Deferred compensation

Our deferred compensation includes cash awards and equity-based awards which are either settled in cash or in stock.

Cash Awards

From time to time, we have granted cash awards with long term vesting requirements. Our cash awards, which are generally service-based, vest either in one year, in annual increments over a three year period or in annual increments over a four year period. We accrue for the cost of each annual increment over the period that service is required to vest. A summary of compensation expense for our cash awards is presented below:



	Successor						Predecessor
					Period from		Period from
					March 22, 2017		January 1, 2017
	For the Year Ended December 31,				through		through
	2019		2018		December 31, 2017		March 21, 2017
Cash LTIP expense (net of amounts capitalized)	$	200	$	543	$	1,192	$	5
Cash LTIP grants (1)	1,300		174		5,637		—
Cash LTIP payments	955		1,183		1,285		42


(1)	All grants are service-based except for a market-condition grant of $263 to our new chief executive officer in December 2019.

As of December 31, 2019, the outstanding liability accrued for our Cash LTIP, based on requisite service provided, was $854.

Equity Awards

The Company’s outstanding equity based awards have generally been granted under the 2017 Chaparral Energy, Inc. Management Incentive Plan (the “MIP”) and the Chaparral Energy, Inc. 2019 Long-Term Incentive Plan (the “LTIP”), which replaced the MIP in June 2019. Our equity grants have been in the form or RSAs or RSUs. In December 2019, we also granted equity awards in the form of RSAs to our recently appointed chief executive officer under an inducement equity grant that is exempted from the general requirement of the NYSE rules that require equity-based compensation plans and arrangements to be approved by stockholders. Even though the inducement grant was made outside of the LTIP, except as expressly provided otherwise in the grant agreement, the grant will be governed in a manner consistent with the terms and conditions of the LTIP.

The LTIP provides for the following types of awards: options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other incentive awards. The aggregate number of shares of Class A common stock, par value $0.01 per share, reserved for issuance under the LTIP when it became effective was 3,500,000 shares. Generally, and to the extent not provided otherwise in an award agreement, (i) in the event of a Change in Control (as defined in the LTIP) in which the acquiring or surviving entity does not assume an outstanding award, the award will fully vest, and (ii) in the event of termination by the Company of a participant’s employment or service without cause or by the participant for Good Reason (as defined in the LTIP), in each case, within one year following the occurrence of a Change in Control, the award will fully vest. These accelerated vesting provisions, if triggered, take precedence over service, performance or market based vesting provisions described below.

Restricted Stock Awards (“RSAs”)

We have granted RSAs to our employees and members of our Board of Directors (the “Board”). Grants awarded to employees consist of shares subject to service vesting conditions (the “Time Shares”) and shares subject to performance or market-based vesting conditions (the “Performance Shares”). All grants to members of our Board are Time Shares. Since 2019, vesting conditions established for all Performance Shares have been linked exclusively to the performance of the Company’s stock price vis-à-vis a peer group and hence have a market-based vesting condition. Please see “Note 1: Nature of operations and summary of significant accounting policies” for our accounting policies for awards that are subject to service-based vesting conditions compared to awards that are subject to market-based vesting conditions. The Time Shares vest in equal annual installments over a three -year vesting period. The Performance Shares vest in three tranches annually according to conditions established each year by our Board of Directors.

A summary of our restricted stock activity is presented below:



	Time Shares						Performance Shares
	Weighted average grant date fair value		Restricted shares		Vest date fair value		Weighted average grant date fair value		Restricted shares		Vest date fair value
	($ per share)						($ per share)
Unvested and outstanding at March 21, 2017	$	—	—				$	—	—
Granted	20.11		1,403,626				20.12		429,510
Vested	—		—				20.05		(152,421	)	$	3,611
Cancelled	—		—				20.05		(7,616	)
Unvested and outstanding at December 31, 2017	$	20.11	1,403,626				$	20.15	269,473
Granted	18.75		41,250				18.75		13,750
Vested	20.12		(445,029	)	$	7,856	20.08		(107,590	)	$	529
Forfeited	20.05		(181,641	)			20.05		(50,105	)
Unvested and outstanding at December 31, 2018	$	20.06	818,206				$	20.12	125,528
Granted	2.40		886,451				1.38		1,087,110
Vested	20.08		(408,270	)	$	2,334	16.45		(33,359	)	$	59
Forfeited	20.05		(226,882	)			20.05		(89,936	)
Unvested and outstanding at December 31, 2019	$	5.41	1,069,505				$	1.53	1,089,343

Restricted Stock Units (“RSUs”)

We have granted RSUs to employees and members of our Board with the following provisions:

Executive employee awards: 50% of the RSUs granted during 2019 were subject only to service vesting conditions and the other 50% were subject to market-based vesting conditions. Service-based RSUs vest in equal annual installments over a three-year period. Market condition RSUs vest in three annual tranches – each year according to our stock return performance in such year relative to a group of peers identified prior to the beginning of such performance year. Both market-based and service-based awards were classified as equity awards.

Non-executive employee awards: Grants consisted of RSUs with service vesting conditions and vest in equal annual installments over a three-year period. Certain RSUs are to be settled in stock upon vesting while others are to be settled in cash. The stock-settled RSUs are classified as equity awards while the cash-settled RSUs are classified as liability awards.

Board awards: Grants consisted of RSUs with service vesting conditions and which vest in its entirety on the earlier of (a) the first anniversary of the grant date or (b) the date of the next Company ensuing annual meeting. These awards were classified as liability awards.

A summary of our RSU activity is presented below:



	Equity classified RSUs
	Service-condition RSUs						Market-condition RSUs
	Weighted average grant date fair value		Restricted units		Vest date fair value		Weighted average grant date fair value		Restricted units
	($ per unit)						($ per unit)
Unvested and outstanding at January 1, 2018	$	—	—				$	—	—
Granted	17.66		92,017				$	—	—
Forfeited	17.66		(2,384	)			$	—	—
Unvested and outstanding at December 31, 2018	$	17.66	89,633				$	—	—
Granted	1.33		788,323				$	1.36	565,000
Vested	17.66		(25,099	)	$	33	$	—	—
Forfeited	3.02		(214,474	)			$	1.36	(175,000	)
Unvested and outstanding at December 31, 2019	$	2.41	638,383				$	1.36	390,000



	Liability-classified RSUs
	Weighted average grant date fair value		Restricted units		Vest date fair value
	($ per unit)
Unvested and outstanding at January 1, 2018	$	—	—
Granted	17.66		37,991
Forfeited	17.66		(795	)
Unvested and outstanding at December 31, 2018	$	17.66	37,196
Granted	1.44		71,570
Vested	9.33		(20,302	)	$	25
Forfeited	17.66		(12,685	)
Unvested and outstanding at December 31, 2019	$	4.57	75,779

Companywide stock award

In the past, we have made grants of 100 shares to each new employee subsequent to being employed for a certain period of time which resulted in a total of 1,100, 600 and 20,100 shares being granted in 2019, 2018 and 2017, respectively. There were no vesting requirements for these awards and thus compensation was recognized in full on the award date based on the closing price of our common stock on that date. The compensation cost is included in the table below.

Stock-based compensation cost

Compensation cost is calculated net of forfeitures. As allowed by recent accounting guidance, we will recognize the impact of forfeitures on expense due to employee terminations as they occur instead of incorporating an estimate of such forfeitures. For awards with performance conditions, we will assess the probability that a performance condition will be achieved at each reporting period to determine whether and when to recognize compensation cost.

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. Stock-based compensation expense is as follows for the periods indicated:



				Successor						Predecessor
							Period from			Period from
							March 22, 2017			January 1, 2017
	For the Year Ended December 31,						through			through
	2019			2018			December 31, 2017			March 21, 2017
Stock-based compensation expense	$	2,303		$	13,444		$	12,606		$	194
Less: stock-based compensation cost capitalized	(722		)	(2,543		)	(2,773		)	(39		)
Total stock-based compensation expense, net	$	1,581		$	10,901		$	9,833		$	155
Payments for stock-based compensation	$	1,198		$	4,936		$	—		$	—
Recognized tax expense associated with stock-based compensation	$	—		$	22		$	—		$	—

Our payments for stock-based compensation are predominantly for tax withholding during vesting events although we also make an immaterial amount of payments for our cash settled RSUs. Payments for RSAs and the associated number of shares repurchased are reflected as treasury stock transactions in our consolidated statements of equity. As of December 31, 2019, and 2018, accrued payroll and benefits payable included $52 and $17, respectively, for stock-based compensation costs expected to be settled within the next twelve months. Unrecognized stock-based compensation cost of approximately $3,386 as of December 31, 2019 is expected to be recognized over a weighted-average period of 1.4 years. This amount does not include market-condition RSAs and RSUs scheduled to vest in 2020 and 2021 since requisite service for those shares had not commenced as of December 31, 2019. We expect to repurchase or settle in cash approximately 476,000 shares/units in 2020. Based on the market price of $1.76 per share, the aggregate intrinsic value of unvested RSAs and RSUs outstanding was $5,743 as of December 31, 2019.

Valuation of Awards

Compensation cost is generally recognized and measured according to the grant date fair value of the awards. For awards with service and performance conditions, the fair value is based on the market price of our Class A common stock on the grant date. For awards with a market condition, expense is based on a grant date fair value that incorporates the probability of vesting and the potential value of the award at vesting. We utilize Monte Carlo simulations to estimate the fair value our market based awards. The fair value and associated assumptions, which are considered to be Level 3 inputs within the fair value hierarchy, for our market condition RSAs and RSUs granted in 2019 are follows:



Valuation assumptions of market awards	Low			High
Risk free rate	1.75		%	2.52		%
Volatility (1)	64.1		%	90.0		%
Fair value per share/unit	$	0.94		$	8.59

_____________________________

(1) Based on daily log returns over a lookback period commensurate with the remaining term until vesting.