(7) Equity‑Based Compensation

Antero is authorized to grant up to 16,906,500 shares of common stock to employees and directors of the Company under the Antero Resources Corporation Long‑Term Incentive Plan (the “Plan”). The Plan allows equity‑based compensation awards to be granted in a variety of forms, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, dividend equivalent awards, and other types of awards. The terms and conditions of the awards granted are established by the Compensation Committee of Antero’s Board of Directors. A total of 14,819,823 shares are available for future grant under the Plan as of December 31, 2014.

In connection with the Antero Midstream IPO, Midstream Management adopted the Antero Midstream Partners LP Long-Term Incentive Plan (the “Midstream Plan”), pursuant to which non-employee directors of Antero Midstream’s general partner and certain officers, employees, and consultants of Antero Midstream’s general partner and its affiliates (which include Antero) are eligible to receive awards representing ownership interests in Antero Midstream. An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream Plan, subject to customary adjustments. A total of 7,618,560 common units are available for future grant under the Midstream Plan as of December 31, 2014.

The Company’s equity‑based compensation expense is as follows for the year ended December 31, 2014 (in thousands):


	2013		2014
Profits interests awards (see note 1)	$	364,957		83,615
Restricted stock awards		219		25,624
Stock options		104		501
Antero Midstream Partners phantom and restricted unit awards		—		2,360
Common stock issued to directors in lieu of cash compensation		—		152
Total expense	$	365,280		112,252

Restricted Stock

Restricted stock and restricted stock unit awards vest subject to the satisfaction of service requirements. Expense related to each restricted stock and restricted stock unit award is recognized on a straight-line basis over the requisite service period of the entire award, less awards expected to be forfeited. The grant date fair values of these awards are determined based on the closing price of the Company’s common stock on the date of the grant. A summary of restricted stock and restricted stock unit awards activity during the year ended December 31, 2014 is as follows:


		Weighted average		Aggregate
	Number of shares	grant date fair value		intrinsic value (in thousands)
Total awarded and unvested, December 31, 2013	45,093	$	54.27	$	2,861
Granted	1,970,587	$	64.75
Vested	(21,825)	$	57.06
Forfeited	(10,182)	$	58.55
Total awarded and unvested—December 31, 2014	1,983,673	$	64.71	$	80,497

Intrinsic values are based on the closing price of the Company’s stock on the referenced dates. Unamortized expense of $103.8 million at December 31, 2014 is expected to be recognized over approximately 3.3 years.

Stock Options

Stock options granted under the Plan to date vest over periods from one to four years and have a maximum contractual life of 10 years. Expense related to stock options is recognized on a straight‑line basis over the requisite service period, less awards expected to be forfeited. Stock options are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant. A summary of stock option activity for the year ended December 31, 2014 is as follows:


				Weighted
		Weighted average		average remaining	Intrinsic
	Stock options	exercise price		contractual life	value (in thousands)
Outstanding at December 31, 2013	70,339	$	54.15	9.79	$	653
Options granted	10,682	$	52.44
Options exercised	—		—
Options cancelled	—		—
Options expired	—		—
Outstanding at December 31, 2014	81,021	$	53.92	8.92	$	—
Vested or expected to vest as of December 31, 2014	81,021	$	53.92	8.92	$	—
Exercisable at December 31, 2014	25,339	$	54.15	8.78	$	—

Intrinsic value is based on the exercise price of the options and the closing price of the Company’s stock on the referenced dates.

A Black‑Scholes option‑pricing model is used to determine the grant-date fair value of stock options. Expected volatility was derived from the volatility of the historical stock prices of a peer group of similar publicly traded companies’ stock prices. The risk‑free interest rate was determined using the implied yield available for zero‑coupon U.S. government issues with a remaining term approximating the expected life of the options. A dividend yield of zero was assumed.

The following table presents information regarding the weighted average fair value for options granted during 2013 and 2014 and the assumptions used to determine fair value.


	2013			2014
Dividend yield		—	%		—	%
Volatility		35	%		40	%
Risk-free interest rate		1.48	%		1.75	%
Expected life (years)		6.17			5.50
Weighted average fair value of options granted	$	20.20		$	20.55

As of December 31, 2014, there was $1.0 million of unrecognized equity‑based compensation expense related to nonvested stock options. That expense is expected to be recognized over a weighted average period of approximately 2.9 years.

Antero Midstream Partners Phantom and Restricted Unit Awards

On November 12, 2014, Antero Midstream granted 20,000 restricted units to the directors of Antero Midstream and 2,361,440 phantom units Antero’s employees and officers. The restricted units and phantom units vest subject to the satisfaction of service requirements, upon the completion of which common units in Antero Midstream are delivered to the holder of the restricted units or phantom units. These restricted and phantom units are treated, for accounting purposes, as if Antero Midstream distributed the units to Antero. Antero recognizes compensation expense as the units are granted to employees, and a portion of the expense is allocated to Antero Midstream. These restricted units and phantom units are recognized as compensation expense within the Company’s consolidated statements of operations deemed distributions to Antero Resources Corporation by Antero Midstream. Expense related to each restricted unit and phantom unit award is recognized on a straight-line basis over the requisite service period of the entire award. The grant date fair values of these awards are determined based on the closing price of Antero Midstream’s common units on the date of grant. A summary of restricted unit and phantom unit awards activity during the year ended December 31, 2014 is as follows:


	Number of units	Weighted average grant date fair value		Aggregate intrinsic value (in thousands)
Total awarded and unvested, December 31, 2013	—	$	—
Granted	2,381,440	$	29.00
Vested	—	$	—
Forfeited	—	$	—
Total awarded and unvested—December 31, 2014	2,381,440	$	29.00	$	65,490

Intrinsic values are based on the closing price of Antero Midstream’s common units on the referenced dates. Unamortized expense of $66.7 million at December 31, 2014 is expected to be recognized over a weighted average period of approximately 3.8 years.