(9) 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 8,449,452 shares were available for future grant under the Plan as of December 31, 2016.

Antero Midstream’s general partner is authorized to grant up to 10,000,000 common units representing limited partner interests in Antero Midstream under the Antero Midstream Partners LP Long-Term Incentive Plan (the “Midstream Plan”) to certain officers, employees, and consultants of Antero and Antero Midstream’s general partner, and its non-employee directors. A total of 7,937,930 common units are available for future grant under the Midstream Plan as of December 31, 2016.

The Company’s equity‑based compensation expense, by type of award, is as follows for the years ended December 31, 2014, 2015, and 2016 (in thousands):


	Year ended December 31,
	2014		2015		2016
Profits interests awards	$	83,615		37,620		—
Restricted stock unit awards		25,624		40,663		73,081
Stock options		501		2,155		2,578
Performance share unit awards		—		—		8,685
Antero Midstream phantom unit awards		2,360		17,126		16,095
Equity awards issued to directors		152		313		1,982
Total expense	$	112,252		97,877		102,421

Profits Interests Awards

Certain profits interest awards historically held by certain of the Company’s officers and employees were fully vested as of December 31, 2015. All available profits interest awards were made prior to the date of the Company’s IPO in 2013, and no additional profits interest awards have been made since the Company’s IPO.

Restricted Stock and Restricted Stock Unit Awards

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. Forfeitures are accounted for as they occur through reversal of expense on awards that were forfeited during the period. 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 for the year ended December 31, 2016 is as follows:


		Weighted average		Aggregate
	Number of shares	grant date fair value		intrinsic value (in thousands)
Total awarded and unvested—December 31, 2015	6,529,459	$	33.48	$	142,342
Granted	1,241,710	$	27.06
Vested	(2,123,282)	$	34.95
Forfeited	(294,440)	$	26.89
Total awarded and unvested—December 31, 2016	5,353,447	$	31.77	$	126,609

Intrinsic values are based on the closing price of the Company’s stock on the referenced dates. Unamortized expense of $130.2 million at December 31, 2016 is expected to be recognized over a weighted average period of approximately 2.0 years.

Stock Options

Stock options granted under the Plan 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 of the entire award. Forfeitures are accounted for as they occur through reversal of expense on awards that were forfeited during the period. Stock options are granted with an exercise price equal to or greater than 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, 2016 is as follows:


				Weighted
		Weighted average		average remaining	Intrinsic
	Stock options	exercise price		contractual life	value (in thousands)
Outstanding at December 31, 2015	720,887	$	50.44	9.14	$	—
Granted	—	$	—
Exercised	—		—
Forfeited	(32,958)	$	50.00
Expired	—		—
Outstanding at December 31, 2016	687,929	$	50.46	8.12	$	—
Vested or expected to vest as of December 31, 2016	687,929	$	50.46	8.12	$	—
Exercisable at December 31, 2016	217,882	$	51.17	7.87	$	—

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 as the Company common stock had traded for a relatively short period of time at the dates the options were granted. 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 the years ended December 31, 2014 and 2015 and the assumptions used to determine fair value.


	Year ended December 31, 2014			Year ended December 31, 2015
Dividend yield		—	%		—	%
Volatility		40	%		40	%
Risk-free interest rate		1.75	%		1.66	%
Expected life (years)		5.50			6.25
Weighted average fair value of options granted	$	20.55		$	14.74

As of December 31, 2016, there was $5.4 million of unamortized equity‑based compensation expense related to nonvested stock options. That expense is expected to be recognized over a weighted average period of approximately 2.2 years.

Performance Share Unit Awards

Performance Share Unit Awards Based on Price Targets

In the first quarter of 2016, the Company granted performance share unit awards (“PSUs”) to certain of its executive officers. The vesting of these PSUs is conditioned on the closing price of the Company’s common stock achieving specific thresholds over 10-day periods, subject to the following vesting restrictions: no PSUs may vest before the first anniversary of the grant date; no more than one-third of the PSUs may vest before the second anniversary of the grant date; and no more than two-thirds of the PSUs may vest before the third anniversary of the grant date. Any PSUs which have not vested by the fifth anniversary of the grant date will expire. Expense related to these PSUs is recognized on a graded basis over three years.

Performance Share Unit Awards Based on Total Shareholder Return

In the second quarter of 2016, the Company granted PSUs to certain of its employees and executive officers which vest based on the total shareholder return (“TSR”) of the Company’s common stock relative to the TSR of a peer group of companies over a three-year performance period. The number of performance shares which may ultimately be earned ranges from zero to 200% of the PSUs granted. Expense related to these PSUs is recognized on a straight-line basis over three years.

Summary Information for Performance Share Unit Awards

A summary of PSU activity for the year ended December 31, 2016 is as follows:


	Number of units	Weighted average grant date fair value
Total awarded and unvested—December 31, 2015	—	$	—
Granted	790,890	$	29.77
Vested	—	$	—
Forfeited	(5,589)	$	32.97
Total awarded and unvested—December 31, 2016	785,301	$	29.75

The grant-date fair values of PSUs were determined using Monte Carlo simulations, which use a probabilistic approach for estimating the fair values of the awards. Expected volatilities were 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 yield available for zero-coupon U.S. government issues with remaining terms corresponding to the service periods of the PSUs. A dividend yield of zero was assumed.

The following table presents information regarding the weighted average fair value for PSUs granted during the year ended December 31, 2016 and the assumptions used to determine the fair values.


	Year ended December 31, 2016
Dividend yield		—	%
Volatility		45	%
Risk-free interest rate		1.01	%
Weighted average fair value of awards granted	$	29.77

As of December 31, 2016, there was $14.7 million of unamortized equity-based compensation expense related to unvested PSUs. That expense is expected to be recognized over a weighted average period of approximately 2.1 years.

Antero Midstream Partners Phantom Unit Awards

Phantom units granted by Antero Midstream 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 phantom units. These 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. Expense related to each phantom unit award is recognized on a straight-line basis over the requisite service period of the entire award. Forfeitures are accounted for as they occur through reversal of expense on awards that were forfeited during the period. 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 phantom unit awards activity for the year ended December 31, 2016 is as follows:


	Number of units	Weighted average grant date fair value		Aggregate intrinsic value (in thousands)
Total awarded and unvested—December 31, 2015	1,667,832	$	28.97	$	38,060
Granted	297,356	$	21.41
Vested	(524,659)	$	28.95
Forfeited	(108,568)	$	28.66
Total awarded and unvested—December 31, 2016	1,331,961	$	27.31	$	41,131

Intrinsic values are based on the closing price of Antero Midstream’s common units on the referenced dates. Unamortized expense of $33.2 million at December 31, 2016 is expected to be recognized over a weighted average period of approximately 2.1 years.