(13) STOCK-BASED COMPENSATION

The Company recognized the following amounts in employee stock-based compensation costs for the three months ended March 31, 2016 and 2015:


	For the three months ended
	March 31,
	2016		2015
	(in millions)
Stock-based compensation cost – expensed (1)	$	23	$	6
Stock-based compensation cost – capitalized	$	3	$	5

(1)

Includes $18 million related to the reduction in workforce that occurred in the first quarter of 2016.

In January 2016, the Company announced a 40% workforce reduction that was substantially concluded by the end of March 2016. Affected employees were offered a severance package that included, if applicable, amendments to outstanding equity awards that modified forfeiture provisions on separation from the Company. As a result, unvested stock-based equity awards became fully vested at the time of separation. These shares were revalued and recognized immediately as a component of restructuring charges on the Company’s condensed consolidated statements of operations.

As of March 31, 2016, there was $86 million of total unrecognized compensation cost related to the Company’s unvested stock option grants, restricted stock grants and performance units. This cost is expected to be recognized over a weighted-average period of 3 years.

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2016 and provides information for options outstanding and options exercisable as of March 31, 2016:


	Number		Weighted Average
	of Options		Exercise Price
	(in thousands)		(per share)
Outstanding at December 31, 2015		5,623	$	24.57
Granted		156		8.60
Exercised		–		–
Forfeited or expired		(10)		30.29
Outstanding at March 31, 2016		5,769		24.13
Exercisable at March 31, 2016		2,567	$	36.12

Restricted Stock

The following table summarizes restricted stock activity for the three months ended March 31, 2016 and provides information for unvested shares as of March 31, 2016:


	Number		Weighted Average
	of Shares		Fair Value
	(in thousands)		(per share)
Unvested shares at December 31, 2015		7,222	$	13.24
Granted		77		8.35
Vested (1)		(1,947)		8.32
Forfeited		(24)		12.11
Unvested shares at March 31, 2016		5,328	$	13.24

(1)

Includes 1,887,160 shares related to the reduction in workforce that occurred in the first quarter of 2016.

Equity-Classified Performance Units

The following table summarizes performance unit activity to be paid out in Company stock for the three months ended March 31, 2016 and provides information for unvested units as of March 31, 2016. The performance units awarded in 2013 and 2014 include a market condition based on Relative Total Shareholder Return (“TSR”) and a performance condition based on the Company's Present Value Index (“PVI”), collectively the “Performance Measures.” The fair value of the TSR market condition of the performance units is based on a Monte Carlo model and is amortized to compensation expense on a straight-line basis over the vesting period of the award. The fair value of the PVI performance condition of the performance units is based on economic analysis for each investment opportunity based upon the expected present value added for each dollar to be invested and amortized to compensation expense on a straight line basis over the vesting period of the award. The performance units awarded in 2015 are based exclusively on TSR. The grant date fair value is calculated using the Performance Measures and the closing price of the Company’s common stock at the grant date.


	Number		Weighted Average
	of Units (1)		Fair Value
	(in thousands)		(per share)
Unvested units at December 31, 2015		407	$	36.65
Granted (2)		1,061		8.31
Vested (3)		(5)		8.08
Forfeited		(38)		8.08
Unvested units at March 31, 2016		1,425	$	14.47

(1)

These amounts reflect the number of performance units granted in thousands. The actual payout of shares may range from a minimum of zero shares to a maximum of two shares contingent upon the actual performance against the Performance Measures.

(2)

Excludes 441,450 units in excess of individual award limits subject to shareholder approval of the amended 2013 Incentive Plan at the annual meeting on May 17, 2016.

(3)

Includes 5,168 units related to the reduction in workforce that occurred in the first quarter of 2016.

Liability-Classified Performance Units

Prior to 2013, certain employees were provided performance units vesting equally over three years, payable in cash. The payout of these units was based on certain metrics, such as total shareholder return and reserve replacement efficiency, compared to a predetermined group of peer companies and Company goals. At the end of each performance period, the value of the vested performance units, if any, would be paid in cash. In the first quarter of 2016, the Company completed the final payout under these performance unit agreements.