Equity Incentive Compensation Plans and Other Long-term Incentive Programs

The Company maintains various stock-based compensation plans and other employee benefit plans as discussed below. Stock-based compensation is measured at the grant date based on the value of the awards, and the fair value is recognized on a straight-line basis over the requisite service period (usually the vesting period). Nonvested shares of common stock generally vest ratably over a three year service period, and nonvested shares of common stock units vest over a one year service period. Cash-based compensation is measured at fair value at each reporting date and is recognized on a straight-line basis over the requisite service period (usually the vesting period). Cash-based awards generally have a cliff vest of three years.

The following table presents the long-term equity and cash incentive compensation related to awards for the periods indicated:



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Common stock options ⁽¹⁾	$	—	$	—	$	69
Nonvested common stock ⁽¹⁾	6,036		5,852		6,696
Nonvested common stock units ⁽¹⁾	1,138		690		883
Nonvested performance-based shares ⁽¹⁾	—		558		1,808
Nonvested performance cash units ⁽²⁾⁽³⁾	52		1,189		2,485
Total	$	7,226	$	8,289	$	11,941


(1)	Unrecognized compensation cost as of December 31, 2018 was $8.1 million related to grants of nonvested shares of common stock that are expected to be recognized over a weighted-average period of 1.8 years.


(2)	The nonvested performance-based cash units are accounted for as liability awards with $1.4 million in accounts payable and accrued liabilities as of December 31, 2017, and $0.3 million, $3.0 million and $2.9 million in derivatives and other noncurrent liabilities as of December 31, 2018, 2017 and 2016, respectively, in the Consolidated Balance Sheets.


(3)	Liability awards are fair valued at each reporting date. The expense for the period will increase or decrease based on updated fair values of these awards at each reporting date.

Stock Options and Nonvested Equity and Cash Awards. In May 2012, the Company's stockholders approved and adopted its 2012 Equity Incentive Plan (the "2012 Incentive Plan"). The purpose of the 2012 Incentive Plan is to enhance the Company's ability to attract and retain officers, employees and directors and to provide such persons with an interest in the Company aligned with the interests of stockholders. The 2012 Incentive Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options) and other awards, including performance units, performance shares, share awards, share units, restricted stock, cash incentive, and stock appreciation rights or SARs. In February 2018, the Company's stockholders approved an amendment to the 2012 Incentive Plan (the "Amendment").

Pursuant to the Amendment under the 2012 Incentive Plan, the Company is authorized to issue 6,500,000 shares, less any shares issued under the 2012 Incentive Plan on or after the Amendment adoption date, and plus any shares that again become available for grant. Shares underlying grants that expire without being exercised or are forfeited are available for grant under the 2012 Incentive Plan; however, shares withheld by the Company to satisfy any tax withholding obligation will not be available for future issuance. As of December 31, 2018, 4,565,902 shares remain available for grant under the 2012 Incentive Plan.

Currently, the Company's practice is to issue new shares upon stock option exercise. The Company does not expect to repurchase any shares in the open market or issue treasury shares to settle any such exercises. For the years ended December 31, 2018, 2017 and 2016, the Company did not pay cash to repurchase any stock option exercises.

A summary of share-based option activity under all the Company's plans as of December 31, 2018, and changes during the year then ended, is presented below:



Option Awards	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	199,123		$	31.42
Granted ⁽¹⁾	—		—
Exercised	—		—
Forfeited or expired	(72,280	)	38.75
Outstanding at December 31, 2018 ⁽²⁾	126,843		27.25		0.12	$	—


(1)	The Company has not granted any share-based option awards since 2012.


(2)	At December 31, 2017, all share-based options granted have vested and are exercisable.

There have been no stock options exercised for the years ended December 31, 2018, 2017 and 2016.

The Company grants service-based shares of common stock to employees, which generally vest ratably over a three year service period. These awards are measured at fair value based on the closing price of the Company's common stock on the date of grant. A summary of the Company's nonvested common stock awards for the years ended December 31, 2018, 2017 and 2016 is presented below:



	Year Ended December 31,
	2018				2017				2016
Nonvested Common Stock Awards	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1,	1,394,868		$	7.00	1,169,099		$	9.33	1,002,947		$	15.53
Granted	1,185,809		5.47		791,129		5.99		686,500		5.11
Modified ⁽¹⁾	1,146,305		4.84		—		—		—		—
Vested ⁽²⁾	(694,505	)	8.24		(513,376	)	10.74		(451,329	)	15.90
Forfeited or expired	(120,311	)	5.93		(51,984	)	7.91		(69,019	)	14.14
Outstanding at December 31,	2,912,166		5.27		1,394,868		7.00		1,169,099		9.33


(1)	Due to the closing of the Merger, the 2016 and 2017 Performance Cash Programs were converted from nonvested performance-based cash units to nonvested common stock awards, resulting in an increase of nonvested common stock awards for the year ended December 31, 2018.


(2)	The fair value of common stock awards vested was $3.7 million, $2.9 million and $1.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The Company grants service-based shares of common stock units to non-employee or outside directors, which generally vest over a one year service period. These awards are measured at fair value based on the closing price of the Company's common stock on the date of grant. The common stock units are the directors' annual compensation and are settled in common stock on a one-to-one basis. The outside directors may also elect to receive all or a portion of their quarterly cash compensation in the form of common stock units. Common stock units have only been granted to directors. A summary of the Company's nonvested common stock units for the years ended December 31, 2018, 2017 and 2016 is presented in the table below:



	Year Ended December 31,
	2018				2017				2016
Nonvested Common Stock Unit Awards	Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value
Outstanding at January 1,	272,559		$	6.37	147,167		$	10.09	145,492		$	11.07
Granted	226,244		5.83		193,878		3.56		98,974		7.02
Vested ⁽¹⁾	(187,566	)	4.24		(68,486	)	6.42		(97,299	)	8.43
Forfeited or expired	—		—		—		—		—		—
Outstanding at December 31,	311,237		7.26		272,559		6.37		147,167		10.09


(1)	The fair value of common stock unit awards vested was $1.1 million, $0.2 million and $0.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.

For the years ended December 31, 2018, 2017 and 2016, the Company granted performance-based cash units that will settle in cash. These awards are accounted for as liability awards and are measured at fair value at each reporting date. A summary of the Company's nonvested performance-based cash units for the years ended December 31, 2018, 2017 and 2016 is presented below:



	Year Ended December 31,
	2018				2017				2016
Nonvested Performance-Based Cash Unit Awards	Units		Weighted Average Fair Value		Units		Weighted Average Fair Value		Units		Weighted Average Fair Value
Outstanding at January 1,	1,548,083				942,326				391,278
Granted	935,293				669,043				646,572
Performance goal adjustment ⁽¹⁾	11,289				—				—
Modified ⁽²⁾	(1,211,478	)			—				—
Vested ⁽³⁾	(286,652	)			—				—
Forfeited or expired	(86,950	)			(63,286	)			(95,524	)
Outstanding at December 31,	909,585		$	1.23	1,548,083		$	5.10	942,326		$	8.89


(1)	The 2015 Program vested at 104.1% in excess of target level and resulted in additional units vested in March 2018. These units are included in the vested line item for the year ended December 31, 2018.

(2)

Due to the closing of the Merger, the 2016 and 2017 Performance Cash Programs were converted from nonvested performance-based cash units to nonvested common stock awards, resulting in a decrease in nonvested performance-based cash units for the year ended December 31, 2018. The 2016 Program converted based on its performance through March 19, 2018, which resulted in 89% of the units converting to nonvested common stock awards or a reduction of 65,173 units converting to nonvested common stock awards.


(3)	The fair value of performance-based cash unit awards vested was $1.5 million for the year ended December 31, 2018. No awards vested in 2017 or 2016.

For the year ended December 31, 2014 and prior, the Company granted performance-based shares that settled in common stock. These awards are accounted for as equity awards. The market-based goals or total shareholder return ("TSR") goals associated with these awards are valued at each reporting date using a Monte Carlo simulation. The non-market-based goals are measured at fair value based on the closing price of the Company's common stock on the date of grant. A summary of the Company's vested performance-based shares of common stock for the years ended December 31, 2018, 2017 and 2016 is presented below:



	Year Ended December 31,
	2018			2017				2016
Nonvested Performance-Based Common Stock Awards	Shares	Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1,	—	$	—	156,615		$	19.54	468,561		$	18.46
Granted ⁽¹⁾	—	—		—		—		—		—
Performance goal adjustment ⁽²⁾	—	—		10,450		24.45		—		—
Vested ⁽³⁾⁽⁴⁾	—	—		(166,023	)	24.45		(156,575	)	19.81
Forfeited or expired	—	—		(1,042	)	24.62		(155,371	)	20.44
Outstanding at December 31,	—	—		—		—		156,615		19.54


(1)	The Company has not granted any performance-based common stock awards since 2014.


(2)	The 2014 Program vested at 106.7% in excess of target level and resulted in additional shares vested in May 2017. These shares are included in the vested line item for the year ended December 31, 2017.


(3)	The Compensation Committee approved a special retention award on July 18, 2013. A debt performance gate was required to be met as of December 31, 2013 in which the shares would vest on July 18, 2014, 2015 and 2016. The vested shares of 15,495 are included in the vested line item for the year ended December 31, 2016.


(4)	The fair value of performance-based common stock awards vested was $0.6 million and $1.2 million for the years ended December 31, 2017 and 2016, respectively. No awards vested in 2018.

Performance Cash and Share Programs

2018 Program. In February 2018, the Compensation Committee of the Board of Directors of the Company approved a performance cash program (the "2018 Program") granting performance cash units that will settle in cash and are accounted for as liability awards. The performance-based awards contingently vest in February 2021, depending on the level at which the performance goal is achieved. The performance goal, which will be measured over the three-year period ending December 31, 2020, will be the Company's total shareholder return ("TSR") based on a matrix measurement of (1) the Company's absolute performance and (2) the Company's ranking relative to a defined peer group's individual TSRs ("Relative TSR"). The Company's absolute performance is measured against the December 29, 2017 closing share price of $5.13. If the Company's absolute performance is lower than the $5.13 share price, the payout is zero for this portion. If the Company's absolute performance is greater than the $5.13 share price, the performance cash units will vest 1% for each 1% in growth, up to 150% of the original grant. If the Company's Relative TSR is less than the median, the payout is zero for this portion. If the Company's Relative TSR is above the median, the payout is equal to the Company's percentile rank above the median, up to 50% of the original grant. The Company's combined absolute performance and Relative TSR have a maximum vest of up to 200% of the original grant.

2017 Program. In February 2017, the Compensation Committee approved a performance cash program (the "2017 Program") granting performance cash units that will settle in cash and are accounted for as liability awards. In March 2018, upon the Merger closing, each award under the 2017 Program was converted to a nonvested common stock award at 100% of the original award. At the time of the modification, 619,006 units were converted to 619,006 nonvested shares of the Company's common stock affecting 34 employees. These awards no longer have a performance criterion, but continue to have a service-based criterion through the cliff vest in February 2020. The conversion of the performance-based liability award to a service-based equity award was accounted for as a modification in accordance with ASC 718, Compensation - Stock Compensation. The total incremental compensation cost resulting from the modification was an increase of $0.5 million. The Company recorded an increase to additional paid-in capital ("APIC") and a decrease to derivative and other noncurrent liabilities of $0.9 million as of December 31, 2018 in the Consolidated Statement of Stockholders' Equity and the Consolidated Balance Sheets, respectively.

2016 Program. In March 2016, the Compensation Committee approved a performance cash program (the "2016 Program") granting performance cash units that would settle in cash and were accounted for as liability awards. In March 2018, upon the Merger closing, each award under the 2016 Program was converted to a nonvested common stock award at 89% of the original award based on the Company's performance through March 19, 2018. At the time of the modification, 592,472 units were converted to 527,299 nonvested shares of the Company's common stock affecting 23 employees. These awards no longer have a performance criterion, but continue to have a service-based criterion through the cliff vest in February 2019. The conversion of the performance-based liability award to a service-based equity award was accounted for as a modification in accordance with ASC 718, Compensation - Stock Compensation. The total incremental compensation cost resulting from the modification was zero. The Company recorded an increase to APIC and a decrease to derivative and other noncurrent liabilities of $1.8 million as of December 31, 2018 in the Consolidated Statement of Stockholders' Equity and the Consolidated Balance Sheets, respectively.

2015 Program. In February 2015, the Compensation Committee approved a performance cash program (the "2015 Program") granting performance cash units that will settle in cash and are accounted for as liability awards. The performance-based awards vested in May 2018, based on the level at which the performance goals were achieved. The performance goals, which were measured over the three year period ending December 31, 2017, consisted of the TSR compared to Relative TSR (weighted at 60%) and the percentage change in discretionary cash flow per debt adjusted share relative to a defined peer group's percentage calculation ("DCF per Debt Adjusted Share") (weighted at 40%). The Relative TSR and DCF per Debt Adjusted Share goals were to vest at 25% or 50%, respectively, of the total award for performance met at the threshold level, 100% at the target level and 200% at the stretch level. If the actual results for a metric are between the threshold and target levels or between the target and stretch levels, the vested number of units will be prorated based on the actual results compared to the threshold, target and stretch goals. If the threshold metrics are not met, no units will vest. In any event, the total number of units that could vest will not exceed 200% of the original number of performance cash units granted. At the end of the three year vesting period, any units that have not vested will be forfeited. A total of 422,345 units were granted under this program during the year ended December 31, 2015. All compensation expense related to the TSR metric was recognized if the requisite service period is fulfilled, even if the market condition was not achieved. All compensation expense related to the DCF per Debt Adjusted Share metric was based on the number of shares expected to vest at the end of the three year period. The Company modified the vesting date of these awards from May 2018 to March 2018. Based upon the Company's performance through 2017, 104.1% or 286,652 units of the 2015 Program vested in March 2018.

2014 Program. In February 2014, the Compensation Committee approved a performance share program (the "2014 Program") pursuant to the 2012 Equity Incentive Plan. The awards in this program settled in shares of common stock. The performance-based awards vested in May 2017, based on the level at which the performance goals were achieved. The performance goals, which were measured over the three year period ending December 31, 2016, consisted of the TSR compared to Relative TSR (weighted at 60%) and the percentage change in DCF per Debt Adjusted Share (weighted at 40%). The Relative TSR and DCF per Debt Adjusted Share goals were to vest at 25% of the total award for performance met at the threshold level, 100% at the target level and 200% at the stretch level. If the actual results for a metric were between the threshold and target levels or between the target and stretch levels, the vested number of shares would be prorated based on the actual results compared to the threshold, target and stretch goals. If the threshold metrics were not met, no shares would vest. In any event, the total number of shares of common stock that could vest would not exceed 200% of the original number of performance shares granted. At the end of the three year vesting period, any shares that did not vest were forfeited. A total of 315,661 shares were granted under this program during the year ended December 31, 2014. All compensation expense related to the TSR metric was recognized if the requisite service period was fulfilled, even if the market condition was not achieved. All compensation expense related to the DCF per Debt Adjusted Share metric was based on the number of shares expected to vest at the end of the three year period. Based upon the Company's performance through 2016, 106.7% or 166,023 shares of the 2014 Program vested in May 2017.

2013 Program. In February 2013, the Compensation Committee approved a new performance share program (the "2013 Program") pursuant to the 2012 Equity Incentive Plan. The performance-based awards vested in May 2016, based on the level at which the performance goals were achieved. The performance goals were measured over the three year period ending December 31, 2015, and consisted of the Relative TSR (weighted at 33 1/3%), the percentage change in DCF per Debt Adjusted Share (weighted at 33 1/3%) and percentage change in proved oil, natural gas and NGL reserves per debt adjusted share ("Reserves per Debt Adjusted Share") (weighted at 33 1/3%). The Relative TSR and DCF per Debt Adjusted Share goals were to vest at 25% of the total award for performance met at the threshold level, 100% at the target level and 200% at the stretch level. The Reserves per Debt Adjusted Share goal were to vest at 50% of the total award for performance met at the threshold level, 100% at the target level and 200% at the stretch level. If the threshold metrics were not met, no shares would vest. The total number of vested shares of common stock would not exceed 200% of the original number of performance shares granted. At the end of the three year vesting period, any shares that were not vested would be forfeited. All compensation expense related to the Relative TSR metric was recognized to the extent the requisite service period was fulfilled, even if the market condition was not achieved. All compensation expense related to the DCF per Debt Adjusted Share metric and the Reserves per Debt Adjusted Share metric was based upon the number of shares expected to vest at the end of the three year period. A total of 450,544 shares were granted under this program during the year ended December 31, 2013. Based upon the Company's performance through 2015, 59.6% or 141,080 shares of the 2013 Program vested in May 2016.

Other Employee Benefits-401(k) Savings Plan. The Company has an employee-directed 401(k) savings plan (the "401(k) Plan") for all eligible employees over the age of 21. Under the 401(k) Plan, employees may make voluntary contributions based on a percentage of their pretax income, subject to statutory limitations.

The Company matches 100% of each employee's contribution, up to 6% of the employee's pretax income in cash. The Company's cash contributions are fully vested upon the date of match. The Company made matching cash contributions of $1.2 million, $1.0 million and $1.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Deferred Compensation Plan. In 2010, the Company adopted a non-qualified deferred compensation plan for certain employees and officers whose eligibility to participate in the plan was determined by the Compensation Committee. The Company makes matching cash contributions on behalf of eligible employees up to 6% of the employee's cash compensation once the contribution limits are reached in the Company's 401(k) Plan. All amounts deferred and matched under the plan vest immediately. Deferred compensation, including accumulated earnings on the participant-directed investment selections, is distributable in cash at participant-specified dates or upon retirement, death, disability, change in control or termination of employment.

The table below summarizes the activity in the plan as of December 31, 2018 and 2017, and the Company's ending deferred compensation liability as of December 31, 2018 and 2017:



	As of December 31,
	2018			2017
	(in thousands)
Beginning deferred compensation liability balance	$	1,749		$	1,447
Employee contributions	370			244
Company matching contributions	198			116
Distributions	(806		)	(274		)
Participant earnings (losses)	(119		)	216
Ending deferred compensation liability balance	$	1,392		$	1,749

Amount to be paid within one year	$	94		$	169
Remaining balance to be paid beyond one year	$	1,298		$	1,580

The Company has established a rabbi trust to offset the deferred compensation liability and protect the interests of the plan participants. The investments in the rabbi trust seek to offset the change in the value of the related liability. As a result, there is no expected impact on earnings or earnings per share from the changes in market value of the investment assets because the changes in market value of the trust assets are offset by changes in the value of the deferred compensation plan liability. The gains and losses from changes in fair value of the investments are included in interest and other income in the Consolidated Statements of Operations.

The following table represents the Company's activity in the investment assets held in the rabbi trust as of December 31, 2018 and 2017:



	As of December 31,
	2018			2017
	(in thousands)
Beginning investment balance	$	1,749		$	1,447
Investment purchases	568			360
Distributions	(806		)	(274		)
Earnings (losses)	(119		)	216
Ending investment balance	$	1,392		$	1,749