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Stock-Based Compensation and Other Benefit Plans | 6 Months Ended
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Jun. 30, 2020
Stock-Based Compensation and Other Benefit Plans [Abstract] |
Stock-Based Compensation and Other Benefit Plans | 14. 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. T he Company had previously 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. On June 25, 2020, the Company’s shareholders approved the 2020 Long-Term Incentive Plan (“2020 Plan”) under which 5,500,000 shares are authorized for future grants. At June 30, 2020, 3,174,198 shares were available for future grants. For each stock option granted, the number of authorized shares under the 2020 Plan will be reduced on a one-for-one basis. For each restricted share granted, the number of shares authorized under both the 2014 Plan and 2020 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. As referenced in the table below, the Company records compensation expense related to stock-based compensation as general and administrative expense associated with the issuance of stock options, restricted stock and stock appreciation rights. During the six months ended June 30, 2020, the Company did not settle any stock-based compensation. During the six months ended June 30, 2019, the Company settled in cash $0.3 million for stock appreciation rights and received $0.1 million for stock option exercises. Because the Company does not pay significant United States federal income taxes, no amounts were recorded for future tax benefits.
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (in thousands)
Stock-based compensation - equity awards |  | $ | 60 |  | $ | 595 |  | $ | 205 |  | $ | 622
Stock-based compensation - liability awards |  |  | 660 |  |  | (698) |  |  | (2,054) |  |  | 998
Total stock-based compensation |  | $ | 720 |  | $ | (103) |  | $ | (1,849) |  | $ | 1,620
Stock options and performance shares 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 generally vest over a service period of up to five years and expire from five to ten years from the date of grant. In June 2020, the Company granted options that are considered performance stock options to purchase an aggregate of 644,758 shares at an exercise price of $1.23 per share and a life of ten year s were granted to employees of the Company. For each option award, options with respect to one-third of the underlying shares vest on the later of the first anniversary of the grant date and the date on which the Company’s stock price, determined using a 30-day average, exceeds $1.42 per share; options with respect to one-third of the underlying shares vest on the later of the second anniversary of the grant date and the date on which the Company’s stock price, determined using a 30-day average, exceeds $1.63 per share; and options with respect to the remaining one-third of the underlying shares vest on the later of the third anniversary of the grant date and the date on which the Company’s stock price, determined using a 30-day average, exceeds $1.88 per share. These awards are option awards that contain a market condition. Compensation cost for such awards is recognized ratably over the derived service period and compensation cost related to awards with a market condition will not be reversed if the Company does not believe it is probable that such performance criteria will be met or if the service provider (employee or otherwise) fails to meet such performance criteria. The Company used the Monte Carlo simulation to calculate the grant date fair value of performance stock option awards. The fair value of these awards will be amortized to expense over the derived service period of the option. During the six months ended June 30, 2020, the assumptions shown below were used to calculate the weighted average grant date fair value of performance stock option awards issued under the 2020 Plan. For options that do not contain a market or performance condition, the Company uses the Black-Scholes model to calculate the grant date fair value of stock option awards. This fair value is then amortized to expense over the service period of the option. Because the Company has not paid cash dividends and does not anticipate paying cash dividends on the common stock in the foreseeable future, no expected dividend yield was input to the Black-Scholes or Monte Carlo models. During the six months ended June 30, 2020 and 2019, the weighted average assumptions shown below were used to calculate the weighted average grant date fair value of option grants.
| Six Months Ended June 30, |
| 2020 |  | 2019 |
Weighted average exercise price - ($/share) | $ | 1.23 |  | $ | 2.08 |
Expected life in years |  | 6.00 |  |  | 3.2 |
Average expected volatility |  | 74.16 | % |  | 72.53 | %
Risk-free interest rate |  | 0.42 | % |  | 2.33 | %
Weighted average grant date fair value - ($/share) | $ | 0.79 |  | $ | 1.06 |
Stock option activity for the six months ended June 30, 2020 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, 2020 |  | 2,834 |  | $ | 1.55 |  |  |  |  |  |
Granted |  | 644 |  |  | 1.23 |  |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |  |
Unvested shares forfeited |  | (60) |  |  | 1.83 |  |  |  |  |  |
Vested shares expired |  | (132) |  |  | 4.71 |  |  |  |  |  |
Outstanding at June 30, 2020 |  | 3,286 |  |  | 1.35 |  |  | 3.40 |  | $ | 403
Exercisable at June 30, 2020 |  | 2,175 |  |  | 1.27 |  |  | 1.46 |  | $ | 345
During the six months ended June 30, 2020, no shares were added to treasury as a result of tax withholding on options exercised. During the six months ended June 30, 2019, 13,875 shares were added to treasury as a result of tax withholding on options exercised. During the six months ended June 30, 2019, 62,235 shares that had been granted from treasury were exercised and taken from treasury. 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. Restricted stock granted to directors will vest on the earlier of (i) the first anniversary of the date of grant and (ii) the first annual meeting of stockholders following the date of grant (but not less than fifty (50) weeks following the date of grant). In June 2020, the Company issued 710,851 and 260,164 shares of service based restricted stock to employees and directors, respectively, with a grant date fair value of $1.23 per share. The vesting of these shares is dependent upon the employees’ and directors’ continued service with the Company. The following is a summary of activity for the six months ended June 30, 2020:
|  | Restricted Stock |  | Weighted Average Grant Date Fair Value
|  | (in thousands) |  |  |
Non-vested shares outstanding at January 1, 2020 |  | 343 |  | $ | 1.52
Awards granted |  | 971 |  |  | 1.23
Awards vested |  | (145) |  |  | 1.39
Awards forfeited |  | — |  |  | —
Non-vested shares outstanding at June 30, 2020 |  | 1,169 |  |  | 1.30
During the six months ended June 30, 2020, 40,432 shares were added to treasury as a result of tax withholding on the vesting of restricted shares. During the six months ended June 30, 2019, 30,573 shares were added to treasury as a result of tax withholding on the vesting of restricted shares. 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 exercise price per share specified in the SAR award (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 of the Company’s common stock 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. During the six months ended June 30, 2020, the Company did not grant SARs to employees or directors. SAR activity for the six months ended June 30, 2020 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, 2020 |  | 3,418 |  | $ | 1.30 |  |  |  |  |  |
Granted |  | — |  |  | — |  |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |  |
Unvested shares forfeited |  | (60) |  |  | 1.83 |  |  |  |  |  |
Vested shares expired |  | — |  |  | — |  |  |  |  |  |
Outstanding at June 30, 2020 |  | 3,358 |  |  | 1.29 |  |  | 2.65 |  | $ | 709
Exercisable at June 30, 2020 |  | 2,177 |  |  | 1.16 |  |  | 2.36 |  | $ | 485
Other Benefit Plans The Company has adopted forms of change in control agreements for its named executive officers and certain other officers of the Company as well as a 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 the 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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