(14) STOCK-BASED COMPENSATION PLANS

Stock-Based Awards

We have one active equity-based stock plan, our Amended and Restated 2005 Equity-Based Incentive Compensation Plan, which we refer to as the 2005 Plan. Under this plan, various awards may be issued to non-employee directors and employees pursuant to decisions of the Compensation Committee, which is composed of only non-employee, independent directors. In 2005, we granted SARs which represent the right to receive a payment equal to the excess of the fair market value of shares of our common stock on the date the right is exercised over the value of the stock on the date of grant. All SARs granted under the 2005 Plan will be settled in shares of stock, vest over a three-year period and have a maximum term of five years from the date they are granted. In 2011, the Compensation Committee of the Board of Directors began granting restricted stock units under this plan. These restricted stock units, which we refer to as restricted stock Equity Awards, vest over a three-year period. All awards granted have been issued at prevailing market prices at the time of grant and the vesting of these shares is based upon an employee’s continued employment with us, with the exception of employment termination due to death, disability or retirement.

In 2014, the Compensation Committee also began granting market-based performance share unit (“TSR”) awards under our 2005 Plan. The number of shares to be issued is determined by our total shareholder return compared to the total shareholder return of a predetermined group of peer companies over the performance period. The grant date fair value of the TSR awards is determined using a Monte Carlo simulation and is recognized as stock-based compensation expense over the three-year performance period. The actual payout of shares granted depends on our total shareholder return compared to our peer companies and will be between zero and 150%, unless our return is negative in which case the payout is capped at 100%. In first quarter 2017, the Compensation Committee also began granting performance-based unit awards based on production growth per share (“PGPS”) and reserve growth per share (“RGPS”). The number of shares to be issued depends on our level of success in achieving specifically identified performance targets. The grant date fair value is determined by the market value of our stock on the grant date and is recognized as stock-based compensation expense over the three-year performance period. The actual payout of shares granted will be between zero and 150%.

The Compensation Committee also grants restricted stock to certain employees and non-employee directors of the Board of Directors as part of their compensation. Upon grant of these restricted shares, which we refer to as restricted stock Liability Awards, the shares generally are placed in our deferred compensation plan and, upon vesting, employees are allowed to take withdrawals either in cash or in stock based on their distribution elections. Compensation expense is recognized over the vesting period, which is typically three years for employee grants and immediate vesting for non-employee directors. All restricted stock awards are issued at prevailing market prices at the time of the grant and vesting is based upon an employee’s continued employment with us, with the exception of employment termination due to death, disability or retirement. Prior to vesting, all restricted stock awards have the right to vote such shares and receive dividends thereon. These Liability Awards are classified as a liability and are remeasured at fair value each reporting period. This mark-to-market adjustment is reported as deferred compensation plan expense in the accompanying consolidated statements of operations.

Total Stock-Based Compensation Expense

Stock-based compensation represents amortization of restricted stock and performance share expense. Unlike the other forms of stock-based compensation, the mark-to-market adjustment of the liability related to the vested restricted stock held in our deferred compensation plan is directly tied to the change in our stock price and not directly related to the functional expenses and therefore, is not allocated to the functional categories. The following table details the allocation of stock-based compensation to functional expense categories (in thousands):

		Three Months Ended June 30,					Six Months Ended June 30,
		2017			2016		2017		2016
Direct operating expense	$	522		$	696	$	1,046	$	1,284
Brokered natural gas and marketing expense		388			378		651		894
Exploration expense		528			371		1,035		1,061
General and administrative expense		14,279			15,443		25,197		26,556
Termination costs		(46	)		—		1,696		—
Total stock-based compensation	$	15,671		$	16,888	$	29,625	$	29,795

Market-Based TSR Awards

The following is a summary of our non-vested TSR awards outstanding at June 30, 2017:

	Number of Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016		395,908		$	44.39
Units granted ^(a)		358,519			26.26
Units vested		(142,954	)		45.80
Units forfeited		(3,679	)		44.21
Outstanding at June 30, 2017		607,794		$	33.37

^(a) Amounts granted reflect the number of performance units granted; however, the actual payout of shares will be between zero and 150% of the performance units granted depending on the total shareholder return ranking compared to the peer companies at the end of the three-year performance period.

The following assumptions were used to estimate the fair value of TSRs granted during first six months 2017 and 2016:

		Six Months Ended June 30,
		2017			2016
Risk-free interest rate		1.49	%		0.94	%
Expected annual volatility		44	%		49	%
Weighted average grant date fair value per unit	$	26.26		$	36.64

We recorded TSR compensation expense of $6.8 million in first six months 2017 compared to $5.6 million in the same period of 2016. During the first six months 2017, 89,000 TSR awards for the 2014-2016 performance period were forfeited due to our final total shareholder return being less than the original target performance units granted.

Performance-Based PGPS/RGPS Awards

The following is a summary of our non-vested PGPS/RGPS awards outstanding at June 30, 2017:


	Number of Units			Weighted Average Grant Date Fair Value of Range Stock
Outstanding at December 31, 2016	—			—
Units granted ^(a)	122,921		$	25.53
Units vested	(10,246	)		25.74
Outstanding at June 30, 2017	112,675		$	25.51

^(a) Amounts granted reflect the number of performance units granted; however, the actual payout of shares will be between zero and 150% depending on achievement of specifically identified performance targets.

We recorded PGPS/RGPS compensation expense of $145,000 in first six months 2017.

Restricted Stock Awards

Equity Awards

In first six months 2017, we granted 875,000 restricted stock Equity Awards to employees at an average grant price of $32.93 compared to 940,000 restricted stock Equity Awards granted to employees at an average grant price of $28.18 in first six months 2016. These awards generally vest over a three-year period. We recorded compensation expense for these Equity Awards of $12.5 million in first six months 2017 compared to $14.0 million in the same period of 2016. Equity Awards are not issued to employees until they are vested. Employees do not have the option to receive cash.

Liability Awards

In first six months 2017, we granted 449,000 shares of restricted stock Liability Awards as compensation to employees at an average price of $26.18 with vesting over a three-year period and 90,000 shares were granted to non-employee directors at an average price of $25.01 with immediate vesting. In first six months 2016, we granted 456,000 shares of Liability Awards as compensation to employees at an average price of $35.70 with vesting generally over a three-year period and 52,000 shares were granted to non-employee directors at an average price of $38.73 with immediate vesting. We recorded compensation expense for Liability Awards of $9.0 million in first six months 2017 compared to $11.3 million in the same period of 2016. Substantially all of these awards are held in our deferred compensation plan, are classified as a liability and are remeasured at fair value at the end of each reporting period. This mark-to-market adjustment is reported as deferred compensation expense in our consolidated statements of operations (see additional discussion below). The following is a summary of the status of our non-vested restricted stock outstanding at June 30, 2017:

	Equity Awards					Liability Awards
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016		765,971		$	33.62		425,018		$	43.48
Granted		874,826			32.93		539,028			25.99
Vested		(384,899	)		35.31		(250,796	)		37.52
Forfeited		(71,169	)		33.28		(4,342	)		31.10
Outstanding at June 30, 2017		1,184,729		$	32.58		708,908		$	32.36

Stock Appreciation Right Awards

There were 397,000 SARs outstanding at June 30, 2017. Information with respect to SARs activity is summarized below:

	Shares			Weighted Average Exercise Price
Outstanding at December 31, 2016		1,003,600		$	69.08
Exercised		—			—
Expired/forfeited		(606,962	)		62.01
Outstanding at June 30, 2017		396,638		$	76.56

Deferred Compensation Plan

Our deferred compensation plan gives non-employee directors and officers the ability to defer all or a portion of their salaries, bonuses or director fees and invest in Range common stock or make other investments at the individual’s discretion. Range provides a partial matching contribution to officers which vests over three years. The assets of the plan are held in a grantor trust, which we refer to as the Rabbi Trust, and are therefore available to satisfy the claims of our general creditors in the event of bankruptcy or insolvency. Our stock held in the Rabbi Trust is treated as a liability award as employees are allowed to take withdrawals from the Rabbi Trust either in cash or in Range stock. The liability for the vested portion of the stock held in the Rabbi Trust is reflected as deferred compensation liability in the accompanying consolidated balance sheets and is adjusted to fair value each reporting period by a charge or credit to deferred compensation plan expense on our consolidated statements of operations. The assets of the Rabbi Trust, other than our common stock, are invested in marketable securities and reported at their market value as other assets in the accompanying consolidated balance sheets. The deferred compensation liability reflects the vested market value of the marketable securities and Range stock held in the Rabbi Trust. Changes in the market value of the marketable securities and changes in the fair value of the deferred compensation plan liability are charged or credited to deferred compensation plan expense each quarter. We recorded mark-to-market gain of $14.5 million in second quarter 2017 compared to mark-to-market loss of $25.7 million in second quarter 2016. We recorded a mark-to-market gain of $27.6 million in first six months 2017 compared to a mark-to-market loss of $41.8 million in first six months 2016. The Rabbi Trust held 2.9 million shares (2.2 million of which were vested) of Range stock at June 30, 2017 compared to 2.7 million shares (2.3 million of which were vested) at December 31, 2016.