Annual report pursuant to Section 13 and 15(d)

Share-Based Compensation

v3.20.4
Share-Based Compensation
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based Compensation
All share and per share numbers included in this footnote, except for those disclosed in “— 2018 Omnibus Incentive Plan” below, have been adjusted for the reverse stock split. See “Note 11 - Stockholders’ Equity” for discussion of the reverse stock split and reduction in authorized shares.
2020 Omnibus Incentive Plan
At the Company’s annual meeting of shareholders on June 8, 2020, shareholders approved the 2020 Omnibus Incentive Plan (the “2020 Plan”), which replaced the 2018 Omnibus Incentive Plan (the “2018 Plan”). From the effective date of the 2020 Plan, no further awards may be granted under the 2018 Plan, however, awards previously granted under the 2018 Plan will remain outstanding in accordance with their terms. Effective August 7, 2020, in connection with the reverse stock split and reduction in authorized shares, the Board of Directors approved and adopted an amendment to the 2020 Plan to proportionately adjust the limitations on awards that may be granted. At December 31, 2020, there were 2,002,463 shares available for future share-based awards under the 2020 Plan. 
2018 Omnibus Incentive Plan
The 2018 Plan, which became effective May 10, 2018 following shareholder approval, authorized and reserved for issuance 9,400,000 shares of common stock, which may be issued upon exercise of vested stock options and/or the vesting of any other share-based equity award that is granted under this plan. The 2018 Plan replaced the 2011 Omnibus Incentive Plan (the “Prior Plan”), and included a provision at inception whereby all remaining, un-issued and authorized shares from the Prior Plan became issuable under the 2018 Plan. This transfer provision resulted in the transfer of an additional 1,322,742 shares into the 2018 Plan, increasing the quantity authorized and reserved for issuance under the 2018 Plan to 10,722,742 at the inception of the 2018 Plan. Another provision provided that shares, which would otherwise become available for issuance under the Prior Plan as a result of vesting and/or forfeiture of any equity awards existing as of the effective date of the 2018 Plan, would also increase the authorized shares available to the 2018 Plan. As a result of the Merger, the 2018 Plan was amended and restated to incorporate the 2017 Incentive Plan of Carrizo Oil & Gas, Inc. (the “Carrizo Plan”), including outstanding awards under the Carrizo Plan and shares available to grant to the former employees of Carrizo which were converted to shares of the Company by applying the conversion ratio of 1.75 shares of the Company per one share of Carrizo (the “Amended and Restated 2018 Plan”).
RSU Equity Awards
The following table summarizes RSU Equity Award activity for the years ended December 31, 2020, 2019 and 2018:
RSU Equity Awards (in thousands) Weighted Average Grant-Date Fair Value per Share
For the Year Ended December 31, 2018
Unvested at the beginning of the period 179  $115.36 
Granted (1)
87  $144.86 
Vested (2)
(51) $103.83 
Forfeited (5) $114.32 
Unvested at the end of the period 210  $130.39 
For the Year Ended December 31, 2019
Unvested at the beginning of the period 210  $130.39 
Granted (1)
188  $85.96 
Vested (2)
(106) $126.75 
Forfeited (23) $110.55 
Unvested at the end of the period 269  $102.48 
For the Year Ended December 31, 2020
Unvested at the beginning of the period 269  $102.48 
Granted (1)
562  $21.07 
Vested (2)
(132) $105.14 
Forfeited (22) $96.84 
Unvested at the end of the period 677  $34.57 

(1)Includes 111.2 thousand, 39.9 thousand and 20.8 thousand target performance-based RSU Equity Awards for the years ended December 31, 2020, 2019 and 2018, respectively.
(2)The fair value of shares vested was $1.6 million, $7.3 million and $6.3 million during the years ended December 31, 2020, 2019 and 2018, respectively.
Grant activity for the years ended December 31, 2020, 2019 and 2018 primarily consisted of RSU Equity Awards granted to executives and employees as part of the annual grant of long-term equity incentive awards.
The number of outstanding performance-based RSU Equity Awards that can vest is based on a calculation that compares the Company’s total shareholder return (“TSR”) to the same calculated return of a group of peer companies selected by the Company and can range between 0% and 300% of the target units for the awards granted in 2020 and between 0% and 200% of the target units for the awards granted in 2018 and 2019. The increase in the maximum amount of performance-based RSU Equity Awards that can vest for the awards granted in 2020 is due to an absolute TSR modifier, which was added as a second factor in the calculation, in addition to the relative TSR multiplier. While the absolute TSR modifier could increase the number of awards that vest, the number of awards that vest could also be reduced if the absolute TSR is less than 5% over the performance period.
The following table summarizes the shares that vested and did not vest as a result of the Company’s performance as compared to its peers.
Years Ended December 31,
Performance-based Equity Awards 2020 2019 2018
Vesting Multiplier
50% - 100%
 100  % 142  %
Target 21,920 8,878 8,300
Vested at end of performance period 11,372 8,878 11,786
Did not vest at end of performance period 10,548 — —
The Company recognizes expense for performance-based RSU Equity Awards based on the fair value of the awards at the grant date. Awards with a performance-based provision do not allow for the reversal of previously recognized expense, even if the market metric is not achieved and no shares ultimately vest. For the years ended December 31, 2020, 2019 and 2018, the grant date fair value of the performance-based RSU Equity Awards, calculated using a Monte Carlo simulation, was $3.4 million, $4.3 million, and $3.5 million, respectively. The following table summarizes the assumptions used and the resulting grant date fair value per performance-based RSU Equity Award granted during the years ended December 31, 2020, 2019 and 2018:
Performance-based Awards June 29, 2020 January 31, 2020 January 31, 2019 May 10, 2018
Expected term (in years) 2.5 2.9 2.9 2.6
Expected volatility 113.2  % 54.8  % 47.9  % 51.6  %
Risk-free interest rate 0.2  % 1.3  % 2.4  % 2.6  %
Dividend yield —  % —  % —  % —  %
As of December 31, 2020, unrecognized compensation costs related to unvested RSU Equity Awards were $13.5 million and will be recognized over a weighted average period of 1.7 years.
Cash-Settled RSU Awards
The table below summarizes the Cash-Settled RSU Award activity for the years ended December 31, 2020, 2019 and 2018:
Cash-Settled RSU Awards
(in thousands)		 Weighted Average Grant-Date Fair Value per Share
For the Year Ended December 31, 2018
Unvested at the beginning of the period 61  $123.82 
Granted 35  $164.77 
Vested (28) $116.67 
Forfeited (2) $161.50 
Unvested at the end of the period 66  $147.59 
For the Year Ended December 31, 2019
Unvested at the beginning of the period 66  $147.59 
Granted 44  $105.08 
Vested (16) $155.29 
Forfeited (8) $145.71 
Unvested at the end of the period 86  $124.22 
For the Year Ended December 31, 2020
Unvested at the beginning of the period 86  $124.22 
Granted 142  $26.84 
Vested (16) $160.39 
Did not vest at end of performance period (16) $163.55 
Forfeited —  $— 
Unvested at the end of the period 196  $47.56 
Grant activity primarily consisted of Cash-Settled RSU Awards to executives as part of the annual grant of long-term equity incentive awards that occurred in the first half of each of the years presented in the table above. These awards cliff vest after an approximate three-year performance period.
The Company’s outstanding Cash-Settled RSU Awards include the same performance-based vesting conditions as the performance-based RSU Equity Awards, which are described above. Additionally, the assumptions used to calculate the grant date fair value per Cash-Settled RSU Award granted for each of the respective periods presented are the same as the performance-based RSU Equity Awards presented above.
For the years ended December 31, 2020, 2019 and 2018, Cash-Settled RSU Awards vested resulting in cash payments of $0.2 million, $0.8 million and $3.2 million, respectively.
The following table summarizes the Company’s liability for Cash-Settled RSU Awards and the classification in the consolidated balance sheets for the periods indicated:
December 31,
2020 2019
(In thousands)
Other current liabilities $182  $966 
Other long-term liabilities 1,336  2,089 
Total Cash-Settled RSU Awards $1,518  $3,055 
As of December 31, 2020, the Company had the following performance-based Cash-Settled RSU Awards outstanding:
Target Awards Outstanding Potential Minimum Units Vesting Potential Maximum Units Vesting
(In thousands)
Vesting in 2021 35  —  70 
Vesting in 2022 111  —  334 
Other 50  50  50 
Total Cash-Settled RSU Awards 196  50  454 
As of December 31, 2020, unrecognized compensation costs related to unvested Cash-Settled RSU Awards were $1.5 million and will be recognized over a weighted average period of 1.9 years.
Cash-Settled SARs
As a result of the Merger, Cash SARs previously granted by Carrizo that were outstanding at closing of the Merger were canceled and converted into a Cash SAR covering shares of the Company’s common stock, with the conversion calculated as prescribed in the agreement governing the Merger. The table below summarizes the Cash SAR activity for the year ended December 31, 2020.
Stock Appreciation Rights
(in thousands)		 Weighted
Average
Exercise
Prices		 Weighted Average Remaining Life
(In years)		 Aggregate Intrinsic Value
(In millions)
For the Year Ended December 31, 2019
Outstanding, beginning of period —  $— 
Granted —  $— 
Reissued 368  $100.34 
Exercised —  $— 
Forfeited —  $— 
Expired —  $— 
Outstanding, end of period 368  $100.34  4.4 $— 
Vested, end of period 368  $100.34  —  $— 
Vested and exercisable, end of period —  $—  —  $— 
For the Year Ended December 31, 2020
Outstanding, beginning of period 368  $100.34 
Granted —  $— 
Exercised —  $— 
Forfeited —  $— 
Expired —  $— 
Outstanding, end of period 368  $100.34  3.4 $— 
Vested, end of period 368  $100.34  —  $— 
Vested and exercisable, end of period —  $—  —  $— 
The acquisition date fair value of the Cash SARs, calculated using the Black-Scholes-Merton option pricing model was $4.6 million. The following table summarizes the assumptions used, the resulting acquisition date fair value per Cash SAR, and the expiration dates for the grants that occurred during periods presented below:
2019 2018 2017 2016
Expected term (in years) 5.4 4.5 1.9 1.1
Expected volatility 60.7  % 56.9  % 58.6  % 68.1  %
Risk-free interest rate 1.7  % 1.7  % 1.6  % 1.5  %
Dividend yield —  % —  % —  % —  %
Expiration date March 17, 2026 March 17, 2025 March 23, 2022 March 17, 2021
The liabilities for Cash SARs as of December 31, 2020 and 2019 were $1.7 million and $5.0 million, respectively, all of which were classified as “Other current liabilities” in the consolidated balance sheets in the respective periods. Changes to the fair value of the Cash SARs are included in “General and administrative” in the consolidated statements of operations. As all Cash SARs are vested, there is no unrecognized compensation costs as of December 31, 2020.
Share-Based Compensation Expense, Net
Share-based compensation expense associated with the RSU Equity Awards, Cash-Settled RSU Awards, and Cash SARs, net of amounts capitalized, is included in “General and administrative” in the consolidated statements of operations. The following table presents share-based compensation expense (benefit), net for each respective period:
Years Ended December 31,
2020 2019 2018
RSU Equity Awards $13,030  $14,322  $9,460 
Cash-Settled RSU Awards (771) 1,021  336 
Cash SARs (3,344) 443  — 
8,915  15,786  9,796 
Less: amounts capitalized to oil and gas properties (6,252) (4,704) (3,434)
Total share-based compensation expense, net $2,663  $11,082  $6,362