EQUITY-BASED COMPENSATION (Successor)

12 Months Ended

Dec. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

We have adopted the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “LTIP”). A total of 50,000,000 shares of Class A Common Stock were initially reserved for issuance under the LTIP. The LTIP provided for the grant of stock awards, including incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, dividend equivalents, restricted stock units and other awards in our Class A Common Stock. Prior to the Business Combination, we had no equity-based compensation programs. During 2019 and the 2018 Successor Period, we recognized stock-based compensation expense of $6.4 million and $22.0 million, respectively, in general and administrative expense including accelerated vesting in 2018 for separated executives related to the LTIP.

On February 11, 2020, we filed a post-effective amendment to our registration statement on Form S-8 (Registration No. 333-224248) to deregister unissued and unsold shares of Class A Common Stock issuable to participants under the LTIP. Accordingly, we are no longer able to grant restricted stock or shares of our Class A Common Stock in satisfaction of our outstanding unexercised stock options, unvested restricted stock and unvested performance-based restricted stock units (“PSUs”) and we anticipate those outstanding stock awards will be canceled as a result of our bankruptcy filing.

Stock options

Stock options previously granted were set to expire seven years from the grant date and generally were to vest in one-third increments each year, based on continued employment. Employees had 90 days after termination to exercise vested stock options, unless extended by an employment agreement.



	Stock Options		Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value		Weighted Average Remaining Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of February 9, 2018	—		$	—	$	—	—	$	—
Granted	5,283,224		8.80		4.33		—	—
Exercised	—		—		—		—	—
Forfeited or expired	(139,319	)	9.38		4.55		—	—
Outstanding as of December 31, 2018	5,143,905		$	8.79	$	4.33	5.3	$	—
Granted	157,710		$	1.07	$	0.61	—	$	—
Exercised	—		—		—		—	—
Forfeited or expired	(1,498,328	)	8.44		4.20		—	—
Outstanding as of December 31, 2019	3,803,287		$	4.80	$	4.22	3.19	$	—
Exercisable as of December 31, 2019	2,260,388		$	9.21	$	4.49	5.15	—

The following assumptions were used to determine the fair value of our 2019 and 2018 option grants:

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	Year Ended December 31, 2019		February 9, 2018 Through December 31, 2018
Expected term (in years)	4.5		4.5
Expected stock volatility	69.8	%	64.6	%
Dividend yield	—		—
Risk-free interest rate	2.4	%	2.5	%

Unrecognized compensation cost related to non-vested stock options at December 31, 2019 was $3.5 million, with a remaining weighted average vesting period of 0.8 years.

Restricted stock

Restricted stock granted to employees generally vested in one-third increments each year based on continued employment. Prior to vesting, unvested restricted stock may not be traded but was entitled to accumulate any dividend value. During the 2018 Successor Period, we granted 98,199 shares to certain of our directors, all which vested immediately, and granted 2,140,160 restricted stock awards to employees. All 2019 grants were to employees.

The following table provides information about activity in our restricted stock awards during the 2018 Successor Period and year ended December 31, 2019:

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	Restricted Stock Awards		Weighted Average Grant Date Fair Value per share
Outstanding as of February 9, 2018	—		$	—
Granted	2,238,359		7.54
Vested⁽¹⁾	(384,413	)	8.40
Forfeited or expired	(61,935	)	8.80
Outstanding as of December 31, 2018	1,792,011		7.32
Granted	70,093		0.96
Vested⁽¹⁾	(619,061	)	7.04
Forfeited or expired	(719,766	)	7.36
Outstanding as of December 31, 2019	523,277		$	6.74

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(1) To satisfy minimum tax withholding, 130,432 and 94,576 shares were withheld in 2019 and during the 2018 Successor Period.

Unrecognized compensation cost related to unvested restricted shares at December 31, 2019 was $2.1 million, with a remaining weighted average vesting period of 1.4 years.

Restricted stock units

Our PSUs granted in 2018 generally vested over three years at 20% during the first year, 30% during the second year and 50% was schedule to vest during the third year. The number of PSUs vesting each year were based on the achievement of annual performance goals and objectives applicable to each respective year of vesting. Based on achievement of those goals and objectives, the number of PSUs that vest could range from 0% to 200% of the target grant applicable to each vesting period. We only recognize expense for PSUs when the specified performance thresholds for future periods have been established. For PSUs granted during the 2018 Successor Period only the performance goals and objectives for 2018 had been established as of December 31, 2018. Those 2018 performance goals were not attained, and the 2018 award tranche was forfeited, except with respect to separations involving employment agreements whereby the separated employee was eligible to receive the award granted. The targets for 2019 were established in March 2019. The 2019 award tranche vested at 199% of target. Due to our bankruptcy and the expected sale of substantially all of our assets, no performance targets will be established for the 2020 award tranche and we expect that tranche will be forfeited as part of our bankruptcy proceedings.

The following table provides information about activity in our PSUs granted during the 2018 Successor Period and year ended December 31, 2019:



	PSUs		Weighted Average Grant Date Fair Value per unit
Outstanding as of February 9, 2018	—		$	—
Granted	2,093,453		4.07
Vested ⁽¹⁾	(1,559,749	)	2.53
Forfeited or expired	(533,704	)	8.54
Outstanding as of December 31, 2018	—		—
Granted	1,220,490		0.32
Vested	(100,870	)	0.96
Forfeited or expired	(54,112	)	0.27
Outstanding as of December 31, 2019	1,065,508		$	0.27

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(1) To satisfy minimum tax withholding, 32,481 and 388,655 shares were withheld in 2019 and during the 2018 Successor Period.

As of December 31, 2019, there was no unrecognized compensation cost related to unvested PSUs.