Our share-based compensation program consists of restricted stock, stock options, performance share units (PSUs) and cash restricted stock units (CRSUs) granted to employees and restricted stock granted to non-employee directors under our long-term incentive plans. The restricted stock and stock options are equity-classified awards and the PSUs and CRSUs are liability-classified awards.

Restricted Stock. We grant restricted stock units to employees and non-employee directors. A summary of the changes in unvested restricted stock during the Current Period is presented below:



	Shares of Unvested Restricted Stock		Weighted Average Grant Date Fair Value Per Share
	(in thousands)
Unvested restricted stock as of January 1, 2019	11,858		$	4.43
Granted	5,364		$	2.85
Vested	(4,973	)	$	4.36
Forfeited	(1,027	)	$	3.67
Unvested restricted stock as of June 30, 2019	11,222		$	3.78

As of June 30, 2019, there was approximately $30 million of total unrecognized compensation expense related to unvested restricted stock. The expense is expected to be recognized over a weighted average period of approximately 2.01 years.

Stock Options. In the Current Period and the Prior Period, we granted members of management stock options that vest ratably over a three-year period. Each stock option award has an exercise price equal to the closing price of our common stock on the grant date. Outstanding options expire seven years to ten years from the date of grant.

We utilize the Black-Scholes option pricing model to measure the fair value of stock options. The expected life of an option is determined using the simplified method. Volatility assumptions are estimated based on the average historical volatility of Chesapeake stock over the expected life of an option. The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of the grant over the expected life of the option. The dividend yield is based on an annual dividend yield, taking into account our dividend policy, over the expected life of the option. We used the following weighted average assumptions to estimate the grant date fair value of the stock options granted in the Current Period:



	Number of Shares Underlying Options		Weighted Average Exercise Price Per Share		Weighted Average Contract Life in Years	Aggregate Intrinsic Value^(a)
	(in thousands)					($ in millions)
Outstanding as of January 1, 2019	18,096		$	7.20	7.15	$	—
Granted	1,000		$	2.97
Exercised	—		$	—		$	—
Expired	(451	)	$	6.57
Forfeited	(554	)	$	3.82
Outstanding as of June 30, 2019	18,091		$	7.09	6.39	$	—
Exercisable as of June 30, 2019	13,030		$	8.29	5.59	$	—

As of June 30, 2019, there was $9 million of total unrecognized compensation expense related to stock options. The expense is expected to be recognized over a weighted average period of approximately 1.39 years, net of actual forfeitures.

Restricted Stock and Stock Option Compensation. We recognized the following compensation costs related to restricted stock and stock options for the Current Quarter, the Prior Quarter, the Current Period and the Prior Period:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
General and administrative expenses	$	9	$	10	$	15	$	17
Oil and natural gas properties	—		—		1		2
Oil, natural gas and NGL production expenses	1		1		2		3
Exploration expenses	—		—		—		—
Total restricted stock and stock option compensation	$	10	$	11	$	18	$	22

Performance Share Units. In the Current Period and the Prior Period, we granted PSUs to senior management that vest ratably over a three-year performance period and are settled in cash. The ultimate amount earned is based on achievement of performance metrics established by the Compensation Committee of the Board of Directors. Compensation expense associated with PSU awards is recognized over the service period based on the graded-vesting method. The value of the PSU awards at the end of each reporting period is dependent upon our estimates of the underlying performance measures.

For PSUs granted in 2017, performance metrics include a total shareholder return (TSR) component, which can range from 0% to 100% and an operational performance component based on finding and development costs, which can range from 0% to 100%, resulting in a maximum payout of 200%. The payout percentage for the 2017 PSU awards is capped at 100% if our absolute TSR is less than zero. The PSUs are settled in cash on the third anniversary of the awards. We utilized a Monte Carlo simulation for the TSR performance measure and the following assumptions to determine the grant date fair value and the reporting date fair value of the 2017 awards.

For PSUs granted in 2018 and 2019, performance metrics include an operational performance component based on a ratio of cumulative earnings before interest expense, income taxes, and depreciation, depletion and amortization expense (EBITDA) to capital expenditures, for which payout can range from 0% to 200%. For the 2019 award, EBITDA and capital expenditures will be adjusted for changes resulting from our conversion from the full cost method of accounting to the successful efforts method. The vested PSUs are settled in cash on each of the three annual vesting dates. We used the closing price of our common stock on the grant date to determine the grant date fair value of the PSUs. The PSU liability will be adjusted quarterly, based on changes in our stock price and expected satisfaction of performance metrics, through the end of the performance period.

Cash Restricted Stock Units. In 2018, we granted CRSUs to employees that vest straight-line over a three-year period and are settled in cash on each of the three annual vesting dates. The ultimate amount earned is based on the closing price of our common stock on each of the vesting dates. We used the closing price of our common stock on the grant date to determine the grant date fair value of the CRSUs. The CRSU liability will be adjusted quarterly, based on changes in our stock price, through the end of the vesting period.



		Grant Date Fair Value		June 30, 2019
	Units	Grant Date Fair Value		Fair Value		Vested Liability
		($ in millions)		($ in millions)
2019 PSU Awards:
Payable 2020, 2021 and 2022	4,887,868	$	15	$	12	$	—
2018 PSU Awards:
Payable 2020 and 2021	2,418,281	$	7	$	5	$	—
2017 PSU Awards:
Payable 2020	1,174,973	$	8	$	2	$	1
2018 CRSU Awards:
Payable 2020 and 2021	9,468,697	$	29	$	18	$	—

We recognized the following compensation costs, net of actual forfeitures, related to our liability-classified awards for the Current Quarter, the Prior Quarter, the Current Period and the Prior Period.



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	($ in millions)
General and administrative expenses	$	(1	)	$	20	$	8	$	21
Oil and natural gas properties	—			1		1		1
Oil, natural gas and NGL production expenses	1			2		3		2
Exploration expenses	(1		)	1		—		1
Total liability-classified awards compensation	$	(1	)	$	24	$	12	$	25