The Company

Long-Term Incentive Plans (LTIPs)

Unit Bonus Plan
In 2008, Lundin Petroleum implemented an LTIP scheme consisting of a Unit Bonus Plan which provides for an annual grant of units that will lead to a cash payment at vesting. The LTIP has a three year duration whereby the initial grant of units vested equally in three tranches: one third after one year; one third after two years; and the fi nal third after three years. The cash payment is conditional upon the holder of the units remaining an employee of the Group at the time of payment. The share price for determining the cash payment at the end of each vesting period will be the average of the Lundin Petroleum closing share price for the fi ve trading days prior to and following the actual vesting date adjusted for any dividend payments between grant date and vesting date. The exercise price at vesting date 31 May 2018 was SEK 279.67.

LTIPs that follow the same principles as the 2008 LTIP have subsequently been implemented each year.

The following table shows the number of units issued under the LTIPs, the amount outstanding as at 31 December 2018 and the year in which the units will vest.

Unit Bonus Plan Plan
2015 2016 2017 2018 Total
Outstanding at the beginning of the period 135,902 224,043 288,216 648,161
Awarded during the period 226,389 226,389
Forfeited during the period -2,980 -5,544 -6,120 -14,644
Exercised during the period -132,922 -110,705 -94,032 -337,659
Outstanding at the end of the period 107,794 188,064 226,389 522,247
Vesting date
31 May 2019 107,794 94,032 75,463 277,289
31 May 2020 94,032 75,463 169,495
31 May 2021 75,463 75,463
Outstanding at the end of the period 107,794 188,064 226,389 522,247

The costs associated with the unit bonus plans are as given in the following table.

 Unit Bonus Plan (MUSD) 2018 2017
 2014 1.5
 2015 3.4 1.9
 2016 2.1 2.4
 2017 2.9 1.7
 2018 1.9
10.3 7.5

Performance Share Plan

LTIP 2018
The 2018 AGM resolved to approve a performance based LTIP (LTIP 2018) for Group management and a number of key employees of Lundin Petroleum, which follows the same principles as the LTIPs 2014-2017, with a three year performance period commencing on 1 July 2018 and expiring on 30 June 2021. The number of performance shares that may be allotted to each participant is limited to a value of three times his/her annual gross base salary for 2018. The total number of Performance Shares under LTIP 2018 as at the date of award may not exceed 460,000, corresponding to approximately 0,1 percent of the total number of outstanding shares in Lundin Petroleum.

The maximum cost for granting LTIP Awards under LTIP 2018 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 8.8 million (approximately SEK 72.5 million), excluding social security charges. On this basis, the maximum cost for social security charges is estimated to be approximately USD 0.9 million (approximately SEK 7.4 million) assuming 100 per cent vesting.

The maximum cost for granting LTIP Awards under LTIP 2017 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 6.9 million (approximately SEK 60.8 million), excluding social security charges. The maximum cost for social security charges is estimated to be approximately USD 0.9 million (approximately SEK 8.2 million) assuming 100 per cent vesting and an annual share price increase of 10 per cent during the Performance Period.

LTIP 2017
The 2017 AGM resolved to approve a performance based LTIP (LTIP 2017) for Group management and a number of key employees of Lundin Petroleum, which follows the same principles as the LTIPs 2014-2016, with a three year performance period commencing on 1 July 2017 and expiring on 30 June 2020. The number of performance shares that may be allotted to each participant is limited to a value of three times his/her annual gross base salary for 2017. The total number of Performance Shares under LTIP 2017 as at the date of award may not exceed 465,000, corresponding to approximately 0,1 percent of the total number of outstanding shares in Lundin Petroleum.

LTIP 2016
The 2016 AGM resolved to approve a performance based LTIP (LTIP 2016) for Group management and a number of key employees of Lundin Petroleum, which follows the same principles as the LTIPs 2014 and 2015, with a three year performance period commencing on 1 July 2016 and expiring on 1 July 2019. The number of performance shares that may be allotted to each participant is limited to a value of three times his/her annual gross base salary for 2016. The total number of Performance Shares under LTIP 2016 as at the date of award may not exceed 715,000, corresponding to approximately 0,2 percent of the total number of outstanding shares in Lundin Petroleum.

The maximum cost for granting LTIP Awards under LTIP 2016 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 9.4 million (approximately SEK 77.1 million), excluding social security charges. The maximum cost for social security charges is estimated to be approximately USD 1.1 million (approximately SEK 9.3 million) assuming 100 per cent vesting and an annual share price increase of 10 per cent during the Performance Period.

LTIP 2015
The 2015 AGM resolved to approve a performance based LTIP (LTIP 2015) for Group management and a number of key employees of Lundin Petroleum, which follows the same principles as the LTIP 2014, with a three year performance period commencing on 1 July 2015 and expiring on 1 July 2018. The number of performance shares that may be allotted to each participant is limited to a value of three times his/her annual gross base salary for 2015. The total number of Performance Shares under LTIP 2015 as at the date of award may not exceed 900,000, corresponding to approximately 0,3 percent of the total number of outstanding shares in Lundin Petroleum.

The maximum cost for granting LTIP Awards under LTIP 2015 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 11.1 million (approximately SEK 96.0 million), excluding social security charges. The maximum cost for social security charges is estimated to be approximately USD 1.3 million (approximately SEK 11.6 million) assuming 100 per cent vesting and an annual share price increase of 10 per cent during the Performance Period.

Delivery of Shares
The LTIP Awards entitle Participants to acquire already existing Lundin Petroleum shares. The Board of Directors will consider means to secure the Company’s expected financial exposure related to the LTIPs. One method would be to enter into an equity swap agreement with a third party on terms in accordance with market practice, whereby the third party in its own name shall be entitled to acquire and transfer shares in Lundin Petroleum to the Participants.

LTIP 2019 Peer Group
The Board of Directors has reviewed the Peer Group and determined that it shall consist of the following companies for LTIP 2019:  Aker BP, Apache Corporation, BP, Cairn Energy, ConocoPhillips, ENI, Equinor, Galp Energia, Hess Corporation, Kosmos Energy, MOL Group, Oil Search, OMV, Premier Oil, Repsol, Santos, Total, Tullow Oil and Vermilion Energy.  The Board of Directors shall have the power to amend the Peer Group in order to maintain a representative and relevant group of companies during the Performance Period.

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