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Equity Compensation Plans
 6 Months Ended
Jun. 30, 2012
Equity Compensation Plans  
Equity Compensation Plans

Note 10—Equity Compensation Plans

 

For a complete discussion of our equity compensation awards, see Note 10 to our Consolidated Financial Statements included in Part IV of our 2011 Annual Report on Form 10-K.

 

PNG Long-term Incentive Plan Award Modification.  In February 2012, the Board of Directors of PNG’s general partner approved the modification of certain awards previously granted under the PNG Plan.  As a result of the modification, approximately 232,500 equity-classified phantom unit awards will now vest in the following manner: (i) approximately 70,000 awards, with distribution equivalent rights also modified to begin payment in February 2012, will vest upon the date PNG pays an annualized distribution of at least $1.45, (ii) approximately 70,000 awards, with distribution equivalent rights also modified to begin payment in May 2013, will vest upon the date PNG pays an annualized distribution of at least $1.50 and (iii) the remainder, with distribution equivalent rights also modified to begin payment in May 2014, will vest upon the date PNG pays an annualized distribution of at least $1.55.  Fifty percent of any awards that have not vested as of the November 2016 distribution date will vest at that time and the remainder will expire.  Additionally, 232,500 of equity-classified phantom unit awards with vesting terms originally tied to the conversion of PNG’s Series A and Series B subordinated units were modified such that all these awards will now fully vest upon conversion of the Series A subordinated units to common units.  Distribution equivalent rights were also granted with respect to these awards to begin payment in February 2012.  There was no financial impact at the time of the modification; however, we anticipate that we will recognize additional equity compensation expense in the future as a result of the modification.

 

Class B Units of Plains AAP, L.P. The following table contains a summary of Plains AAP, L.P. Class B Unit awards:

 

 

 

Reserved for Future
Grants

 

Outstanding

 

Outstanding Units
Earned

 

Grant Date
Fair Value of Oustanding
Class B Units (1)

 

Balance as of December 31, 2011

 

16,500

 

183,500

 

80,063

 

$

44

 

Forfeitures

 

1,000

 

(1,000

)

—

 

$

—

 

Earned

 

—

 

—

 

24,250

 

$

—

 

Balance as of June 30, 2012

 

17,500

 

182,500

 

104,313

 

$

44

 

 

(1)                         Of the grant date fair value, approximately $5 million was recognized as expense during the six months ended June 30, 2012.

 

Other Equity Compensation Information.  Our equity compensation activity for awards denominated in PAA and PNG units is summarized in the following table (units in millions):

 

 

 

PAA Units (1)(5)

 

PNG Units (2)(3)(4)(6)

 

 

 

Units

 

Weighted Average Grant
Date
Fair Value per Unit

 

Units

 

Weighted Average Grant
Date
Fair Value per Unit

 

Outstanding, December 31, 2011

 

4.0

 

$

43.53

 

0.8

 

$

20.55

 

Granted

 

0.7

 

$

66.28

 

0.1

 

$

15.05

 

Vested

 

(1.5

)

$

39.30

 

—

 

$

23.67

 

Cancelled or forfeited

 

(0.1

)

$

59.32

 

—

 

$

—

 

Outstanding, June 30, 2012

 

3.1

 

$

50.58

 

0.9

 

$

17.56

 

 

(1)                         Amounts do not include Class B units of Plains AAP, L.P.

(2)                        Amounts do not include Class B units of PNGS GP LLC.

(3)                         Amounts include PNG Transaction Grants.

(4)                         Weighted average grant date fair value per unit for PNG Units outstanding at June 30, 2012 is impacted by the modification of PNG awards during the first quarter of 2012 as discussed above.

(5)                         Approximately 0.4 million common units were issued, net of approximately 0.3 million units withheld for taxes, for PAA units that vested during the six months ended June 30, 2012. The remaining 0.8 million PAA units that vested were settled in cash.

(6)                         Less than 0.1 million common units vested during the six months ended June 30, 2012.

 

The table below summarizes the expense recognized and the value of vesting (settled both in units and cash) related to our equity compensation plans (in millions):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Equity compensation expense

 

$

20

 

$

27

 

$

60

 

$

46

 

LTIP unit-settled vestings (1)

 

$

33

 

$

23

 

$

58

 

$

23

 

LTIP cash-settled vestings

 

$

29

 

$

18

 

$

65

 

$

18

 

DER cash payments

 

$

2

 

$

1

 

$

4

 

$

2

 

 

(1)                         For each of the three and six months ended June 30, 2012 and June 30, 2011, approximately $1 million relates to unit vestings that were settled with PNG units.