Compensation Plans

6 Months Ended

Jun. 30, 2019

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

Note 7 - Compensation Plans

Equity Incentive Compensation Plan

As of June 30, 2019, 5.8 million shares of common stock were available for grant under the Company’s Equity Incentive Compensation Plan (“Equity Plan”).

Performance Share Units

The Company grants performance share units (“PSUs”) to eligible employees as part of its long-term equity incentive compensation program. The number of shares of the Company’s common stock issued to settle PSUs ranges from zero to two times the number of PSUs awarded and is determined based on certain settlement criteria over a three-year performance period. PSUs generally vest on the third anniversary of the date of the grant or upon other triggering events as set forth in the Equity Plan.

For PSUs that were granted in 2016 and 2017, the settlement criteria included a combination of the Company’s Total Shareholder Return (“TSR”) on an absolute basis, and the Company’s TSR relative to the TSR of certain peer companies over the associated three-year performance period. The fair value of the PSUs granted in 2016 and 2017 was measured on the applicable grant dates using a stochastic Monte Carlo simulation using geometric Brownian motion (“GBM Model”). As these awards depend entirely on market-based settlement criteria, the associated compensation expense is recognized on a straight-line basis within general and administrative expense and exploration expense over the vesting periods of the respective awards.

For PSUs granted in 2018 and 2019, the settlement criteria included a combination of the Company’s TSR relative to the TSR of certain peer companies, and the Company’s cash return on total capital invested (“CRTCI”) relative to the CRTCI of certain peer companies over the associated three-year performance period. The fair value of the PSUs granted in 2018 and 2019 was measured on the applicable grant dates using the GBM Model, with the assumption that the associated CRTCI performance condition will be met at the target amount at the end of the respective performance periods. Compensation expense for PSUs granted in 2018 and 2019 is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. As these awards depend on a combination of performance-based settlement criteria and market-based settlement criteria, compensation expense may be adjusted in future periods as the number of units expected to vest increases or decreases based on the Company’s expected CRTCI performance relative to the applicable peer companies.

Total compensation expense recorded for PSUs was $2.9 million and $2.4 million for the three months ended June 30, 2019, and 2018, respectively, and was $5.7 million and $4.8 million for the six months ended June 30, 2019, and 2018, respectively. As of June 30, 2019, there was $13.0 million of total unrecognized compensation expense related to non-vested PSU awards, which is being amortized through 2021. There were no material changes to the outstanding and non-vested PSUs during the six months ended June 30, 2019.

Subsequent to June 30, 2019, the Company issued 793,125 PSUs with a grant date fair value of $10.2 million. In addition to the settlement criteria described above, the 2019 Performance Share Unit Award Agreement also stipulates that if either the Company’s absolute TSR, or absolute CRTCI, is negative over the three-year performance period, the maximum number of shares of common stock that can be issued to settle outstanding PSUs shall be capped at one times the number of PSUs granted on the award date, regardless of the Company’s TSR and CRTCI performance relative to the peer group. Subsequent to June 30, 2019, the Company settled PSUs that were granted in 2016, with no shares issued upon settlement because the grant settled at a zero multiplier.

Employee Restricted Stock Units

The Company grants restricted stock units (“RSUs”) to eligible persons as part of its long-term equity incentive 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 within general and administrative expense and exploration expense over the vesting periods of the respective awards. RSUs granted to employees generally vest one-third on each anniversary date of the grant over a three-year vesting period or upon other triggering events as set forth in the Equity Plan.

Total compensation expense recorded for employee RSUs was $2.8 million and $2.3 million for the three months ended June 30, 2019, and 2018, respectively, and was $5.5 million and $5.0 million for the six months ended June 30, 2019, and 2018, respectively. As of June 30, 2019, there was $13.7 million of total unrecognized compensation expense related to non-vested RSU awards, which is being amortized through 2021. There were no material changes to the outstanding and non-vested RSUs during the six months ended June 30, 2019.

Subsequent to June 30, 2019, the Company granted 953,761 RSUs with a grant date fair value of $11.8 million. These RSUs generally vest one-third on each anniversary date of the grant over a three-year vesting period or upon other triggering events as set forth in the Equity Plan. Subsequent to June 30, 2019, the Company settled 462,522 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 Equity Plan and award agreements. As a result, the Company issued 331,530 net shares of common stock upon settlement of the awards.

Director Shares

During the second quarters of 2019, and 2018, the Company issued 96,719 and 58,572 shares, respectively, of its common stock to its non-employee directors under the Equity Plan. Shares issued during the second quarter of 2019 will fully vest on December 31, 2019. Shares issued during the second quarter of 2018 fully vested on December 31, 2018.

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 either the first or last day of the purchase period. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code. There were 184,079 and 100,249 shares issued under the ESPP during the second quarters of 2019, and 2018, respectively. Total proceeds to the Company for the issuance of these shares was $2.0 million and $1.9 million for the six months ended June 30, 2019, and 2018, respectively. The fair value of ESPP grants is measured at the date of grant using the Black-Scholes option-pricing model.