Equity-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Restricted stock awards. The Company has granted restricted stock awards to its 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 or, if applicable, the date of modification. Compensation expense is recognized ratably over the requisite service period.

During the three months ended March 31, 2020, employees and directors of the Company were granted restricted stock awards equal to 3,505,629 shares of common stock with a $3.36 weighted average grant date per share value. Equity-based compensation expense recorded for restricted stock awards was $4.4 million and $6.4 million for the three months ended March 31, 2020 and 2019, 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 its officers under its Amended and Restated 2010 Long Term Incentive Plan. The PSUs are awards of restricted stock units that may be earned, if at all, based on the level of achievement with respect to the applicable performance metrics, and each PSU that is earned represents the right to receive one share of the Company’s common stock upon settlement.

The Company accounted for these 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 applicable performance periods. Depending on the Company’s TSR performance relative to the defined peer group, and subject to an adjustment based on the Company’s internal rate of return for certain PSUs, award recipients may earn between 0% and 240% of the target number of 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, risk-free interest rates, stock price volatility, initial value, stock price on the date of grant 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 is the standard deviation of the average percentage change in stock price 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, 2020:


Forecast period (years)	2 - 4
Risk-free interest rates	1.53% - 1.55%
Oasis stock price volatility	68.56	%
Oasis initial value	$3.19
Oasis stock price on date of grant	$2.77

During the three months ended March 31, 2020, officers of the Company were granted 2,429,747 PSUs with a $2.77 weighted average grant date per unit value. Equity-based compensation expense recorded for PSUs was $2.3 million and $2.5 million for the three months ended March 31, 2020 and 2019, 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 (the “OMP Phantom Units”) to its employees under its Amended and Restated 2010 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 Units generally vest in equal installments each year over a three-year period from the date of grant, 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 Units are accounted for as liability-classified awards since the awards will settle in cash, and equity-based compensation expense is accounted for under the fair value method in accordance with GAAP. Under the fair value method for liability-classified awards, compensation expense 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, 2020, the Company granted 241,720 OMP Phantom Units to certain employees of Oasis with a weighted average grant date fair value of $16.69 per unit. Equity-based compensation for the OMP Phantom Units was a $0.6 million benefit and a $0.7 million expense for the three months ended March 31, 2020 and 2019, 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, 2020, 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 $16.69 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 expense is accounted for under the fair value method in accordance with GAAP. Under the fair value method for equity-classified awards, equity-based compensation expense is measured at the grant date based on the fair value of the award and is recognized over the vesting period. Equity-based compensation expense recorded for these awards was approximately $0.1 million for each of the three months ended March 31, 2020 and 2019, and is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.