Financials - Santos

30. Share‐based Payment Plans (continued)
(b) Executive Long‐term Incentive Programme (continued)
Cash‐settled share‐based payments
As a result of the 2009 Entitlement Offer, issued at a 26.9% discount to the closing price of the shares before the announcement of the
Entitlement Offer, the Board determined that for every unvested SAR and option as at the time of the Entitlement Offer, eligible senior
executives would be entitled to a payment of $1.31 per SAR and option if and when those applicable SARs and options are converted
to shares.
The amounts recognised in the financial statements of the Group during the financial year in relation to cash‐settled share‐based
payment grants issued under the LTI Programme were:
2012 2011
$000 $000
Balance of liability at 1 January 2,051 2,112
Employee expenses 49 367
Revaluation (129) (107)
Cash payments (278) (321)
Balance of liability at 31 December 1,693 2,051
Intrinsic value of vested liability 1,604 1,543
(c) Santos Eastern Star Gas Limited Employee Incentive Plan
Santos acquired Eastern Star Gas Limited (“ESG”) in 2011. Under the ESG employee incentive plan, eligible ESG employees were granted
shares in ESG with interest‐free loans extended for terms of up to five years. The shares issued ranked equally with other issued ordinary
shares and were not quoted on the ASX as they were subject to trading restrictions while there were loans outstanding (“ESG Plan
Shares”).
As part of the acquisition of ESG, Santos issued Santos ESG Plan Shares in respect of the ESG Plan Shares for the same consideration as
ordinary ESG shares (i.e. 0.06881 Santos shares for each unquoted ESG Plan Share). These Santos ESG Plan Shares are subject to the
same terms and conditions as the ESG Plan Shares including trading restrictions until repayment of the loan balance and are not quoted
on the ASX while there are loans outstanding. Should the employees not repay the interest‐free loans during the term period, they
forfeit the shares, which will then be sold on‐market. The loans therefore have not been recognised as receivables. Employees are
entitled to dividends on these shares while the interest‐free loans are outstanding.
Financial statement effect
On 17 November 2011, 2,002,362 shares were granted to eligible ESG employees at a weighted average exercise price of $7.82.
No further shares have been issued under this plan.
In the period from 17 November 2011 to 31 December 2011, employee loans in respect of 1,061,634 shares were repaid at a weighted
average exercise price of $7.40, resulting in trading restrictions being lifted on those shares and an increase in the Company’s share
capital. During 2012 a total of $5 million employee loans were repaid (2011: $10 million). At 31 December 2012, loans were still
outstanding in respect of 223,628 (2011: 940,728) shares at a weighted average exercise price of $11.37 (2011: $8.28). The weighted
average remaining contractual life for the outstanding employee loans in respect of these shares is 2.2 years (2011: 1.2 years).
The range of exercise prices for shares outstanding at the end of the year was $9.01 to $15.26 (2011: $4.65 to $15.26).
Santos Annual Report 2012 139