JKX Oil & Gas plc Annual Report 2011117At a glance01-17Board statements18-23Operational review24-36Financial review37-47CSR review48-61Directors' reports62-83Financial statements84-13622. Obligations under leasesAt the reporting date, the Group's aggregate future minimum commitments under non-cancellable operating leases are as follows: 2011 2010 $000 $000Within one year 165 1,302In the second to fifth years inclusive 2,085 1,775After five years 1,994 4864,244 3,563Operating lease primarily relate to rentals payable by the Group for certain of its office premises and staff accommodation.23. Staff costs 2011 2010 $000 $000Wages and salaries 22,768 16,256UK social security costs 584 607Pension contributions 3,297 2,786Share based payments (equity-settled) (note 24) 1,569 77528,218 20,424Staff costs are shown gross and $6.4m (2010: $2.6m) is capitalised, representing time spent on exploration and development activities.During the year, the average monthly number of employees was: 2011 2010Management/operational 769 655Administration support 52 45 821 700Included within management/operational are 5 (2010: 4) Directors on service contracts. Further details of the Directors and their remuneration is included on pages 74 to 83 which form part of these financial statements.24. Share-based paymentsShare optionsShare options are granted to Executive Directors and Senior Management based on performance criteria. The scheme rules are described in the Directors' Remuneration Report and repeated below. All share-based payments are equity settled.At 31 December 2011, there were outstanding options under various employee share option schemes, exercisable during the years 2011 to 2021 (2010: 2011 to 2020), to acquire 2,759,824 (2010: 2,593,724) shares of the Company at prices ranging from £0.00 to £4.54 per share (2010: £0.00 to £4.54). The vesting period of the options is 3 years, with an exercise period of 7 years, making a 10 year maximum term.The table on the following page illustrates the number and weighted average prices (WAEP) of, and movements in, share options during the year.
118 2011 2011 2010 2010 Number WAEP Number WAEPOutstanding as at 1 January 2,593,724 211.63p 2,099,551 238.93pGranted during the year 887,800 204.33p 1,071,000 152pSurrendered/lapsed during the year (671,700) 277.60p (327,500) 298pExercised during the year 1 (50,000) 151.50p (249,327) 71.96pOutstanding at 31 December 2,759,824 194.32p 2,593,724 211.63pExercisable at 31 December 297,924 128.38p347,924 131.7p1 Weighted average market price at exercise 291.7p (2010: 402.7p)For the share options outstanding as at 31 December 2011, the weighted average remaining contractual life is 7.7 years (2010: 8.0 years).During the year share options were granted in accordance with the new share option schemes, the Discretionary Share Option Scheme ('DSOS') and the Performance Share Plan ('PSP'), which were introduced in 2010. They reflect the best practice aspects recommended by the Association of British Insurers following the publication of their guidelines in March 2001 (the 'ABI Guidelines').2011 Share Option SchemesDSOSThe DSOS is made up of two parts. Options to acquire ordinary shares in the Company granted under Part A are 'Approved Options' and options to acquire Shares granted under Part B of the DSOS are 'Unapproved Options'. No consideration shall be payable for the grant of an Option.575,900 (2010: 675,500) options were granted under DSOS in 2011. The exercise price of options granted under DSOS is 315p. For these options to vest there has to be an increase in the Group's Earnings Per Share ('EPS') growth over the performance period measured over the 3 consecutive calendar years commencing from the date the options were granted. The weighted average fair value of options granted during the year under the DSOS was 159.6p per option.PSPPSP are granted solely to Executive Directors. Subject to shareholder approval at the AGM, Executive Directors will receive awards under the 2010 Performance Share Plan in the form of nil cost options. No consideration is required to be paid for the grant or exercise of an Option.311,900 (2010: 395,500) options were granted under PSP in 2011. The PSP options provide a conditional right to acquire shares at nil cost subject to the satisfaction of the performance conditions and continued employment with the Group. For these options to vest a comparison is performed between the Group's TSR against the FTSE 250 index (half the options) and the All-Share Oil & Gas Producers index (other half of options). The weighted average fair value of options granted during the year under the PSP was 184.3p per option.Pre 2011 Share Option SchemesIn 2009, share options were granted in accordance with The New Approved Share Option Scheme and the New Unapproved Share Option Scheme (collectively the '2001 Share Option Schemes') that were introduced in 2001. They reflect the best practice aspects recommended by the Association of British Insurers following the publication of their guidelines in March 2001 (the 'ABI Guidelines').The weighted average fair value of options granted in 2009 under the New Approved Share Option Scheme and the New Unapproved Share Option Scheme was 56.90p per option.Fair value of share options grantedThe fair value of options granted under the DSOS is estimated as at the date of grant using a variance of the Binomial model, taking into account terms and conditions upon which the options are granted, which includes the performance condition related to the Company's earnings per share directly. No dividends are paid on shares under the scheme prior to exercise.Group financial statementsNotes to the financial statements continued