10. Stock-Based Compensation

Restricted Stock Awards — The Company has granted restricted stock awards to employees and directors under its 2010 Long-Term Incentive Plan, the majority of which vest over a three-year period. The fair value of restricted stock grants is based on the value of the Company's common stock on the date of grant. Compensation expense is recognized ratably over the requisite service period. As of December 31, 2011, the Company assumed no annual forfeiture rate because of the Company's lack of turnover and lack of forfeiture history for this type of award.

The following table summarizes information related to restricted stock held by the Company's employees and directors at December 31, 2011:

		September 30,			September 30,
	Shares			Weighted Average Grant Date Fair Value
Non-vested shares outstanding at December 31, 2009		—			—
Granted		240,345		$	16.16
Vested		—			—
Forfeited		—			—

Non-vested shares outstanding at December 31, 2010		240,345		$	16.16
Granted		248,228			30.99
Vested		(92,115	)		16.24
Forfeited		(5,180	)		27.40

Non-vested shares outstanding at December 31, 2011		391,278		$	25.40

Stock-based compensation expense recorded for restricted stock awards for the years ended December 31, 2011 and 2010 was approximately $3.7 million and $1.2 million, respectively, and is included in General and administrative expenses on the Company's Consolidated Statement of Operations. No stock-based compensation expense was recorded for the year ended December 31, 2009 as the Company had not historically issued stock-based compensation awards to its employees and directors. Unrecognized expense as of December 31, 2011 for all outstanding restricted stock awards was $6.6 million and will be recognized over a weighted average period of 1.9 years. The fair value of awards vested for the year ended December 31, 2011 was $2.5 million.

Class C Common Unit Interests — In March 2010, the Company recorded a $5.2 million stock-based compensation charge associated with OP Management's grant of 1.0 million Class C Common Unit interests ("C Units") to certain employees of the Company. The C Units were granted on March 24, 2010 to individuals who were employed by the Company as of February 1, 2010, and who were not executive officers or key employees with an existing capital investment in OP Management ("Oasis Petroleum Management LLC Capital Members"). All of the C Units vested immediately on the grant date, and based on the characteristics of the C Units awarded to employees, the Company concluded that the C Units represented an equity-type award and accounted for the value of this award as if it had been awarded by the Company.

The C Units were membership interests in OP Management and not direct interests in the Company. The C Units are non-transferable and have no voting power. OP Management had an interest in OAS Holdco, but neither OP Management nor its members had a controlling interest or controlling voting power in OAS Holdco. OP Management distributed any cash or common stock it received to its members based on membership interests and distribution percentages. OP Management only made distributions if it first received cash or common stock from distributions made at the election of OAS Holdco. As of December 31, 2010, OP Management had distributed substantially all cash or requisite common stock to its members based on membership interests and distribution percentages. As of December 31, 2011, OP Management was dissolved.

In accordance with the FASB's authoritative guidance for share-based payments, the Company used a fair-value-based method to determine the value of stock-based compensation awarded to its employees and recognized the entire grant date fair value of $5.2 million as stock-based compensation expense on the Consolidated Statement of Operations due to the immediate vesting of the awards with no future requisite service period required of the employees.

The Company used a probability weighted expected return method to evaluate the potential return and associated fair value allocable to the C Unit shareholders using selected hypothetical future outcomes (continuing operations, private sale of the Company, and an IPO). Approximately 95% of the fair value allocable to the C Unit shareholders came from the IPO scenario. The IPO fair value of the C Units awarded to the Company's employees was estimated on the date of the grant using the Black-Scholes option-pricing model with the assumptions described below.

The exercise price of the option used in the option-pricing model was set equal to the maximum value of OP Management's current capital investment in the Company as that value must be returned to Oasis Petroleum Management LLC Capital Members before distributions were made to the C Unit shareholders. Since the Company was not a public entity on the grant date, it did not have historical stock trading data that could be used to compute volatilities associated with certain expected terms; therefore, the expected volatility value of 60% was estimated based on an average of volatilities of similar sized oil and gas companies with operations in the Williston Basin whose common stocks were publicly traded. The allocable fair value to the C Units assumed a timing of four years based on a future potential secondary offering or distribution of

common stock of the Company. The OAS Holdco agreement between its members required a complete distribution of all remaining shares held by OAS Holdco by 2014, the fourth year following the year of the IPO. The 2.08% risk-free rate used in the pricing model was based on the U.S. Treasury yield for a government bond with a maturity equal to the time to liquidity of four years. The Company did not estimate forfeiture rates due to the immediate vesting of the award and did not estimate future dividend payments as it did not expect to declare or pay dividends in the foreseeable future.

Discretionary Stock Awards — During the fourth quarter of 2010, the Company recorded a $3.5 million stock-based compensation charge primarily associated with OP Management granting discretionary shares of the Company's common stock to certain of the Company's employees who were not C Unit holders and certain contractors. Based on the characteristics of these awards, the Company concluded that they represented an equity-type award and accounted for the value of these awards as if they had been awarded by the Company. The fair value of these awards was based on the value of the Company's common stock on the date of grant. All of these awards vested immediately on the grant date with no future requisite service period required of the employees or contractors.

Stock-based compensation expense recorded for the C Units and discretionary stock awards for the year ended December 31, 2010 was $8.7 million. As the awards vested immediately, there was no unrecognized stock-based compensation expense as of December 31, 2011 related to these awards. No stock-based compensation expense was recorded for the years ended December 31, 2011 and 2009 related to the C Units or discretionary shares.