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The Company runs an incentive programme for employees whereby warrants are issued to employees enabling them to buy shares in the company. The incentive warrants for 2004 until 2007 were issued at a 10% premium to the average closing price of Lundin Petroleum shares for the ten days after the AGM. The warrants are valid for three years but can not be exercised within the first year of issue. Issued warrants to employees leaving the Company within the first year of issue, are forfeited.
At the AGM held on 16 May 2007, the shareholders of Lundin Petroleum approved the implementation of a Long-Term Incentive Plan (LTI) consisting of a Share Option Plan and a Performance Share Plan. Employees had the choice to select either the Share Option Plan or the Performance Share Plan or a 50/50 allocation of both.
The Share Option Plan includes the conditional granting of options with a vesting period of 18 months and subject to the achievement of a performance condition measuring Total Shareholder Return (TSR) relative to a peer group of companies. The options were issued at a 10% premium to the average closing price of Lundin Petroleum shares for the ten days after the AGM. Employees will earn between 0 and 100 percent of the options depending upon the companies performance measured using a relative TSR.
The Performance Share Plan includes a conditional award of Lundin Petroleum shares with a vesting period of three years and subject to the achievement of a performance condition relative to TSR. The number of shares awarded under the Performance Share Plan is based on the value of the options granted under the Share Option Plan. The employees will earn between 50 and 100 percent of the award of shares depending upon the companies performance measured using a relative TSR. Under the Performance Share Plan, Lundin Petroleum made a conditional award of 67,751 shares subject to the achievement of performance criteria. In June 2007, Lundin Petroleum acquired 68,000 of its own shares to fully hedge its potential obligation under the Performance Share Plan.
The incentive warrants outstanding as at 31 December 2007, their expiry date and exercise prices are shown in the table.
| at 31 December 2007 |
Issued 2005
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Issued 2006
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Issued 2007
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| Exercise price (SEK) |
60.20
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97.40
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78.05
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| Numbers authorised |
2,900,000
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3,226,000
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3,950,000
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| Number outstanding |
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| Exercise period |
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In addition to these incentive warrants, 642,500 incentive warrants were acquired and converted to Lundin Petroleum incentive warrants and another 371,500 incentive warrants in Lundin Petroleum were issued in connection with the acquisition of Valkyries Petroleum Corp (Valkyries). The number of incentive warrants associated with the Valkyries acquisition outstanding at 31 December 2007 amounted to 384,000 with an exercise price in the range SEK 75.62 – 97.40 with various exercise periods up to 31 May 2009.
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