Quarterly report pursuant to Section 13 or 15(d)

Equity-Based Compensation and Cash Awards

v3.21.2
Equity-Based Compensation and Cash Awards
9 Months Ended
Sep. 30, 2021
Equity-Based Compensation and Cash Awards  
Equity-Based Compensation and Cash Awards

(9) Equity-Based Compensation and Cash Awards

On June 17, 2020, Antero Resources’ stockholders approved the Antero Resources Corporation 2020 Long-Term Incentive Plan (the “2020 Plan”), which replaced the Antero Resources Corporation Long-Term Incentive Plan (the “2013 Plan”), and the 2020 Plan became effective as of such date. The 2020 Plan provides for grants of stock options (including incentive stock options), stock appreciation rights, restricted stock awards, RSU awards, vested stock awards, dividend equivalent awards, and other stock-based and cash awards. The terms and conditions of the awards granted are established by the Compensation Committee of Antero Resources’ Board of Directors. Employees, officers, non-employee directors and other service providers of the Company and its affiliates are eligible to receive awards under the 2020 Plan. No further awards will be granted under the 2013 Plan on or after June 17, 2020.

The 2020 Plan provides for the reservation of 10,050,000 shares of the Company’s common stock, plus the number of certain shares that become available again for delivery from the 2013 Plan in accordance with the share recycling provisions described below. The share recycling provisions allow for all or any portion of an award (including an award granted under the 2013 Plan that was outstanding as of June 17, 2020) that expires or is cancelled, forfeited, exchanged, settled for cash, or otherwise terminated without actual delivery of the shares to be considered not delivered and thus available for new awards under the 2020 Plan. Further, any shares withheld or surrendered in payment of any taxes relating to awards that were outstanding under either the 2013 Plan as of June 17, 2020 or are granted under the 2020 Plan (other than stock options and stock appreciation rights) will again be available for new awards under the 2020 Plan.

A total of 7,888,490 shares were available for future grant under the 2020 Plan as of September 30, 2021.

Antero Midstream Partners LP’s (“Antero Midstream Partners”) general partner was authorized to grant up to 10,000,000 common units representing limited partner interests in Antero Midstream Partners under the Antero Midstream Partners LP Long-Term Incentive Plan (the “AMP Plan”) to non-employee directors of its general partner and certain officers, employees, and consultants of Antero Midstream Partners and its affiliates (which include Antero Resources). Antero Resources deconsolidated Antero Midstream Partners on March 12, 2019, and on such date each outstanding phantom unit award under the AMP Plan, was

assumed by Antero Midstream Corporation and converted into 1.8926 RSUs (all such RSUs, the “Converted AM RSU Awards”) under the Antero Midstream Corporation Long Term Incentive Plan (the “AMC Plan”). Each RSU award under the AMC Plan represents a right to receive one share of Antero Midstream Corporation common stock.

The Company’s equity-based compensation expense, by type of award, was as follows for the three and nine months ended September 30, 2020 and 2021 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

   

2020

2021

   

2020

2021

RSU awards

$

3,063

3,327

$

9,021

9,957

PSU awards

1,827

1,452

5,380

3,211

Converted AM RSU Awards (1)

459

186

1,881

988

Equity awards issued to directors

350

333

719

1,033

Total expense

$

5,699

5,298

$

17,001

15,189

(1) Antero Resources recognized compensation expense for equity awards granted under both the 2013 Plan and the AMP Plan because the awards under the AMP Plan are accounted for as if they are distributed by Antero Midstream Partners to Antero Resources. Antero Resources allocates a portion of equity-based compensation expense related to grants prior to the deconsolidation of Antero Midstream Partners on March 12, 2019 to Antero Midstream Partners based on its proportionate share of Antero Resources’ labor costs.

(a)

Restricted Stock Unit Awards

A summary of RSU award activity for the nine months ended September 30, 2021 is as follows:

Weighted

Average

Number of

Grant Date

  

Shares

  

Fair Value

Total awarded and unvested—December 31, 2020

8,432,397

$

4.06

Granted

1,431,993

9.52

Vested

(3,546,654)

4.36

Forfeited

(293,338)

5.18

Total awarded and unvested—September 30, 2021

6,024,398

$

5.12

As of September 30, 2021, there was approximately $24 million of unamortized equity-based compensation expense related to unvested RSUs. That expense is expected to be recognized over a weighted average period of approximately 2.6 years.

(b)

Performance Share Unit Awards

PSU Awards Based on Absolute Total Shareholder Return (“TSR”)

In April 2021, the Company granted PSU awards to certain of its executive officers that vest based on Antero Resources’ absolute TSR determined as of the last day of each of three one-year performance periods ending on April 15, 2022, April 15, 2023, and April 15, 2024, and one cumulative three-year performance period ending on April 15, 2024, in each case, subject to the executive officer’s continued employment through April 15, 2024. The number of shares of common stock that may ultimately be earned following the end of the cumulative three-year performance period with respect to the TSR PSUs ranges from zero to 200% of the target number of TSR PSUs originally granted. Expense related to these PSUs is recognized on a graded-vested basis over the term of each performance period. Forfeitures are accounted for as they occur by reversing the expense previously recognized for awards that were forfeited during the period.

PSU Awards Based on Leverage Ratio

In April 2021, the Company granted PSUs to certain of its executive officers that vest based on the Company’s total debt less cash and cash equivalents divided by the Company’s Adjusted EBITDAX (as defined and described in Item 2 below under “Non-GAAP Financial Measures”) determined as of the last day of each of three one-year performance periods ending on December 31,

2021, December 31, 2022, and December 31, 2023, in each case, subject to the executive officer’s continued employment through December 31, 2023 (“Leverage Ratio PSUs”). The number of shares of common stock that may ultimately be earned with respect to the Leverage Ratio PSUs ranges from zero to 200% of the target number of Leverage Ratio PSUs originally granted. Expense related to the Leverage Ratio PSUs is recognized based on the number of shares of common stock that are expected to be issued at the end of each measurement period, and such expense is reversed if the likelihood of achieving the performance condition becomes improbable. As of September 30, 2021, the likelihood of achieving the performance conditions related to the Leverage Ratio PSUs was probable.

A summary of PSU award activity for the nine months ended September 30, 2021 is as follows:

Weighted

Number of

Average Grant

   

Units

   

Date Fair Value

Total awarded and unvested—December 31, 2020

2,547,798

$

12.66

Granted

479,120

9.71

Forfeited

(67,000)

2.97

Cancelled (unearned)

(1,112,639)

19.19

Total awarded and unvested—September 30, 2021

1,847,279

$

8.31

The following table presents information regarding the weighted average fair values for market-based PSUs granted during the nine months ended September 30, 2021, and the assumptions used to determine the fair values:

Dividend yield

%

Volatility

85

%

Risk-free interest rate

0.32

%

Weighted average fair value of awards granted—Absolute TSR

$

11.99

As of September 30, 2021, there was approximately $8 million of unamortized equity-based compensation expense related to unvested PSUs. That expense is expected to be recognized over a weighted average period of approximately 2.0 years.

(c)

Stock Options

A summary of stock option activity for the nine months ended September 30, 2021 is as follows:

Weighted

Weighted

Average

Average

Remaining

Intrinsic

Stock

Exercise

Contractual

Value

  

Options

  

Price

  

Life

  

(in thousands)

Outstanding—December 31, 2020

432,461

$

50.64

4.1

$

Granted

Exercised

Forfeited

Expired

(76,167)

50.00

Outstanding—September 30, 2021

356,294

$

50.78

3.2

$

Vested—September 30, 2021

356,294

$

50.78

3.2

$

Exercisable—September 30, 2021

356,294

$

50.78

3.2

$

Intrinsic values are based on the exercise price of the options and the closing price of Antero Resources’ common stock on the referenced dates.

As of September 30, 2021, all stock options were fully vested resulting in no unamortized equity-based compensation expense.

(d)

Converted AM RSU Awards

A summary of the Converted AM RSU Awards for the nine months ended September 30, 2021 is as follows:

Weighted

Average

Number of

Grant Date

   

Units

   

Fair Value

Total awarded and unvested—December 31, 2020

296,390

$

15.06

Granted

Vested

(209,964)

15.73

Forfeited

(3,444)

13.25

Total awarded and unvested—September 30, 2021

82,982

$

13.46

As of September 30, 2021, there was less than $1.0 million of unamortized equity-based compensation expense related to unvested Converted AM RSU Awards. Such expense is expected to be recognized over a weighted average period of 0.6 years, and the Company’s proportionate share will be allocated to it as it is recognized.

(e)

Cash Awards

In January 2020, the Company granted cash awards of approximately $3.3 million to certain executives under the 2013 Plan, and compensation expense for these awards is recognized ratably over the vesting period for each of three tranches through January 20, 2023. In July 2020, the Company granted additional cash awards in the aggregate of $2.6 million to certain non-executive employees under the 2020 Plan that vest ratably over four years. As of December 31, 2020 and September 30, 2021, the Company has recorded approximately $3.2 million and $2.0 million, respectively, in Other liabilities in the condensed consolidated balance sheets related to unvested cash awards.