STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2017

Stock-based Compensation

STOCK-BASED COMPENSATION

6.STOCK-BASED COMPENSATION

We have recognized stock-based compensation cost as shown below for the periods indicated. 

	Three Months Ended
	March 31,
(in thousands)	2017		2016
Restricted stock awards
Performance stock awards	$	6,402	$	5,694
Service-based stock awards		4,924		4,165
		11,326		9,859
Stock option awards		666		655
Total stock compensation cost		11,992		10,514
Less amounts capitalized to oil and gas properties		(5,704)		(4,986)
Compensation expense	$	6,288	$	5,528

Expense associated with stock compensation will fluctuate based on the grant-date fair value of awards, the number of awards, and the timing of the awards.  The increase in expense in 2017 as compared to 2016 is primarily due to new performance stock awards granted in December 2016 and service-based stock awards granted in June 2016, partially offset by the vesting of awards subsequent to March 31, 2016 and before March 31, 2017.  Additionally, pursuant to Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting  (“ASU 2016-09”), which we adopted on January 1, 2017, we made an accounting policy election to account for forfeitures in compensation cost when they occur, rather than including an estimate of the number of awards that are expected to vest in our compensation cost.  This also contributed to the increase in stock compensation expense in 2017 as compared to 2016.

ASU 2016-09 simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The amendments within ASU 2016-09 related to the timing of when excess tax benefits and tax benefits on dividends on nonvested equity shares are recognized and accounting for forfeitures were adopted using a modified retrospective method.  In accordance with this method, we recorded a cumulative-effect adjustment relating to those amendments, representing an increase to beginning deferred income tax assets of $33.1 million, a reduction to beginning accumulated deficit of $28.7 million, and an increase to beginning additional paid-in capital of $4.4 million.  The amendments within ASU 2016-09 related to the presentation in the statement of cash flows of excess tax benefits and cash outflows attributable to tax withholdings on the net settlement of equity-classified awards were adopted using a retrospective method.  In accordance with this method, we adjusted the statement of cash flows for the three months ended March  31, 2016 by increasing net cash provided by operating activities by $0.3 million and increasing net cash used by financing activities by $0.3 million for the effects of tax withholdings on the net settlement of equity-classified awards.  There were no cash flows related to excess tax benefits during the three months ended March 31, 2017 and 2016.