Falkland Oil & Gas (LSE: FOGL) issues options at 28p.
The shares of Falkland Oil & Gas (LSE: FOGL) kept steady at 28.5p during London trading today after the popular AIM-quoted company revealed its latest director share awards.
Falkland, which is exploring for oil and gas to the south and east of the Falkland Islands, said the awards would have a three-year performance period and a ten-year term.
Falkland confirmed the 'restricted' shares it had awarded would vest following the "achievement of strategic objectives and operating milestones" during 2013, 2014 and 2015.
The firm also said the 'market value' options it had granted would vest according to the share-price growth recorded during the same three years, with any payout starting at 33% and calculated from 28p.
Falkland's chief executive, Tim Bushell, today collected 371,429 restricted shares and 742,857 options, while operations director Colin More received 334,286 restricted shares and 668,571 options.
Falkland's directors will no doubt hope they will be able to exercise their options in the future. Last year, a bad run of drilling news saw Falkland's shares plunge from as high as 99p to 28p -- an all-time low.
That price plunge currently means the board's options have questionable value. According to Falkland's 2011 annual report, up to four million staff options may be 'underwater', with a further 1.8 million restricted shares unlikely to have much value due their vesting being linked to the company's share performance.
Still, today's option grants may prove valuable one day to Falkland's directors. At 28p, the exercise price is well below the group's last reported net cash position of about 43p per share, equivalent to roughly £138m.
On the face of it, losing money on 28p shares that are backed entirely by cash could be hard to achieve.
But whether investors can make any money -- and whether Falkland's directors eventually profit from today's option grant -- is a different story. Ultimately, whether the 43p per share cash hoard makes Falkland a 'buy' at 28p remains your decision.
That said, you can always consult this free Motley Fool report, which explains the factors you need to consider when evaluating smaller oil and gas explorers. The sector has always provided its fair share of multi-baggers and falling knives that can persuade even the most cautious of investors to take a wild punt.
Anyway, if Falkland's cash hoard is tempting you today, please click here to read the Fool's exclusive oil and gas report before you hit the 'buy' button.
> Maynard does not own any share mentioned in this article.