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Note 17 - Stock-based Compensation and Other Benefit Plans | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] | 17. 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. The 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 December 31, 2023, 1,808,989 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 the 2020 Plan will be reduced by twice the number of restricted shares. The 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 years ended December 31, 2023, 2022 and 2021, the Company settled in cash $0.4 million, $0.8 million and $3.3 million, respectively, for SARs. During the years ended December 31, 2023, 2022 and 2021, the Company received in cash $0.7 million, $0.3 million and $1.4 million, respectively from stock option exercises.
|  | Twelve Months Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |
Stock-based compensation - equity awards |  | $ | 3,338 |  |  | $ | 2,045 |  |  | $ | 1,060 |
Stock-based compensation - liability awards |  |  | (15 | ) |  |  | 155 |  |  |  | 1,399 |
Total stock-based compensation |  | $ | 3,323 |  |  | $ | 2,200 |  |  | $ | 2,459 |
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 June 2023, the Company granted options to certain employees of the Company that are considered performance stock options to purchase an aggregate of 334,753 shares at an exercise price of $4.19 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 $4.82 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 $5.54 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 $6.37 per share. These awards are option awards that contain a market condition. Compensation cost for such awards is recognized ratably over the derived service period and compensation cost related to awards with a market condition will not be reversed if the Company does not believe it is probable that such performance criteria will be met or if the service provider (employee or otherwise) fails to meet such performance criteria. During the year ended December 31, 2023, 2022 and 2021 the weighted average assumptions shown below were used to calculate the weighted average grant date fair value of performance stock options grants under the Monte Carlo model.
|  | Twelve Months Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Weighted average exercise price - ($/share) |  | $ | 4.19 |  |  | $ | 6.41 |  |  | $ | 3.14 |
Expected life in years |  |  | 6.4 |  |  |  | 6.0 |  |  |  | 6.0 |
Average expected volatility |  |  | 68 | % |  |  | 72 | % |  |  | 75 |
Risk-free interest rate |  |  | 3.73 | % |  |  | 1.98 | % |  |  | 0.95 |
Expected dividend yield |  |  | 5.97 | % |  |  | 2.30 | % |  |  | — |
Weighted average grant date fair value - ($/share) |  | $ | 2.29 |  |  | $ | 2.84 |  |  | $ | 2.07 |
Performance stock options activity associated with the Monte Carlo model for the year ended December 31, 2023 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, 2023 |  |  | 444 |  |  | $ | 3.95 |  |  |  |  |  |  |  |  |
Granted |  |  | 335 |  |  |  | 4.19 |  |  |  |  |  |  |  |  |
Exercised |  |  | (168 | ) |  |  | (1.74 | ) |  |  |  |  |  |  |  |
Unvested shares forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Vested shares expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2023 |  |  | 611 |  |  | $ | 4.69 |  |  |  | 8.72 |  |  | $ | 255 |
Exercisable at December 31, 2023 |  |  | 118 |  |  | $ | 4.56 |  |  |  | 7.60 |  |  | $ | 116 |
The intrinsic value of a performance stock option awards is the amount that the current market value of the underlying stock exceeds the exercise price of the award. The intrinsic performance stock option awards exercised in 2023 was $0.5 million. As of December 31, 2023, unrecognized compensation cost related to outstanding performance stock option awards was $0.8 million, which is expected to be recognized over a weighted average period of 2.0 years. During the year ended December 31, 2023, 5,959 shares were added to treasury as a result of tax withholding on performance stock option awards exercised. Regular stock options (stock options without a performance condition) activity associated with the Black-Scholes model for the year ended December 31, 2023 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, 2023 |  |  | 387 |  |  | $ | 1.86 |  |  |  |  |  |  |  |  |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Exercised |  |  | (217 | ) |  |  | (1.75 | ) |  |  |  |  |  |  |  |
Unvested shares forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Vested shares expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2023 |  |  | 170 |  |  | $ | 1.99 |  |  |  | 0.27 |  |  | $ | 425 |
Exercisable at December 31, 2023 |  |  | 170 |  |  | $ | 1.99 |  |  |  | 0.27 |  |  | $ | 425 |
The intrinsic value of a stock option is the amount that the current market value of the underlying stock exceeds the exercise price of the option. The intrinsic value of stock options exercised in 2023, 2022 and 2021 was $0.6 million, $1.2 million, and $1.6 million, respectively. There was no unrecognized stock compensation cost as of December 31, 2023 and December 31, 2022, respectively. 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). The following is the activity for the Company's restricted stock for the year ended December 31, 2023:
|  | Restricted Stock |  |  | Weighted Average Grant Date Fair Value |
|  | (in thousands) |  |  |  |  |
Non-vested shares outstanding at January 1, 2023 |  |  | 665 |  |  | $ | 4.59 |
Awards granted |  |  | 796 |  |  |  | 4.19 |
Awards vested |  |  | (354 | ) |  |  | 3.92 |
Awards forfeited |  |  | (22 | ) |  |  | 5.35 |
Non-vested shares outstanding at December 31, 2023 |  |  | 1,085 |  |  | $ | 4.50 |
The total fair value of vested restricted stock awards during 2023, 2022 and 2021 was $1.5 million, $2.4 million, and $1.8 million, respectively. The weighted average grant date fair value per share of restricted stock awards, which vested during 2023, 2022 and 2021, was $3.92, $2.25 and $1.28, respectively. As of December 31, 2023, unrecognized compensation cost related to restricted stock totaled $2.4 million and is expected to be recognized over a weighted average period of 1.5 year. In connection with the Arrangement with TransGlobe and pursuant to the Arrangement Agreement, at the effective time of the Arrangement, certain awards previously issued to TransGlobe’s key employees and board members who continued their relationship as employees or board members of VAALCO following the Arrangement, will continue to be governed by the applicable TransGlobe plan, provided that each such applicable plan has been amended to provide that VAALCO common stock shall be issuable in lieu of cash or TransGlobe common stock with respect to TransGlobe’s deferred share units (“DSU”s), performance share units (“PSU”s) and restricted stock units (“RSU”s), in each case, based on the exchange ratio in the Arrangement. For the PSUs that will remain outstanding following the effective time of the Arrangement as described in the immediately preceding sentence, the applicable vesting percentage was determined by the TransGlobe board of directors to be 200% for PSUs granted in 2020 and 2021; and 64.4% for PSUs granted in 2022. On the effective date of the Arrangement, October 13, 2022, the combined fair value of the DSUs, PSU's and RSU's liability from TransGlobe was $6.0 million. On December 16, 2022, the Compensation Committee determined that the awards would be settled in shares from the 2020 Plan, thereby converting all the awards from cash-settled liability awards to equity awards. On the date of this conversion, the awards were revalued based on VAALCO’s share price, and the Company recognized a gain of $0.6 million in its consolidated statements of operations and comprehensive income (loss). RSUs were issued to directors, officers and employees of TransGlobe in the ordinary course of business prior to the Arrangement. Each RSU vests annually over a three-year period. On December 16, 2022, Compensation Committee determined that the awards would be settled in shares from the 2020 Plan, thereby converting all the awards to equity awards instead of cash-settled liability awards. RSU activity for the twelve months ended December 31, 2023 is presented in the table below:
|  | Restricted Stock |  |  | Weighted Average Conversion Date Fair Value |
|  | (in thousands) |  |  |  |  |
Non-vested shares outstanding at January 1, 2023 |  |  | 383 |  |  | $ | 4.27 |
Awards granted |  |  | 183 |  |  |  | 4.19 |
Awards vested |  |  | (285 | ) |  |  | 4.27 |
Awards forfeited |  |  | (58 | ) |  |  | 4.23 |
Non-vested shares outstanding at December 31, 2023 |  |  | 223 |  |  | $ | 4.22 |
The total fair value of vested RSU awards during 2023 was $1.2 million. The weighted average grant date fair value per share of RSU, which vested during 2023, was $4.27. As of December 31, 2023, unrecognized compensation cost related to RSU’s totaled $0.7 million and is expected to be recognized over a weighted average period of 1.1 years. During the year ended December 31, 2023, 173,738 shares were added to treasury as a result of tax withholding on the vesting of RSU’s. PSUs are similar to RSUs except that they originally contained a performance factor affecting the vesting percentage. For the PSUs that remained outstanding following the effective time of the Arrangement, the applicable vesting percentage was determined by the TransGlobe board of directors to be 200% for PSUs granted in 2020 and 2021; and 64.4% for PSUs granted in 2022. All PSUs granted vest on the third anniversary of their grant date. On December 16, 2022, the Compensation Committee determined that the awards would be settled in shares from the 2020 Plan, thereby converting all the awards to equity awards instead of cash-settled liability awards. PSU activity for the twelve months ended December 31, 2023 is presented in the table below:
|  | Restricted Stock |  |  | Weighted Average Conversion Date Fair Value |
|  | (in thousands) |  |  |  |  |
Non-vested shares outstanding at January 1, 2023 |  |  | 690 |  |  | $ | 4.27 |
Awards granted |  |  | — |  |  |  | — |
Awards vested |  |  | (533 | ) |  |  | 4.27 |
Awards forfeited |  |  | (36 | ) |  |  | 4.27 |
Non-vested shares outstanding at December 31, 2023 |  |  | 121 |  |  | $ | 4.27 |
As of December 31, 2023, unrecognized compensation cost related to PSU’s totaled $0.1 million and is expected to be recognized over a weighted average period of 0.7 years. During the twelve months ended December 31, 2023, 156,616 shares were added to treasury as a result of tax withholding on the vesting of PSU’s. DSUs are similar to RSUs, except that they become fully vested on the date of grant and are only issued to directors of the Company. Distributions under the DSU plan do not occur until the retirement of the DSU holder from the Company's Board of Directors. On December 16, 2022, the Compensation Committee determined that the awards would be settled in shares from the 2020 Plan, thereby converting all the awards to equity awards instead of cash-settled liability awards. At June 30, 2023, approximately 101,313 DSUs are vested but not converted. During the second quarter of 2023, 358,563 DSUs were converted to shares of common stock of the company following the departure of Mr. David Cook and Mr. Timothy Marchant from the board of directors, of which 65,582 shares were forfeited back to VAALCO to satisfy applicable tax withholding obligations. 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 years ended December 31, 2023 and 2022, the Company did not grant SARs to employees or directors. SAR activity for the year ended December 31, 2023 is provided below:
|  | Number of Shares Underlying SARs |  |  | Weighted Average Exercise Price Per Share |  |  | Weighted Average Remaining Contractual Term |  |  | Aggregate Intrinsic Value |
|  | (in thousands) |  |  |  |  |  |  | (in years) |  |  | (in thousands) |
Outstanding at January 1, 2023 |  |  | 202 |  |  | $ | 1.87 |  |  |  |  |  |  |  |  |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Exercised |  |  | (126 | ) |  |  | 1.59 |  |  |  |  |  |  |  |  |
Unvested SARs forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Vested SARs expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2023 |  |  | 76 |  |  | $ | 2.33 |  |  |  | 0.16 |  |  | $ | 164 |
Exercisable at December 31, 2023 |  |  | 76 |  |  | $ | 2.33 |  |  |  | 0.16 |  |  | $ | 164 |
The intrinsic value of a SAR is the amount that the current market value of the underlying stock exceeds the exercise price of the award. The intrinsic value of SARs exercised in 2023, 2022 and 2021 was $0.4 million, $0.8 million, and 0.8 million respectively. SARs considered liabilities under US GAAP and the awards are measured at fair value on the grant date and remeasured at fair value until the award is settled. On February 28, 2024, all remaining SAR awards were exercised. 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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