2020 Incentive Compensation Program. In order to effectively incentivize employees in the current environment, the Board of Directors approved a revised 2020 incentive compensation program applicable to all employees effective June 12, 2020 (the “2020 Incentive Compensation Program”).

Under the 2020 Incentive Compensation Program, all 2020 equity-based awards, including restricted stock awards, performance share units (“PSUs”) and the OMP phantom unit awards (the “OMP Phantom Units”), previously granted under the Company’s Amended and Restated 2010 Long Term Incentive Plan, were forfeited and concurrently replaced with cash retention incentives, which were accounted for as modifications of such 2020 awards. In addition, all employees waived participation in the Company’s 2020 annual cash incentive plan and instead will be eligible to earn cash performance incentives based on the achievement of certain specified incentive metrics measured on a quarterly basis from July 1, 2020 to June 30, 2021. The 2020 Incentive Compensation Program resulted in $15.6 million, or approximately 50% of the target amount under such program, being paid in June 2020 with the remainder of the target amount under such program payable over the following 12 months.

For the Company’s officers and certain other senior employees, the prepaid cash incentives paid in June 2020 may be clawed back if (i) certain specified incentive metrics measured on a quarterly basis are not achieved from July 1, 2020 to December 31,

2020 and (ii) such individuals do not remain employed for a period of up to 12 months, unless such individuals are terminated without cause or resign for good reason. The after-tax value of the cash incentives paid to the Company’s officers and certain other senior employees of $8.8 million was capitalized to prepaid expenses and is being amortized over the relevant service periods. The Company immediately expensed the difference between the cash and after-tax value of the prepaid cash incentives of $4.1 million, which is not subject to the clawback provisions of the 2020 Incentive Compensation Program, and recognized additional compensation expenses of $0.4 million to adjust for the grant date fair value of certain original 2020 equity-based awards that exceeded the replacement cash retention incentives less amounts previously recognized for the original 2020 equity-based awards.

For all other employees, the June 2020 incentive payment of $2.7 million was not subject to any clawback provisions, and $2.1 million, which represents the excess of the cash retention payment over amounts previously recognized for the original 2020 equity-based awards the cash incentives replaced, was immediately expensed.

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 from the applicable date of grant. 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.


	Shares	Weighted Average Grant Date Fair Value per Share
Non-vested shares outstanding December 31, 2019	5,736,167	$	8.77
Granted	3,516,579	3.06
Vested	(3,465,313)	6.82
Forfeited(1)	(3,191,398)	3.19
Non-vested shares outstanding September 30, 2020	2,596,035	$	9.39

(1)On June 12, 2020, all restricted stock awards issued to employees and non-employee directors in 2020 were forfeited and concurrently replaced with cash incentives under the 2020 Incentive Compensation Program. Refer to “2020 Incentive Compensation Program” above for more information.

Equity-based compensation expense recorded for restricted stock awards was $3.1 million and $10.6 million for the three and nine months ended September 30, 2020, respectively, and $5.8 million and $18.4 million for the three and nine months ended September 30, 2019, respectively.

As a result of the Chapter 11 Cases, the Company expects that each non-vested share remaining outstanding will become vested upon the Company’s emergence, and each holder shall receive the pro rata share of the New Warrants allocable to such share.

Performance share units. The Company has granted 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 for the applicable period, 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.


	Units	Weighted Average Grant Date Fair Value per Unit
Non-vested PSUs at December 31, 2019	3,027,224	$	9.12
Granted	2,429,747	2.56
Vested	(672,606)	8.61
Forfeited(1)	(2,396,524)	3.12
Non-vested PSUs at September 30, 2020	2,387,841	$	8.17

(1)On June 12, 2020, all PSUs issued to the Company’s officers in 2020 were forfeited and concurrently replaced with cash incentives under the 2020 Incentive Compensation Program. Refer to “2020 Incentive Compensation Program” above for more information.

Equity-based compensation expense recorded for PSUs was $1.6 million and $5.7 million for the three and nine months ended September 30, 2020, respectively, and $2.5 million and $7.5 million for the three and nine months ended September 30, 2019, respectively.

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.

As a result of the Chapter 11 Cases, the Company expects that the PSUs will be eligible to vest upon the Company’s emergence based on the change in control vesting provisions applicable to the PSUs. The holder of any PSUs that are settled in vested shares upon the Company’s emergence shall receive the pro rata share of the New Warrants allocable to such shares.

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.


	Phantom Units	Weighted Average Grant Date Fair Value per Unit
Non-vested units outstanding December 31, 2019	362,002	$	19.09
Granted	242,500	8.65
Vested	(109,199)	13.52
Forfeited(1)	(314,676)	8.64
Non-vested units outstanding September 30, 2020	180,627	$	9.72

(1)On June 12, 2020, all OMP Phantom Units issued to certain employees of Oasis in 2020 were forfeited and concurrently replaced with cash incentives under the 2020 Incentive Compensation Program. Refer to “2020 Incentive Compensation Program” above for more information.

Equity-based compensation recorded for the OMP Phantom Units was an expense of $0.1 million for the three months ended September 30, 2020 and a net credit of $0.1 million for the nine months ended September 30, 2020, and an expense of $0.1 million and $1.8 million for the three and nine months ended September 30, 2019, respectively.

OMP restricted unit awards. OMP has granted to independent directors of the general partner restricted unit awards under the Oasis Midstream Partners LP 2017 Long Term Incentive Plan, which vest over a one-year period from the date of grant. 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.


	Restricted Units	Weighted Average Grant Date Fair Value per Unit
Non-vested units outstanding December 31, 2019	16,170	$	18.57
Granted	16,170	16.69
Vested	(16,170)	18.57
Forfeited	—	—
Non-vested units outstanding September 30, 2020	16,170	$	16.69