Compensation Plans

9 Months Ended

Sep. 30, 2011

Compensation Plans [Abstract]

Compensation Plans

6. Compensation Plans

The Company recognized stock-based compensation expense of $242 and $767 during the three and nine months ended September 30, 2011, respectively, as compared to $230 and $726 in the three and nine months ended September 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 September 30, 2011 and changes during the nine months ended September 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		(2,540	)	$	4.58
Cancelled/expired		(55,800	)	$	17.62
Outstanding at September 30, 2011		524,658		$	12.08		3.6	$	210
Exercisable at September 30, 2011		293,523		$	13.72		3.2	$	67

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 September 30, 2011 and changes during the nine months ended September 30, 2011 were as follows:

				Weighted-
				Average
				Grant Date
	Shares			Fair Value
Stock Awards:
Outstanding at January 1, 2011		83,304		$	8.40
Granted		525,195		$	6.46
Vested		(44,738	)	$	5.30
Forfeited/returned		—		$	—
Nonvested at September 30, 2011		563,761		$	6.84

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 September 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 September 30, 2011.

Long Term Incentive Plan

On September 30, 2011, the Company adopted a Long-Term Incentive Plan (“LTIP”), which operates under the Company’s 2010 Stock Incentive Plan. Under the LTIP, the executive officers of the Company may earn up to an aggregate of 486,657 shares of common stock of the Company. The executive officers may earn one-third of the shares by continued employment with the Company through December 31, 2013. The remaining two-thirds may be earned through increases in the Company’s implied net asset value, as defined. If the Company ultimately achieves the service requirements and performance objectives determined by the LTIP, the associated total share-based compensation expense is expected to be approximately $3.1 million, based on the grant date fair value.. The Company did not recognize any expense related to the LTIP during the three and nine months ended September 30, 2011.