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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
Restricted Stock Units
The 2014 Plan allows, among other things, for the grant of restricted stock units (“RSUs”). As of December 31, 2020, the maximum number of shares of Class A Common Stock that may be issued under the 2014 Plan was 9.4 million shares.
Each RSU represents the contingent right to receive one share of Class A Common Stock. The holders of outstanding RSUs do not receive dividends or have voting rights prior to vesting and settlement. The Company determines the fair value of granted RSUs based on the market price of the Class A Common Stock on the date of the grant. Compensation expense for granted RSUs is recognized on a straight-line basis over the vesting term and is net of forfeitures, as incurred. Stock-based compensation is included in General and administrative expense in the Consolidated Statements of Operations and is recorded with a corresponding increase in Additional paid-in capital within the Consolidated Balance Sheets.
The table below summarizes unvested RSU activity for the year ended December 31, 2020:
 SharesWeighted-Average Grant Date Fair Value
Unvested RSUs at December 31, 20191,107,796 $6.60 
Granted859,100 $5.07 
Forfeited(1,083)$5.19 
Vested(914,905)$6.37 
Unvested RSUs at December 31, 20201,050,908 $5.55 
During the year ended December 31, 2020, Earthstone granted 744,700 RSUs to employees and 114,400 RSUs to certain members of the Board with vesting periods ranging from 12 to 36 months. The total grant date fair value of the RSUs granted during the years ended December 31, 2020 and 2019 were $4.4 million and $6.5 million, respectively, with a weighted average grant date fair value per share of $5.07 and $6.04, respectively. The total vesting date fair value of the RSUs that vested during 2020 and 2019 was $3.0 million and $4.2 million, respectively. As of December 31, 2020, there was approximately $5.7 million of total unrecognized stock-based compensation expense related to unvested RSUs, which will be amortized over the remaining vesting periods. The weighted average remaining vesting period of the unrecognized compensation expense is 0.98 years.
For the years ended December 31, 2020 and 2019, stock-based compensation related to RSUs was $5.4 million and $5.9 million, respectively.
Performance Units
The table below summarizes performance unit (“PSU”) activity for the year ended December 31, 2020:
 SharesWeighted-Average Grant Date Fair Value
Unvested PSUs at December 31, 2019835,625 $10.51 
Granted1,043,800 $5.36 
Unvested PSUs at December 31, 20201,879,425 $7.65 
On January 30, 2020, the Board of Directors of Earthstone (the “Board”) granted 1,043,800 PSUs (the “2020 PSUs”) to certain officers pursuant to the 2014 Plan (the “2020 Grant”). The 2020 Grant was subject to the approval of an amendment to the 2014 Plan to increase the number of available shares available thereunder (the “2014 Plan Amendment”). The 2014 Plan Amendment was approved at the 2020 annual meeting of stockholders held on June 3, 2020. The 2020 PSUs are payable in shares of Class A Common Stock based upon the achievement by the Company over a period commencing on February 1, 2020 and ending on January 31, 2023 (the “Performance Period”) of certain performance criteria established by the Board.
The 2020 PSUs are eligible to be earned based on the annualized Total Shareholder Return (“TSR”) of the Class A Common Stock during a three-year period beginning on February 1, 2020. Between 0x to 2.0x of the Performance Units are eligible to be earned based on Earthstone achieving an annualized TSR based on the following pre-established goals:
Earthstone’s Annualized TSRTSR Multiplier
23.9% or greater 2.0
14.5%1.0
8.4%0.5
Less than 8.4%0.0
In the event that greater than 1.0x of the 2020 PSUs are earned, such additional PSUs may be paid in cash rather than the issuance of shares of Class A Common Stock. Based on the COVID-19 pandemic and the recent commodity price crash, the Company believes that the target annualized TSR of 14.5% included in the 2020 PSU awards will be difficult to achieve.
The Company accounts for these awards as market-based awards which are valued utilizing the Monte Carlo Simulation pricing model, which calculates multiple potential outcomes for an award and establishes grant date fair value based on the most likely outcome. For the 2020 PSUs, assuming a risk-free rate of 1.4% and volatility of 62.0%, the Company calculated the weighted average grant date fair value per PSU to be $5.36.
As of December 31, 2020, there was $6.1 million of unrecognized compensation expense related to the PSU awards which will be amortized over a weighted average period of 0.88 years.
For the years ended December 31, 2020 and 2019, stock-based compensation related to the PSUs was approximately $4.6 million and $2.7 million, respectively.