COMMON STOCK PLANS

Energen Employee Savings Plan (ESP): A majority of Company employees are eligible to participate in the ESP by electing to contribute a portion of their compensation to the ESP. The Company may match a percentage of the contributions and make these contributions in Company common stock or in funds for the purchase of Company common stock. Employees may diversify 100 percent of their ESP Company stock account into other ESP investment options. The ESP also contains employee stock ownership plan provisions. At December 31, 2011, total shares reserved for issuance equaled 1,080,108. Expense associated with Company contributions to the ESP was $6.8 million, $6.2 million and $5.8 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Stock Incentive Plan: The Stock Incentive Plan provided for the grant of incentive stock options and non-qualified stock options to officers and key employees. The Stock Incentive Plan also provided for the grant of performance share awards and restricted stock. The Company has typically funded options, restricted stock obligations and performance share obligations through original issue shares. On April 27, 2011, the Company amended the Stock Incentive Plan to increase the number of shares authorized for issuance by 3,000,000. Under the Stock Incentive Plan, 8,600,000 shares of Company common stock were reserved for issuance with 3,798,701 remaining for issuance as of December 31, 2011.

Performance Share Awards: The Stock Incentive Plan provided for the grant of performance share awards, with each unit equal to the market value of one share of common stock, to eligible employees based on predetermined Company performance criteria at the end of a four-year award period. The Stock Incentive Plan provided that payment of earned performance share awards be made in the form of Company common stock.

No performance share awards were granted in 2011, 2010 or 2009. A summary of performance share award activity is presented below:



	Stock Incentive Plan
	Shares		Weighted Average Price
Nonvested at December 31, 2008	228,683		$	30.80
Expired without payout	(117,540	)	18.50
Nonvested at December 31, 2009	111,143		43.81
Vested and paid	(111,143	)	43.81
Nonvested at December 31, 2010	—		$	—

During the years ended December 31, 2011 and 2010, the Company recorded no expense for performance share awards. The Company recorded expense of $0.5 million for the year ended December 31, 2009 for performance share awards with a related deferred income tax benefit of $0.2 million.

Stock Options: The Stock Incentive Plan provided for the grant of incentive stock options, non-qualified stock options, or a combination thereof to officers and key employees. Options granted under the Stock Incentive Plan provided for the purchase of Company common stock at not less than the fair market value on the date the option is granted. The sale or transfer of the shares is limited during certain periods. All outstanding options are incentive or non-qualified, vest within three years from date of grant, and expire 10 years from the grant date.

A summary of stock option activity as of December 31, 2011, and transactions during the years ended December 31, 2011, 2010 and 2009 are presented below:



	Stock Incentive Plan
	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2008	620,517		$	40.75
Granted	543,242		29.91
Exercised	(55,950	)	13.10
Outstanding at December 31, 2009	1,107,809		36.83
Granted	281,110		46.69
Exercised	(111,676	)	23.83
Forfeited	(1,200	)	13.72
Outstanding at December 31, 2010	1,276,043		40.16
Granted	293,978		54.99
Exercised	(227,405	)	32.33
Forfeited	(4,375	)	35.35
Outstanding at December 31, 2011	1,338,241		$	44.77
Exercisable at December 31, 2009	360,229		$	36.87
Exercisable at December 31, 2010	574,992		$	41.16
Exercisable at December 31, 2011	677,753		$	43.72
Remaining reserved for issuance at December 31, 2011	3,798,701		—

The Company uses the Black-Scholes pricing model to calculate the fair values of the options awarded. For purposes of this valuation the following assumptions were used to derive the fair values:



Grant date	1/26/2011		1/27/2010		8/24/2009		1/28/2009
Awards granted	293,978		281,110		4,750		538,492
Fair market value of stock at grant	$19.65		$16.47		$15.00		$8.83
Expected life of award	5.8 years		5.7 years		5.7 years		5.7 years
Risk-free interest rate	2.45	%	2.76	%	2.80	%	1.89	%
Annualized volatility rate	37.8	%	37.3	%	36.9	%	34.8	%
Dividend yield	1.0	%	1.1	%	1.2	%	1.7	%

The Company recorded stock option expense of $5.6 million, $4.6 million and $4.4 million during the years ended December 31, 2011, 2010 and 2009, respectively, with a related deferred tax benefit of $2.1 million, $1.7 million and $1.6 million respectively.

The total intrinsic value of stock options exercised during the year ended December 31, 2011, was $4.3 million. During the year ended December 31, 2011, the total intrinsic value of stock appreciation rights exercised was $0.9 million. During the year ended December 31, 2011, the Company received cash of $7.5 million from the exercise of stock options and paid $0.6 million in settlement of stock appreciation rights. Total intrinsic value for outstanding options as of December 31, 2011, was $10.5 million and $6.2 million for exercisable options. The fair value of options vested for the year ended December 31, 2011 was $4.2 million. As of December 31, 2011, there was $1.9 million of unrecognized compensation cost related to outstanding nonvested stock options.

The following table summarizes options outstanding as of December 31, 2011:



Stock Incentive Plan
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life
$14.86	37,250	1.08 years
$21.38	8,460	2.08 years
$46.45	154,920	5.00 years
$55.08	7,260	5.50 years
$60.56	184,565	6.00 years
$29.79	365,948	7.00 years
$43.30	4,750	7.67 years
$46.69	281,110	8.00 years
$54.99	293,978	9.00 years
$14.86-$60.56	1,338,241	7.08 years

The weighted average remaining contractual life of currently exercisable stock options is 6.01 years as of December 31, 2011.

Restricted Stock: In addition, the Stock Incentive Plan provided for the grant of restricted stock which have been valued based on the quoted market price of the Company’s common stock at the date of grant. Restricted stock awards have a three to six year vesting period. A summary of restricted stock activity as of December 31, 2011, and transactions during the years ended December 31, 2011, 2010 and 2009 is presented below:



	Stock Incentive Plan
	Shares		Weighted Average Price
Nonvested at December 31, 2008	111,355		$	31.49
Granted	6,150		43.30
Vested	(64,500	)	31.65
Nonvested at December 31, 2009	53,005		32.66
Vested	(28,855	)	30.30
Nonvested at December 31, 2010	24,150		35.49
Vested	(14,875	)	30.81
Nonvested at December 31, 2011	9,275		$	42.99

The Company recorded expense of $0.1 million, $0.2 million and $0.4 million for the years ended December 31, 2011, 2010 and 2009, respectively, related to restricted stock, with a related deferred income tax benefit of $47,000, $70,000 and $143,000, respectively. As of December 31, 2011, there was $76,000 of total unrecognized compensation cost related to nonvested restricted stock awards recorded in premium on capital stock. These awards have a remaining requisite service period of 0.72 years.

2004 Stock Appreciation Rights Plan: The Energen 2004 Stock Appreciation Rights Plan provided for the payment of cash incentives measured by the long-term appreciation of Company stock. Officers of the Company are not eligible to participate in this Plan. These awards are liability awards which settle in cash and are re-measured each reporting period until settlement. These awards have a three year requisite service period.

The Company issued the following awards with stock appreciation rights. The Company uses the Black-Scholes pricing model to calculate the fair values of the options awarded. For purposes of this valuation the following assumptions were used to derive the fair values as of December 31, 2011:



Grant date	1/26/2011	1/27/2010	2/13-16/2009	1/28/2009
Awards granted	189,984	171,749	3,292	305,257
Fair market value of award	$15.43	$16.43	$21.98	$22.93
Expected life of award	5.6 years	4.6 years	3.6 years	3.6 years
Risk-free interest rate	1.05%	0.77%	0.53%	0.53%
Annualized volatility rate	39.5%	39.5%	39.5%	39.5%
Dividend yield	1.1%	1.1%	1.1%	1.1%

Expense associated with stock appreciation rights of $4.3 million, $3.4 million and $4.6 million was recorded for the years ended December 31, 2011, 2010 and 2009, respectively.

Petrotech Incentive Plan: The Energen Resources’ Petrotech Incentive Plan provided for the grant of stock equivalent units which may include market conditions. Officers of the Company are not eligible to participate in this Plan. These awards are liability awards which settle in cash and are re-measured each reporting period until settlement. Stock equivalent units with service conditions were valued based on the Company’s stock price at the end of the period adjusted to remove the present value of future dividends.

Energen Resources awarded 6,314 stock equivalent units with a three year vesting period in 2011. During 2010, Energen Resources awarded 2,442 stock equivalent units with a three year vesting period. In the first quarter of 2009, Energen Resources awarded 900 stock equivalent units with a two year vesting period and 2,911 stock equivalent units with a three year vesting period. During the third quarter of 2009, Energen Resources awarded 938 stock equivalent units with a three year vesting period. None of the awards issued included a market condition. Energen Resources recognized expense of $0.2 million, $0.2 million and $1.0 million during 2011, 2010 and 2009, respectively, related to these units.

1997 Deferred Compensation Plan: The 1997 Deferred Compensation Plan allowed officers and non-employee directors to defer certain compensation. Amounts deferred by a participant under the 1997 Deferred Compensation Plan are credited to accounts maintained for a participant in either a stock account or an investment account. The stock account tracks the performance of the Company's common stock, including reinvestment of dividends. The investment account tracks the performance of certain mutual funds. The Company has funded, and presently plans to continue funding, a trust in a manner that generally tracks participants' accounts under the 1997 Deferred Compensation Plan. While intended for payment of benefits under the 1997 Deferred Compensation Plan, the trust's assets remain subject to the claims of the Company's creditors. Amounts earned under the Deferred Compensation Plan and invested in Company common stock held by the trust have been recorded as treasury stock, along with the related deferred compensation obligation in the consolidated statements of shareholders' equity. As of December 31, 2011 there were 706,355 shares reserved for issuance from the 1997 Deferred Compensation Plan.

1992 Energen Corporation Directors Stock Plan: In 1992 the Company adopted the Energen Corporation Directors Stock Plan to pay a portion of the compensation of its non-employee directors in shares of Company common stock. Under the Plan, 12,420 shares, 15,400 shares and 12,000 shares were awarded during the years ended December 31, 2011, 2010 and 2009, respectively, leaving 162,904 shares reserved for issuance as of December 31, 2011.

Stock Repurchase Program: By resolution adopted May 25, 1994, and supplemented by resolutions adopted April 26, 2000 and June 24, 2006, the Board authorized the Company to repurchase up to 12,564,400 shares of the Company's common stock. There were no shares repurchased pursuant to its repurchase authorization for the years ended December 31, 2011, 2010 and 2009. As of December 31, 2011, a total of 8,992,700 shares remain authorized for future repurchase. The Company also from time to time acquires shares in connection with participant elections under the Company's stock compensation plans. For the years ended December 31, 2011, 2010 and 2009, the Company acquired 12,867 shares, 62,794 shares and 23,942 shares, respectively, in connection with its stock compensation plans.