Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

v3.22.4
STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement, Noncash Expense [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
As discussed in Note 2, on the Emergence Date, the Company's Predecessor common stock was cancelled and the Company's Successor Common Stock was issued. Accordingly, the Company's then existing stock-based compensation awards were also cancelled, which resulted in the recognition of previously unamortized expense of $4.4 million related to the cancelled awards on the date of cancellation. The expense was included in reorganization items, net on the accompanying consolidated statements of operations. As a result, stock-based compensation for the Predecessor and Successor periods are not comparable.
Successor Stock-Based Compensation
As of the Emergence Date, the Board of Directors adopted the Incentive Plan with a share reserve equal to 2.8 million shares of Common Stock. The Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and performance awards or any combination of the foregoing. The Company has granted both restricted stock units and performance vesting restricted stock units to employees and directors pursuant to the Incentive Plan, as discussed below. During the year ended December 31, 2022 and Prior Successor Period, the Company's stock-based compensation expense was $8.7 million and $3.1 million, respectively, of which the Company capitalized $2.9 million and $1.1 million, respectively, relating to its exploration and development efforts. Stock compensation expense, net of the amounts capitalized, is included in general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2022, the Company has awarded an aggregate of approximately 265 thousand restricted stock units and approximately 191 thousand performance vesting restricted stock units, net of forfeited awards, under the Incentive Plan.
The following table summarizes restricted stock unit activity for the Prior Successor Period and year ended December 31, 2022:
Number of
Unvested
Restricted Stock Units		 Weighted
Average
Grant Date
Fair Value		 Number of
Unvested
Performance Vesting Restricted Stock Units		 Weighted
Average
Grant Date
Fair Value
Unvested shares as of May 18, 2021 —  $ —  —  $ — 
Granted 200,484  66.05  153,138  48.54 
Vested —  —  —  — 
Forfeited/canceled (2,071) 66.89  —  — 
Unvested shares as of December 31, 2021 198,413  $ 66.04  153,138  $ 48.54 
Granted 78,192  $ 96.90  37,666  $ 66.82 
Vested (67,564) 65.91  —  — 
Forfeited/canceled (11,269) 80.11  —  — 
Unvested shares as of December 31, 2022 197,772  $ 77.49  190,804  $ 52.15 
Successor Restricted Stock Units
Restricted stock units awarded under the Incentive Plan generally vest over a period of 3 to 4 years in the case of employees and 4 years in the case of directors upon the recipient meeting applicable service requirements. Stock-based compensation expense is recorded ratably over the service period. The grant date fair value of restricted stock units represents the closing market price of the Company's Common Stock on the date of the grant. Unrecognized compensation expense as of December 31, 2022, was $12.3 million. The expense is expected to be recognized over a weighted average period of 2.13 years.
Successor Performance Vesting Restricted Stock Units
The Company has awarded performance vesting restricted stock units to certain of its executive officers under the Incentive Plan. The number of shares of Common Stock issued pursuant to the award will be based on a combination of (i) the Company's total shareholder return ("TSR") and (ii) the Company's relative total shareholder return ("RTSR") for the performance period. Participants will earn from 0% to 200% of the target award based on the Company's TSR and RTSR ranking compared to the TSR of the companies in the Company's designated peer group at the end of the performance period. Awards will be earned and vested over a three-year performance period, subject to earlier termination of the performance period in the event of a change in control. The grant date fair values were determined using the Monte Carlo simulation method and are being recorded ratably over the performance period.
The table below summarizes the assumptions used in the Monte Carlo simulation to determine the grant date fair value of awards granted during the year ended December 31, 2022:
Grant date April 29, 2022
Forecast period (years) 3
Risk-free interest rates 2.9%
Implied equity volatility 88.4%
Stock price on the date of grant $93.98
For grants awarded in the Prior Successor Period, expected volatilities utilized in the Monte Carlo models were estimated using a historical period consistent with the remaining performance period of approximately 3 years. The risk-free interest rates were based on the U.S. Treasury rate for a term commensurate with the expected life of the grant. The Company assumed a range of risk-free interest rates between 0.35% and 0.67% and a range of expected volatilities between 87.0% and 87.1% to estimate the fair value.
Unrecognized compensation expense as of December 31, 2022, related to performance vesting restricted shares was $5.6 million. The expense is expected to be recognized over a weighted average period of 1.71 years.
Predecessor Stock-Based Compensation
The Predecessor granted restricted stock units to employees and directors pursuant to the 2019 Amended and Restated Incentive Stock Plan (the "2019 Plan"). During the Prior Predecessor Period and the year ended December 31, 2020, the Company’s stock-based compensation cost was $4.4 million and $16.3 million, respectively, of which the Company capitalized $0.9 million and $2.9 million, respectively, relating to its exploration and development efforts. Stock compensation costs, net of the amounts capitalized, are included in general and administrative expenses in the accompanying consolidated statements of operations.
The following table summarizes restricted stock unit activity for the Prior Predecessor Period and the year ended December 31, 2020:
Number of
Unvested
Restricted Stock Units		 Weighted
Average
Grant Date
Fair Value		 Number of
Unvested
Performance Vesting Restricted Stock Units		 Weighted
Average
Grant Date
Fair Value
Unvested shares as of December 31, 2019 4,098,318  $ 4.73  1,783,660  $ 2.96 
Granted 3,069,521  0.85  —  — 
Vested (1,294,285) 5.73  —  — 
Forfeited (4,171,041) 1.68  (943,065) 1.98 
Unvested shares as of December 31, 2020 1,702,513  $ 4.74  840,595  $ 4.07 
Granted —  —  —  — 
Vested (227,132) 8.45  —  — 
Forfeited/canceled (1,475,381) 4.16  (840,595) 4.07 
Unvested shares as of May 17, 2021 —  $ —  —  $ — 
Predecessor Restricted Stock Units
Restricted stock units awarded under the 2019 Plan generally vested over a period of one year in the case of directors and three years in the case of employees and vesting was dependent upon the recipient meeting applicable service requirements. Stock-based compensation costs are recorded ratably over the service period. The grant date fair value of restricted stock units represents the closing market price of the Company's Common Stock on the date of grant. All unrecognized compensation expense was recognized as of the Emergence Date.
Predecessor Performance Vesting Restricted Stock Units
The Company previously awarded performance vesting restricted stock units to certain of its executive officers under the 2019 Plan. The number of shares of Common Stock issued pursuant to the award was based on RTSR. RTSR is an incentive measure whereby participants will earn from 0% to 200% of the target award based on the Company’s TSR ranking compared to the TSR of the companies in the Company’s designated peer group at the end of the performance period. Awards were to be earned and vested over a performance period measured from January 1, 2019 to December 31, 2021, subject to earlier termination of the performance period in the event of a change in control. All unrecognized compensation expense was recognized as of the Emergence Date.