Note 12—Share-Based Compensation

We recorded share-based compensation expense and related tax benefit within our consolidated statements of operations as follows:


	Successor				Predecessor
			Period From		Period From
			November 20, 2018		January 1, 2018
	Year Ended		through		through		Year Ended
	December 31, 2019		December 31, 2018		November 19, 2018		December 31, 2017
(in thousands)
Operating expenses	$	1,460	$	—	$	177	$	416
General and administrative expenses		5,611		599		2,366		6,403
Share-based compensation expense		7,071		599		2,543		6,819
Tax benefit (a)		(1,098)		(126)		—		(1,147)
Total	$	5,973	$	473	$	2,543	$	5,672

(a)

The effects of tax benefits from share-based compensation expense are included within income tax expense in our consolidated statements of operations. As a result of the cancellation of all equity and equity-based awards granted under the Pacific Drilling S.A. 2011 Omnibus Stock Incentive Plan (the “2011 Stock Plan”), there was no tax benefit from share-based compensation expense during the Predecessor period in 2018.

On November 28, 2018, the board of directors approved the 2018 Stock Plan pursuant to which the Company may issue up to 7.5 million common shares to 2018 Stock Plan participants using various types of stock-based incentive awards, including stock options, restricted shares, restricted share units and other equity-based awards. The compensation committee of the board of directors determines, subject to board approval, the terms and conditions of equity awards made to participants under the 2018 Stock Plan.

Prior to the adoption of the 2018 Stock Plan, the 2011 Stock Plan provided for the grant of equity-based or equity-related awards to directors, officers, employees and consultants. In connection with our emergence from bankruptcy on November 19, 2018, all equity and equity-based awards granted under the 2011 Stock Plan were cancelled and are no longer outstanding.

Time-Based Restricted Share Units (“RSUs”)

Pursuant to the 2018 Stock Plan, in December 2018, the board of directors granted an aggregate of 0.3 million time-based RSUs to our Chairman of the Board, our Chief Executive Officer and our two other Class A directors. The fair value of time-based RSUs is determined using the market value of our shares on the date of grant. These time-based RSUs vest over periods ranging from two to four years from the grant date.

During the year ended December 31, 2019, the board of directors approved the issuance of 1.0 million time-based RSUs to certain members of senior management and employees. The RSUs generally vest in equal annual installments over three years, starting on January 1, 2020.

A summary of time-based RSU activity for the year ended December 31, 2019 is as follows:


	Number of Restricted Share Units	Weighted-Average Grant-Date Fair Value
	(in thousands)		(per share)
Nonvested — January 1, 2019	290	$	13.00
Granted	1,044		14.50
Vested	(35)		13.93
Cancelled or forfeited	(76)		14.70
Nonvested — December 31, 2019	1,223	$	14.15

The total grant-date fair value of the time-based RSUs vested was $0, $2.0 million and $5.2 million for the Successor period in 2018 and the Predecessor periods in 2018 and 2017, respectively.

As of December 31, 2019, total compensation costs related to nonvested time-based RSUs not yet recognized was $13.0 million and is expected to be recognized over a weighted-average period of 2.3 years.

Performance-Based Restricted Share Units (“RSUs”) and Performance Share Units (“PSUs”)

Pursuant to the 2018 Stock Plan, in December 2018, the board of directors granted an aggregate of 0.3 million performance-based RSUs to our Chairman of the Board and our Chief Executive Officer. The performance-based RSUs vest only upon a change of control based on an internal rate of return calculation on such date, and do not meet the threshold for expense recognition under GAAP until they vest.

During the year ended December 31, 2019, the board of directors approved the issuance of 0.4 million PSUs to certain members of our senior management. The PSUs are subject to achievement of a relative total shareholder return performance goal as compared to a specified peer group. These PSUs vest on December 31, 2021 and the number of shares issued on that date, if any, is dependent upon the level of achievement of the performance goal. To measure the fair value of the PSUs, we used a Monte Carlo simulation model. The fair value of the PSUs is amortized on a straight-line basis to expense over the vesting period. During the year ended December 31, 2019, the fair value of the PSUs granted was calculated using the following weighted-average assumptions:


	2019
	PSUs
Expected volatility	49.0	%
Expected dividends	—
Risk-free interest rate	2.3	%

A summary of PSU activity for the year ended December 31, 2019 is as follows:


	Number of Performance Share Units	Weighted-Average Grant-Date Fair Value
	(in thousands)		(per share)
Nonvested — January 1, 2019	—	$	—
Granted	375		15.43
Vested	—		—
Cancelled or forfeited	—		—
Nonvested — December 31, 2019	375	$	15.43

As of December 31, 2019, total compensation costs related to nonvested PSUs not yet recognized were $4.2 million and are expected to be recognized over a weighted average period of 2.0 years.

Stock Bonus Awards

In December 2018, our board of directors approved the issuance of an aggregate of 39,614 common shares to 269 participants as stock bonus awards under the 2018 Stock Plan, of which 8,061 shares were withheld for the payment of taxes resulting in a net issuance of 31,553 common shares.