Long-term Incentive Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

Long-Term Incentive Compensation

LONG-TERM INCENTIVE COMPENSATION

The Company’s long-term incentive compensation plans consist of a combination of stock-based awards that derive their value directly or indirectly from the Company’s common stock price, and cash-based awards that are fixed in amount but subject to meeting annual performance thresholds. In March 2020, the Company issued its first long-term fixed cash-based awards. The resulting impact to general and administrative expenses as well as capitalized expenses was immaterial for the first quarter of 2020.

Stock-Based Compensation

The Company’s stock-based compensation is classified as either equity awards or liability awards in accordance with GAAP.  The fair value of an equity-classified award is determined at the grant date and is amortized to general and administrative expense on a straight-line basis over the vesting period of the award.  A portion of this general and administrative expense is capitalized into natural gas and oil properties, included in property and equipment. The fair value of a liability-classified award is determined on a quarterly basis beginning at the grant date until final vesting.  Changes in the fair value of liability-classified awards are recorded to general and administrative expense and capitalized expense over the vesting period of the award. Generally, stock options granted to employees and directors vest ratably over three years from the grant date and expire seven years from the date of grant. The Company issues shares of restricted stock, restricted stock units, or performance cash awards to employees and directors which generally vest over four years. Restricted stock, restricted stock units, performance cash awards and stock options granted to participants under the 2013 Incentive Plan, as amended and restated, immediately vest upon death, disability or retirement (subject to a minimum of three years of service). The Company issues performance unit awards to employees which historically have vested at or over three years.

In February 2020, the Company notified employees of a workforce reduction plan as a result of a strategic realignment of the Company’s organizational structure. This reduction was substantially complete by the end of the first quarter of 2020. Affected employees were offered a severance package which, if applicable, included the current value of unvested long-term incentive awards that were forfeited.

The Company recognized the following amounts in total employee stock-based compensation costs for the three months ended March 31, 2020 and 2019:

	For the three months ended March 31,
(in millions)	2020			2019
Stock-based compensation cost – expensed	$	—	(1)	$	7
Stock-based compensation cost – capitalized	—		(1)	4

(1)For the three months ended March 31, 2020, a decrease in the value of liability-based awards approximately offset the amounts expensed and capitalized for equity-based awards.

Equity-Classified Awards

The Company recognized the following amounts in employee equity-classified stock-based compensation costs for the three months ended March 31, 2020 and 2019:

	For the three months ended March 31,
(in millions)	2020		2019
Equity-classified awards – expensed	$	1	$	2
Equity-classified awards – capitalized	—		1

As of March 31, 2020, there was $4 million of total unrecognized compensation cost related to the Company’s unvested equity-classified stock option grants, equity-classified restricted stock grants and equity-classified performance units.  This cost is expected to be recognized over a weighted-average period of 0.9 years.

Equity-Classified Stock Options

The following table summarizes equity-classified stock option activity for the three months ended March 31, 2020 and provides information for options outstanding and options exercisable as of March 31, 2020:

	Number of Options	Weighted Average Exercise Price
	(in thousands)
Outstanding at December 31, 2019	4,635	$	15.26
Granted	—	$	—
Exercised	—	$	—
Forfeited or expired	(62)	$	15.11
Outstanding at March 31, 2020	4,573	$	15.27
Exercisable at March 31, 2020	4,478	$	15.48

Equity-Classified Restricted Stock

The following table summarizes equity-classified restricted stock activity for the three months ended March 31, 2020 and provides information for unvested shares as of March 31, 2020:

	Number of Shares	Weighted Average Fair Value
	(in thousands)
Unvested shares at December 31, 2019	1,480	$	7.00
Granted	12	$	2.42
Vested	(522)	$	7.75
Forfeited	(167)	$	8.59
Unvested shares at March 31, 2020	803	$	6.11

Equity-Classified Performance Units

The following table summarizes equity-classified performance unit activity for the three months ended March 31, 2020 and provides information for unvested units as of March 31, 2020.  The performance unit awards granted in 2018 include a market condition based exclusively on the Total Shareholder Return (“TSR”), with their fair value calculated by a Monte Carlo model.  The total fair value of the performance units is amortized to compensation expense on a straight line basis over the vesting period of the award.  The grant date fair value is calculated using the closing price of the Company’s common stock at the grant date.

	Number of Units (1)	Weighted Average Fair Value
	(in thousands)
Unvested units at December 31, 2019	178	$	10.47
Granted	—	$	—
Vested	(178)	$	10.47
Forfeited	—	$	—
Unvested units at March 31, 2020	—	$	—

(1)The actual payout of shares may range from a minimum of zero shares to a maximum of two shares per unit contingent upon TSR.  The performance units have a three-year vesting term and the actual disbursement of shares, if any, is determined during the first quarter following the end of the three-year vesting period.

Liability-Classified Awards

The Company recognized the following amounts in employee liability-classified stock-based compensation costs for the three months ended March 31, 2020:

	For the three months ended March 31,
(in millions)	2020		2019
Liability-classified stock-based compensation cost – expensed	$	(1)	$	5
Liability-classified stock-based compensation cost – capitalized	—		3

Liability-Classified Restricted Stock Units

In the first quarter of each year beginning with 2018, the Company granted restricted stock units that vest over a period of four years and are payable in either cash or shares at the option of the Compensation Committee of the Company’s Board of Directors.  The Company has accounted for these as liability-classified awards, and accordingly changes in the market value of the instruments will be recorded to general and administrative expense and capitalized expense over the vesting period of the award.  As of March 31, 2020, there was $26 million of total unrecognized compensation cost related to liability-classified restricted stock units that is expected to be recognized over a weighted-average period of 3.0 years. The amount of unrecognized compensation cost for liability-classified awards will fluctuate over time as they are marked to market.

	Number of Units	Weighted Average Fair Value
	(in thousands)
Unvested units at December 31, 2019	12,992	$	2.42
Granted	6,172	$	1.41
Vested	(3,852)	$	1.38
Forfeited	(1,464)	$	1.67
Unvested units at March 31, 2020	13,848	$	1.69

Liability-Classified Performance Units

In each year beginning with 2018, the Company granted performance units that vest at the end of, or over, a three-year period and are payable in either cash or shares at the option of the Compensation Committee of the Company’s Board of Directors.  The Company has accounted for these as liability-classified awards, and accordingly changes in the fair market value of the instruments will be recorded to general and administrative expense and capitalized expense over the vesting period of the awards.  The performance unit awards granted in 2018 include a performance condition based on cash flow per debt-adjusted share and two market conditions, one based on absolute TSR and the other on relative TSR as compared to a group of the Company’s peers. The performance unit awards granted in 2019 include performance conditions based on return on average capital employed and two market conditions, one based on absolute TSR and the other on relative TSR.  The performance units granted in 2020 include a performance condition based on return on average capital employed and a market condition based on relative TSR. The fair values of the market conditions are calculated by Monte Carlo models on a quarterly basis.  As of March 31, 2020, there was $15 million of total unrecognized compensation cost related to liability-classified performance units.  This cost is expected to be recognized over a weighted-average period of 2.6 years.  The amount of unrecognized compensation cost for liability-classified awards will fluctuate over time as they are marked to market. The final value of the performance unit awards is contingent upon the Company’s actual performance against these performance measures.

	Number of Units	Weighted Average Fair Value
	(in thousands)
Unvested units at December 31, 2019	5,142	$	2.42
Granted	6,172	$	1.41
Vested	—	$	—
Forfeited	—	$	—
Unvested units at March 31, 2020	11,314	$	1.69

Cash-Based Compensation

Performance Cash Awards

In 2020, the Company granted performance cash awards that vest over a four-year period and are payable in cash on an annual basis. The value of each unit of the award equals one dollar. The Company recognizes the cost of these awards as general and administrative expense and capitalized expense over the vesting period of the awards. The performance cash awards granted in 2020 include a performance condition determined annually by the Company. In 2020, the performance measure is a targeted discretionary cash flow amount. If the Company, in its sole discretion, determines that the threshold was not met, the amount for that vesting period will not vest and will be cancelled. As of March 31, 2020, there was $19 million of total unrecognized compensation cost related to performance cash awards. This cost is expected to be recognized over a weighted average 3.9 years. The final value of the performance cash awards is contingent upon the Company’s actual performance against these performance measures.

	Number of Units	Weighted Average Fair Value
	(in thousands)
Unvested units at 12/31/2019	—	$	—
Granted	20,044	$	1.00
Vested	—	$	—
Forfeited	(135)	$	1.00
Unvested units at March 31, 2020	19,909	$	1.00