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Stock-Based Compensation and Other Benefit Plans | 9 Months Ended
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Sep. 30, 2019
Stock-Based Compensation and Other Benefit Plans [Abstract] |
Stock-Based Compensation and Other Benefit Plans | 15. STOCK-BASED COMPENSATION AND OTHER BENEFIT PLANS The Company’s stock-based compensation has been granted under several stock incentive and long-term incentive plans. The plans authorize the Compensation Committee of the Company’s Board of Directors to issue various types of incentive compensation. Currently, the Company has issued stock options and restricted shares under the 2014 Long-Term Incentive Plan (“2014 Plan”) and stock appreciation rights under the 2016 Stock Appreciation Rights Plan. At September 30, 2019, 68,241 shares were authorized for future grants under the 2014 plan. For each stock option granted, the number of authorized shares under the 2014 Plan will be reduced on a one-for-one basis. For each restricted share granted, the number of shares authorized under the 2014 Plan will be reduced by twice the number of restricted shares. T he Company has no set policy for sourcing shares for option grants. Historically the shares issued under option grants have been new shares. The Company records compensation expense related to stock-based compensation as general and administrative expense. For the three months ended September 30, 2019 and 2018, stock-based compensation was $1.2 million and $1.0 million, respectively, related to the issuance of stock options, restricted stock and stock appreciation rights. For the nine months ended September 30, 2019 and 2018, stock-based compensation was $2.8 million and $3.7 million, respectively, related to the issuance of stock options, restricted stock and stock appreciation rights. During the nine months ended September 30, 2019 and 2018, the Company settled in cash $0.3 million and $0.1 million, respectively, for stock appreciation rights exercises. Because the Company does not pay significant United States federal income taxes, no amounts were recorded for future tax benefits.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2019 |  | 2018 |  | 2019 |  | 2018
|  | (in thousands)
Stock-based compensation - equity awards |  | $ | 180 |  | $ | 136 |  | $ | 802 |  | $ | 683
Stock-based compensation - liability awards |  |  | 970 |  |  | 837 |  |  | 1,968 |  |  | 3,046
Total stock-based compensation |  | $ | 1,150 |  | $ | 973 |  | $ | 2,770 |  | $ | 3,729
Stock options Stock options have an exercise price that may not be less than the fair market value of the underlying shares on the date of grant. In general, stock options granted to participants will become exercisable over a period determined by the Compensation Committee of the Company’s Board of Directors, which in the past has been a five-year life, with the options vesting over a service period of up to five years. In addition, stock options will become exercisable upon a change in control, unless provided otherwise by the Compensation Committee. There were $0.1 million and $0.5 million, respectively, in cash proceeds from the exercise of stock options in the nine months ended September 30, 2019 and 2018, respectively. On February 28, 2019, the Company granted stock options for 622,140 shares to employees; these options vest over a three-year period, vesting in three equal parts on the first, second and third anniversaries after the date of grant with an exercise price of $2.33 per share. On April 1, 2019, the Company granted stock options for 44,163 shares to an employee with an exercise price of $2.29 per share. On June 6, 2019, the Company granted stock options for 257,228 shares to directors with an exercise price of $1.43 per share; these options vested immediately. During the nine months ended September 30, 2019, 13,875 shares were added to treasury as a result of tax withholding on options exercised. No shares were added to treasury as a result of tax withholding on options exercised during 2018. During the nine months ended September 30, 2019, 62,235 shares that had been granted from treasury were exercised and taken from treasury. The Company uses the Black-Scholes model to calculate the grant date fair value of stock option awards. This fair value is then amortized to expense over the vesting period of the option. During the nine months ended September 30, 2019 and 2018, the weighted average assumptions shown below were used to calculate the weighted average grant date fair value of option grants. Because the Company has not paid cash dividends and does not anticipate paying cash dividends on the common stock in the foreseeable future, no expected dividend yield was input to the Black-Scholes model.
| Nine Months Ended September 30,
| 2019 |  | 2018 |
Weighted average exercise price - ($/share) | $ | 2.08 |  | $ | 1.05 |
Expected life in years |  | 3.2 |  |  | 3.5 |
Average expected volatility |  | 72.53 | % |  | 70.50 | %
Risk-free interest rate |  | 2.33 | % |  | 2.51 | %
Weighted average grant date fair value - ($/share) | $ | 1.06 |  | $ | 0.68 |
Stock option activity for the nine months ended September 30, 2019 is provided below:
|  | Number of Shares Underlying Options |  | Weighted Average Exercise Price Per Share |  |  | Weighted Average Remaining Contractual Term |  |  | Aggregate Intrinsic Value
|  | (in thousands) |  |  |  |  |  | (in years) |  |  | (in thousands)
Outstanding at January 1, 2019 |  | 2,601 |  | $ | 1.54 |  |  |  |  |  |
Granted |  | 923 |  |  | 2.08 |  |  |  |  |  |
Exercised |  | (141) |  |  | 0.94 |  |  |  |  |  |
Unvested shares forfeited |  | (306) |  |  | 1.50 |  |  |  |  |  |
Vested shares expired |  | (124) |  |  | 6.70 |  |  |  |  |  |
Outstanding at September 30, 2019 |  | 2,953 |  |  | 1.52 |  |  | 2.96 |  | $ | 2,010
Exercisable at September 30, 2019 |  | 1,952 |  |  | 1.45 |  |  | 2.52 |  | $ | 1,497
Restricted shares Restricted stock granted to employees will vest over a period determined by the Compensation Committee that is generally a three-year period, vesting in three equal parts on the anniversaries following the date of the grant. Share grants to directors vest immediately and are not restricted. On February 28, 2019, the Company issued 174,464 shares of service based restricted stock to employees with a grant date fair value of $2.33 per share. The vesting of these shares is dependent upon the employee’s continued service with the Company. The shares will vest in three equal parts over three year s. On April 1, 2019, the Company issued 22,926 shares of service based restricted stock to an employee with a grant date fair value of $2.29 per share. The vesting of these shares is dependent upon the employee’s continued service with the Company. The shares will vest in three equal parts over three year s. On June 6, 2019, the Company issued 111,888 shares of service based restricted stock to directors with a grant date fair value of $1.43 per share. These shares vested immediately. The following is a summary of activity for the nine months ended September 30, 2019:
|  | Restricted Stock |  | Weighted Average Grant Price
|  | (in thousands) |  |  |
Non-vested shares outstanding at January 1, 2019 |  | 507 |  | $ | 0.91
Awards granted |  | 309 |  |  | 2.00
Awards vested |  | (232) |  |  | 1.14
Awards forfeited |  | (166) |  |  | 1.29
Non-vested shares outstanding at September 30, 2019 |  | 418 |  |  | 1.44
During the three and nine months ended September 30, 2019, 30,573 shares were added to treasury as a result of tax withholding on the vesting of restricted shares. During the three and nine months ended September 30, 2018, 8,117 shares were added to treasury as a result of tax withholding on the vesting of restricted shares. During the nine months ended September 30, 2018, 35,265 shares were taken from treasury for vesting of restricted stock that had been granted outside of the 2014 Plan. Stock appreciation rights (“SARs”) SARs are granted under the VAALCO Energy, Inc. 2016 Stock Appreciation Rights Plan. A SAR is the right to receive a cash amount equal to the spread with respect to a share of common stock upon the exercise of the SAR. The spread is the difference between the SAR price per share specified in a SAR award on the date of grant (that may not be less than the fair market value of the Company’s common stock on the date of grant) and the fair market value per share on the date of exercise of the SAR. SARs granted to participants will become exercisable over a period determined by the Compensation Committee of the Company’s Board of Directors. In addition, SARs will become exercisable upon a change in control, unless provided otherwise by the Compensation Committee of the Company’s Board of Directors. On February 28, 2019, 951,699 SARs were granted that vest over a three-year period with a life of 5 year s and have a $2.33 SAR price per share specified in a SAR award on the date of grant. On May 10, 2019, 196,892 SARs were granted that vest over a three-year period with a life of 5 year s and have a $1.72 SAR price per share specified in a SAR award on the date of grant. SAR activity for the nine months ended September 30, 2019 is provided below:
|  | Number of Shares Underlying SARs |  | Weighted Average Exercise Price Per Share |  | Term |  | Aggregate Intrinsic Value
|  | (in thousands) |  |  |  |  | (in years) |  |  | (in thousands)
Outstanding at January 1, 2019 |  | 3,369 |  | $ | 0.96 |  |  |  |  |
Granted |  | 1,148 |  |  | 2.23 |  |  |  |  |
Exercised |  | (270) |  |  | 0.86 |  |  |  |  |
Unvested shares forfeited |  | (541) |  |  | 1.41 |  |  |  |  |
Vested shares expired |  | — |  |  | — |  |  |  |  |
Outstanding at September 30, 2019 |  | 3,706 |  |  | 1.29 |  | 3.39 |  | $ | 2,971
Exercisable at September 30, 2019 |  | 1,240 |  |  | 1.04 |  | 2.75 |  | $ | 1,231
Other Benefit Plans On May 2 and June 6, 2019, the Company adopted forms of change in control agreement for its named executive officers and certain other officers of the Company and amended its severance plan for its Houston-based non-executive employees in order to provide severance benefits in connection with a change in control. Upon a termination of a participant’s employment by the Company without cause or a resignation by the participant for good reason three months prior to a change in control or six months following a change in control, executives and officers with change in control agreements and participants in the severance plan will be entitled to receive 100% and 50%, respectively, of their participant’s base salary and continued participation in the Company’s group health plans for the participant and his or her eligible spouse and other dependents for six months. In addition, certain named executive officers will receive 75% of their target bonus.

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