128 Woodside Petroleum Ltd|Annual Report 2018
E.3 Employee benefits (cont.)
Executive incentive plans (EIP)
Short-term awards (STA)
The STA are delivered in the form of restricted shares to
executives, including all executive KMP. Restricted shares
entitle their holders to receive dividends. There are no further
performance conditions for vesting of deferred STA. Participants
are not required to make any payments in respect of STA awards
at grant or at vesting.
Long-term awards (LTA)
LTA are granted in the form of Variable Pay Rights (VPRs) to
executives, including all executive KMP. Vesting of LTA is subject
to achievement of relative total shareholder return (RTSR) targets,
with 33% measured against the ASX 50 and the remaining 67%
tested against an international group of oil and gas companies.
Participants are not required to make any payments in respect of
LTA awards at grant or at vesting.
Executive incentive scheme (EIS)
The EIS was introduced for the 2018 performance year for all
excutives including executive KMP. The EIS is delivered in the
form of a cash incentive, restricted shares and performance rights.
The grant date of the restricted shares and performance rights
has been determined to be subsequent to the performance year,
being the date of the Board of Directors' approval (13 February
2019). Accordingly, restricted shares and perfomance rights
have not been included in the table below as they have not been
granted as at 31 December 2018. An expense related to the 2018
performance year has been estimated for restricted shares and
performance rights, using fair value estimates based on inputs at
31 December 2018.
Recognition and measurement
All compensation under WEP, SWEP and executive share plans
is accounted for as share-based payments to employees for
services provided. The cost of equity-settled transactions with
employees is measured by reference to the fair values of the
equity instruments at the date at which they are granted. The
fair value of share-based payments is recognised, together with
the corresponding increase in equity, over the period in which
the vesting conditions are fulfilled, ending on the date on which
the relevant employee becomes fully entitled to the shares. At
each balance sheet date, the Group reassesses the number of
awards that are expected to vest based on service conditions. The
expense recognised each year takes into account the most
recent estimate.
The fair value of the benefit provided for the WEP and SWEP is
estimated using the Black-Scholes option pricing technique. The
fair value of the restricted shares is estimated as the closing share
price at grant date. The fair value of the benefit provided for the
RTSR VPRs was estimated using the Binomial or Black-Scholes
option pricing technique combined with a Monte Carlo simulation
methodology, where relevant, using historical volatility to estimate
the volatility of the share price in the future.
The number of performance rights and movements for all share
plans are summarised as follows:
Numberofperformancerights
Employeeplans Executiveplans
WEP SWEP STA LTA
Year ended 31 December 2018
Openingbalance
Grantedduringtheyear
Vestedduringtheyear () - () ()
Forfeitedduringtheyear () - () ()
Performance rights at 31 December 2018
USm USm USm USm
Fair value of rights granted during the year -
Numberofperformancerights
Employeeplans Executiveplans
WEP SWEP STA LTA
Year ended 31 December 2017
Opening balance
Granted during the year
Vested during the year1,2 () () () ()
Forfeited during the year () () () ()
Performance rights at 31 December 2017
USm USm USm USm
Fair value of rights granted during the year -
1. For the purpose of valuation, the share price on grant date for the 2018 WEP allocations was US$24.36 (2017: US$22.77) and the average SWEP was US$24.09 (2017: US$23.38).
2. For the purpose of valuation, the share price on grant date for the 2018 STA and LTA allocations was US$24.45 (2017: US$22.49).
For more detail on these share plans and performance rights issued to KMPs, refer to the Remuneration Report on pages
82-85 and pages 92-94.
NOTES TO THE FINANCIAL STATEMENTS E. OTHER ITEMS
for the year ended 31 December 2018