Annual Report 2011 - PGS

Notes to the consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In June 2011, the Company established a fifth employee share option program. Options covering 1,469,000 shares were
granted to certain key employees.
The Company’s option programs are considered as equity-settled plans and the options were measured at fair value at date of
grant. For the 2006, 2008 and 2009 plans one third of the options vest each of the three years subsequent to the date of grant.
First possible exercise is one year after grant date. For the 2010 and 2011 plan the options will vest respectively 3 and 4 years
after the date of grant for each half of the award. The options may only be exercised four times a year, during a defined period
after the publication of the Company’s quarterly earnings release. The latest possible exercise date for all plans is five years
subsequent to the grant date.
For options granted under the 2006 employee option program, the exercise price corresponds to the weighted average trading
price for the Company’s ordinary shares on the Oslo Stock Exchange the week before the options were granted. For options
granted under the 2008, 2009, 2010 and 2011 employee option programs the exercise price corresponds to the weighted
average trading price for the Company’s ordinary shares on the Oslo Stock Exchange at the date of grant.
Maximum gain on the options in the 2008, 2009, 2010 and 2011 employee option programs are subject to a cap of 1.5 times the
employee’s salary for each calendar year. The fair value of the cap is achieved through a reduction of the fair value of the
options granted. There is no cap on the 2006 employee share option program.
The fair value determined at the grant date is expensed over the vesting period, using the accelerated method, based on the
Company’s estimate of the shares that will eventually vest. Fair value is measured using the Black-Scholes pricing model. The
expected life used in the model has been adjusted based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations. The options include a service condition as the individuals participating in
the plan must be employed by the Company for a certain period of time in order to earn the right to exercise the share options.
The options include no performance conditions.
For the years ended December 31, 2011, 2010 and 2009, the Company recognized compensation cost with a corresponding
increase in shareholders’ equity of $5.1 million, $5.3 million and $11.8 million, respectively. Total net unrecognized
compensation cost as of December 31, 2011 was $10.7 million (related to non-vested share-based options), which is expected
to be recognized over a period of 3.5 years.
The tables below detail the Company’s outstanding options for the years presented.
Year ended December 31, 2011
Options
outstanding
December
31, 2010
Options
exercised in
2011
Options
forfeited in
2011
Options
expired in
2011
Options
outstanding
December 31,
2011
Weightedaverage
remaining
contractual
term
Options
exercisable
December 31,
2011
Grant
date
Options
granted in 2011
2006 1,114,782 --- --- --- (1,114,782) --- --- ---
2007 177,000 --- --- (12,000) --- 165,000 0.4 years 165,000
2008 2,528,166 --- --- (93,500) --- 2,434,666 1.4 years 2,434,666
2009 2,243,527 --- (553,213) (72,889) --- 1,617,425 2.4 years 813,121
2010 1,616,500 --- --- (78,000) --- 1,538,500 3.4 years 63,334
2011 --- 1,497,000 --- (15,000) --- 1,482,000 4.4 years ---
Total 7,679,975 1,497,000 (553,213) (271,389) (1,114,782) 7,237,591 2.7 years 3,476,121
Year ended December 31, 2010
Options
outstanding
December 31,
2009
Options
granted
in 2010
Options
exercised
in 2010
Options
forfeited in
2010
Options
outstanding
December 31,
2010
Weightedaverage
remaining
contractual term
Options
exercisable
December 31,
2010
Grant date
2006 1,276,788 --- --- (162,006) 1,114,782 0.5 years 1,114,782
2007 201,000 --- --- (24,000) 177,000 1.4 years 177,000
2008 2,965,500 --- --- (437,334) 2,528,166 2.4 years 1,708,966
2009 3,052,500 --- (359,536) (449,437) 2,243,527 3.4 years 533,840
2010 --- 1,666,500 --- (50,000) 1,616,500 4.4 years ---
Total 7,495,788 1,666,500 (359,536) (1,122,777) 7,679,975 2.8 years 3,534,588
The following share options, granted under the share option plans, were exercised for all years presented:
Year ended December 31, 2011 Year ended December 31, 2010
Granted
Options
Exercised
Exercise
date
Share price at
exercise date
Options
exercised
Exercise
date
Share price at
exercise date
2009 162,259 February 23, 2011 NOK 86.70
2009 19,999 May 10, 2011 NOK 79.80 8,338 June 21, 2010 NOK 69.25
2009 363,038 August 2, 2011 NOK 83.40 88,465 August 4, 2010 NOK61.55
2009 7,917 November 3, 2011 NOK 59.45 262,733 November 4, 2010 NOK 80.60
Total 553,213 359,536
PGS ANNUAL REPORT 2011 42
PGS Annual Report 2011 113