Equity-Based Compensation

Restricted stock awards. The Company has granted restricted stock awards to employees and directors under its Amended and Restated 2010 Long Term Incentive Plan, the majority of which vest over a three-year period. The fair value of restricted stock awards is based on the closing sales price of the Company’s common stock on the date of grant. Compensation expense is recognized ratably over the requisite service period.

During the three months ended March 31, 2019, employees and non-employee directors of the Company were granted restricted stock awards equal to 4,030,475 shares of common stock with a $6.62 weighted average grant date per share value. Equity-based compensation expense recorded for restricted stock awards was $6.4 million and $4.8 million for the three months ended March 31, 2019 and 2018, respectively. Equity-based compensation expense is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.

Performance share units. The Company has granted performance share units (“PSUs”) to officers of the Company under its Amended and Restated 2010 Long Term Incentive Plan. The PSUs are awards of restricted stock units, and each PSU that is earned represents the right to receive one share of the Company’s common stock.

The Company accounts for PSUs as equity awards pursuant to the FASB’s authoritative guidance for share-based payments. The number of PSUs to be earned is subject to a market condition, which is based on a comparison of the total shareholder return (“TSR”) achieved with respect to shares of the Company’s common stock against the TSR achieved by a defined peer group at the end of the performance periods. Depending on the Company’s TSR performance relative to the defined peer group, award recipients will earn between 0% and 200% of the initial PSUs granted. All compensation expense related to the PSUs will be recognized if the requisite performance period is fulfilled, even if the market condition is not achieved.

The aggregate grant date fair value of the market-based awards was determined using a Monte Carlo simulation model. The Monte Carlo simulation model uses assumptions regarding random projections and must be repeated numerous times to achieve a probabilistic assessment. The key valuation assumptions for the Monte Carlo model are the forecast period, initial value, stock price on the date of grant, risk-free interest rate, volatility and correlation coefficients. The risk-free interest rates are the U.S. Treasury bond rates on the date of grant that correspond to each performance period. The initial value is the average of the volume weighted average prices for the 30 trading days prior to the start of the performance cycle for the Company and each of its peers. Volatility was calculated from the daily historical returns of stock prices over a historical period for the Company and each of its peers. The correlation coefficients are measures of the strength of the linear relationship between and amongst the Company and its peers estimated based on historical stock price data.

The following assumptions were used for the Monte Carlo model to determine the grant date fair value and associated equity-based compensation expense of the PSUs granted during the three months ended March 31, 2019:



Risk-free interest rate	2.55% - 2.56%
Oasis volatility	71.17	%
Oasis initial value	$5.85
Oasis stock price on date of grant	$6.63

During the three months ended March 31, 2019, officers of the Company were granted 1,685,090 PSUs with a $6.80 weighted average grant date per unit value. Equity-based compensation expense recorded for PSUs was $2.5 million and $1.9 million for the three months ended March 31, 2019 and 2018, respectively. Equity-based compensation expense is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.

OMP phantom unit awards. The Company has granted OMP phantom unit awards (collectively, the “OMP Phantom Unit Awards,” and each an “OMP Phantom Unit”) to employees under its Amended and Restated 2010 Long Term Incentive Plan in 2018, and in 2017, under OMP GP’s Oasis Midstream Partners LP 2017 Long Term Incentive Plan.

Each OMP Phantom Unit represents the right to receive, upon vesting of the award, a cash payment equal to the fair market value of one OMP common unit on the day prior to the date it vests (the “Vesting Date”). Award recipients are also entitled to Distribution Equivalent Rights (“DER”) with respect to each OMP Phantom Unit received. Each DER represents the right to receive, upon vesting of the award, a cash payment equal to the value of the distributions paid on one OMP common unit between the Grant Date and the applicable Vesting Date. The OMP Phantom Unit Awards vest in equal amounts each year over a three-year period, and compensation expense will be recognized over the requisite service period and is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.

The OMP Phantom Unit Awards are accounted for as liability-classified awards since the awards will settle in cash, and equity-based compensation cost is accounted for under the fair value method in accordance with GAAP. Under the fair value method for liability-classified awards, compensation cost is remeasured each reporting period at fair value based upon the closing price of a publicly traded common unit. The Company will directly pay, or will reimburse OMP, for the cash settlement amount of these awards.

During the three months ended March 31, 2019, the Company granted 341,290 OMP Phantom Unit Awards to certain employees of Oasis with a weighted average grant date fair value of $18.57 per unit. Equity-based compensation expense recorded for the OMP Phantom Unit Awards was $0.7 million and $0.1 million for the three months ended March 31, 2019 and 2018, respectively, and is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.

OMP restricted unit awards. During the three months ended March 31, 2019, independent directors of OMP were granted 16,170 restricted unit awards, which vest over a one-year period with a weighted average grant date fair value of $18.57 per common unit. These awards are accounted for as equity-classified awards since the awards will settle in common units upon vesting. Equity-based compensation cost is accounted for under the fair value method in accordance with GAAP. Under the fair value method for equity-classified awards, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the vesting period. Compensation cost associated with these awards was approximately $0.1 million and $0.1 million for the three months ended March 31, 2019 and 2018, respectively, and is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.