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Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation General Stock-based compensation expense of awards issued under the Company’s incentive plans, and the income tax benefit of awards vested and exercised, are as follows:
|  | Three Months Ended March 31,
(In millions) |  | 2023 |  | 2022
Restricted stock units - employees and non-employee directors |  | $ | 7 |  |  | $ | 8 |
Restricted stock awards |  | 4 |  |  | 5 |
Performance share awards |  | 5 |  |  | 6 |
Deferred performance shares |  | — |  |  | 4 |
Total stock-based compensation expense |  | $ | 16 |  |  | $ | 23 |
Income tax benefit |  | $ | 1 |  |  | $ | 5 |
Refer to Note 13 of the Notes to the Consolidated Financial Statements in the Form 10-K for further description of the various types of stock-based compensation awards and the applicable award terms. Subsequent Event. On May 4, 2023, the Company’s stockholders approved the Coterra Energy Inc. 2023 Equity Incentive Plan (the “2023 Plan”) which replaced the existing Cabot Oil & Gas Corporation 2014 Incentive Plan (the “Prior Cabot Plan”) and the Cimarex Energy Co. Amended and Restated 2019 Equity Incentive Plan (the “Prior Cimarex Plan). Under the 2023 Plan, permitted awards include, but are not limited to, options, stock appreciation rights, restricted stock, restricted stock units, performance stock units and other cash and stock-based awards. A total of 22.95 million shares of common stock may be issued under the 2023 Plan. The 2023 Plan expires on February 21, 2033. No additional awards may be granted under the Prior Cabot Plan or the Prior Cimarex Plan on or after May 4, 2023. Awards outstanding under any of the Company’s prior plans will remain outstanding and vest in accordance with their original terms and conditions. Restricted Stock Units - Employees During the three months ended March 31, 2023, the Company granted 666,303 restricted stock units to employees of the Company with a weighted average grant date value of $23.00 per unit. 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-year service period. The Company used an annual forfeiture rate assumption of zero to five percent for purposes of recognizing stock-based compensation expense for its restricted stock units. Performance Share Awards Total Shareholder Return (“TSR”) Performance Share Awards. During the three months ended March 31, 2023, the Company granted 577,172 TSR Performance Share Awards, which 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 and certain industry-related indices over a three-year performance period, which commenced on February 1, 2023 and ends on January 31, 2026. 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. These awards also include a feature 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 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. The following assumptions were used to determine the grant date fair value of the equity component on February 21, 2023 and the period-end fair value of the liability component of the TSR Performance Share Awards:
|  | Grant Date |  | March 31, 2023
Fair value per performance share award |  | $ | 17.18 |  |  | $10.92 - $11.99
Assumptions: |  |  |  |
Stock price volatility |  | 44.8 | % |  | 41.8% - 43.4%
Risk-free rate of return |  | 4.40 | % |  | 3.8% - 4.1%

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