The 2014 Plan allows, among other things, for the grant of restricted stock units (“RSUs”). As of December 31, 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 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.


	Shares	Weighted-Average Grant Date Fair Value
Unvested RSUs at December 31, 2021	771,817	$	5.91
Granted	780,765	$	13.65
Forfeited	(16,934)	$	8.17
Vested	(665,670)	$	7.75
Unvested RSUs at December 31, 2022	869,978	$	11.40

During the year ended December 31, 2022, Earthstone granted 727,765 RSUs to employees and 53,000 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, 2022, 2021 and 2020 were $10.7 million, $4.1 million and $4.4 million, respectively, with a weighted average grant date fair value per share of $13.65, $6.16 and 5.07, respectively. The total vesting date fair value of the RSUs that vested during 2022, 2021 and 2020 was $8.9 million, $8.8 million and $3.0 million, respectively. As of

December 31, 2022, there was approximately $9.2 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 1.20 years.


	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 December 31, 2022	2,616,085	$	10.21

The total grant date fair value of the PSUs granted during the years ended December 31, 2022, 2021 and 2020 were $9.2 million, $11.9 million and $5.6 million, respectively, with a weighted average grant date fair value per share of $19.42, $10.85 and $5.36, respectively. The total vesting date fair value of the PSUs that vested during 2022 and 2021 was $8.3 million and $3.5 million respectively. No PSUs vested during 2020. As of December 31, 2022, there was $16.1 million of unrecognized compensation expense related to the PSU awards which will be amortized over a weighted average period of 0.71 years.

The Company classifies awards that will be settled in cash as liability awards. PSU grants to be settled in shares are classified as equity awards. Corresponding liabilities of $14.4 million and $7.8 million related to the PSUs were included in Other current liabilities and Accrued expenses, respectively, in the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively. Additionally, corresponding liabilities of $10.4 million and $6.3 million related to the PSUs were included in Other noncurrent liabilities in the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively.

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 payable in cash or 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 these awards that will be settled in cash as liability awards. PSU grants to be settled in shares are classified as equity awards.

The 2022 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 January 1, 2022. 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 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 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.

TSR for the Company and each of the peer companies is generally determined by dividing (A) the volume weighted average price of a share of stock for the trading days during the thirty calendar days ending on and including the last calendar day of the applicable performance period minus the volume weighted average price of a share of stock for the trading days during the thirty calendar days ending on and including the first day of the applicable performance period plus cash dividends paid over

the applicable performance period by (B) the volume weighted average price of a share of stock for the trading days during the thirty calendar days ending on and including the first day of the applicable performance period.

On January 27, 2021, the Board granted 1,099,800 PSUs (the “2021 PSUs”) to certain officers pursuant to the 2014 Plan (the “2021 Grant”). 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 that will be settled in cash as liability awards. PSU grants to be settled in shares are classified as equity awards.

The 2021 PSUs are eligible to be earned based on the annualized TSR of the Class A Common Stock during a three-year period beginning on February 1, 2021. 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 these awards as market-based awards which are valued quarterly 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 2021 PSUs, assuming a risk-free rate of 0.3% and volatility of 86.0%, the Company calculated the weighted average grant date fair value per PSU to be $10.85.

On January 30, 2020, the Board granted 1,043,800 PSUs (the “2020 PSUs”) to certain officers pursuant to the 2014 Plan (the “2020 Grant”). 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 of certain performance criteria established by the Board.

The 2020 PSUs are eligible to be earned based on the annualized 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:

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, solely at the discretion of the Board.

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.

On January 28, 2019, the Board granted 669,550 PSUs (the “2019 PSUs”) to certain executive officers pursuant to the 2014 Plan. The PSUs are payable in shares of Class A Common Stock based upon the achievement by the Company over a period commencing on February 1, 2019 and ending on January 31, 2022 of performance criteria established by the Board.

The number of shares of Class A Common Stock that may be issued will be determined by multiplying the number of PSUs granted by the Relative TSR Percentage (0% to 200%). The “Relative TSR Percentage” is the percentage, if any, achieved by attainment of a certain predetermined range of targets for the three-year period beginning on February 1, 2019.

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 PSUs granted on January 28, 2019, assuming a risk-free rate of 2.6% and volatilities ranging from 40.1% to 114.1%, the Company calculated the weighted average grant date fair value per PSU to be $9.30.

All outstanding PSUs may be paid in either cash or the issuance of shares of Class A Common Stock or any combination of the two therein, at the discretion of the Board. In January 2023, the Board, at its discretion, consented to settlement of the 2020 Grant in shares of Class A Common Stock up to 100% and the remaining 100% in cash. In consideration of the settlement of the 2020 Grant, which was consistent with the 2019 Grant, the Company deemed it appropriate to modify the remaining performance-based grants (the “Modification”). Based on the Modification, the Company calculated the fair value of the cash settled portion of each award representing an estimated accumulative increase to the liability of $9.9 million as of December 31, 2022, consisting of $17.1 million in additional stock-based compensation during the year ended December 31, 2022, partially offset by $7.2 million of stock-based compensation previously recognized in Additional Paid-in Capital.

During the years ended December 31, 2022 and 2021, the Company recorded gross expense related to stock-based compensation of approximately $35.4 million (net of $4.1 million of income tax benefit) and $21.0 million (net of $2.8 million of income tax benefit), respectively.