Equity-Based Compensation

6 Months Ended

Jun. 30, 2015

Equity-Based Compensation (CPE Inc. only)

19. Equity-Based Compensation

Our LTIP permits awards to our employees and eligible non-employee directors, which we generally grant in the first quarter of each year. The LTIP allows for the issuance of equity-based compensation in the form of restricted stock, restricted stock units, options, stock appreciation rights, dividend equivalent rights, performance awards, and share awards. In May 2011, the stockholders approved increasing the pool of shares of CPE Inc.’s common stock authorized for issuance in connection with equity-based awards under the LTIP from 3.4 million shares to 5.5 million shares. As of June 30, 2015, approximately 1.8 million shares were available for grant, depending on the actual performance and vesting of then-outstanding awards.

Generally, each form of equity-based compensation awarded to eligible employees cliff vests on the third anniversary of the grant date, subject to meeting any applicable performance criteria for the award. However, the awards will pro-rata vest sooner if an employee terminates employment with or stops providing services to us because of death, “disability,” “redundancy” or “retirement” (as such terms are defined in the award agreement or the LTIP, as applicable), or if an employee subject to an employment agreement is terminated for any other reason than for “cause” or leaves for “good reason” (as such terms are defined in the relevant employment agreement). In addition, the awards will fully vest if an employee is terminated without cause (or leaves for good reason, if the employee is subject to an employment agreement) within two years after a “change in control” (as such term is defined in the LTIP) occurs.

Restricted Stock and Restricted Stock Units

We granted restricted stock and restricted stock units under the LTIP to eligible employees, and we granted restricted stock units to our non-employee directors. The restricted stock units granted to our directors generally vest upon their resignation or retirement (except for a removal for cause) or upon certain events constituting a “change in control” (as such term is defined in the award agreement). They will pro-rata vest if a director resigns or retires within one year of the date of grant.

A summary of restricted stock award activity is as follows (in thousands):

		Weighted-Average Grant-Date Fair Value

	Number
		(per share)
Non-vested shares at January 1, 2015	407	$	18.14
Granted	460		8.05
Forfeited	(37)		15.49
Vested	(107)		16.98
Non-vested shares at June 30, 2015	723	$	12.04

As of June 30, 2015, unrecognized compensation cost related to restricted stock awards was $4.6 million, which will be recognized over a weighted-average period of 2.2 years prior to vesting.

Performance-Based Share Units

Performance-based share units granted represent the number of shares of common stock to be awarded based on the achievement of targeted performance levels related to pre-established total stockholder return goals over a three-year period and may range from 0% to 200% of the targeted amount. The grant date fair value of the awards is based upon a Monte Carlo simulation and is amortized over the performance period.

A summary of performance-based share unit award activity is as follows (in thousands):

		Weighted-Average Grant-Date Fair Value

	Number
		(per share)
Non-vested units at January 1, 2015	497	$	21.84
Granted	601		9.66
Forfeited	(73)		19.86
Vested	(97)		17.61
Non-vested units at June 30, 2015	928	$	14.55

The assumptions used to estimate the fair value of the performance-based share units granted on March 2, 2015 are as follows:

Risk-free interest rate		1.0	%
Expected volatility		37.7	%
Term		2.8 years
Fair value (per share)	$	9.66