6. EQUITY-BASED COMPENSATION

WES LTIP. WES GP awards phantom units under the WES LTIP primarily to its independent directors and its Chief Executive Officer. The phantom units awarded to the independent directors vest one year from the grant date, while all other awards are subject to graded vesting over a three-year service period.

The following table summarizes WES LTIP award activity for the years ended December 31, 2014, 2013 and 2012:



	2014				2013				2012
	Weighted-Average Grant-Date Fair Value		Units		Weighted-Average Grant-Date Fair Value		Units		Weighted-Average Grant-Date Fair Value		Units
Phantom units outstanding at beginning of year	$	49.47	16,844		$	41.77	25,619		$	33.92	23,978
Vested	49.55		(13,122	)	41.28		(14,695	)	33.20		(14,260	)
Granted	68.14		5,800		62.49		5,920		45.91		15,901
Phantom units outstanding at end of year	60.74		9,522		49.47		16,844		41.77		25,619

WES LTIP Compensation Expense. Compensation expense is recognized over the vesting period and was $0.6 million for each of the years ended December 31, 2014 and 2013, and $0.4 million for the year ended December 31, 2012. As of December 31, 2014, there was $0.3 million of unrecognized compensation expense attributable to the outstanding awards under the WES LTIP, of which $0.2 million will be realized by WES, and which is expected to be recognized over a weighted-average period of 0.7 years.

WGP LTIP and Anadarko Incentive Plans. WGP GP awards phantom units under the WGP LTIP to its independent directors and executive officers. The phantom units awarded to the independent directors vest one year from the grant date, while awards granted to executive officers are subject to graded vesting over a three-year service period.

The following table summarizes WGP LTIP award activity for WGP GP independent directors and executive officers for the years ended December 31, 2014 and 2013:



	2014				2013
	Weighted-Average Grant-Date Fair Value		Units		Weighted-Average Grant-Date Fair Value		Units
Phantom units outstanding at beginning of year	$	39.19	36,238		$	—	—
Vested	37.32		(18,400	)	—		—
Granted	51.19		4,398		39.19		36,238
Phantom units outstanding at end of year	43.10		22,236		39.19		36,238

6. EQUITY-BASED COMPENSATION (CONTINUED)

WGP LTIP and Anadarko Incentive Plans Compensation Expense. Compensation expense for independent directors under the WGP LTIP, was $0.2 million and $0.3 million for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014, there was $0.1 million of unrecognized compensation expense attributable to the outstanding independent director awards under the WGP LTIP, which will be realized by WGP and is expected to be recognized in 0.4 years.

For the years ended December 31, 2014, 2013 and 2012, general and administrative expenses included $3.5 million, $3.0 million and $3.3 million, respectively, of equity-based compensation expense, allocated to WES by Anadarko, for awards granted to the executive officers of WES GP and other employees under the WGP LTIP and Anadarko Incentive Plans. Of these amounts, $3.2 million, $2.9 million and $3.2 million for the years ended December 31, 2014, 2013 and 2012, respectively, of allocated equity-based compensation expense is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital. As of December 31, 2014, $7.2 million of estimated unrecognized compensation expense attributable to the WGP LTIP and the Anadarko Incentive Plans will be allocated to WES over a weighted-average period of 2.1 years.

The Incentive Plan. For the year ended December 31, 2012, general and administrative expenses included $68.8 million of compensation expense for grants of Unit Value Rights (“UVRs”), Unit Appreciation Rights (“UARs”) and Distribution Equivalent Rights (“DERs”) under the Incentive Plan to certain executive officers of WES GP as a component of their compensation, which was allocated to WES by Anadarko.

Under the terms of the Incentive Plan, the value of a UAR was equal to an amount calculated by dividing the “determined value” (defined below) by 1,000,000, less the applicable UAR exercise price. Prior to WGP’s IPO in December 2012, the value of awards issued under the Incentive Plan were revised periodically based on the estimated fair value of WES GP using a discounted cash flow estimate and multiples-valuation terminal value.

Anadarko and the Incentive Plan participants entered into a Memorandum of Understanding (the “MOU”) that, among other things, confirmed the intent and the understanding that WGP’s IPO resulted in the vesting of all unvested Incentive Plan awards and that the value of WES’s common units held by WGP prior to its IPO would not be considered in the valuation of the Incentive Plan awards.

WGP’s IPO and concurrent execution of the MOU triggered the exercise of all outstanding UARs and lump-sum cash payments (less any applicable withholding taxes) to plan participants equal to the value of each award, less its exercise price, if applicable. Pursuant to the MOU, the “determined value” was defined as equal to the aggregate WGP equity value, as determined using the market price of WGP based on the IPO price of WGP’s common units, reduced by the market value of WES’s common units owned by WGP prior to its IPO (based on the closing price of WGP’s common units on the day of the pricing of the IPO). Awards outstanding under the Incentive Plan at the time of WGP’s IPO (and the effective termination of the Incentive Plan) were valued at $2,745.00 per UAR and $12.00 per DER. Outstanding UVRs that vested concurrent with WGP’s IPO were cash-settled at their grant-date fair value.

In addition to the execution of the MOU, WGP, WES GP and Anadarko entered into a contribution agreement whereby cash, in an amount equal to the aggregate cash payment required to settle all outstanding awards, was contributed to WES GP by Anadarko. The cash payments made in connection with WGP’s IPO and the vesting, exercise and settlement of all outstanding awards under the Incentive Plan as described above, impacted WGP’s cash flows to the extent compensation expense was allocated to WES since the inception of the Incentive Plan. The compensation expense allocated to WES since the inception of the Incentive Plan, and subsequently contributed by Anadarko during the fourth quarter of 2012, was recorded to partners’ capital in the consolidated financial statements. The weighted-average intrinsic per-unit value as of December 31, 2012 was $65.24 for UVRs, $2,690.47 for UARs and $11.93 for DERs.