(3) Share-Based Compensation

Bankruptcy Proceedings

Upon the Company's emergence from bankruptcy on April 22, 2016, as discussed in Note 1A, the Company’s current common stock was canceled and new common stock was issued. The Company's currently existing share-based compensation awards were also either vested or canceled upon the Company's emergence from bankruptcy. Accelerated vesting and cancellation of these share-based compensation awards will result in the recognition of expense, on the date of vesting or cancellation, to record any previously unamortized expense related to the awards.

Share-Based Compensation Plans

We have various types of share-based compensation plans. Refer to Part III, as well as Note 7 in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2015 for additional information related to these share-based compensation plans. We follow guidance contained in FASB ASC 718 to account for share-based compensation.

We receive a tax deduction for certain stock option exercises during the period the stock options are exercised, generally for the excess of the market value on the exercise date over the exercise price of the stock option awards. We receive an additional tax deduction when restricted stock awards vest at a higher value than the value used to recognize compensation expense at the date of grant. We are required to report excess tax benefits from the award of equity instruments as financing cash flows. For the three months ended March 31, 2016, there was no income tax benefit or shortfall in earnings, while for the three months ended March 31, 2015 we did recognize an income tax shortfall in earnings of $1.2 million, primarily related to restricted stock awards that vested at a price lower than the grant date fair value.

Share-based compensation expense for awards issued to both employees and non-employees, which was recorded in “General and administrative, net” in the accompanying condensed consolidated statements of operations, was $0.7 million and $0.8 million for the three months ended March 31, 2016 and 2015. Share-based compensation expense recorded in lease operating cost was less than $0.1 million for the three months ended March 31, 2016 and 2015, respectively. We also capitalized $0.2 million and $0.3 million of share-based compensation for the three months ended March 31, 2016 and 2015, respectively. We view stock option awards and restricted stock awards with graded vesting as single awards with an expected life equal to the average expected life of component awards, and we amortize the awards on a straight-line basis over the life of the awards.

Stock Option Awards

We use the Black-Scholes-Merton option pricing model to estimate the fair value of stock option awards. During the three months ended March 31, 2016, 111,984 stock option awards expired leaving 1,218,406 stock option awards outstanding at March 31, 2016. There was no other activity relating to our stock option awards during the three months ended March 31, 2016.

As of March 31, 2016, our stock option awards outstanding and exercisable had no aggregate intrinsic value since all outstanding stock option awards were out of the money, and we did not have any remaining unrecognized compensation cost related to stock option awards. At March 31, 2016, the weighted average contract life of stock option awards outstanding and exercisable was 3.8 years. Upon the Company's emergence from bankruptcy on April 22, 2016, these outstanding awards were canceled.

Restricted Stock Awards

The plans, as described in Note 7 of our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, allow for the issuance of restricted stock awards that generally may not be sold or otherwise transferred until certain restrictions have lapsed. The unrecognized compensation cost related to these awards is typically expensed over the period the restrictions lapse (generally one to three years). Upon the Company's emergence from bankruptcy on April 22, 2016, the outstanding restricted stock awards for most employees vested on an accelerated basis while awards issued to certain members of management of the Company and the Board of Directors were canceled.

The compensation expense for these awards was determined based on the closing market price of our stock at the date of grant applied to the total number of shares that were anticipated to fully vest. As of March 31, 2016, we had unrecognized compensation expense of $2.3 million related to restricted stock awards which was expected to be recognized over a weighted-average period of 1.2 years. The grant date fair value of shares vested during the three months ended March 31, 2016 was $3.4 million.

The following table represents restricted stock award activity for the three months ended March 31, 2016:



	Shares		Wtd. Avg. Grant Price
Restricted shares outstanding, beginning of period	1,487,076		$	8.94
Restricted shares granted	—		$	—
Restricted shares canceled	(57,077	)	$	9.21
Restricted shares vested	(223,690	)	$	15.35
Restricted shares outstanding, end of period	1,206,309		$	7.73

Performance-Based Restricted Stock Units

For the three months ended March 31, 2015, the Company granted 216,450 units of performance-based restricted stock units containing market conditions that require the price of our common stock to increase to $5.22 per share by December 31, 2017, the end of the performance period, before any payout is achieved. These units were granted at 100% of the target payout level with conditions of the grants allowing for a payout ranging between no payout and 200% of target. The compensation expense for these awards is based on the per unit grant date valuation using a Monte-Carlo simulation multiplied by the target payout level. The payout level is calculated based on actual stock price performance achieved during the performance period. The awards have a cliff vesting period of 3.0 years. Upon the Company's emergence from bankruptcy on April 22, 2016, these outstanding awards were canceled.

As of March 31, 2016, we had unrecognized compensation expense of $0.6 million related to our restricted stock units, which was expected to be recognized over a weighted-average period of 1.4 years. During the three months ended March 31, 2016, 189,700 shares vested, with no payout as they were out of the money. The weighted average grant date fair value for the restricted stock units granted during the three months ended March 31, 2015 was $1.98 per unit.

The following table represents restricted stock unit activity for the three months ended March 31, 2016:



	Shares		Wtd. Avg. Grant Price
Restricted stock units outstanding, beginning of period	591,400		$	9.20
Restricted stock units granted	—		$	—
Restricted stock units canceled	—		$	—
Restricted stock units vested	(189,700	)	$	15.01
Restricted stock units outstanding, end of period	401,700		$	6.45

Cash-Settled Restricted Stock Units (Liability Awards)

During the three months ended March 31, 2015, the Company granted 147,812 units of cash-settled restricted stock units. These grants originally required a cash payout based on the fair value of the stock price on the date of the next Annual Shareholder Meeting, which was originally expected to be held during May of 2016. The grants had cliff vesting period of approximately 1.0 year while the compensation expense and corresponding liability are remeasured quarterly over the corresponding service period. The Company recorded a liability of less than $0.1 million for these awards in "Accounts Payable and accrued liabilities” on the accompanying condensed consolidated balance sheet as of March 31, 2016. Upon the Company's emergence from bankruptcy on April 22, 2016, these outstanding awards were canceled.