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”). Under the Phantom Plan, awards vest at the end of five years, 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 us 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.

Under the RSU Plan, restricted stock units may be awarded to Participants in an aggregate amount of 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, 2014 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		Vest date fair value
	($ per share)						($ per share)
Unvested and outstanding at January 1, 2014	$	17.01	53,162				$	13.53	325,297
Granted	—		—				8.52		504,752
Vested	12.61		(22,041	)	$	212	13.96		(118,400	)	$	1,094
Forfeited	19.54		(6,223	)			9.85		(105,214	)
Unvested and outstanding at September 30, 2014	$	20.26	24,898				$	9.91	606,435

Based on an estimated fair value of $13.76 per phantom share and RSU as of September 30, 2014, the aggregate intrinsic value of the unvested phantom shares and RSUs outstanding was $8,687.

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.

The awards granted under the 2010 Plan consist of shares that are subject to service vesting conditions (the “Time Vested” awards) and shares that are subject to market and performance vested conditions (the “Performance Vested” awards). Except as noted below, 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 whereby CCMP Capital Investors II (AV-2), L.P., CCMP Energy I LTD., and CCMP Capital Investors (Cayman) II, L.P. (collectively “CCMP”) receive cash upon the sale of its class E common stock (a “Transaction” as defined in the 2010 Plan). Prior to October 1, 2014, the Performance Vested awards vest in the event of a Transaction that achieves certain market targets as defined in the 2010 Plan. Any shares of Performance Vested awards not vested on a Separation Date (as defined in the 2010 Plan) will be forfeited as of the Separation Date.

A summary of our restricted stock activity during the nine months ended September 30, 2014 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, 2014	$	634.67	19,246				$	307.45	46,701
Granted	818.50		5,245				204.90		10,033
Vested	649.18		(4,517	)	$	3,697	—		—
Forfeited	638.06		(1,399	)			338.51		(4,468	)
Unvested and total outstanding at September 30, 2014	$	682.80	18,575				$	285.11	52,266

During the nine months ended September 30, 2014 and 2013, respectively, we repurchased and canceled 1,810 and 873 vested shares, primarily for tax withholding, and we expect to repurchase approximately 2,000 restricted shares vesting during the next twelve months. Based on an estimated fair value of $969.00 per Time Vested restricted share, the aggregate intrinsic value of the unvested Time Vested restricted shares outstanding was $17,999 as of September 30, 2014.

Effective October 1, 2014, we terminated all outstanding grants of Performance Vested awards and issued new grants of Performance Vested awards to reflect that (i) a certain number of shares which would vest if CCMP receives net proceeds from a Transaction that yields a return of at least 350% per share were removed from the initial Performance Vested awards and an equal amount were granted effective as of October 1, 2014, under Time Vesting awards (which vest on January 1, 2015, 2016, 2017 and 2018); and (ii) the remaining number of shares subject to the previous Performance Vested awards were reallocated among three targets for vesting. These vesting targets will apply for any new grants of Performance Vested awards. Any shares of Performance Vested awards not vested on a Separation Date will be forfeited as of the Separation Date.



Return on Investment Target		Target Shares Vested
175% per share		33% of shares multiplied by the Vesting Fraction
200% per share		33% of shares multiplied by the Vesting Fraction
250% per share		33% of shares multiplied by the Vesting Fraction

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,
	2014			2013			2014			2013
Stock-based compensation cost	$	2,309		$	2,045		$	9,026		$	4,620
Less: stock-based compensation cost capitalized	(289		)	(505		)	(2,735		)	(1,440		)
Stock-based compensation expense	$	2,020		$	1,540		$	6,291		$	3,180

Payments for stock-based compensation were $699 and $135 during the third quarters of 2014 and 2013, respectively, and were $2,787 and $1,433 during the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014 and December 31, 2013, accrued payroll and benefits payable included $7,305 and $5,080, respectively, for stock-based compensation costs expected to be settled within the next twelve months. Unrecognized compensation cost of approximately $19,982 is expected to be recognized over a weighted average period of 2.3 years.