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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation |
13. | Share-Based Compensation
As discussed in Note 2, on the Effective Date, our Predecessor common stock was canceled and New Common Stock was issued. Accordingly, our then existing share-based compensation awards were also canceled, which resulted in the recognition of any previously unamortized expense related to the canceled awards on the date of cancellation. Share-based compensation for the Predecessor and Successor Periods is not comparable. Successor Share-Based Compensation As of the Effective Date, the Board adopted the LTIP with a share reserve equal to 6,800,000 shares of New Common Stock. The LTIP provides for the grant of restricted stock units (“RSUs”), restricted stock awards, stock options, stock appreciation rights, performance awards and other stock awards to the Company’s employees and non-employee directors. Restricted Stock Units. In the 2022 and 2021 Successor Periods, we granted RSUs to employees and non-employee directors under the LTIP, which will vest over a three-year to five-year period and one-year period, respectively. The fair value of RSUs is based on the closing sales price of our common stock on the date of grant, and compensation expense is recognized ratably over the requisite service period. A summary of the changes in unvested RSUs is presented below:
|  | Unvested Restricted Stock Units |  | Weighted Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Unvested as of February 10, 2021 |  | — |  |  | $ | — |
Granted (a) |  | 1,202 |  |  | $ | 52.60 |
Vested (a) |  | (377) |  |  | $ | 65.66 |
Forfeited |  | (50) |  |  | $ | 44.37 |
Unvested as of December 31, 2021 |  | 775 |  |  | $ | 46.77 |
Granted |  | 666 |  |  | $ | 81.87 |
Vested |  | (300) |  |  | $ | 48.11 |
Forfeited |  | (184) |  |  | $ | 56.54 |
Unvested as of December 31, 2022 |  | 957 |  |  | $ | 68.91 |
_________________________________________ (a)Due to the Vine Acquisition, each Vine restricted stock unit was converted into a Company restricted stock unit. As a result, approximately 430 thousand Vine restricted stock units were converted to Company restricted stock units, of which approximately 375 thousand restricted stock units were accelerated. We recognized accelerated share-based compensation expense in other operating expense on our consolidated statement of operations. The aggregate intrinsic value of restricted stock units that vested during the 2022 and 2021 Successor Periods was approximately and $26 million and $25 million based on the stock price at the time of vesting, respectively. As of December 31, 2022, there was approximately $50 million of total unrecognized compensation expense related to unvested restricted stock units. The expense is expected to be recognized over a weighted average period of approximatel y 2.71 years. Performance Share Units. In the 2022 and 2021 Successor Periods, we granted performance share units (“PSUs”) to senior management under the LTIP, which will generally vest over a three-year period and will be settled in shares. The performance criteria include total shareholder return (“TSR”) and relative TSR (“rTSR”), and could result in a total payout between 0% - 200% of the target units. For the PSUs granted in 2021, the performance criteria also include share price hurdles which could result in a total payout between 0% - 100% of the target units. The fair value of the PSUs was measured on the grant date using a Monte Carlo simulation, and compensation expense is recognized ratably over the requisite service period because these awards depend on a combination of service and market criteria. The following tables present the assumptions used in the valuation of the PSUs granted in the 2022 and 2021 Successor Periods.
2022 PSU Awards |  |  |
Assumption | TSR, rTSR |  |
Risk-free interest rate | 2.00 | % |  |
Volatility | 70.2 | % |  |
2021 PSU Awards |  |  |
Assumption | TSR, rTSR |  | Share Price Hurdle
Risk-free interest rate | 0.23 | % |  | 0.30 | %
Volatility | 71.4 | % |  | 68.4 | %
A summary of the changes in unvested PSUs is presented below:
|  | Unvested Performance Share Units |  | Weighted Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Unvested as of February 10, 2021 |  | — |  |  | $ | — |
Granted |  | 201 |  |  | $ | 64.41 |
Vested |  | (9) |  |  | $ | 38.95 |
Forfeited |  | (9) |  |  | $ | 55.42 |
Unvested as of December 31, 2021 |  | 183 |  |  | $ | 66.12 |
Granted |  | 133 |  |  | $ | 109.65 |
Vested |  | — |  |  | $ | — |
Forfeited |  | (40) |  |  | $ | 57.48 |
Unvested as of December 31, 2022 |  | 276 |  |  | $ | 88.28 |
The aggregate intrinsic value of PSUs that vested during the 2021 Successor Period was approximately $0.6 million based on the stock price at the time of vesting. As of December 31, 2022, there was approximatel y $16 million of total unrecognized compensation expense related to unvested PSUs. The expense is expected to be recognized over a weighted average period of approximat ely 1.99 years. Predecessor Share-Based Compensation Our Predecessor share-based compensation program consisted of restricted stock, stock options and PSUs granted to employees and restricted stock granted to non-employee directors under our long-term incentive plans. The restricted stock and stock options were equity-classified awards and the PSUs were liability-classified awards. Restricted Stock Units. We granted restricted stock units to employees and non-employee directors. The following table provides information related to restricted stock units activity for the Predecessor periods presented:
|  | Unvested Restricted Stock Units |  | Weighted Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Unvested as of January 1, 2021 |  | 1 |  |  | $ | 616.57 |
Granted |  | — |  |  | $ | — |
Vested |  | — |  |  | $ | — |
Forfeited/canceled |  | (1) |  |  | $ | 611.47 |
Unvested as of February 9, 2021 |  | — |  |  | $ | — |
Unvested as of January 1, 2020 |  | 52 |  |  | $ | 709.85 |
Granted |  | 68 |  |  | $ | 60.00 |
Vested |  | (21) |  |  | $ | 791.69 |
Forfeited |  | (98) |  |  | $ | 243.13 |
Unvested as of December 31, 2020 |  | 1 |  |  | $ | 616.57 |
The aggregate intrinsic value of restricted stock units that vested during the 2020 Predecessor Period was approximately $1 million based on the stock price at the time of vesting. Stock Options. In the 2020 Predecessor Period, we granted members of management stock options that vested ratably over a three-year period. Each stock option award had an exercise price equal to the closing price of our common stock on the grant date. Outstanding options expired seven years to ten years from the date of grant. We utilized the Black-Scholes option-pricing model to measure the fair value of stock options. The expected life of an option was determined using the simplified method. Volatility assumptions were estimated based on the average historical volatility of Chesapeake stock over the expected life of an option. The risk-free interest rate was based on the U.S. Treasury rate in effect at the time of the grant over the expected life of the option. The dividend yield was based on an annual dividend yield, taking into account our dividend policy, over the expected life of the option. The following table provides information related to stock option activity for the Predecessor periods presented:
|  | Number of Shares Underlying Options |  | Weighted Average Exercise Price Per Share |  | Weighted Average Contract Life in Years |  | Aggregate Intrinsic Value(a)
|  | (in thousands) |  |  |  |  |  | ($ in millions)
Outstanding as of January 1, 2021 |  | 20 |  |  | $ | 1,429.11 |  |  | 4.27 |  | $ | — |
Granted |  | — |  |  | $ | — |  |  |  |  |
Exercised |  | — |  |  | $ | — |  |  |  |  | $ | — |
Expired |  | (1) |  |  | $ | 741.86 |  |  |  |  |
Forfeited/canceled |  | (19) |  |  | $ | 1,452.40 |  |  |  |  |
Outstanding as of February 9, 2021 |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Exercisable as of February 9, 2021 |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Outstanding as of January 1, 2020 |  | 90 |  |  | $ | 1,420.90 |  |  | 5.70 |  | $ | — |
Granted |  | — |  |  | $ | — |  |  |  |  |
Exercised |  | — |  |  | $ | — |  |  |  |  | $ | — |
Expired |  | (23) |  |  | $ | 914.50 |  |  |  |  |
Forfeited |  | (47) |  |  | $ | 1,666.21 |  |  |  |  |
Outstanding as of December 31, 2020 |  | 20 |  |  | $ | 1,429.11 |  |  | 4.27 |  | $ | — |
Exercisable as of December 31, 2020 |  | 19 |  |  | $ | 1,439.55 |  |  | 4.35 |  | $ | — |
___________________________________________ (a)The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option. Restricted Stock, Stock Option, and PSU Compensation. We recognized the following compensation costs, net of actual forfeitures, related to RSUs, stock options, and PSUs for the periods presented:
|  | Successor |  |  | Predecessor
|  | Year Ended December 31, 2022 |  | Period from February 10, 2021 through December 31, 2021 |  |  | Period from January 1, 2021 through February 9, 2021 |  | Year Ended December 31, 2020
General and administrative expenses |  | $ | 19 |  |  | $ | 7 |  |  |  | $ | 3 |  |  | $ | 20 |
Natural gas and oil properties |  | 4 |  |  | 2 |  |  |  | — |  |  | 1 |
Production expense |  | 3 |  |  | 2 |  |  |  | — |  |  | 1 |
Total RSU, stock option and PSU compensation |  | $ | 26 |  |  | $ | 11 |  |  |  | $ | 3 |  |  | $ | 22 |
Related income tax benefit |  | $ | 6 |  |  | $ | — |  |  |  | $ | — |  |  | $ | — |

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