Annual Report 2007 in PDF - Cairn Energy PLC

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NOTES TO THE ACCOUNTS CONTINUED 7. Staff Costs (continued) Cairn India Employee Stock Option Plan (2006) The Cairn India Employee Stock Option Plan (2006) (‘CIESOP’), which was adopted by Cairn India in November 2006, is a discretionary arrangement that allows the company to grant options over its shares to selected employees and executive directors. Under the plan, Cairn India will grant options equivalent to 88,265,718 equity shares (when aggregated with the number of options to be granted pursuant to the Cairn India Performance Option Plan (2006) (‘CIPOP’) of the face value of Rs.10 each at an exercise price that will be determined by the Remuneration Committee, but not less than the fair market value of the equity shares on the date of grant to each of the eligible employees of Cairn India. Options will generally vest on the third anniversary of grant, subject to the individuals remaining in employment. In accordance with generally prevailing practice in India, the ability to exercise these options will not be subject to the satisfaction of any additional performance conditions. Option exercises will be settled by an allotment of shares to the relevant individual. The following table details the number and WAEP of share options issued under the CIESOP at the Balance Sheet date: 98 CAIRN ENERGY PLC ANNUAL REPORT 2007 Number WAEP (Rs.) Outstanding at the beginning of the year – – Granted during the year 8,982,755 164.27 Lapsed during the year (437,045) 160.00 Exercised during the year – – ––––––––––– ––––––––––– Outstanding at the end of the year 8,545,710 164.49 ––––––––––– ––––––––––– Exercisable at the end of the year – Weighted average fair value of options granted in year Rs.89.4 Weighted average remaining contractual life of outstanding options 9.47 years The CIESOP options have been valued using the Black–Scholes model. The main inputs to the model are as per the CISMP above. The fair value of the options is based on an independent valuation using the following assumptions: 1 January 20 September Vesting Date 2010 2010 Vesting % 100% 100% Volatility 41.04% 36.40% Risk free rate 7.50% 7.23% Cairn India Performance Option Plan (2006) The CIPOP was adopted by Cairn India in November 2006, and is a discretionary arrangement that allows the company to grant options over its shares to selected employees and executive directors. Under the plan, Cairn India will grant options equivalent to 88,265,718 equity shares (when aggregated with the number of options to be granted pursuant to the CIESOP) of the face value of Rs.10 each at an exercise price of Rs.10 each to each of the eligible employees of Cairn India. The vesting of these options will generally be dependent on both continued employment and the extent to which predetermined performance conditions are met over a specified period of at least three years. Initially, the performance condition attached to options granted pursuant to the CIPOP will be based on the TSR of Cairn India compared to the TSR of a group of exploration, production and integrated oil companies.
NOTES TO THE ACCOUNTS CONTINUED The following table details the number and WAEP of share options issued under the CIPOP at the Balance Sheet date. Number WAEP (Rs.) Outstanding at the beginning of the year – – Granted during the year 4,943,389 164.55 Lapsed during the year (188,145) 160.00 Exercised during the year – – ––––––––––– ––––––––––– Outstanding at the end of the year 4,755,244 164.73 ––––––––––– ––––––––––– Exercisable at the end of the year – Weighted average fair value of options granted in year Rs.156.58 Weighted average remaining contractual life of outstanding options 9.49 years The CIPOP options have been valued using the Black–Scholes model. The main inputs to the model are as per the CISMP above. The fair value of the options is based on an independent valuation using the following assumptions: 1 January 20 September Vesting date 2010 2010 Vesting % 100% 100% Volatility 41.61% 40.24% Risk free rate 7.33% 7.65% 8. Directors’ Emoluments Details of each director’s remuneration, pension entitlements, share options and awards pursuant to the LTIP are set out in the Directors’ Remuneration Report on pages 57 to 68. Directors’ emoluments are included within remuneration of key management personnel disclosures in Note 36. 9. Finance Income 2007 2006 $’000 $’000 Bank interest 47,396 3,838 Other interest 17,780 765 ––––––––––– ––––––––––– 10. Finance Costs 65,176 4,603 ––––––––––– ––––––––––– 2006 2007 (Restated) $’000 $’000 Bank loan and overdraft interest 7,318 6,649 Other finance charges 8,873 4,727 ––––––––––– ––––––––––– 16,191 11,376 Less: borrowing costs capitalised (13,868) (4,625) ––––––––––– ––––––––––– 2,323 6,751 Other finance costs – unwinding of discount 1,687 1,183 – fair value movement on currency exchange options 3,254 9,694 Exchange loss 23,075 14,247 ––––––––––– ––––––––––– 30,339 31,875 ––––––––––– ––––––––––– CAIRN ENERGY PLC ANNUAL REPORT 2007 99
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ANNUAL REPORT & ACCOUNTS 2007 CAIRN
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CAIRN is an edinburgh based oil and
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CAIRN INDIA performance First comme
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2000 lakshmi disCovery 2001 sarasWa
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THE RESTRUCTURING OF THE GROUP INTO
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ajasthan midstream the government o
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Cambay Basin, India CAIRN ENERGY PL
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Cairn india assets 30% 30% 49% 40%
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Rajasthan, India the increased reso
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Detail heading here relore min ullu
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uk (West Of shetland) Block 214/19
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nePal the security situation in nep
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angladesh reserves sangu gross 2p r
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activities in all operated blocks.
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2007 marked the beginning of a new
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key financial performance indicator
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CAIRN INDIA CAPITAL EXPENDITURE FOR
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3 9 12 4 8 1 Sir Bill Gammell, Chie
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2007 ACCOUNTS Risk Factors 36 Corpo
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RISk FACTORS CONTINUED The developm
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RISk FACTORS CONTINUED Corporate Re
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CORPORATE GOVERNANCE STATEMENT CONT
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Page 75 and 76: GROUP INCOME STATEMENT For the year
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Page 79 and 80: NOTES TO THE ACCOUNTS For the year
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Page 137 and 138: GLOSSARY OF TERMS CONTINUED TECHNIC
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