SHARE-BASED COMPENSATION:

Prior to December 17, 2015, we maintained the Stone Energy Corporation 2009 Amended and Restated Stock Incentive Plan, as amended from time to time (the "2009 Plan"). The 2009 Plan was originally approved at the 2009 Annual Meeting of Stockholders and was an amendment and restatement of the Company’s 2004 Amended and Restated Stock Incentive Plan (the "2004 Plan"), and it superseded and replaced in its entirety the 2004 Plan. The 2009 Plan provides for the granting of (a) "incentive" stock options as defined in Section 422 of the Code, (b) stock options that do not constitute incentive stock options ("non-statutory" stock options), (c) stock appreciation rights in conjunction with an incentive or non-statutory stock option, (d) restricted stock, (e) restricted stock units, (f) dividend equivalents, (g) other stock-based awards, (h) conversion awards, and (i) cash awards, any of which may be further designated as performance awards (collectively referred to as "awards"). On December 17, 2015, Stone amended and restated the 2009 Plan to incorporate all prior amendments to the 2009 Plan and certain other non-material changes to the 2009 Plan. See Note 16 – Employee Benefit Plans – Stock Incentive Plans for more information.

No stock options have been granted pursuant to the 2009 Plan since its initial effective date on May 28, 2009; however, we have previously granted options under the 2004 Plan that remain outstanding. Stock options previously granted to employees vested ratably over a five-year service-vesting period and expire 10 years subsequent to award. Stock options issued to nonemployee directors vested ratably over a three-year service-vesting period and expire 10 years subsequent to award. We have granted restricted stock awards under the 2009 Plan, which awards typically vest over a one-year or three-year period.

We record share-based compensation expense for share-based compensation awards based on the fair value on the date of grant. Compensation expense for share-based compensation awards is recognized in our financial statements on a straight-line basis over the vesting period of the award.

For the year ended December 31, 2016, we incurred $11,562 of share-based compensation related to restricted stock issuances or granting of stock awards, and of which a total of approximately $3,117 was capitalized into oil and gas properties. For the year ended December 31, 2015, we incurred $17,917 of share-based compensation, all of which related to restricted stock issuances, and of which a total of approximately $5,593 was capitalized into oil and gas properties. For the year ended December 31, 2014, we incurred $17,051 of share-based compensation, all of which related to restricted stock issuances, and of which a total of approximately $5,797 was capitalized into oil and gas properties. Because of the non-cash nature of share-based compensation, the expensed portion of share-based compensation is added back to net income in arriving at net cash provided by operating activities in our statement of cash flows. The capitalized portion is not included in net cash used in investing activities.

The Plan, as described in Note 2 – Chapter 11 Proceedings, provides that the Company's common stock will be cancelled and new common stock will be issued upon emergence from bankruptcy. On February 15, 2017, the Plan was confirmed by the Bankruptcy Court and we expect to emerge from bankruptcy on February 28, 2017. Immediately prior to emergence, the vesting of all outstanding, unvested share-based awards for non-executive employees will be accelerated. Upon emergence from bankruptcy, all outstanding, unvested restricted shares held by the Company’s executives will be cancelled and exchanged for a proportionate share of 5% of the common stock of reorganized Stone, plus warrants for ownership of up to 15% of reorganized Stone’s common equity. Vesting will continue in accordance with the applicable vesting provisions of the original awards. All other executive share-based awards will be cancelled upon emergence from bankruptcy.

Stock Options. There were no stock option grants during the years ended December 31, 2016, 2015 or 2014. The following tables include stock option activity during the years ended December 31, 2016, 2015 and 2014 (amounts in tables represent actual values except where indicated otherwise).



	Year Ended December 31, 2016
	Number of Options		Wgtd. Avg. Exercise Price		Wgtd. Avg. Term	Aggregate Intrinsic Value (in thousands)
Options outstanding, beginning of period	14,447		$	269.25
Granted	—		—
Exercised	—		—
Forfeited	—		—
Expired	(1,500	)	477.45
Options outstanding, end of period (1)	12,947		245.13		1.4 years	$	—
Options exercisable, end of period	12,947		245.13		1.4 years	—
Options unvested, end of period	—		—		—	—

(1) Exercise prices for stock options outstanding at December 31, 2016 range from $69.70 to $446.70.



	Year Ended December 31, 2015
	Number of Options		Wgtd. Avg. Exercise Price		Wgtd. Avg. Term	Aggregate Intrinsic Value (in thousands)
Options outstanding, beginning of period	20,497		$	339.36
Granted	—		—
Exercised	—		—
Forfeited	—		—
Expired	(6,050	)	506.76
Options outstanding, end of period	14,447		269.25		2.1 years	$	—
Options exercisable, end of period	14,447		269.25		2.1 years	—
Options unvested, end of period	—		—		—	—



	Year Ended December 31, 2014
	Number of Options		Wgtd. Avg. Exercise Price		Wgtd. Avg. Term	Aggregate Intrinsic Value (in thousands)
Options outstanding, beginning of period	33,117		$	393.74
Granted	—		—
Exercised	(25	)	462.00
Forfeited	—		—
Expired	(12,595	)	482.11
Options outstanding, end of period	20,497		339.36		2.4 years	$	531
Options exercisable, end of period	20,497		339.36		2.4 years	531
Options unvested, end of period	—		—		—	—

Restricted Stock and Other Stock Awards. The fair value of restricted shares and stock awards is typically determined based on the average of our high and low stock prices on the grant date. During the year ended December 31, 2016, we issued 31,313 shares of restricted stock or stock awards valued at $280. During the year ended December 31, 2015, we issued 141,872 shares of restricted stock valued at $23,722. During the year ended December 31, 2014, we issued 67,305 shares of restricted stock valued at $24,593.

A summary of the restricted stock and stock award activity under the 2009 Plan for the years ended December 31, 2016, 2015 and 2014 is as follows (amounts in table represent actual values):



	2016				2015				2014
	Number of Restricted Shares		Wgtd. Avg. Fair Value Per Share		Number of Restricted Shares		Wgtd. Avg. Fair Value Per Share		Number of Restricted Shares		Wgtd. Avg. Fair Value Per Share
Restricted stock outstanding, beginning of period	180,239		$	208.17	129,848		$	299.45	125,334		$	239.07
Issuances	31,313		8.93		141,872		167.21		67,305		365.40
Lapse of restrictions or granting of stock awards	(117,406	)	158.79		(63,745	)	296.00		(59,731	)	245.73
Forfeitures	(13,056	)	200.06		(27,736	)	223.80		(3,060	)	301.54
Restricted stock outstanding, end of period	81,090		$	205.34	180,239		$	208.17	129,848		$	299.45

As of December 31, 2016, there was $2,823 of unrecognized compensation cost related to unvested share-based awards for non-executive employees and $3,318 of unrecognized compensation cost related to unvested restricted shares held by the Company's executives. The current weighted average remaining vesting period of such awards is approximately one year.

Under U.S. GAAP, if tax deductions exceed book compensation expense, then excess tax benefits are credited to additional paid-in capital to the extent realized. If book compensation expense exceeds tax deductions, the tax deficit results in either a reduction in additional paid-in capital and/or an increase in income tax expense, depending on the pool of available excess tax benefits to offset such deficit. There were no adjustments to additional paid-in capital related to the net tax effect of stock option exercises and restricted stock vesting in 2016 or 2015 and such adjustments were ($54) in 2014. Additionally, during 2016, 2015, and 2014, $4,117, $1,314 and $609 of tax deficits were charged to income tax expense, respectively.