Compensation Plans

6 Months Ended

Jun. 30, 2011

Compensation Plans

The Company recognized stock-based compensation expense of $250 and $525 during the three and six months ended June 30, 2011, respectively, as compared to $220 and $496 in the three and six months ended June 30, 2010, respectively.

Compensation expense related to stock options is calculated using the Black Scholes valuation model. Expected volatilities are based on the historical volatility of Double Eagle’s common stock over a period consistent with that of the expected terms of the options. The expected terms of the options are estimated based on factors such as vesting periods, contractual expiration dates, historical trends in the Company’s common stock price and historical exercise behavior. The risk-free rates for periods within the contractual life of the options are based on the yields of U.S. Treasury instruments with terms comparable to the estimated option terms.

A summary of stock option activity under the Company’s various stock option plans as of June 30, 2011 and changes during the six months ended June 30, 2011 is presented below:


						Weighted-
						Average
				Weighted-		Remaining
				Average		Contractual		Aggregate
				Exercise		Term (in		Intrinsic
	Shares			Price		years)		Value
Options:
Outstanding at January 1, 2011		556,339		$	12.94		4.4
Granted		26,659		$	5.10
Exercised		(1,200	)	$	4.50
Cancelled/expired		(50,000	)	$	17.95

Outstanding at June 30, 2011		531,798		$	12.10		3.9	$	575


Exercisable at June 30, 2011		296,363		$	13.23		3.4	$	186

The Company measures the fair value of the stock awards based upon the fair market value of its common stock on the date of grant and recognizes the resulting compensation expense ratably over the associated service period, which is generally the vesting term of the stock awards. The Company recognizes these compensation costs net of a forfeiture rate and recognizes the compensation costs for only those shares expected to vest. The Company typically estimates forfeiture rates based on historical experience, while also considering the duration of the vesting term of the award.

Nonvested stock awards as of June 30, 2011 and changes during the six months ended June 30, 2011 were as follows:


				Weighted-
				Average
				Grant Date
	Shares			Fair Value
Stock Awards:
Outstanding at January 1, 2011		83,304		$	8.40
Granted		15,279		$	5.73
Vested		(38,923	)	$	4.76
Forfeited/returned		—		$	—

Nonvested at June 30, 2011		59,660		$	10.10

As part of the acquisition of Petrosearch in 2009, the Company assumed all outstanding warrants to purchase common stock that had been issued by Petrosearch prior to the merger. At June 30, 2011, the Company had 8,660 warrants with an exercise price of $21.25 that expire December 2011. The warrants had no intrinsic value at June 30, 2011.