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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation General Stock-based compensation expense for the years ended December 31, 2021, 2020 and 2019 was $57 million, $43 million and $31 million, respectively, and is included in general and administrative expense in the Consolidated Statement of Operations. The related income tax benefit for the years ended December 31, 2021, 2020 and 2019 was $24 million, $10 million and $7 million, respectively. Restricted Stock Units - Employees Restricted stock units are granted from time to time to employees of the Company. The fair value of restricted stock unit grants is based on the closing stock price on the grant date. Restricted stock units generally vest either at the end of a three year service period or on a graded or graduated vesting basis at each anniversary date over a three or four year service period. For awards that vest at the end of the service period, expense is recognized ratably using a straight-line approach over the service period. Under the graded or graduated approach, the Company recognizes compensation cost ratably over the requisite service period, as applicable, for each separately vesting tranche as though the awards are, in substance, multiple awards. For most restricted stock units, vesting is dependent upon the employees' continued service with the Company, with the exception of employment termination due to death, disability or, if applicable, retirement. If retirement protection is included in the grant award, the Company accelerates the vesting period for retirement-eligible employees for purposes of recognizing compensation expense in accordance with the vesting provisions of the Company's stock-based compensation programs. The Company used an annual forfeiture rate assumption ranging from zero to five percent for purposes of recognizing stock-based compensation expense for restricted stock units. The annual forfeiture rates were based on the Company's actual forfeiture history or expectations for this type of award to various employee groups. The following table is a summary of restricted stock unit award activity:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share
Outstanding at beginning of period | 50,500 |  |  | $ | 25.29 |  |  | 58,834 |  |  | $ | 25.19 |  |  | 150,293 |  |  | $ | 28.12 |
Granted | 1,236,971 |  |  | 20.83 |  |  | — |  |  | — |  |  | 55,500 |  |  | 25.29 |
Vested | — |  |  | — |  |  | (6,334) |  |  | 24.39 |  |  | (143,959) |  |  | 28.29 |
Forfeited | (1,000) |  |  | 25.29 |  |  | (2,000) |  |  | 25.29 |  |  | (3,000) |  |  | 25.29 |
Outstanding at end of period(1)(2) | 1,286,471 |  |  | $ | 21.00 |  |  | 50,500 |  |  | $ | 25.29 |  |  | 58,834 |  |  | $ | 25.19 |
__________________________________________________________________ (1)As of December 31, 2021, the aggregate intrinsic value was $24 million and was calculated by multiplying the closing market price of the Company's common stock on December 31, 2021 by the number of non-vested restricted stock units outstanding. (2)As of December 31, 2021, the weighted average remaining contractual term of non-vested restricted stock units outstanding was 2.3 years. On September 30, 2021, certain executives of the Company entered into letter agreements whereby, in exchange for the cancellation of their rights under their change-in-control agreements and the non-competition and non-solicitation provisions contained in the letter agreements, each such executive would receive a grant of restricted stock units at the effective time of the Merger. On October 1, 2021, the Company granted 258,252 shares of restricted stock units, with a grant date value of $22.25 per unit to each such executive. The fair value of these units is measured based on the closing stock price on the October 1, 2021 grant date and will fully vest over a six-month vesting period. Compensation expense recorded for all employee restricted stock units for the years ended December 31, 2021, 2020 and 2019 was $4 million, $— million and $1 million, respectively. Unamortized expense as of December 31, 2021 for all outstanding restricted stock units was $23 million and will be recognized over the next 2.3 years. The total fair value of restricted stock units that vested during 2021, 2020 and 2019 was $— million, $— million and $4 million, respectively. Restricted Stock Units - Non-Employee Directors Restricted stock units are granted from time to time to non-employee directors of the Company. The fair value of the restricted stock units is based on the closing stock price on the grant date. These units vest immediately and compensation expense is recorded immediately. Shares of Company common stock are issued when the director ceases to be a director of the Company. The following table is a summary of restricted stock unit award activity:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share
Outstanding at beginning of period | 704,284 |  |  | $ | 17.99 |  |  | 574,219 |  |  | $ | 18.47 |  |  | 490,415 |  |  | $ | 17.41 |
Granted and fully vested | 107,710 |  |  | 18.51 |  |  | 130,065 |  |  | 15.88 |  |  | 83,804 |  |  | 24.70 |
Issued | (566,096) |  |  | 17.04 |  |  | — |  |  | — |  |  | — |  |  | — |
Forfeited | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Outstanding at end of period(1)(2) | 245,898 |  |  | $ | 20.41 |  |  | 704,284 |  |  | $ | 17.99 |  |  | 574,219 |  |  | $ | 18.47 |
_______________________________________________________________________________ (1)As of December 31, 2021, the aggregate intrinsic value was $5 million and was calculated by multiplying the closing market price of the Company's stock on December 31, 2021 by the number of outstanding restricted stock units. (2)Due to the immediate vesting of the units and the unknown term of each director, the weighted-average remaining contractual term in years has not been provided. Compensation expense recorded for all non-employee director restricted stock units for the year ended December 31, 2021, 2020 and 2019 was $2 million, $2 million and $2 million, respectively, which reflects the total fair value of these units. Restricted Stock Awards Restricted stock awards are granted from time to time to employees of the Company. The fair value of restricted stock grants is based on the closing stock price on the grant date. Restricted stock awards generally vest either at the end of a three year service period or on a graded or graduated vesting basis at each anniversary date over a three or four year service period. For awards that vest at the end of the service period, expense is recognized ratably using a straight-line approach over the service period. Under the graded or graduated approach, the Company recognizes compensation cost ratably over the requisite service period, as applicable, for each separately vesting tranche as though the awards are, in substance, multiple awards. For most restricted stock awards, vesting is dependent upon the employees' continued service with the Company, with the exception of employment termination due to death, disability or, if applicable, retirement. If retirement protection is included in the grant award, the Company accelerates the vesting period for retirement-eligible employees for purposes of recognizing compensation expense in accordance with the vesting provisions of the Company's stock-based compensation programs. The Company used an annual forfeiture rate assumption of ranging from zero to 15 percent for purposes of recognizing stock-based compensation expense for restricted stock awards. The annual forfeiture rates were based on the Company's actual forfeiture history for this type of award to various employee groups. The following table is a summary of restricted stock award activity:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share
Outstanding at beginning of period | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Granted | 3,364,354 |  |  | 22.25 |  |  | — |  |  | — |  |  | — |  |  | — |
Vested | (337,142) |  |  | 22.25 |  |  | — |  |  | — |  |  | — |  |  | — |
Forfeited | (8,029) |  |  | 22.25 |  |  | — |  |  | — |  |  | — |  |  | — |
Outstanding at end of period(1)(2) | 3,019,183 |  |  | $ | 22.25 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
_______________________________________________________________________________ (1)As of December 31, 2021, the aggregate intrinsic value was $57 million and was calculated by multiplying the closing market price of the Company's stock on December 31, 2021 by the number of non-vested restricted stock awards outstanding. (2)As of December 31, 2021, the weighted average remaining contractual term of non-vested restricted stock awards outstanding was 2.0 years. On October 1, 2021, the Company granted 3,364,354 shares of restricted stock, with a grant date value of $22.25 per share. These awards are replacement awards granted to Cimarex employees as provided under the Merger Agreement. The fair value of these awards is measured based on the closing stock price on the closing date of the Merger (grant date). The awards will vest over periods ranging from two months to three years. Approximately $22 million of the grant date value was recognized as merger consideration and the remaining fair value will be recognized as stock-based compensation expense over the respective vesting periods. Compensation expense recorded for all restricted stock awards for the year ended December 31, 2021was $5 million and unamortized expense as of December 31, 2021 was $41 million and will be recognized over the next 2.0 years. The total fair value of restricted stock awards that vested during 2021 was $7 million. Performance Share Awards The Company grants three types of performance share awards: two based on performance conditions measured against the Company's internal performance metrics (“Employee Performance Share Awards” and “Hybrid Performance Share Awards”) and one based on market conditions measured based on the Company's performance relative to a predetermined peer group (“TSR Performance Share Awards”). The performance period for these awards commences on January 1 of the respective year in which the award was granted and extends over a three-year performance period. For all performance share awards, the Company used an annual forfeiture rate assumption ranging from zero percent to seven percent for purposes of recognizing stock-based compensation expense for its performance share awards. Performance Share Awards Based on Internal Performance Metrics The fair value of performance share award grants based on internal performance metrics is based on the closing stock price on the grant date. Each performance share award represents the right to receive up to 100 percent of the award in shares of common stock. Employee Performance Share Awards. The Employee Performance Share Awards vest at the end of the three-year performance period and the performance metrics are set by the Company's Compensation Committee. For the awards granted in 2021 and 2020, an employee will earn 100 percent of the award on the third anniversary, provided that the Company averages $100 million or more of operating cash flow during the three-year performance period. For awards granted in 2019, an employee will earn one-third of the award for each of the three performance metrics. The three performance metrics are based on the Company's average production, average finding costs and average reserve replacement over a three-year performance period. Based on the Company's probability assessment at December 31, 2021, it is considered probable that all of the criteria for these awards will be met. The following table is a summary of activity for Employee Performance Share Awards:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share
Outstanding at beginning of period | 1,610,124 |  |  | $ | 20.31 |  |  | 1,259,287 |  |  | $ | 23.64 |  |  | 1,280,021 |  |  | $ | 22.22 |
Granted | 769,594 |  |  | 18.76 |  |  | 722,500 |  |  | 15.60 |  |  | 526,730 |  |  | 24.95 |
Issued and fully vested | (481,784) |  |  | 23.25 |  |  | (334,640) |  |  | 22.60 |  |  | (388,370) |  |  | 20.49 |
Forfeited | (39,830) |  |  | 18.94 |  |  | (37,023) |  |  | 20.38 |  |  | (159,094) |  |  | 24.29 |
Outstanding at end of period | 1,858,104 |  |  | $ | 18.93 |  |  | 1,610,124 |  |  | $ | 20.31 |  |  | 1,259,287 |  |  | $ | 23.64 |
On September 29, 2021, in accordance with the Merger Agreement, the compensation committee of the Board of Directors of the Company certified that the performance conditions of the Employee Performance Share Awards which were granted in 2019 had been met. In the first quarter of 2022, 407,540 shares with a grant date fair value of $10 million are expected to be issued and fully vested. Hybrid Performance Share Awards. The Hybrid Performance Share Awards have a three-year graded performance period. The awards vest 25 percent on each of the first and second anniversary dates and 50 percent on the third anniversary provided that the Company has $100 million or more of operating cash flow for the year preceding the vesting date, as set by the Company's Compensation Committee. If the Company does not meet the performance metric for the applicable period, then the portion of the performance shares that would have been issued on that anniversary date will be forfeited. The following table is a summary of activity for the Hybrid Performance Share Awards:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share |  | Shares |  | Weighted- Average Grant Date Fair Value per Share
Outstanding at beginning of period | 903,551 |  |  | $ | 19.41 |  |  | 692,788 |  |  | $ | 23.90 |  |  | 662,388 |  |  | $ | 22.48 |
Granted | 423,171 |  |  | 18.58 |  |  | 506,412 |  |  | 15.60 |  |  | 315,029 |  |  | 24.95 |
Issued and fully vested | (1,326,722) |  |  | 19.14 |  |  | (295,649) |  |  | 23.40 |  |  | (284,629) |  |  | 21.78 |
Forfeited | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Outstanding at end of period | — |  |  | $ | — |  |  | 903,551 |  |  | $ | 19.41 |  |  | 692,788 |  |  | $ | 23.90 |
On October 1, 2021, in accordance with the Merger Agreement, the Company vested 960,497 shares of common stock in connection with the accelerated vesting of all outstanding Hybrid Performance Share Awards upon the completion of the Merger. The Company recognized approximately $8 million of stock-based compensation expense in the fourth quarter of 2021 associated with the accelerated vesting of these awards. As of December 31, 2021, there were no Hybrid Awards outstanding. Performance Share Awards Based on Market Conditions These awards have both an equity and liability component, with the right to receive up to the first 100 percent of the award in shares of common stock and the right to receive up to an additional 100 percent of the value of the award in excess of the equity component in cash. The equity portion of these awards is valued on the grant date and is not marked to market, while the liability portion of the awards is valued as of the end of each reporting period on a mark-to-market basis. The Company calculates the fair value of the equity and liability portions of the awards using a Monte Carlo simulation model. TSR Performance Share Awards. The TSR Performance Share Awards granted are earned, or not earned, based on the comparative performance of the Company's common stock measured against a predetermined group of companies in the Company's peer group over a three-year performance period. The Company incorporated a new feature in the 2021 TSR awards that will reduce the potential cash component of the award if the actual performance is negative over the three-year period and the base calculation indicates an above-target payout. The following table is a summary of activity for the TSR Performance Share Awards:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- Average Grant Date Fair Value per Share(1) |  | Shares |  | Weighted- Average Grant Date Fair Value per Share(1) |  | Shares |  | Weighted- Average Grant Date Fair Value per Share(1)
Outstanding at beginning of period | 1,398,853 |  |  | $ | 16.41 |  |  | 1,428,634 |  |  | $ | 20.17 |  |  | 1,299,868 |  |  | $ | 19.47 |
Granted | 723,224 |  |  | 16.07 |  |  | 862,180 |  |  | 13.79 |  |  | 536,673 |  |  | 20.63 |
Issued and fully vested | (2,122,077) |  |  | 16.30 |  |  | (891,961) |  |  | 19.89 |  |  | (407,907) |  |  | 18.57 |
Forfeited | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Outstanding at end of period | — |  |  | $ | — |  |  | 1,398,853 |  |  | $ | 16.41 |  |  | 1,428,634 |  |  | $ | 20.17 |
_______________________________________________________________________________ (1)The grant date fair value figures in this table represent the fair value of the equity component of the performance share awards. On October 1, 2021, in accordance with the Merger Agreement, the Company vested 2,122,077 shares of common stock in connection with the accelerated vesting of all outstanding TSR Performance Share Awards upon the completion of the Merger. Under the terms of the Merger Agreement, all TSR Performance Share Awards were vested at target, resulting in a 100 percent payout of equity, with no cash payments earned under the awards. The Company recognized approximately $10 million of stock-based compensation expense in the fourth quarter of 2021 associated with the acceleration of vesting of these awards. The following table reflects certain balance sheet information of outstanding TSR Awards:
|  | December 31,
(In millions) |  | 2021 |  | 2020
Other current liabilities |  | $ | — |  |  | $ | — |
Other non-current liabilities |  | — |  |  | 7 |
The following table reflects certain cash payments related to the vesting of TSR Awards:
|  | Year Ended December 31,
(In millions) |  | 2021 |  | 2020 |  | 2019
Cash payments for TSR awards |  | $ | — |  |  | $ | 14 |  |  | $ | 5 |
The following assumptions were used to determine the grant date fair value of the equity component of the TSR Performance Share Awards for the respective periods:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Fair value per performance share award granted during the period | $ | 16.07 |  |  | $ | 13.79 |  |  | $ | 20.63 |
Assumptions |  |  |  |  |
Stock price volatility | 39.8 | % |  | 29.5 | % |  | 31.3 | %
Risk free rate of return | 0.2 | % |  | 1.4 | % |  | 2.5 | %
The following assumptions were used to determine the fair value of the liability component of the TSR Performance Share Awards for the respective periods:
| December 31,
| 2021 |  | 2020 |  | 2019
Fair value per performance share award at the end of the period | $— |  | $10.37 - $10.81 |  | $6.18 - $14.80
Assumptions |  |  |  |  |
Stock price volatility | —% |  | 42.4% - 52.4% |  | 29.8% - 30.4%
Risk free rate of return | —% |  | 0.1% |  | 1.6%
The stock price volatility was calculated using historical closing stock price data for the Company for the period associated with the expected term through the grant date of each award. The risk free rate of return percentages are based on the continuously compounded equivalent of the U.S. Treasury within the expected term as measured on the grant date. Performance Share Awards - Other Information Compensation expense recorded for both the equity and liability components of all performance share awards for the years ended December 31, 2021, 2020 and 2019 was $41 million, $40 million and $29 million, respectively. Total unamortized compensation expense related to the equity component of performance shares at December 31, 2021 was $13 million and will be recognized over the next 1.3 years. As of December 31, 2021, the aggregate intrinsic value for all performance share awards was $34 million and was calculated by multiplying the closing market price of the Company's stock on December 31, 2021 by the number of unvested performance share awards outstanding. As of December 31, 2021, the weighted average remaining contractual term of unvested performance share awards outstanding was approximately 1.3 years. Stock Option Awards On October 1, 2021, the Company granted stock option awards to purchase 1,577,554 shares of the Company’s common stock with exercise prices ranging from $8.47 to $28.72 per share. These awards are replacement awards granted to Cimarex employees and former employees as provided under the Merger Agreement and were fully vested on the closing date of the Merger. The grant date fair value of approximately $14 million was recognized as merger consideration and, accordingly, no compensation expense will be recognized by the Company related to these awards, as there is no future service requirement for the holders of these awards. The following table is a summary of activity for the Stock Option Awards:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- Average Strike Price |  | Shares |  | Weighted- Average Strike Price |  | Shares |  | Weighted- Average Strike Price
Outstanding at beginning of period | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Granted | 1,577,554 |  |  | 16.19 |  |  | — |  |  | — |  |  | — |  |  | — |
Exercised | (222,202) |  |  | 9.15 |  |  | — |  |  | — |  |  | — |  |  | — |
Forfeited or Expired | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Outstanding at end of period(1) | 1,355,352 |  |  | $ | 17.35 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Exercisable at end of period(1) | 1,355,352 |  |  | $ | 17.35 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
_______________________________________________________________________________ (1)The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the stock option. The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2021 was $6 million and $6 million, respectively. The weighted-average remaining contractual term is 3.5 years. Deferred Performance Shares As of December 31, 2021, 495,774 shares of the Company's common stock representing vested performance share awards were deferred into the deferred compensation plan. During 2021, no shares were sold out of the plan. During 2021, an increase to the deferred compensation liability of $1 million was recognized, which represents the increase in the closing price of the Company's shares held in the trust during the period. The increase in compensation expense was included in general and administrative expense in the Consolidated Statement of Operations.

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