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Stock-Based Compensation and Other Benefit Plans | 9 Months Ended
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Sep. 30, 2021
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 stockholders approved the 2020 Long-Term Incentive Plan (as amended, the “2020 Plan”) under which 5,500,000 shares are authorized for grants. In June 2021, the Company’s stockholders approved an amendment to the 2020 Plan pursuant to which an additional 3,750,000 shares were authorized for issuance pursuant to awards under the 2020 Plan. At September 30, 2021, 7,558,975 shares were available for future grants under the 2020 Plan. 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 the 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 nine months ended September 30, 2021, the Company settled in cash $3.1 million for stock appreciation rights and received $1.3 million for stock option exercises. During the nine months ended September 30, 2020, the Company did no t settle any stock-based compensation. 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,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
|  | (in thousands)
Stock-based compensation - equity awards |  | $ | 327 |  | $ | 322 |  | $ | 767 |  | $ | 527
Stock-based compensation - liability awards |  |  | (302) |  |  | (570) |  |  | 1,331 |  |  | (2,624)
Total stock-based compensation |  | $ | 25 |  | $ | (248) |  | $ | 2,098 |  | $ | (2,097)
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 that is generally a three-year period, vesting in three equal parts on the anniversaries from the date of grant, and may contain performance hurdles. In March 2021, the Company granted options to certain employees of the Company that are considered performance stock options to purchase an aggregate of 401,759 shares at an exercise price of $3.14 per share and a life of ten years. For each performance stock option award, 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 $3.61 per share; performance stock 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 $4.15 per share; and performance stock 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 $4.78 per share. These awards are option awards that contain a market condition. Compensation cost for such awards is recognized ratably over the derived service period and compensation cost related to awards with a market condition will not be reversed if the Company does not believe it is probable that such performance criteria will be met or if the service provider (employee or otherwise) fails to meet such performance criteria. The Company used the Monte Carlo simulation to calculate the grant date fair value of performance stock option awards. The fair value of these awards will be amortized to expense over the derived service period of the option. During the three and nine months ended September 30, 2021, no performance stock option awards issued under the 2020 Plan were exercised. For options that do not contain a market or performance condition, the Company uses the Black-Scholes model to calculate the grant date fair value of stock option awards. This fair value is then amortized to expense over the service period of the option. Because the Company has not historically paid cash dividends, no expected dividend yield was input to the Black-Scholes or Monte Carlo models. During the nine months ended September 30, 2021 and 2020, the weighted average assumptions shown below were used to calculate the weighted average grant date fair value of option grants under the Monte Carlo model in 2021 and Black-Scholes models.
| Nine Months Ended September 30,
| 2021 |  | 2020 |
Weighted average exercise price - ($/share) | $ | 3.14 |  | $ | 1.23 |
Expected life in years |  | 6.0 |  |  | 6.0 |
Average expected volatility |  | 75 | % |  | 74 | %
Risk-free interest rate |  | 0.95 | % |  | 0.42 | %
Weighted average grant date fair value - ($/share) | $ | 2.07 |  | $ | 0.79 |
Stock option activity associated with the Monte Carlo model for the nine months ended September 30, 2021 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, 2021 |  | 644 |  | $ | 1.23 |  |  |  |  |  |
Granted |  | 402 |  |  | 3.14 |  |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |  |
Unvested shares forfeited |  | (687) |  |  | 1.96 |  |  |  |  |  |
Vested shares expired |  | — |  |  | — |  |  |  |  |  |
Outstanding at September 30, 2021 |  | 359 |  | $ | 1.96 |  |  | 9.00 |  | $ | 378
Exercisable at September 30, 2021 |  | 74 |  | $ | 1.23 |  |  | 8.74 |  | $ | 126
Stock option activity associated with the Black-Scholes model for the nine months ended September 30, 2021 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, 2021 |  | 1,804 |  | $ | 1.38 |  |  |  |  |  |
Granted |  | — |  |  | — |  |  |  |  |  |
Exercised |  | (1,088) |  |  | 1.20 |  |  |  |  |  |
Unvested shares forfeited |  | (64) |  |  | 2.33 |  |  |  |  |  |
Vested shares expired |  | — |  |  | — |  |  |  |  |  |
Outstanding at September 30, 2021 |  | 652 |  | $ | 1.60 |  |  | 1.73 |  | $ | 876
Exercisable at September 30, 2021 |  | 555 |  | $ | 1.47 |  |  | 1.61 |  | $ | 816
During the nine months ended September 30, 2021, 504,813 shares were added to treasury as a result of tax withholding on options exercised. During the nine months ended September 30, 2020, no shares were added to treasury as a result of tax withholding on options exercised. 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 March 2021, the Company issued 526,147 shares of service- based restricted stock to employees, with a grant date fair value of $3.14 per share. In June 2021, the Company issued 78,432 shares of service-based restricted stock to directors, with a grant date fair value of $3.06 per share. The vesting of these shares is dependent upon, among other things, the employees’ and directors’ continued service with the Company. The following is a summary of activity for the nine months ended September 30, 2021:
|  | Restricted Stock |  | Weighted Average Grant Date Fair Value
|  | (in thousands) |  |  |
Non-vested shares outstanding at January 1, 2021 |  | 1,155 |  | $ | 1.30
Awards granted |  | 605 |  |  | 3.13
Awards vested |  | (543) |  |  | 1.28
Awards forfeited |  | (462) |  |  | 2.00
Non-vested shares outstanding at September 30, 2021 |  | 755 |  | $ | 2.36
During the nine months ended September 30, 2021, 68,134 shares were added to treasury as a result of tax withholding on the vesting of restricted shares. During the nine months ended September 30, 2020, 40,432 shares were added to treasury as a result of tax withholding on the vesting of restricted shares. Stock appreciation rights (“SARs”) SARs may be granted under the VAALCO Energy, Inc. 2016 Stock Appreciation Rights Plan and the 2020 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 nine months ended September 30, 2021 and 2020, the Company did no t grant SARs to employees or directors. SAR activity for the nine months ended September 30, 2021 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, 2021 |  | 2,940 |  | $ | 1.33 |  |  |  |  |  |
Granted |  | — |  |  | — |  |  |  |  |  |
Exercised |  | (2,306) |  |  | 1.16 |  |  |  |  |  |
Unvested SARs forfeited |  | (125) |  |  | 2.33 |  |  |  |  |  |
Vested SARs expired |  | — |  |  | — |  |  |  |  |  |
Outstanding at September 30, 2021 |  | 509 |  | $ | 1.83 |  |  | 2.23 |  | $ | 567
Exercisable at September 30, 2021 |  | 338 |  | $ | 1.69 |  |  | 2.10 |  | $ | 423
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. Some of the named executive officers are also entitled to severance payments under their employment agreements.

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