BP 2005 Annual Report Download - page 158

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156 Making energy more
Notes on financial statements continued
10 Share-based payments continued
As share options are exercised continuously throughout the year, the weighted average share price during the year of $10.77 (2004 $8.95 and
2003 $6.81) is representative of the weighted average share price at the date of exercise. For the options outstanding at 31 December 2005, the
exercise price ranges and weighted average remaining contractual lives are shown below.
Options outstanding Options exercisable
Weighted Weighted Weighted
Number average average Number average
of remaining exercise of exercise
Range of exercise prices shares life (yrs) price ($) shares price ($)
$4.22–$6.14 74,255,790 1.88 5.51 52,734,810 5.44
$6.15–$8.06 151,161,264 6.15 7.02 36,840,758 7.70
$8.07–$9.99 176,892,928 5.95 8.29 133,128,330 8.32
$10.00–$11.92 48,143,520 9.19 10.45 25,500 10.53
450,453,502 5.69 7.64 222,729,398 7.54
FAIR VALUES AND ASSOCIATED DETAILS FOR OPTIONS AND SHARES GRANTED
ShareSave ShareSave
Options granted in 2005 BPSOP 3 year 5 year
Option pricing model used Binomial Binomial Binomial
Weighted average fair value $2.34 $2.76 $2.94
Weighted average share price $10.85 $10.49 $10.49
Weighted average exercise price $10.63 $7.96 $7.96
Expected volatility 18% 18% 18%
Option life 10 years 3.5 years 5.5 years
Expected dividends 2.72% 3.00% 3.00%
Risk free interest rate 4.25% 4.00% 4.25%
Expected exercise behaviour 5% years 4-9 100% year 4 100% year 6
70% year 10
EDIP ShareSave ShareSave
Options granted in 2004 Options BPSOP 3 year 5 year
Option pricing model used Binomial Binomial Binomial Binomial
Weighted average fair value $1.34 $1.55 $1.94 $2.13
Weighted average share price $8.09 $8.12 $8.75 $8.75
Weighted average exercise price $8.09 $8.09 $7.00 $7.00
Expected volatility 22% 22% 22% 22%
Option life 7 years 10 years 3.5 years 5.5 years
Expected dividends 3.75% 3.75% 3.75% 3.75%
Risk free interest rate 3.50% 4.00% 3.00% 3.75%
Expected exercise behaviour 5% years 2-6 5% years 4-9 100% year 4 100% year 6
75% year 7 70% year 10
EDIP ShareSave ShareSave
Options granted in 2003 Options BPSOP 3 year 5 year
Option pricing model used Binomial Binomial Binomial Binomial
Weighted average fair value $1.37 $1.50 $1.91 $2.02
Weighted average share price $6.29 $6.43 $7.23 $7.23
Weighted average exercise price $6.29 $6.35 $5.79 $5.79
Expected volatility 30% 30% 30% 30%
Option life 7 years 10 years 3.5 years 5.5 years
Expected dividends 4.00% 4.00% 4.00% 4.00%
Risk free interest rate 3.50% 3.50% 3.50% 3.50%
Expected exercise behaviour 5% years 2-6 5% years 4-9 100% year 4 100% year 6
75% year 7 70% year 10
The group uses a third-party estimate of expected volatility of US ADSs for the quarter within which the grant date of the relevant plan falls.
This estimate takes into account the volatility implied by options in the market.
MTPP – MTPP – EDIP – EDIP –
Shares granted in 2005 TSR FCF TSR LTL RSP
Number of equity instruments
granted (million) 9.3 8.4 3.7 0.5 0.3
Weighted average fair value $5.72 $11.04 $3.87 $10.13 $11.04
Fair value measurement basis Monte Carlo Market value Monte Carlo Market value Market value