XML 31 R19.htm IDEA: XBRL DOCUMENT v3.22.1
Share-Based Compensation
 3 Months Ended
Mar. 31, 2022
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation
12.Share-Based Compensation
As discussed in Note 2, on the Effective Date, our Predecessor 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 is not comparable.
Successor Share-Based Compensation
As of the Effective Date, the Board of Directors adopted the 2021 Long Term Incentive Plan (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.
Restricted Stock Units. In the 2021 and 2022 Successor Periods, we granted restricted stock units to employees and non-employee directors under the LTIP, which will vest over a three-year period. The fair value of restricted stock units 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 units is presented below:
 
Unvested
Restricted Stock Units		Weighted Average
Grant Date
Fair Value Per Share
(in thousands)
Unvested as of December 31, 2021775 $46.77 
Granted484 $74.84 
Vested(31)$65.42 
Forfeited(42)$44.42 
Unvested as of March 31, 20221,186 $57.81 
The aggregate intrinsic value of restricted stock units that vested during the 2022 Successor Period was approximately $2 million based on the stock price at the time of vesting.
As of March 31, 2022, there was approximately $57 million of total unrecognized compensation expense related to unvested restricted stock units. The expense is expected to be recognized over a weighted average period of approximately 2.62 years.
Performance Share Units. In the 2021 and 2022 Successor Periods, we granted performance share units (“PSUs”) to senior management under the LTIP, which will generally vest over a three-year period and will be settled in shares. The performance criteria include total shareholder return (“TSR”) and relative TSR (“rTSR”), and could result in a total payout between 0% - 200% of the target units. For the PSUs granted in 2021, the performance criteria also include share price hurdles which could result in a total payout out between 0% - 100% of the target units. The fair value of the PSUs was measured on the grant date using a Monte Carlo simulation, and compensation expense is recognized ratably over the requisite service period because these awards depend on a combination of service and market criteria.
The following table presents the assumptions used in the valuation of the PSUs granted in 2022.
AssumptionTSR, rTSR
Risk-free interest rate2.00 %
Volatility70.2 %
A summary of the changes in unvested PSUs is presented below:
Unvested Performance Share UnitsWeighted Average
Grant Date
Fair Value Per Share
(in thousands)
Unvested as of December 31, 2021183 $66.12 
Granted133 $109.65 
Vested— $— 
Forfeited(20)$54.03 
Unvested as of March 31, 2022296 $86.47 
As of March 31, 2022, there was approximately $23 million of total unrecognized compensation expense related to unvested PSUs. The expense is expected to be recognized over a weighted average period of approximately 2.68 years.
Predecessor Share-Based Compensation
Our Predecessor share-based compensation program consisted of restricted stock units, stock options, PSUs and cash restricted stock units (“CRSUs”) granted to employees and restricted stock units granted to non-employee directors under our long-term incentive plans. The restricted stock units and stock options were equity-classified awards and the PSUs and CRSUs were liability-classified awards.
Restricted Stock Units. We granted restricted stock units to employees and non-employee directors. A summary of the changes in unvested restricted stock units is presented below:
Unvested
Restricted Stock Units		Weighted Average
Grant Date
Fair Value Per Share
(in thousands)
Unvested as of December 31, 20201 $616.57 
Granted— $— 
Vested— $— 
Forfeited/canceled(1)$611.47 
Unvested as of February 9, 2021— $— 
Stock Options. In the year ended December 31, 2020, 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 December 31, 202020 $1,429.11 4.27$— 
Granted— $— 
Exercised
— $— $— 
Expired
(1)$741.86 
Forfeited/canceled
(19)$1,452.40 
Outstanding as of February 9, 2021— $— —$— 
Exercisable as of February 9, 2021— $— —$— 
___________________________________________
(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.
Restricted Stock Units, Stock Option, and PSU Compensation. We recognized the following compensation costs, net of actual forfeitures, related to restricted stock units, stock options, and PSUs for the periods presented:
SuccessorPredecessor
Three Months Ended March 31, 2022Period from February 10, 2021 through March 31, 2021Period from January 1, 2021 through February 9, 2021
General and administrative expenses$3 $— $3 
Oil and natural gas properties1 — — 
Total restricted stock units, stock option, and PSU compensation$4 $— $3