010 US$’000 Current income tax: UK corporation tax – – Foreign tax – – Total current income tax – – BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS Deferred tax: Origination and reversal of temporary differences – – Tax charge in the income statement – –
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