Note 7 - Compensation Plans

Equity Incentive Compensation Plan

As of September 30, 2016, 5.5 million shares of common stock remained available for grant under the Company’s Equity Incentive Compensation Plan.

Performance Share Units Under the Equity Incentive Compensation Plan

The Company grants performance share units (“PSUs”) to eligible employees as part of its long-term equity compensation program. The number of shares of the Company’s common stock issued to settle PSUs ranges from 0% to 200% of the number of PSUs awarded and is determined based on certain performance criteria over a three-year measurement period. The performance criteria for the PSUs are based on a combination of the Company’s annualized Total Shareholder Return (“TSR”) for the performance period and the relative performance of the Company’s TSR compared with the annualized TSR of certain peer companies for the performance period. Compensation expense for PSUs is recognized primarily within general and administrative and exploration expense over the vesting periods of the respective awards.

Total compensation expense recorded for PSUs for the three months ended September 30, 2016, and 2015, was $2.3 million and $2.4 million, respectively, and $8.2 million and $7.4 million for the nine months ended September 30, 2016, and 2015, respectively. As of September 30, 2016, there was $18.9 million of total unrecognized compensation expense related to unvested PSU awards, which is being amortized through 2019.

A summary of the status and activity of non-vested PSUs for the nine months ended September 30, 2016, is presented in the following table:



	PSUs⁽¹⁾		Weighted-Average Grant-Date Fair Value
Non-vested at beginning of year	626,328		$	61.81
Granted	447,971		$	26.56
Vested	(129,422	)	$	64.19
Forfeited	(99,414	)	$	57.43
Non-vested at end of quarter	845,463		$	43.29

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⁽¹⁾	The number of awards assumes a multiplier of one. The final number of shares of common stock issued may vary depending on the three-year performance multiplier, which ranges from zero to two.

During the nine months ended September 30, 2016, the Company granted 447,971 PSUs with a fair value of $11.9 million as part of its regular annual long-term equity compensation program. These PSUs will fully vest on the third anniversary of the date of the grant. Also, during this period, the Company settled PSUs that were granted in 2013, which earned a 0.2 times multiplier, by issuing 30,061 net shares of the Company’s common stock in accordance with the terms of the respective PSU awards. The Company and the majority of grant recipients mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings in accordance with the Company’s Equity Incentive Compensation Plan and individual award agreements. As a result, 14,809 shares were withheld to satisfy income and payroll tax withholding obligations that arose upon delivery of the shares underlying the PSUs.

Restricted Stock Units Under the Equity Incentive Compensation Plan

The Company grants restricted stock units (“RSUs”) as part of its long-term equity compensation program. Each RSU represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period. Compensation expense for RSUs is recognized primarily within general and administrative expense and exploration expense over the vesting periods of the award.

Total compensation expense recorded for RSUs was $2.8 million and $4.1 million for the three months ended September 30, 2016, and 2015, respectively, and $9.3 million and $9.9 million for the nine months ended September 30, 2016, and 2015, respectively. As of September 30, 2016, there was $17.8 million of total unrecognized compensation expense related to unvested RSU awards, which is being amortized through 2019.

A summary of the status and activity of non-vested RSUs for the nine months ended September 30, 2016, is presented in the following table:



	RSUs		Weighted-Average Grant-Date Fair Value
Non-vested at beginning of year	543,737		$	55.01
Granted	417,065		$	28.08
Vested	(240,233	)	$	58.08
Forfeited	(79,393	)	$	46.32
Non-vested at end of quarter	641,176		$	37.42

During the nine months ended September 30, 2016, as part of its regular annual long-term equity compensation program, the Company granted 417,065 RSUs with a fair value of $11.7 million. These RSUs will vest one-third of the total grant on each of the next three anniversary dates of the grant. Also, during the nine months ended September 30, 2016, the Company released 240,233 RSUs that related to awards granted in previous years. The Company and the majority of grant participants mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings as provided for in the plan document and award agreements. As a result, the Company issued 168,395 net shares of common stock. The remaining 71,838 shares were withheld to satisfy income and payroll tax withholding obligations that occurred upon delivery of the shares underlying those RSUs.

Director Shares

During the nine months ended September 30, 2016, and 2015, the Company issued 53,473 and 37,950 shares, respectively, of its common stock to its non-employee directors, under the Company’s Equity Incentive Compensation Plan and recorded compensation expense of $1.2 million and $1.4 million, respectively.

Beginning with the awards granted in 2016, all shares issued to non-employee directors fully vest on December 31^st of the year granted.

Employee Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of eligible compensation, without accruing in excess of $25,000 in value from purchases for each calendar year. The purchase price of the stock is 85 percent of the lower of the fair market value of the stock on the first or last day of the purchase period, and shares issued under the ESPP have no restriction period. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code of 1986, as amended (“IRC”). The Company had 808,854 shares available for issuance under the ESPP as of September 30, 2016. There were 140,853 and 96,285 shares issued under the ESPP during the nine months ended September 30, 2016, and 2015, respectively, and the Company received $2.4 million and $3.2 million, respectively, in cash through payroll deductions. The Company recorded compensation expense of $1.7 million in each of the nine months ended September 30, 2016, and 2015. The fair value of ESPP grants is measured at the date of grant using the Black-Scholes option-pricing model.

Net Profits Plan

Cash payments made or accrued under the Net Profits Plan for the nine months ended September 30, 2016, totaled $26.8 million, which included accrued payments of $21.6 million resulting from the divestitures of properties subject to the Net Profits Plan in the third quarter of 2016. Payments related to divested properties are accounted for as a reduction in the net gain on divestiture activity line item in the accompanying statement of operations. Cash payments made or accrued under the Net Profits Plan for the nine months ended September 30, 2015, totaled $7.4 million, which included payments of $3.8 million resulting from the divestitures of the Company’s Mid-Continent properties subject to the Net Profits Plan in the second quarter of 2015.