Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v2.4.0.8
Stock-Based Compensation
 9 Months Ended
Mar. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Note 9 - Stock Based Compensation
The 2012 Stock Incentive Plan
On January 16, 2013, the Company's shareholders approved the Magellan Petroleum Corporation 2012 Omnibus Incentive Compensation Plan (the "2012 Stock Incentive Plan"). The 2012 Stock Incentive Plan replaced the Company's 1998 Stock Incentive Plan (the "1998 Stock Plan"). The 2012 Stock Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock and/or restricted stock units, performance shares and/or performance units, incentive awards, cash awards, and other stock based awards to employees, including officers, directors, and consultants of the Company (or subsidiaries of the Company) who are selected to receive incentive compensation awards by the Compensation, Nominating and Governance Committee (the "CNG Committee") of the Board of Directors of the Company (the "Board"), which is the plan administrator for the 2012 Stock Incentive Plan. The stated maximum number of shares of the Company's common stock authorized for awards under the 2012 Stock Incentive Plan is 5,000,000 shares plus the remaining number of shares under the 1998 Stock Plan immediately before the effective date of the 2012 Stock Incentive Plan, which was 288,435 as of January 15, 2013. The maximum aggregate annual number of options or stock appreciation rights that may be granted to one participant is 1,000,000, and the maximum annual number of performance shares, performance units, restricted stock, or restricted stock units that may be granted to any one participant is 500,000. The maximum term of the 2012 Stock Incentive Plan is ten years.

Stock Option Grants
Under the 2012 Stock Incentive Plan, stock option grants may contain time based, performance based, or market based vesting provisions. During the nine months ended March 31, 2014, the Company granted a total of 3,000,000 stock options under the 2012 Stock Incentive Plan, of which 1,500,000 were granted as PBOs, and 1,500,000 were granted with market based vesting provisions. Performance metrics used to measure the potential vesting of the PBOs consist of: (i) completing the drilling of the CO2-EOR pilot program at Poplar (weighted 10%); (ii) board approval of a full field CO2-EOR development project at Poplar (weighted 40%); (iii) sale of substantially all of the Amadeus Basin assets (weighted 20%); (iv) approval of a farmout agreement or the ability to participate in drilling one well in the Weald Basin with internally developed funding, including proceeds from a sale of assets (weighted 20%); and (v) approval and execution of a farmout agreement for drilling one well in the Bonaparte Basin (weighted 10%). Potential vesting of the market based stock options are subject to the Company maintaining a $2.35 per share closing price for 10 consecutive trading days and median stock price of $2.35 over a period of 90 days. As of March 31, 2014, performance metrics (i), (iii) and (iv) were met.
As of March 31, 2014, 2,250,000 stock options with market based vesting provisions or PBOs had not vested, and 560,107 shares, including forfeited shares, which remain available for future issuance. Stock options outstanding have expiration dates ranging from November 18, 2015, to October 15, 2023.
The following table summarizes the stock option activity for the nine months ended March 31, 2014:
 
Number of
Shares
 
WAEPS (1)
Fiscal year opening balance
7,788,957

 
$1.33
Granted
3,000,000

 
$1.03
Forfeited
(41,666
)
 
$1.05
Balance at March 31, 2014
10,747,291

 
$1.25
Weighted average remaining contractual term
6.4

years
(1) Weighted average exercise price per share.
The fair value of stock options granted under the 2012 Stock Incentive Plan or the 1998 Stock Plan was estimated using the following weighted-average assumptions for the nine months ended:
 
March 31,
 
2014
 
2013
 
PBOs (1)
 
Market Based (2)
 
PBOs
Number of options
1,500,000
 
 
1,500,000
 
 
1,007,500
 
Weighted average grant date fair value per share
$0.57
 
 
$0.69
 
 
$0.61
 
Expected dividend
0
 
 
0
 
 
0
 
Forfeiture rate
0
 
 
0
 
 
0
 
Risk free interest rate
1.5
%
-
1.7
%
 
 
 
2.8
%
 
0.6
%
-
0.8
%
Expected life (years)
0.4

-
1.6

 
 
 
2.6

 
5.1

-
6.0

Expected volatility (based on historical price)
61.7
%
-
61.9
%
 
 
 
66.6
%
 
60.3
%
-
63.5
%
(1) The term related to these PBOs were estimated using an average probabilistic weighted method.
(2) The Company assumed market based options will be voluntarily exercised at the midpoint of vesting, and the contractual term.
Stock Compensation Expense
The Company recorded $0.6 million and $1.7 million of related stock compensation expense for the three and nine months ended March 31, 2014, respectively, and $0.1 million and $0.8 million of related stock compensation expense for the three and nine months ended March 31, 2013. Stock compensation expense is included in general and administrative expense in the unaudited condensed consolidated statements of operations. As of March 31, 2014, the unrecorded expected future compensation expense related to stock option awards was $1.5 million.

Stock Awards
On July 1, 2013, 450,000 restricted shares of the Company's Common Stock (the "Common Stock") were awarded to executive officers pursuant to the 2012 Stock Incentive Plan. The restricted shares are subject to a three year vesting term. The Company's compensation policy is designed to provide the Company's non-employee directors with a portion of their annual base Board service compensation in the form of equity. On July 1, 2013, the Company issued a total of 266,664 shares of its Common Stock to non-employee directors pursuant to this policy and the 2012 Stock Incentive Plan.