Hi fellow MEOmitesI have just come down from the welcome...

Hi fellow MEOmites

I have just come down from the welcome isolation of the Green Mountains but I am still on the scenic tour. I will be back in WA by 11 Nov just in time for SV hand over.

Nothing much seems to have happened since my last post with the SP still strong on its upward trend. Today's announcement re the SV handover should ensure the upward momentum will continue up to the A#1 spud at least.

Before I went on my wander around the rainforest I noticed investq's post and replies regarding the Directors' options. I wanted to voice my opinion but didn't have time so my apologies for posting on a thread that has probably been put to bed by now.

I did find some of the comments unfair but that is only my opinion.

The question of Director's options always stirs up angst within the SHs ranks of any company. With some public listed companies the directors award themselves options without owning any shares themselves or even creating value for the SHs. I stay away from such companies. With MEO it is different and here is my take on the question of Directors options.

Shares held

First let's look at the shares held:

Directors

Mr Nicholas Heath (MD) - 1,000,000.
Mr Gregory Short (NED) - 112,444.
Mr Michael Sweeney (NED) - 139,984.
Mr Stephen Hopley (NED) - 70,000.

Executive

Mr Jurgen Hendrich (CEO) - 1,700,000 (inc. 439,000 held by his spouse).
Mr Colin Naylor (CFO & Secretary) - 490,000.
Mr Robert Gard (Commercial Manager) - 2,200,000m.

None of these shares held were obtained through the exercise of options and are held solely through the management's confidence in the company. They will have had their patience tested just like all other LT SHs.

Options

Share options are granted to senior Executives and Non-Executive Directors as part of a share based payment plan.

In 2008/9 financial year there were 10.7m outstanding options from the previous FY. During the year there were 7.7m granted and 5m expired leaving 13.4m outstanding.

There were no options granted during the 2009/10 financial year but 4.5m expired leaving 8.9m outstanding.

The present 8.9m options are distributed as follows:

At the Annual General Meeting of Shareholders on 13 November 2008 SHs approved the granting of 1,000,000 options exercisable at a price of 50c per option on or before 30 September 2011 to each of Messrs M J F Sweeney and S W Hopley. These options vested on 30 September 2009.

Mr Michael Sweeney - 1,000,000 (50c per option - expiry 30 September 2011)
Mr Stephen Hopley - 1,000,000 (50c per option - expiry 30 September 2011)

Total 2,000,000

In June 2009, 2,700,000 options were granted to Executives, exercisable at a price of 50 cents per option on or before 30 June 2012. These options vest 50% on 30 June 2010 and 50% on 30 June 2011 with no performance hurdle only tenure nad strike price. They are distributed as follows:

Mr Colin Naylor - 900,000 (50c per option - expiry 30 June 2012)
Mr Robert Gard - 900,000 (50c per option - expiry 30 June 2012)
Mr Ken Hendrick (Impl Manager) - 450,000 (50c per option expiry 30 June 2012)
Mr David Maughan (Expl Manager) - 450,000 (50c per option - expiry 30 June 2012)

Total 2,700,000

Mr Jurgen Hendrich

On 16 June 2008, 5,300,000 share options were granted to the Chief Executive Officer, Mr Jurgen Hendrich. The share options package is based entirely on the share price performance of MEO, details are as follows:-

(. 1.1 million Options, granted at an option price of 50 cents, vest after 50 trading days at a price at or above 85 cents, but lapse on 30 June 2010. These options lapsed on 30 June 2010 as the share price hurdle was not achieved.)
. 1.1 million Options, granted at an option price of 85 cents, vest after 50 trading days at a price at or above 120 cents, but lapse on 30 June 2011.
. 1.1 million Options, granted at an option price of 120 cents, vest after 50 trading days at a price at or above 160 cents, but lapse on 30 September 2011.
. 2 million options are granted at an option price of $1.00. These Options vest when the market capitalisation of MEO reaches or exceeds $1 billion for 30 trading days, but lapse on September 30, 2011. (To achieve this MC it would currently require a SP of >$2.10 for the 30 days).

If vested the expiry date for these options is 30 June 2012 but if the hurdles are not achieved the options will lapse on 30 June and 30 September 2011 respectively.

Total 4,200,000

Current distribution of options

Directors

Mr Nicholas Heath - 0.
Mr Gregory Short - 0.
Mr Michael Sweeney - 1,000,000.
Mr Stephen Hopley - 1,000,000.

Executive

Mr Jurgen Hendrich - 4,200,000.
Mr Colin Naylor - 900,000.
Mr Robert Gard) - 900,000..
Mr Ken Hendrick - 450,000
Mr David Maughan - 450,000

Proposed issue of options 2010

Mr Nicholas Heath (1.5m) and Mr Gregory Short (1m).

These options will vest on a service condition ending on 30th June 2013 and expire 18 Nov 2013 at an exercise price of $0.50c. These options are on a par with those already held by Messrs Sweeney and Hopley (above)

Mr Jurgen Hendrich (1.5m)

The options issued to Mr Hendrich will be subject to a service condition and a share price hurdle ending on 1 July 2013. Options will vest on 1st July 2013, provided the MEO share price is at or above 60 cents per share for at least 30 trading days, in the period from 1st July 2010 to 1st July 2013, and the Managing Director remains in the service of MEO Australia Limited throughout that period. Upon vesting, the options are exercisable at any time until they expire at 5:00pm on 18th November 2014.

If Mr Hendrich ceases employment with MEO Australia Limited after 1 July 2013, vested options held by the Managing Director may be exercised within a period of 6 months following the Managing Director ceasing employment with MEO Australia Limited, and in any event, no later than 5:00pm on 18th November 2014, after which time the options shall expire.

So, should the new issue of 4,000,000 options be voted for in the AGM, the total options on issue will be 12,900,000 which is less than the 13,400,000 outstanding in 2009 and will be allocated as follows:

Directors

Mr Nicholas Heath - 1,500,000.
Mr Gregory Short - 1,000,000.
Mr Michael Sweeney - 1,000,000.
Mr Stephen Hopley - 1,000,000.

Executive

Mr J?rgen Hendrich - 5,700,000.
Mr Colin Naylor - 900,000.
Mr Robert Gard - 900,000.
Mr Ken Hendrick - 450,000
Mr David Maughan - 450,000.

Do management deserve these options?

I don't think it is simply just a case of giving the director's options.

We have to remember that the present CEO and board members took over MEO Australia in 2008. This was post Heron and pre-Zeus. The GFC was taking hold and most of the major shareholders had left the MEO ship. The RDI deal was struck but was tenuous at best as it relied on a number of variables that could not be met. Once Zeus failed the SP crashed to sub 10c and we have been clawing our way back ever since.

The present management have lifted the SP. This has been under trying conditions. During the lean times management have never allocated options sub 50c, rather, the main reason their last options expired was because they decided to go with the more lucrative, but drawn out, negotiations with PBR. This, along with the CR last November and, to a lesser extent the dissolution of the Doravale Trust, had a negative effect on the SP. In the meantime management have taken some heat from SHs by not meeting some deadlines which were out of their control.

For two years now, apart from the lead up to the non-announcement last Oct, the SP has hardly risen above 50c. The manipulators have made sure of that. Even so the benefits to patient shareholders are starting to come to fruition.

The options are issued to attract and retain a qualified team to see MEO progress and build long term value for SHs above 50/60c for the next three years. It is an incentive based bonus that is on a par with most private and public companies.

The argument from some MEOmites is that the strike price is too close to the current SP. A lot has been said in this forum about the negative impact on the SP should Artemis be a duster (heaven forbid). We have been told over and over that MEO holds no value apart from Artemis. If we listen to them and A#1 fails then the 30 days above 60c would be difficult to achieve anyway.

Another argument could be put that by keeping the strike rate at 50c with a 30 day hurdle of 60c the CEO is putting a low VPS on the company but I have taken this into account. With success at Artemis the market will look favourably on MEO no matter what and it will be a whole new ball game.

It must be remembered that Artemis is a wildcat. Success at Artemis will bring major investors on board but the 78% risk is still there which may need to be compensated elsewhere. Artemis has good prospects but I have always felt that the Bonaparte projects will be the company maker for MEO. Management are continually working towards this goal and are putting safeguards in place just in case Artemis doesn?t keep up to her promise.

This includes the farmout of Heron, the potential of Blackwood and the fact we have been fortunate enough to gain the services of Mr Errol Johnstone as Chief Geoscientist to shore up the potential future ventures we now anticipate through the efforts of the management team led by the CEO.

Like hotbid says the latest deadline has been met. The SV is only about 4 weeks over the original mid Oct schedule and that is because of the BOP failure in July. I think the difficult times are now behind us and we can look forward to better times ahead.

Even though MEOmites have been through the wringer over the last 18 months there have been time when we have been able to top up at sub 50/45/30 and even 10c. Management have also held shares through this time and I, for one, don't begrudge them their options.

I hope management is able to put the Company in a position where they can exercise all their options. Admittedly their exercise will dilute SHs holdings but the benefit will come through the SP stability.

The present slow but sure lead up to Artemis is far better than the heady days pre-Heron which also included a CR. This only added to the volatility. It may not suit some short term players but there are and will be profits for all to share.

We would all like free options but would we like the responsibility of running a SC company that goes with them. They cannot be exercised for three years anyway. I am sure there will be a lot of profit for SHS to make out of MEO during that time.

MEOmites and management alike deserve all the rewards they get for their perseverance and dedication.

I am not trying to influence anybody's vote at the AGM. I am just trying to put forward a reasonable explanation why the issue of options to management are warranted in this case.

But this is just IMHO.

#:>))