Unit Bonus Plan

In 2008, Lundin Petroleum implemented a 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 final 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 five trading day average closing Lundin Petroleum share price prior to and following the actual vesting date.

In 2009, 2010 and 2011, LTIPs that follow the same principles as the 2008 LTIP have been implemented for employees other than Executive Management.

The following table shows the number of units issued under the LTIPs, the amount outstanding as at 31 December 2011 and the year in which the units will vest.

Unit Bonus Plan	Total units	Outstanding 31 Dec 2011	Year of vesting
			2010	2011	2012	2013	2014
2009	670,400	219,984	232,437	219,980	219,984	–	–
2010	723,950	470,169	–	236,299	235,085	235,084	–
2011	425,850	418,400	–	–	139,467	139,467	139,466

The total number of units vesting do not necessarily equal the units awarded due to the recalculation following distributions by Lundin Petroleum offsetting units that have lapsed following employees leaving the Group.

The costs associated with the Unit Bonus Plans are as given in the following table.

Unit Bonus Plan (TUSD)	2011	2010
2008	786	1,625
2009	3,851	2,901
2010	7,379	3,070
2011	4,350	–
	16,366	7,596

The costs for 2010 also included an amount of TUSD 218 relating to employees of the UK operations that were shown as discontinued items.

 

Phantom Option Plan
At the AGM on 13 May 2009, the shareholders of Lundin Petroleum approved the implementation of an LTIP for Executive Management (being the President and Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Senior Vice President Operations) consisting of a grant of phantom options exercisable after five years from the date of grant. The exercise of these options entitles the recipient to receive a cash payment based on the appreciation of the market value of the Lundin Petroleum share. Payment of the award under these phantom options will occur in two equal instalments: (i) first on the date immediately following the fifth anniversary of the date of grant and (ii) second on the date which is one year following the date of the first payment.

The LTIP for Executive Management includes 5,500,928 phantom options with an exercise price of SEK 52.91 (rebased from 4,000,000 phantom options and SEK 72.76 respectively following the distribution of the shares of EnQuest Plc and Etrion Corporation, made in 2010). The phantom options will vest in May 2014 being the fifth anniversary of the date of grant. The recipients will be entitled to receive a cash payment equal to the average closing price of the Company's shares during the fifth year following grant, less the exercise price, multiplied by the number of phantom options. The participants of the phantom option plan are not entitled to receive new awards under the Unit Bonus Plan whilst the phantom options are still outstanding.

Lundin Petroleum holds 6,882,638 of its own shares acquired at an average cost of SEK 46.51 per share which mitigates the exposure of the LTIP. The Lundin Petroleum share price at 31 December 2011 was SEK 169.20. The provision for LTIP amounted to MUSD 70.3 as at 31 December 2011 and the market value of the shares held at 31 December 2011 was MUSD 169.1. The gain in the value of the own shares held can not be offset against the cost for the LTIP in accordance with accounting rules.

The cost for the 2009 LTIP for Executive Management amounted to TUSD 41,604 (TUSD 8,894) for the financial year ended 31 December 2011.