STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

As a result of our bankruptcy, the outstanding stock-based awards under our Amended and Restated California Resources Corporation Long-Term Incentive Plan (Amended LTIP) were cancelled on our Effective Date.

On January 18, 2021, our Board of Directors approved the California Resources Corporation 2021 Long Term Incentive Plan (2021 Incentive Plan). The shares issuable under the new long-term incentive plan had been previously authorized by the Bankruptcy Court in connection with our emergence from Chapter 11 and the terms of the new long-term incentive plan were approved by our Board of Directors. As a result, the 2021 Incentive Plan became effective on January 18, 2021. The 2021 Incentive Plan provides for potential grants of stock options, stock appreciation rights, restricted stock awards, restricted stock units, vested stock awards, dividend equivalents, other stock-based awards and substitute awards to employees, officers, non-employee directors and other service providers of the Company and its affiliates. The 2021 Incentive Plan provides for the reservation of 9,257,740 shares of common stock for future issuances, subject to adjustment as provided in the 2021 Incentive Plan. Shares of stock subject to an award under the 2021 Incentive Plan that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without the actual delivery of shares (restricted stock awards are not considered “delivered shares” for this purpose) will again be available for new awards under the 2021 Incentive Plan. However, (i) shares tendered or withheld in payment of any exercise or purchase price of an award or taxes relating to awards, (ii) shares that were subject to an option or a stock appreciation right but were not issued or delivered as a result of the net settlement or net exercise of the option or stock appreciation right, and (iii) shares repurchased on the open market with the proceeds from the exercise price of an option, will not, in each case, again be available for new awards under the 2021 Incentive Plan.

In January 2021 we granted approximately 258,000 restricted stock units to our non-employee directors as the equity portion of their compensation. In addition, certain of our executives were granted approximately 544,000 restricted stock units and 544,000 performance stock units.

Predecessor Compensation Plan

In 2019, our stockholders approved the Amended LTIP, which provided for the issuance of stock, incentive and non-qualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, stock bonuses, performance-based awards and other awards to executives, employees and non-employee directors. Shares of our common stock were permitted to be withheld by us in satisfaction of tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock units. Further, shares of our common stock were permitted to be withheld by us in payment of the exercise price of employee stock options, which also counted against the authorized shares specified above.

The maximum number of authorized shares of our common stock that were available for issuance pursuant to the Amended LTIP was 7.3 million shares. As of December 31, 2019, 4.7 million shares were issued or reserved under the Amended LTIP and 2.6 million shares were available for future issuance of awards. In the second quarter of 2020, our then Board of Directors approved the following changes to the 2020 compensation program: (i) the previously established target amounts under the 2020 variable compensation programs remained unchanged, but any unvested amounts under such programs were revised to only be eligible for cash settlement, and (ii) as a condition to receiving any award under our 2020 variable compensation programs, participants waived participation in our 2020 annual incentive program and forfeited all stock-based compensation awards previously granted in 2020. At the time of the amendments, there were no changes to any stock-based compensation awards granted prior to February 2020; however, as a result of our bankruptcy, the outstanding stock-based awards under our Amended LTIP were cancelled on our Effective Date.

The cancellation of the stock-based compensation awards granted under the Amended LTIP prior to 2020 resulted in the recognition of all previously unrecognized compensation expense for equity-based awards under the Amended LTIP and the elimination of the liability related to cash-based awards under the Amended LTIP.

As shown in the table below, we recognized the following stock-based compensation expense during the Predecessor periods. No stock-based compensation was recognized during the Successor period.


	Predecessor
	January 1, 2020 - October 31, 2020			Years ended December 31,
(in millions)			2019			2018
Stock-based compensation expense	$	3		$	32		$	45
Payments of cash-based portion of awards	$	8		$	25		$	24

Restricted Stock Units

As part of the Amended LTIP, executives and other employees were granted restricted stock units (RSUs). RSUs were service based and, depending on the terms of the awards, were settled in cash or stock at the time of vesting. The awards either (i) vested ratably over three years, with one third of the granted units becoming vested on the day before each of the first three anniversaries of the applicable date of grant, or (ii) cliff vested upon the third anniversary of the applicable date of grant. Our RSUs had nonforfeitable dividend rights, and any dividends or dividend equivalents declared during the vesting period were paid as declared.

For cash- and stock-settled RSUs, compensation value was initially measured on the date of grant using the quoted market price of our common stock. Compensation expense for cash-settled RSUs was adjusted on a monthly basis for the cumulative change in the value of the underlying stock. Compensation expense for the stock-settled RSUs were recognized on a straight-line basis over the requisite service periods, adjusted for actual forfeitures. All outstanding RSUs were cancelled for no consideration as a result of our emergence from bankruptcy.

The following summarizes our RSU activity for 2020:


	Stock-Settled			Cash-Settled
	Number of Units	Weighted-Average Grant-Date Fair Value		Number of Units
	(in thousands)			(in thousands)
Unvested at December 31, 2019 (Predecessor)	554	$	17.54	2,285
Granted	633	$	6.20	4,327
Vested	(357)	$	16.40	(1,062)
Cancelled or Forfeited	(830)	$	9.37	(5,550)

Unvested at October 31, 2020 (Predecessor)	—	$	—	—

Performance Stock Units

Our performance stock units (PSUs) were restricted stock unit awards with performance targets with payouts ranging from 0% to 200% of the target award. Up to the target amount of the PSUs were eligible to be settled in cash or stock, and any amount of the PSUs earned in excess of the target amounts of such PSUs were to be settled in cash. These awards accrued dividend equivalents as dividends are declared during the vesting period, which were paid upon certification for the number of earned PSUs. Compensation expense was adjusted quarterly, on a cumulative basis, for any changes in the number of share equivalents expected to be paid based on the relevant performance criteria. All outstanding PSUs were cancelled for no consideration as a result of our emergence from bankruptcy.

The following summarizes our PSU activity for 2020:


	Stock-Settled			Cash-Settled
	Number of Awards	Weighted-Average Grant-Date Fair Value		Number of Units
	(in thousands)			(in thousands)
Unvested at December 31, 2019 (Predecessor)	497	$	19.75	401
Granted	792	$	6.20	792

Cancelled or Forfeited	(1,289)	$	11.43	(1,193)

Unvested at October 31, 2020 (Predecessor)	—	$	—	—

Stock Options

We granted stock options to certain executives under our Amended LTIP. These options permitted the purchase of Predecessor common stock at exercise prices no less than the fair market value of the stock on the date the options were granted, with the majority of options being granted at 10% above fair market value. The options had terms of seven years and vested ratably over three years, with one third of the granted options becoming exercisable on the day before each of the first three anniversaries of the applicable date of grant, subject to certain restrictions including continued employment. All outstanding stock options were cancelled for no consideration as a result of our emergence from bankruptcy.

The following table summarizes our option activity during 2020:


	Options	Weighted-Average Exercise Price		Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value
	(in thousands)
Balance at December 31, 2019 (Predecessor)	1,427	$	59.00	$	16.81	$	—
Granted	593	$	6.82	$	3.31	$	—

Cancelled or Forfeited	(2,020)	$	43.68	$	12.84	$	—


Balance at October 31, 2020 (Predecessor)	—	$	—	$	—	$	—