Quarterly report pursuant to Section 13 or 15(d)

Equity-Based Compensation

v3.7.0.1
Equity-Based Compensation
3 Months Ended
Mar. 31, 2017
Equity-Based Compensation  
Equity-Based Compensation

(7)Equity-Based Compensation

 

Antero is authorized to grant up to 16,906,500 shares of common stock to employees and directors of the Company under the Antero Resources Corporation Long-Term Incentive Plan (the “Plan”).  The Plan allows equity-based compensation awards to be granted in a variety of forms, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, dividend equivalent awards, and other types of awards.  The terms and conditions of the awards granted are established by the Compensation Committee of Antero’s Board of Directors.  A total of 8,555,117 shares were available for future grant under the Plan as of March 31, 2017.

 

Antero Midstream’s general partner is authorized to grant up to 10,000,000 common units representing limited partner interests in Antero Midstream under the Antero Midstream Partners LP Long-Term Incentive Plan (the “Midstream Plan”) to non-employee directors of Antero Midstream’s general partner and certain officers, employees, and consultants of Antero Midstream’s general partner and its affiliates (which include Antero).  A total of 7,944,445 common units were available for future grant under the Midstream Plan as of March 31, 2017.

 

The Company’s equity-based compensation expense, by type of award, was as follows for the three months ended March 31, 2016 and 2017 (in thousands):

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

  

2016

  

2017

 

Restricted stock unit awards

 

$

17,467

 

 

18,225

 

Stock options

 

 

660

 

 

620

 

Performance share unit awards

 

 

883

 

 

2,135

 

Antero Midstream phantom unit awards

 

 

3,988

 

 

4,043

 

Equity awards issued to directors

 

 

472

 

 

480

 

Total expense

 

$

23,470

 

 

25,503

 

 

Restricted Stock and Restricted Stock Unit Awards

 

Restricted stock and restricted stock unit awards vest subject to the satisfaction of service requirements.  Expense related to each restricted stock and restricted stock unit award is recognized on a straight-line basis over the requisite service period of the entire award.  Forfeitures are accounted for as they occur by reversing expense previously recognized for awards that were forfeited during the period.  The grant date fair values of these awards are determined based on the closing price of the Company’s common stock on the date of the grant.

A summary of restricted stock and restricted stock unit awards activity for the three months ended March 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted
average

 

Aggregate

 

 

    

Number of
shares

    

grant date
fair value

    

intrinsic value
(in thousands)

 

Total awarded and unvested—December 31, 2016

 

5,353,447

 

$

31.77

 

$

126,609

 

Granted

 

37,178

 

$

25.62

 

 

 

 

Vested

 

(139,635)

 

$

28.71

 

 

 

 

Forfeited

 

(84,733)

 

$

25.87

 

 

 

 

Total awarded and unvested—March 31, 2017

 

5,166,257

 

$

31.87

 

$

117,842

 

 

Intrinsic values are based on the closing price of the Company’s stock on the referenced dates.  As of March 31, 2017, there was $111.0 million of unamortized equity-based compensation expense related to unvested restricted stock units.  That expense is expected to be recognized over a weighted average period of approximately 1.8 years.

 

Stock Options

 

Stock options granted under the Plan vest over periods from one to four years and have a maximum contractual life of 10 years.  Expense related to stock options is recognized on a straight-line basis over the requisite service period of the entire award.  Forfeitures are accounted for as they occur by reversing expense previously recognized for awards that were forfeited during the period.  Stock options are granted with an exercise price equal to or greater than the market price of the Company’s common stock on the date of grant. 

A summary of stock option activity for the three months ended March 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted
average

 

average
remaining

 

Intrinsic

 

 

    

Stock
options

    

exercise
price

    

contractual
life

    

value
(in thousands)

  

Outstanding at December 31, 2016

 

687,929

 

$

50.46

 

8.12

 

$

 —

 

Granted

 

 —

 

$

 —

 

 

 

 

 

 

Exercised

 

 —

 

 

 —

 

 

 

 

 

 

Forfeited

 

(6,208)

 

$

50.00

 

 

 

 

 

 

Expired

 

 —

 

 

 —

 

 

 

 

 

 

Outstanding at March 31, 2017

 

681,721

 

$

50.47

 

7.87

 

$

 —

 

Vested or expected to vest as of  March 31, 2017

 

681,721

 

$

50.47

 

7.87

 

$

 —

 

Exercisable at March 31, 2017

 

216,924

 

$

51.18

 

7.60

 

$

 —

 

 

Intrinsic value is based on the exercise price of the options and the closing price of the Company’s stock on the referenced dates.

 

As of March 31, 2017, there was $4.7 million of unamortized equity-based compensation expense related to unvested stock options.  That expense is expected to be recognized over a weighted average period of approximately 2.0 years.

 

Performance Share Unit Awards

 

Performance Share Unit Awards Based on Price Targets

 

In 2016, the Company granted performance share unit awards (“PSUs”) to certain of its executive officers that are based on price targets.  The vesting of these PSUs is conditioned on the closing price of the Company’s common stock achieving specific price thresholds over 10-day periods, subject to the following vesting restrictions: no PSUs may vest before the first anniversary of the grant date; no more than one-third of the PSUs may vest before the second anniversary of the grant date; and no more than two-thirds of the PSUs may vest before the third anniversary of the grant date.  Any PSUs which have not vested by the fifth anniversary of the grant date will expire.  Expense related to these PSUs is recognized on a graded basis over three years.

 

Performance Share Unit Awards Based on Total Shareholder Return

 

In 2016, the Company also granted PSUs to certain of its employees and executive officers which vest based on the total shareholder return (“TSR”) of the Company’s common stock relative to the TSR of a peer group of companies over a three-year performance period.  The number of performance shares which may ultimately be earned ranges from zero to 200% of the PSUs granted.  Expense related to these PSUs is recognized on a straight-line basis over three years.

 

Summary Information for Performance Share Unit Awards

 

A summary of PSU activity for the three months ended March 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

Number of
units

 

Weighted
average
grant date
fair value

 

Total awarded and unvested—December 31, 2016

 

785,301

 

$

29.75

 

Granted

 

 —

 

$

 —

 

Vested

 

(41,666)

 

$

27.38

 

Forfeited

 

 —

 

$

 —

 

Total awarded and unvested—March 31, 2017

 

743,635

 

$

29.88

 

 

As of March 31, 2017, there was $12.5 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 1.9 years.

 

Antero Midstream Partners Phantom Unit Awards

 

Phantom units granted by Antero Midstream vest subject to the satisfaction of service requirements, upon the completion of which common units in Antero Midstream are delivered to the holder of the phantom units.  These phantom units are treated, for accounting purposes, as if Antero Midstream distributed the units to Antero.  Antero recognizes compensation expense as the units are granted to employees, and a portion of the expense is allocated to Antero Midstream.  Expense related to each phantom unit award is recognized on a straight-line basis over the requisite service period of the entire award.  Forfeitures are accounted for as they occur by reversing expense previously recognized for awards that were forfeited during the period.  The grant date fair values of these awards are determined based on the closing price of Antero Midstream’s common units on the date of grant.  A summary of phantom unit awards activity for the three months ended March 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Number of
units

 

Weighted
average
grant date
fair value

 

Aggregate
intrinsic value
(in thousands)

 

Total awarded and unvested—December 31, 2016

 

1,331,961

 

$

27.31

 

$

41,131

 

Granted

 

5,967

 

$

33.52

 

 

 

 

Vested

 

 —

 

$

 —

 

 

 

 

Forfeited

 

(16,327)

 

$

29.00

 

 

 

 

Total awarded and unvested—March 31, 2017

 

1,321,601

 

$

27.33

 

$

43,824

 

 

Intrinsic values are based on the closing price of Antero Midstream’s common units on the referenced dates.  As of March 31, 2017, there was $29.0 million of unamortized equity-based compensation expense related to unvested phantom unit awards.  That expense is expected to be recognized over a weighted average period of approximately 1.9 years.