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Compensation Plans
 9 Months Ended
Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]  
Compensation Plans
Note 7 - Compensation Plans
As of September 30, 2022, 3.8 million shares of common stock were available for grant under the Company’s Equity Incentive Compensation Plan (“Equity Plan”). The Company may also grant other types of long-term incentive-based awards, such as cash awards and performance-based cash awards, to eligible employees.
Performance Share Units
The Company has granted performance share units (“PSU” or “PSUs”) to eligible employees as part of its Equity Plan. 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 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 granted in 2019, which the Company determined to be equity awards, the settlement criteria included a combination of the Company’s Total Shareholder Return (“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. In addition to these performance criteria, the award agreements for these grants also stipulated that if the Company’s absolute TSR was negative over the three-year performance period, the maximum number of shares of common stock that could be issued to settle outstanding PSUs was capped at one times the number of PSUs granted on the award date, regardless of the Company’s TSR and CRTCI performance relative to its peer group. The fair value of the PSUs granted in 2019 was measured on the grant date using the GBM Model, with the assumption that the associated CRTCI performance condition would be met at the target amount at the end of the performance period. Compensation expense for PSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. PSUs granted in 2019 vested during the nine months ended September 30, 2022, and earned a 2.0 times multiplier upon settlement. The Company and all eligible recipients mutually agreed to net share settle a portion of the vested awards to cover income and payroll tax withholdings, as provided for in the Equity Plan and the award agreement. After withholding 349,487 shares to satisfy income and payroll tax withholding obligations, 654,923 shares of the Company’s common stock were issued in accordance with the terms of the award agreement.
For PSUs granted in 2022, which the Company determined to be equity awards, settlement will be determined based on a combination of the following criteria measured over the three-year performance period: the Company’s TSR relative to the TSR of certain peer companies, the Company’s absolute TSR, free cash flow (“FCF”) generation, and the achievement of certain ESG targets, in each case as defined by the award agreement. The absolute and relative TSR portions of the fair value of the PSUs granted in 2022
were measured on the grant date using the GBM Model. The portion of the awards associated with FCF generation and ESG performance conditions assumes that target amounts will be met at the end of the performance period. Compensation expense for PSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. The Company initially records compensation expense associated with the issuance of PSUs based on the fair value of the awards as of the date of grant. 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 FCF generation and achievement of certain ESG targets. During the nine months ended September 30, 2022, the Company granted a total of 276,010 PSUs with a grant date fair value of $7.4 million.
Total compensation expense recorded for PSUs was $0.6 million and $0.8 million for the three months ended September 30, 2022, and 2021, respectively, and $2.0 million and $5.3 million for the nine months ended September 30, 2022, and 2021, respectively. As of September 30, 2022, there was $6.8 million of total unrecognized compensation expense related to non-vested PSUs, which is being amortized through mid-2025.
A summary of activity during the nine months ended September 30, 2022, is presented in the following table:
PSUs (1)
Weighted-Average Grant-Date Fair Value
Non-vested at beginning of year464,483$12.80 
Granted276,010$26.67 
Vested(460,928)$12.80 
Forfeited(3,555)$12.80 
Non-vested at end of quarter276,010$26.67 
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(1)    The number of shares of common stock assumes a multiplier of one. The actual number of shares of common stock to be issued will range from zero to two times the number of PSUs awarded depending on the three-year performance multiplier.
Employee Restricted Stock Units
The Company has granted restricted stock units (“RSU” or “RSUs”) to eligible employees as part of its Equity Plan. Each RSU granted 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. RSUs generally vest in one-third increments on each anniversary date of the grant over the applicable vesting period or upon other triggering events as set forth in the Equity Plan.
The Company records compensation expense associated with the issuance of RSUs based on the fair value of the awards as of the date of grant. The fair value of an RSU is equal to the closing price of the Company’s common stock on the date of the grant. Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. During the nine months ended September 30, 2022, the Company granted to employees a total of 526,776 RSUs with a grant date fair value of $18.0 million, and the Company settled RSUs upon the vesting of awards granted in previous years. The Company and all eligible recipients mutually agreed to net share settle a portion of the vested awards to cover income and payroll tax withholdings, as provided for in the Equity Plan and applicable award agreements. After withholding 284,423 shares to satisfy income and payroll tax withholding obligations, 636,504 shares of the Company’s common stock were issued in accordance with the terms of the applicable award agreements during the nine months ended September 30, 2022.
Total compensation expense recorded for RSUs was $3.5 million and $2.9 million for the three months ended September 30, 2022, and 2021, respectively, and $10.0 million and $7.2 million for the nine months ended September 30, 2022, and 2021, respectively. As of September 30, 2022, there was $27.8 million of total unrecognized compensation expense related to non-vested RSUs, which is being amortized through mid-2025.
A summary of activity during the nine months ended September 30, 2022, is presented in the following table:
RSUsWeighted-Average Grant-Date Fair Value
Non-vested at beginning of year1,841,237$13.79 
Granted526,776$34.08 
Vested(920,927)$12.17 
Forfeited(49,704)$16.62 
Non-vested at end of quarter1,397,382$22.41 
Director Shares
During the nine months ended September 30, 2022, and 2021, the Company issued a total of 29,471 and 57,795 shares, respectively, of its common stock as compensation to its non-employee directors under the Equity Plan. Shares issued during 2022 will fully vest on December 31, 2022, and shares issued during 2021 fully vested on December 31, 2021.
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, subject to a maximum of 2,500 shares per offering period and a maximum of $25,000 in value related to purchases for each calendar year. The purchase price of the common stock is 85 percent of the lower of the trading price of the common stock on either the first or last day of the six-month offering period. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. There were a total of 65,634 and 252,665 shares issued under the ESPP during the nine months ended September 30, 2022, and 2021, respectively. Total proceeds to the Company for the issuance of these shares was $1.6 million and $1.3 million for the nine months ended September 30, 2022, and 2021, respectively. The fair value of ESPP grants is measured at the date of grant using the Black-Scholes option-pricing model.
Please refer to Note 7 - Compensation Plans in the 2021 Form 10-K for additional detail on the Company’s Equity Plan.