JKX Oil & Gas plc Annual Report 2011135At a glance01-17Board statements18-23Operational review24-36Financial review37-47CSR review48-61Directors' reports62-83Financial statements84-136For 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 2010 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.The fair value of options granted under the PSP is estimated as at the date of grant using a variant of the Monte Carlo model, taking into account the terms and conditions upon which the options are granted, which includes the performance condition related to the TSR directly. No dividends are paid on shares under the scheme prior to exercise.The fair value of share options previously granted under the 2001 Share Option Schemes is estimated as at the date of grant using a variant of the standard binomial model, taking into account the terms and conditions upon which the options are granted, which includes the performance condition related to the Company's share price directly. The performance condition based on performance relative to other companies is modeled with a Monte Carlo model.The total share based payment charge for the year was $1.6m (2010: $0.8m).
136Company financial statementsNotes to the Company financial statements continuedThe following table lists the inputs to the model used for the options granted in the years ended 31 December 2011 and 31 December 2010. The expected future volatility has been determined by reference to the historical volatility. 2011 2010 2011 2010 DSOS DSOS PSP PSPDividend yield (%) 1.60 2.10 1.60 2.10Expected share price volatility (%) 65.00 66.00 65.00 66.00Risk free interest rate (%) 1.90 1.70 1.90 1.50Exercise price (pence) 315.00p 241.00p 0.00p 0.00pExpected life of option (years) 3.40 3.40 3.00 3.00Weighted average share price (pence) 239.93p 288.30p 239.93p 288.30p I. Auditors' remuneration 2011 2010 $000 $000Audit services Fees payable to company auditors for the audit of the parent company 40 45Non-audit services Tax advisory services - -4045J. Directors' remunerationThe remuneration of the Directors is disclosed in the audited section of the Remuneration Report on pages 74 to 83, which form part of these financial statements.K. Related party transactionsIn respect of the full year 2010 a final dividend of 2.6 pence per share was paid to shareholders on 24 June 2011 (in respect of the full year 2009: 2.7 pence per share on 11 June 2010); no interim dividend for 2011 was paid (2010: 2.4 pence per share). Total dividends paid during the year were 2.6 pence per share (2010: 5.0 pence per share) and amounted to $7.2m (2010: $13.2m).In respect of the full year 2011, the Directors do not propose any final dividend (2010: 2.6 pence per share). The total estimated dividend to be paid is $nil (2010: $7.2m). L. Operating lease commitmentsAt the reporting date, the Company has annual lease agreements in respect of properties for which the payments extend over a number of years. Annual commitments under non-cancellable opering leases expiring: 2011 2010 $000 $000Within one year - land and buildings - 261After five years - land and buildings 532 303 532 564M. Related party transactionsThe Company has made no related party transactions with companies other than wholly owned subsidiaries.