Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

For the three and nine months ended September 30, 2012 , we recognized stock compensation expense for restricted stock awards of $2.9 million and $8.2 million, respectively. For the same period we also capitalized stock compensation cost for oil and natural gas properties of $0.7 million and $2.0 million, respectively. For these same periods, the tax benefit related to this stock based compensation was $1.2 million and $3.2 million, respectively. For the three and nine months ended September 30, 2011 , we recognized stock compensation expense for restricted stock awards and stock options of $2.7 million and $7.7 million, respectively. We also capitalized for the same periods stock compensation cost for oil and natural gas properties of $0.6 million and $1.9 million, respectively. For these same periods, the tax benefit related to this stock based compensation was $1.1 million and $3.0 million, respectively. The remaining unrecognized compensation cost related to unvested awards at September 30, 2012 is approximately $14.5 million of which $2.6 million is anticipated to be capitalized. The weighted average period of time over which this cost will be recognized is 0.8 years.

At our annual meeting of stockholders held on May 2, 2012, our stockholders approved the Unit Corporation Stock and Incentive Compensation Plan Amended and Restated May 2, 2012 (the amended plan). The amended plan allows us to grant stock-based and cash-based compensation to our employees (including employees of subsidiaries) as well as non-employee directors. A total of 3,300,000 shares of the company's common stock is authorized for issuance to eligible participants under the amended plan. The amended plan succeeds the Non-employee Directors' 2000 Stock Option Plan (the option plan), and no new awards will be issued under the option plan.

The table below shows the estimates of the fair value of these stock options granted to our non-employee directors under the option plan in 2011 using the Black-Scholes model and applying the estimated values also presented in the table:



	Nine Months Ended September 30, 2011
Options granted	31,500
Estimated fair value (in millions)	$	0.7
Estimate of stock volatility	0.48
Estimated dividend yield	—		%
Risk free interest rate	2		%
Expected annual life based on
prior experience	5
Forfeiture rate	—		%

Expected volatilities are based on the historical volatility of our common stock. Within the model, we use historical data to estimate stock option exercise and termination rates and aggregates groups that have similar historical exercise behavior for valuation purposes. To date, we have not paid dividends on our common stock. The risk free interest rate is computed from the LIBOR rate using the term over which it is anticipated the grant will be exercised.

We did not grant any SARs or stock options (other than the non-employee director options discussed above) during either of the three or nine month periods ending September 30, 2012 and 2011.The following table shows the fair value of any restricted stock awards granted to employees and non-employee directors during the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Shares granted:
Employees	2,509			12,402			370,445			209,150
Non employee directors	—			—			24,606			—
	2,509			12,402			395,051			209,150
Estimated fair value (in millions):
Employees	$	0.1		$	0.6		$	15.7		$	10.9
Non employee directors	—			—			1.0			—
	$	0.1		$	0.6		$	16.7		$	10.9
Percentage of shares granted expected to be distributed:
Employees	95		%	95		%	94		%	93		%
Non employee directors	—		%	—		%	100		%	—		%

The restricted stock awards granted during the first three and nine months of 2012 and 2011 are being recognized over a three year vesting period, except for a portion of those granted to certain executive officers. As to those executive officers, 30% of the shares granted, or 46,441 shares in 2012 and 20,062 shares in 2011 (the performance shares), will cliff vest in the first half of 2015 and 2014, respectively. The actual number of performance shares that vest in 2014 and 2015 will be based on the company’s achievement of certain performance criteria over a three-year period, and will range from 50% to 150% of the restricted shares granted as performance shares. Based on the first year’s results, the participants would receive less than 100% of the performance based shares. Total 2012 awards resulted in stock compensation expense and the capitalized cost related to oil and natural gas properties for the first nine months of 2012 by an aggregate of $5.6 million.

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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