UNIT-BASED COMPENSATION

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

On May 22, 2019, the board of directors of the General Partner adopted the Rattler Midstream LP Long Term Incentive Plan (“LTIP”), for employees, consultants and directors of the General Partner and any of its affiliates, including Diamondback, who perform services for the Partnership. The LTIP provides for the grant of unit options, unit appreciation rights, restricted units, unit awards, phantom units, distribution equivalent rights, cash awards, performance awards, other unit-based awards and substitute awards. As of June 30, 2020, a total of 14,856,026 common units had been reserved for issuance pursuant to the LTIP. Common units that are cancelled, forfeited or withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The LTIP is administered by the board of directors of the General Partner or a committee thereof.

For the three and six months ended June 30, 2020, the Partnership incurred $2.1 million and $4.3 million, respectively, of unit–based compensation.

Phantom Units

Under the LTIP, the board of directors of the General Partner is authorized to issue phantom units to eligible employees and non-employee directors. The Partnership estimates the fair value of phantom units as the closing price of the Partnership’s common units on the grant date of the award, which is expensed over the applicable vesting period. Upon vesting, the phantom units entitle the recipient to one common unit of the Partnership for each phantom unit. The recipients are also entitled to distribution equivalent rights, which represent the right to receive a cash payment equal to the value of the distributions paid on one phantom unit between the grant date and the vesting date.

The following table presents the phantom unit activity under the LTIP for the six months ended June 30, 2020:


	Phantom Units	Weighted Average Grant-Date Fair Value
Unvested at December 31, 2019	2,226,895	$	19.14
Granted	20,910	$	13.85
Vested	(449,633)	$	19.14
Forfeited	(23,442)	$	18.23
Unvested at June 30, 2020	1,774,730	$	19.09

The aggregate fair value of phantom units that vested during the six months ended June 30, 2020 was $8.6 million. As of June 30, 2020, the unrecognized compensation cost related to unvested phantom units was $32.9 million. Such cost is expected to be recognized over a weighted-average period of 3.87 years.