The 2014 Plan, allows, among other things, for the grant of restricted stock units (“RSUs”). As of September 30, 2022, the maximum number of shares of Class A Common Stock that may be issued under the 2014 Plan was 12.0 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 period and is net of forfeitures, as incurred. Stock-based

compensation is included in General and administrative expense in the Condensed Consolidated Statements of Operations and is recorded with a corresponding increase in Additional paid-in capital within the Condensed Consolidated Balance Sheets.


	Shares	Weighted-Average Grant Date Fair Value
Unvested RSUs at December 31, 2021	771,817	$	5.91
Granted	511,615	$	13.75
Forfeited	(14,934)	$	7.93
Vested	(491,107)	$	7.77
Unvested RSUs at September 30, 2022	777,391	$	9.86

As of September 30, 2022, there was $7.2 million of unrecognized compensation expense related to the RSU awards which will be recognized over a weighted average period of 1.28 years.

For the three and nine months ended September 30, 2022, Stock-based compensation related to RSUs was $1.5 million and $4.2 million, respectively. For the three and nine months ended September 30, 2021, Stock-based compensation related to RSUs was $1.2 million and $3.9 million, respectively.


	Shares	Weighted-Average Grant Date Fair Value
Unvested PSUs at December 31, 2021	2,751,725	$	8.42
Granted	472,485	$	19.42

Vested	(608,125)	$	9.30
Unvested PSUs at September 30, 2022	2,616,085	$	10.20

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 PSUs are expected to be paid in shares of Class A Common Stock upon the achievement by Earthstone over a period commencing on February 1, 2020 and ending on January 31, 2023 (the “2020 Performance Period”) of certain performance criteria established by the Board.

On February 1, 2022, the Board granted 472,485 PSUs (the “2022 PSUs”) to certain officers pursuant to the 2014 Plan. The 2022 PSUs are expected to be paid in shares of Class A Common Stock upon the achievement by Earthstone over a period commencing on January 1, 2022 and ending on December 31, 2024 (the “2022 Performance Period”) of certain performance criteria established by the Board.

The Company classifies 2020 PSUs and 2022 PSUs as equity awards as they are expected to be settled in shares. In the event that a PSU grant is expected to be settled in cash, it is alternatively classified as a liability award.

The 2020 PSUs and 2022 PSUs are eligible to be earned based on the annualized Total Shareholder Return (“TSR”) of the Class A Common Stock during 2020 Performance Period and 2022 Performance Period, respectively. 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:

The Company accounts for 2020 PSUs and 2022 PSUs as market-based awards which were valued utilizing the Monte Carlo Simulation pricing model, which calculated multiple potential outcomes for an award and established 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. For the 2022 PSUs, assuming a risk-free rate of 1.4% and volatility of 86.0%, the Company calculated the weighted average grant date fair value per PSU to be $19.42.

On January 27, 2021, the Board granted 1,099,800 PSUs to certain officers pursuant to the 2014 Plan (the “2021 PSUs”). The 2021 PSUs are payable in cash or shares of Class A Common Stock upon the achievement by the Company over a period commencing on January 1, 2021 and ending on December 31, 2023 of certain performance criteria established by the Board. The Company classifies these awards as liability awards as they are expected to be paid in cash. As of September 30, 2022 and December 31, 2021, $13.5 million and $6.3 million, respectively, have been included in Other noncurrent liabilities in the Condensed Consolidated Balance Sheets related to the 2021 PSUs.

On January 28, 2019, the Board granted 669,550 PSUs to certain named executive officers pursuant to the 2014 Plan (the “2019 PSUs”). The 2019 PSUs were payable in shares of Class A Common Stock based upon the achievement by Earthstone over a period commencing on February 1, 2019 and ending on January 31, 2022 of performance criteria established by the Board. On January 31, 2022, the Company settled the remaining 608,125 PSUs, net of forfeitures, at a rate of 1.97x. 1.0x was settled through the issuance of 608,125 shares of Class A Common Stock and the remainder was settled in cash.

As of September 30, 2022, there was $17.7 million of unrecognized compensation expense related to all PSU awards which will be amortized over a weighted average period of 1.10 years.