Share-Based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

11. Share-Based Compensation

As discussed in Note 2, on the Effective Date, our common stock was canceled and New Common Stock was issued. Accordingly, our then existing share-based compensation awards were also canceled, which resulted in the recognition of any previously unamortized expense related to the canceled awards on the date of cancellation. Share based compensation for the Predecessor and Successor periods are not comparable.

Successor Share-Based Compensation

As of the Effective Date, the Board of Directors adopted the LTIP with a share reserve equal to 6,800,000 shares of New Common Stock. The LTIP provides for the grant of restricted stock units, restricted stock awards, stock options, stock appreciation rights, performance awards and other stock awards to the Company’s employees and non-employee directors.

Successor Restricted Stock

In the 2021 Successor Period, we granted restricted stock awards to non-employee directors under the LTIP, which will vest over a one-year period. The fair value of restricted stock awards is based on the closing sales price of our common stock on the date of grant, and compensation expense is recognized ratably over the requisite service period. A summary of the changes in unvested restricted stock is presented below:

	Shares of Unvested Restricted Stock	Weighted Average Grant Date Fair Value Per Share
	(in thousands)
Unvested as of February 10, 2021	—	$	—
Granted	49	$	43.84
Vested	—	$	—
Forfeited/canceled	—	$	—
Unvested as of March 31, 2021	49	$	43.84

Predecessor Share-Based Compensation

Our Predecessor share-based compensation program consisted 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 were equity-classified awards and the PSUs and CRSUs were liability-classified awards.

Predecessor Equity-Classified Awards

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

	Shares of Unvested Restricted Stock	Weighted Average Grant Date Fair Value Per Share
	(in thousands)
Unvested as of January 1, 2021	1	$	616.57
Granted	—	$	—
Vested	—	$	—
Forfeited/canceled	(1)	$	611.47
Unvested as of February 9, 2021	—	$	—

Stock Options. In the 2020 Predecessor Period, we granted members of management stock options that vested ratably over a three-year period. Each stock option award had an exercise price equal to the closing price of our common stock on the grant date. Outstanding options expired seven years to ten years from the date of grant.

We utilized the Black-Scholes option-pricing model to measure the fair value of stock options. The expected life of an option was determined using the simplified method. Volatility assumptions were estimated based on the average historical volatility of Chesapeake stock over the expected life of an option. The risk-free interest rate was 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 was based on an annual dividend yield, taking into account our dividend policy, over the expected life of the option.

The following table provides information related to stock option activity:

	Number of Shares Underlying   Options	Weighted Average Exercise Price Per Share		Weighted   Average Contract Life in Years	Aggregate   Intrinsic Value(a)
	(in thousands)
Outstanding as of January 1, 2021	20	$	1,429	4.27	$	—
Granted	—	$	—
Exercised	—	$	—		$	—
Expired	(1)	$	742
Forfeited/canceled	(19)	$	1,452
Outstanding as of February 9, 2021	—	$	—	—	$	—
Exercisable as of February 9, 2021	—	$	—	—	$	—

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(a)The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option.