10. Stock-Based Compensation

As of March 31, 2019, there were 152,724 shares of common stock available for grant under the 2017 Incentive Plan of Carrizo Oil & Gas, Inc. (“2017 Incentive Plan”). The Company has not granted stock appreciation rights to be settled in shares of common stock and has no outstanding stock options. See “Note 11. Stock-Based Compensation” of the Notes to Consolidated Financial Statements in the 2018 Annual Report for details of the Company’s equity-based incentive plans.

Restricted Stock Awards and Units

The table below summarizes restricted stock award and unit activity for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019				2018
	Restricted Stock Awards and Units		Weighted Average Grant Date Fair Value		Restricted Stock Awards and Units		Weighted Average Grant Date Fair Value
Unvested, beginning of period	2,266,667			$19.28	1,482,655			$28.07
Granted	1,918,683			$11.01	1,347,165			$14.68
Vested	(851,456	)		$20.64	(564,912	)		$31.87
Forfeited	(13,834	)		$17.16	(1,078	)		$29.61
Unvested, end of period	3,320,060			$14.16	2,263,830			$19.15

Grant activity primarily consisted of restricted stock units to employees as part of the annual grant of long-term equity incentive awards that occurred in the first quarter of each of the years presented in the table above and vest ratably over an approximate three-year period. The Company currently intends to settle the restricted stock units granted in the first quarter of 2019 in cash upon vesting if the proposed amendment and restatement of the 2017 Incentive Plan is not approved by shareholders at the Company’s annual meeting of shareholders on May 16, 2019. As such, these restricted stock units were accounted for as liability awards. The liability for these restricted stock units as of March 31, 2019 was $0.6 million and was classified as “Other current liabilities” in the consolidated balance sheets. If the amendment and restatement of the 2017 Incentive Plan is approved, the Company intends to settle these restricted stock units in common stock rather than cash upon vesting.

The aggregate fair value of restricted stock awards and units that vested during the three months ended March 31, 2019 and 2018 was $9.8 million and $8.9 million, respectively. As of March 31, 2019, unrecognized compensation costs related to unvested restricted stock awards and units were $42.1 million and will be recognized over a weighted average period of 2.4 years. As of March 31, 2018, unrecognized compensation costs related to unvested restricted stock awards and units were $35.0 million to be recognized over a weighted average period of 2.4 years.

Cash SARs

The table below summarizes the activity for stock appreciation rights that will be settled in cash (“Cash SARs”) for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019				2018
	Cash SARs	Weighted Average Exercise Prices		Weighted Average Remaining Life (In years)	Cash SARs	Weighted Average Exercise Prices		Weighted Average Remaining Life (In years)
Outstanding, beginning of period	1,330,924		$21.35		714,238		$27.12
Granted	770,775		$10.98		616,686		$14.67
Exercised	—		$—		—		$—
Forfeited	—		$—		—		$—
Expired	—		$—		—		$—
Outstanding, end of period	2,101,699		$17.55	5.1	1,330,924		$21.35	5.1
Vested, end of period	919,800		$24.34		543,018		$27.18
Vested and exercisable, end of period	—		$24.34	3.2	—		$27.18	3.3

Grant activity primarily consisted of Cash SARs to certain employees as part of the annual grant of long-term equity incentive awards that occurred in the first quarter of each of the years presented in the table above. The Cash SARs granted in the first quarter of 2019 and 2018 vest ratably over an approximate three-year period and expire approximately seven years from the grant date.

The grant date fair value of the Cash SARs, calculated using the Black-Scholes-Merton option pricing model, was $4.6 million and $4.9 million for the three months ended March 31, 2019 and 2018. The following table summarizes the assumptions used and the resulting grant date fair value of the Cash SARs granted during the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019		2018
Expected term (in years)	6.1		6.0
Expected volatility	56.0	%	54.3	%
Risk-free interest rate	2.6	%	2.8	%
Dividend yield	—	%	—	%
Grant date fair value per Cash SAR	$6.00		$7.89

The aggregate intrinsic value of Cash SARs outstanding as of March 31, 2019 and 2018 was $1.1 million and $0.7 million, respectively, and the aggregate intrinsic value of Cash SARs vested and exercisable as of March 31, 2019 and 2018 was zero. The liability for Cash SARs as of March 31, 2019 was $2.5 million, all of which was classified as “Other current liabilities,” in the consolidated balance sheets. As of December 31, 2018, the liability for Cash SARs was $1.8 million, all of which was classified as “Other current liabilities” in the consolidated balance sheets. As of March 31, 2019, unrecognized compensation costs related to unvested Cash SARs were $7.8 million and will be recognized over a weighted average period of 2.7 years. As of March 31, 2018, unrecognized compensation costs related to unvested Cash SARs were $5.8 million to be recognized over a weighted average period of 2.8 years.

Performance Shares

The table below summarizes performance share activity for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019				2018
	Target Performance Shares ⁽¹⁾		Weighted Average Grant Date Fair Value		Target Performance Shares ⁽¹⁾		Weighted Average Grant Date Fair Value
Unvested, beginning of period	182,209			$27.01	144,955			$47.14
Granted	130,302			$14.20	93,771			$19.09
Vested at end of performance period	(31,244	)		$35.71	(49,458	)		$65.51
Did not vest at end of performance period	(10,407	)		$35.71	(7,059	)		$65.51
Forfeited	—			$—	—			$—
Unvested, end of period	270,860			$19.51	182,209			$27.01


(1)	The number of performance shares that vest may vary from the number of target performance shares granted depending on the Company’s final TSR ranking for the approximate three-year performance period.

Grant activity primarily consisted of performance shares as part of the annual grant of long-term equity incentive awards to certain employees that occurred in the first quarter of 2019 and 2018. Each performance share represents the right to receive one share of common stock, however, the number of performance shares that vest ranges from zero to 200% of the target performance shares granted based on the total shareholder return (“TSR”) of the Company’s common stock relative to the TSR achieved by a specified industry peer group over an approximate three-year performance period, the last day of which is also the vesting date.

The following table presents the results of the Company’s final TSR ranking during the performance periods that ended during the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019		2018
Target performance shares granted	41,651		56,517
Multiplier	75	%	88	%
Performance shares vested	31,244		49,458
Performance shares that did not vest	10,407		7,059
Aggregate fair value of performance shares vested (In thousands)	$357		$768

For the three months ended March 31, 2019 and 2018, the grant date fair value of the performance shares, calculated using a Monte Carlo simulation, was $1.9 million and $1.8 million, respectively. The following table summarizes the assumptions used and the resulting grant date fair value per performance share for the performance shares granted during the three months ended March 31, 2019:



	Three Months Ended March 31,
	2019		2018
Number of simulations	500,000		500,000
Expected term (in years)	3.1		3.0
Expected volatility	58.2	%	61.5	%
Risk-free interest rate	2.5	%	2.4	%
Dividend yield	—	%	—	%
Grant date fair value per performance share	$14.20		$19.09

As of March 31, 2019, unrecognized compensation costs related to unvested performance shares were $3.5 million and will be recognized over a weighted average period of 2.3 years. As of March 31, 2018, unrecognized compensation costs related to unvested performance shares were $3.3 million to be recognized over a weighted average period of 2.4 years.

Stock-Based Compensation Expense, Net

Stock-based compensation expense associated with restricted stock awards and units, Cash SARs, and performance shares, net of amounts capitalized, is included in “General and administrative, net” in the consolidated statements of income. The Company recognized the following stock-based compensation expense, net for the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
	2019			2018
	(In thousands)
Restricted stock awards and units		$4,823			$5,084
Cash SARs	760			(1,415		)
Performance shares	435			557
	6,018			4,226
Less: amounts capitalized to oil and gas properties	(1,903		)	(708		)
Total stock-based compensation expense, net		$4,115			$3,518