Stock-based compensation

Phantom Stock Plan and Restricted Stock Unit Plan

Effective January 1, 2004, we implemented a Phantom Unit Plan, which was revised on December 31, 2008 as the Second Amended and Restated Phantom Stock Plan (the “Phantom Plan”), to provide deferred compensation to certain key employees (the “Participants”). Phantom stock may be awarded to Participants in total up to 2% of the fair market value of the Company. No Participant may be granted, in the aggregate, more than 5% of the maximum number of phantom shares available for award. Under the Plan, awards vest on the fifth anniversary of the award date, but may also vest on a pro-rata basis following a Participant’s termination of employment with us due to death, disability, retirement or termination by us without cause. Also, phantom stock will vest if a change of control event occurs. Phantom shares are cash-settled within 120 days of the vesting date.

Effective March 1, 2012, we implemented a Non-Officer Restricted Stock Unit Plan (the “RSU Plan”) to create incentives to motivate Participants to put forth maximum effort toward the success and growth of the Company and to enable the Company to attract and retain experienced individuals who by their position, ability and diligence are able to make important contributions to the Company’s success. The RSU Plan is intended to replace the Phantom Plan. Although the Phantom Plan remains in effect, we do not expect to make any further awards under the Phantom Plan.

Restricted stock units may be awarded to Participants in total up to 2% of the fair market value of the Company. Under the RSU Plan, awards generally vest in equal annual increments over a three-year period. RSU awards may also vest following a Participant’s termination of employment in combination with the occurrence of a change of control event, as specified in the RSU Plan. RSU awards are cash-settled, generally within 120 days of the vesting date.

A summary of our phantom stock and RSU activity during the nine months ended September 30, 2012 is presented in the following table:



	Phantom Plan						RSU Plan
	Weighted average grant date fair value		Phantom shares		Vest date fair value		Weighted average grant date fair value		Restricted Stock Units
	($ per share)						($ per share)
Unvested and outstanding at January 1, 2012	$	16.37	125,768				$	—	—
Granted	$	—	—				$	17.07	177,026
Vested	$	14.34	(26,254	)	$	401	$	—	—
Forfeited	$	17.06	(13,324	)			$	17.34	(20,907	)
Unvested and outstanding at September 30, 2012	$	16.89	86,190				$	17.03	156,119

Based on an estimated fair value of $17.20 per phantom share and RSU as of September 30, 2012, the aggregate intrinsic value of the unvested phantom shares and RSUs outstanding was $4,168.

2010 Equity Incentive Plan

We adopted the Chaparral Energy, Inc. 2010 Equity Incentive Plan (the “2010 Plan”) on April 12, 2010. The 2010 Plan reserves a total of 86,301 shares of our class A common stock for awards issued under the 2010 Plan. All of our or our affiliates’ employees, officers, directors, and consultants, as defined in the 2010 Plan, are eligible to participate in the 2010 Plan.

These awards consist of shares that are subject to service vesting conditions (the “Time Vested” awards) and shares that are subject to market and performance vesting conditions (the “Performance Vested” awards). The Time Vested awards vest in equal annual installments over the five-year vesting period but may also vest on an accelerated basis in the event of a Transaction (as defined in the 2010 Plan). The Performance Vested awards vest in the event of a Transaction that achieves certain market targets as defined in the 2010 Plan.

A summary of our restricted stock activity during the nine months ended September 30, 2012 is presented below:



	Time Vested						Performance Vested
	Weighted average grant date fair value		Restricted shares		Vest date fair value		Weighted average grant date fair value		Restricted shares
	($ per share)						($ per share)
Unvested and outstanding at January 1, 2012	$	680.74	11,585				$	298.15	53,098
Granted	$	607.06	525				$	394.00	5,532
Vested	$	681.40	(2,583	)	$	1,930	$	—	—
Forfeited	$	685.04	(601	)			$	299.56	(2,364	)
Unvested and total outstanding at September 30, 2012	$	675.92	8,926				$	307.52	56,266

During the nine months ended September 30, 2012, we repurchased and canceled 764 vested shares (653 were for tax withholding), and we expect to repurchase approximately 1,500 restricted shares vesting during the next twelve months. Based on an estimated fair value of $563.30 per Time Vested restricted share, the aggregate intrinsic value of the unvested Time Vested restricted shares outstanding was $5,028.

Stock-based compensation cost

Compensation cost is calculated net of forfeitures, which are estimated based on our historical and expected turnover rates. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation cost could be different from what we have recorded in the current period.

A portion of stock-based compensation cost associated with employees involved in our acquisition, exploration, and development activities has been capitalized as part of our oil and natural gas properties. The remaining cost is reflected in lease operating and general and administrative expenses in the consolidated statements of operations. We recognized stock-based compensation expense as follows for the periods indicated:



	Three months ended						Nine months ended
	September 30,						September 30,
	2012			2011			2012			2011
Stock-based compensation cost	$	1,725		$	1,179		$	4,773		$	4,216
Less: stock-based compensation cost capitalized	(605		)	(439		)	(1,715		)	(1,603		)
Stock-based compensation expense	$	1,120		$	740		$	3,058		$	2,613

Payments for stock-based compensation were $120 and $326 during the three months ended September 30, 2012 and 2011, respectively, and were $981 and $602 during the nine months ended September 30, 2012 and 2011, respectively. As of September 30, 2012 and December 31, 2011, accrued payroll and benefits payable included $2,472 and $2,359, respectively, for stock-based compensation costs expected to be settled within the next twelve months. Unrecognized compensation cost of approximately $15,405 is expected to be recognized over a weighted-average period of 3.00 years.