Quarterly report pursuant to Section 13 or 15(d)

Equity-Based Compensation

v2.4.1.9
Equity-Based Compensation
3 Months Ended
Mar. 31, 2015
Stock-Based Compensation  
Equity-Based Compensation

(5)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 14,765,723 shares were available for future grant under the Plan as of March 31, 2015.

 

In connection with the Antero Midstream IPO, Antero Midstream’s general partner adopted the Antero Midstream Partners LP Long-Term Incentive Plan (the “Midstream Plan”), pursuant to which 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) are eligible to receive awards representing ownership interests in Antero Midstream.  An aggregate of 10,000,000 common units may be delivered pursuant to awards under the Midstream Plan, subject to customary adjustments.  A total of 7,640,500 common units are available for future grant under the Midstream Plan as of March 31, 2015.

 

The Company’s equity-based compensation expense was as follows for the three months ended March 31,  2014 and 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

  

2014

  

2015

 

Profits interests awards (see note 1)

 

$

28,689 

 

 

14,718 

 

Restricted stock awards

 

 

309 

 

 

8,436 

 

Stock options

 

 

139 

 

 

129 

 

Antero Midstream phantom and restricted unit awards

 

 

 —

 

 

4,425 

 

Common stock issued to directors in lieu of cash compensation

 

 

 —

 

 

75 

 

Total expense

 

$

29,137 

 

 

27,783 

 

 

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, less awards expected to be forfeited.  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 during the three months ended March 31, 2015 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted
average

 

Aggregate

 

 

    

Number of
shares

    

grant date
fair value

    

intrinsic value
(in thousands)

  

Total awarded and unvested—December 31, 2014

 

1,983,673 

 

$

64.71 

 

$

80,497 

 

Granted

 

53,386 

 

$

35.18 

 

 

 

 

Vested

 

(2,617)

 

$

60.66 

 

 

 

 

Forfeited

 

(320)

 

$

37.52 

 

 

 

 

Total awarded and unvested—March 31, 2015

 

2,034,122 

 

$

63.94 

 

$

71,845 

 

 

Intrinsic values are based on the closing price of the Company’s stock on the referenced dates.  Unamortized expense of $97.2 million at March 31, 2015 is expected to be recognized over approximately 3.0 years.  On April 15, 2015, the Company granted restricted stock unit awards for 806,717 shares at a grant date fair value of $33.4 million, which will be recognized as expense over vesting periods of approximately 4 years.

 

Stock Options

 

Stock options granted under the Plan to date 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, less awards expected to be forfeited.  Stock options are granted with an exercise price equal to 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, 2015 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted
average

 

average
remaining

 

Intrinsic

 

 

    

Stock
options

    

exercise
price

    

contractual
life

    

value
(in thousands)

  

Outstanding at December 31, 2014

 

81,021 

 

$

53.92 

 

8.92 

 

$

 —

 

Options granted

 

 —

 

 

 —

 

 

 

 

 

 

Options exercised

 

 —

 

 

 —

 

 

 

 

 

 

Options cancelled

 

 —

 

 

 —

 

 

 

 

 

 

Options expired

 

 —

 

 

 —

 

 

 

 

 

 

Outstanding at March 31, 2015

 

81,021 

 

$

53.92 

 

8.67 

 

$

 —

 

Vested or expected to vest as of  March 31, 2015

 

81,021 

 

$

53.92 

 

8.67 

 

$

 —

 

Exercisable at March 31, 2015

 

25,339 

 

$

54.15 

 

8.54 

 

$

 —

 

 

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

 

A Black-Scholes option-pricing model is used to determine the grant-date fair value of the Company’s stock options.  Expected volatility was derived from the volatility of the historical stock prices of a peer group of similar publicly traded companies’ stock prices.  The risk-free interest rate was determined using the implied yield available for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options.  A dividend yield of zero was assumed.

 

The following table presents information regarding the weighted average fair value for options granted in 2013 and 2014 and the assumptions used to determine fair value.

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

 

2014

 

 

Dividend yield

 

 

 —

%

 

 

 —

%

 

Volatility

 

 

35 

%

 

 

40 

%

 

Risk-free interest rate

 

 

1.48 

%

 

 

1.75 

%

 

Expected life (years)

 

 

6.17 

 

 

 

5.50 

 

 

Weighted average fair value of options granted

 

$

20.20 

 

 

$

20.55 

 

 

 

As of March 31, 2015, there was $0.9 million of unrecognized equity-based compensation expense related to nonvested stock options.  That expense is expected to be recognized over a weighted average period of approximately 2.3 years.  On April 15, 2015, the Company granted stock option awards for 665,367 shares having a grant date fair value of approximately $9.8 million, which will be recognized as expense over vesting periods of approximately 4 years.

 

Antero Midstream Partners Phantom and Restricted Unit Awards

 

Restricted units and 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 restricted units or phantom units.  These restricted and 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 restricted unit and phantom unit award is recognized on a straight-line basis over the requisite service period of the entire award.  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 restricted unit and phantom unit awards activity during the three months ended March 312015 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of
units

 

Weighted
average
grant date
fair value

 

Aggregate
intrinsic value
(in thousands)

 

Total awarded and unvested—December 31, 2014

 

2,381,440 

 

$

29.00 

 

$

65,490 

 

Granted

 

 —

 

$

 —

 

 

 

 

Vested

 

 —

 

$

 —

 

 

 

 

Forfeited

 

(21,940)

 

$

29.00 

 

 

 

 

Total awarded and unvested—March 31, 2015

 

2,359,500 

 

$

29.00 

 

$

57,076 

 

 

Intrinsic values are based on the closing price of Antero Midstream’s common units on the referenced dates.  Unamortized expense of $61.6 million at March 312015 is expected to be recognized over a weighted average period of approximately 3.6 years.