BP 2011 Annual Report Download - page 249

Financial statements
BP Annual Report and Form 20-F 2011 247
Notes on financial statements
40. Share-based payments continued
Share option transactions
Details of share option transactions for the year under the share options plans are as follows:
Share option transactions 20112010 2009
Number
of
options
Weighted
average
exercise price
$
Number
of
options
Weighted
average
exercise price
$
Number
of
options
Weighted
average
exercise price
$
Outstanding at 1 January 263,306,722 8.75 295,895,357 8.73 326,254,599 8.70
Granteda152,472,556 6.03 10,420,287 6.08 9,679,836 6.55
Forfeited (9,058,406) 7.22 (9,499,661) 7.88 (5,954,325) 8.81
Exercised (2,502,306) 7.64 (31,839,034) 7.97 (21,293,871) 7.53
Expired (29,717,854) 8.26 (1,670,227) 8.71 (12,790,882) 8.01
Outstanding at 31 December 374,500,712 7.73 263,306,722 8.75 295,895,357 8.73
Exercisable at 31 December 209,776,014 9.01 242,530,635 8.90 274,685,068 8.80
a Share options granted during 2011 include 142.5 million options awarded under the BP Plan 2011 with a fair value of $1.02 per option at the date of grant, determined using a binomial option pricing model
including assumptions for share price volatility, dividends and cancellations.
The weighted average share price at the date of exercise was $7.71 (2010 $9.54 and 2009 $9.10).
For options outstanding at 31 December 2011, the exercise price ranges and weighted average remaining contractual lives were as shown below:
Options outstandingaOptions exercisable
Range of exercise prices
Number
of
shares
Weighted
average
remaining life
Years
Weighted
average
exercise price
$
Number
of
shares
Weighted
average
exercise price
$
$5.66 – $7.22 199,571,741 7.51 6.11 37,283,772 6.37
$7.23 – $8.79 81,608,110 1.21 8.13 81,608,110 8.13
$8.80 – $10.35 22,264,187 2.73 9.83 19,827,458 9.92
$10.36 – $11.92 71,056,674 3.81 11.14 71,056,674 11.14
374,500,712 5.15 7.73 209,776,014 9.01
a
Included within options outstanding at 31 December 2011 are options granted under the BPSOP of 208 million options (2010 239 million options).
Fair values and associated details for restricted share units granted
For restricted share units granted in 2011, the number of units and weighted average fair value at the date of grant were as shown below:
Restricted share units granted in 2011 CPP EPP RSP DAB PSP
Number of restricted share units granted (million) 1.4 8.9 20.0 17.5 19.2
Weighted average fair value $11.99 $7.51 $6.86 $7.51 $7.51
Fair value measurement basis Monte Carlo Market value Market value Market value Market value
Restricted share units granted in 2010 CPP EPP RSP DAB PSP
Number of restricted share units granted (million) 1.3 7.6 21.4 24.5 16.0
Weighted average fair value $19.81 $9.43 $6.78 $9.43 $9.43
Fair value measurement basis Monte Carlo Market value Market value Market value Market value
Restricted share units granted in 2009 CPP EPP RSP DAB PSP
Number of restricted share units granted (million) 1.4 7.6 2.4 38.9 16.5
Weighted average fair value $9.76 $6.56 $8.76 $6.56 $8.32
Fair value measurement basis Monte Carlo Market value Market value Market value Monte Carlo
The group uses the observable market price for ordinary shares at the date of grant to determine the fair value of non-TSR restricted share units.
The group used a Monte Carlo simulation to determine the fair values of the TSR elements of the 2011, 2010 and 2009 CPP and EDIP grants and
the 2009 PSP grant. In accordance with the plans’ rules, the model simulates BP’s TSR and compares it against its principal strategic competitors over the
three-year period of the plans. The model takes into account the historical dividends, share price volatilities and covariances of BP and each comparator
company to produce a predicted distribution of relative share performance. This is applied to the reward criteria to give an expected value of the TSR
element.
Accounting expense does not necessarily represent the actual value of share-based payments made to recipients, which are determined by the
remuneration committee according to established criteria.
Employee Share Ownership Plan Trusts (ESOPs)
ESOPs have been established to acquire BP shares to satisfy any awards made to participants under the BP share plans as required. The ESOPs have
waived their rights to dividends on shares held for future awards and are funded by the group. Until such time as the company’s own shares held by the
ESOPs vest unconditionally to employees, the amount paid for those shares is shown as a reduction in shareholders’ equity (see Note 39). Assets and
liabilities of the ESOPs are recognized as assets and liabilities of the group.
At 31 December 2011, the ESOPs held 27,784,503 shares (2010 11,477,253 shares and 2009 18,062,246 shares) for potential future awards,
which had a market value of $197 million (2010 $82 million and 2009 $174 million).