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STOCKHOLDERS' EQUITY | 12 Months Ended
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Dec. 31, 2018
STOCKHOLDERS' EQUITY |
STOCKHOLDERS' EQUITY | 12. STOCKHOLDERS’ EQUITY Preferred Stock and Non-Cash Preferred Stock Dividend On January 24, 2017 (the Commitment Date), the Company entered into a stock purchase agreement with certain accredited investors to sell, in a private placement exempt from registration requirements of the Securities Act pursuant to Section 4(a)(2), approximately 5,518 shares of 8% Automatically Convertible Preferred Stock, par value $0.0001 per share (the Preferred Stock), each share of which was convertible into 10,000 shares of common stock. Also on January 24, 2017, the Company received an executed written consent in lieu of a stockholders’ meeting authorizing and approving the conversion of the Preferred Stock into common stock. On February 27, 2017, the Company filed with the Delaware Secretary of State a Certificate of Designation, Preferences, Rights and Limitations of the Preferred Stock (the Certificate of Designation), which created the series of preferred stock issued by the Company on that same date. The Company issued the Preferred Stock at $72,500 per share. Gross proceeds were approximately $400.1 million, or $7.25 per share of common stock. The Company incurred approximately $11.9 million in expenses associated with this offering, including placement agent fees. On March 16, 2017, the Company mailed a definitive information statement to its stockholders notifying them that a majority of its stockholders had consented to the issuance of common stock, par value $0.0001 per share, upon the conversion of the Preferred Stock. The Preferred Stock automatically converted into 55.2 million shares of common stock on April 6, 2017 in accordance with the terms of the Certificate of Designation. No cash dividends were paid on the Preferred Stock since, pursuant to the terms of the Certificate of Designation of the Preferred Stock, conversion occurred prior to June 1, 2017. The Company agreed to file a registration statement to register the resale of shares of common stock issuable upon conversion of the Preferred Stock and to pay penalties in the event such registration was not effective by June 27, 2017. The Company filed such registration statement on March 3, 2017 and it was declared effective by the SEC on April 7, 2017. In accordance with ASC Topic 470, Debt (ASC 470), the Company determined that the conversion feature in the Preferred Stock represented a beneficial conversion feature. The fair value of the Company’s common stock of $8.12 per share on the Commitment Date was greater than the conversion price of $7.25 per share of common stock, representing a beneficial conversion feature of $0.87 per share of common stock, or approximately $48.0 million in aggregate. Under ASC 470, $48.0 million (the intrinsic value of the beneficial conversion feature) of the proceeds received from the issuance of the Preferred Stock was allocated to “Additional paid‑in capital,” creating a discount on the Preferred Stock (the Discount). The Discount is required to be amortized on a non‑cash basis over the approximate 65-month period between the issuance date and the required redemption date of July 28, 2022, or fully amortized upon an accelerated date of redemption or conversion, and recorded as a preferred dividend. The Discount was fully amortized and a non‑cash preferred dividend was recorded upon the conversion date of April 6, 2017. The Discount amortization is reflected in “Non‑cash preferred dividend” in the consolidated statements of operations. The preferred dividend was charged against additional paid‑in capital since no retained earnings were available. Common Stock On September 9, 2016, upon emergence from chapter 11 bankruptcy, all existing shares of Predecessor common stock were cancelled and the Successor Company issued approximately 90.0 million shares of common stock to the Predecessor Company's existing common stockholders, Third Lien Noteholders, Unsecured Noteholders, and the Convertible Noteholder. Refer to Note 2, "Reorganization," for further details. Also on September 9, 2016, the Successor Company filed an amended and restated certificate of incorporation with the Delaware Secretary of State to provide for (i) the total number of shares of all classes of capital stock that the Successor Company has the authority to issue is 1,001,000,000 of which 1,000,000,000 shares are common stock, par value $0.0001 per share and 1,000,000 shares are preferred stock, par value $0.0001 per share, (ii) a classified board structure, (iii) the right of removal of directors with or without cause by stockholders, and (iv) a restriction on the Successor Company from issuing any non-voting equity securities in violation of Section 1123(a)(6) of chapter 11 of title 11 of the United States Code. On February 9, 2018, the Company sold 9.2 million shares of common stock, par value $0.0001 per share, in a public offering at a price of $6.90 per share. The net proceeds to the Company from the offering were approximately $60.4 million, after deducting the underwriters’ discounts and offering expenses. The Company used the net proceeds, together with the net proceeds from the issuance of the Additional 2025 Notes, to fund the cash consideration for the acquisition of the West Quito Draw Properties, and for general corporate purposes, including funding the Company’s 2018 drilling program. Warrants On September 9, 2016, the Company issued 4.7 million new warrants. The warrants can be exercised to purchase 4.7 million shares of the Company's common stock at an exercise price of $14.04 per share. The holders are entitled to exercise the warrants in whole or in part at any time prior to expiration on September 9, 2020. Incentive Plans On September 9, 2016, the Company’s board of directors adopted the 2016 Long-Term Incentive Plan (the Plan). An aggregate of 10.0 million shares of the Company’s common stock were available for grant pursuant to awards under the Plan. On April 6, 2017, Amendment No. 1 to the Plan to increase, by 9.0 million shares, the maximum number of shares of common stock that may be issued thereunder, i.e., a maximum of 19.0 million shares, became effective, which was 20 calendar days following the date the Company mailed an information statement to all stockholders of record notifying them of approval of the amendment by written consent of holders of a majority of the Company’s outstanding stock. As of December 31, 2018 and 2017, a maximum of 4.9 million and 7.7 million shares, respectively of the Company’s common stock remained reserved for issuance under the Plan. The Company accounts for stock-based payment accruals under authoritative guidance on stock compensation. The guidance requires all stock-based payments to employees and directors, including grants of stock options and restricted stock, to be recognized in the financial statements based on their fair values. The Company has elected not to apply a forfeiture estimate and will recognize a credit in compensation expense to the extent awards are forfeited. For the years ended December 31, 2018 and 2017, the Company recognized $15.3 million and $36.8 million of stock-based compensation expense, respectively. For the period from September 10, 2016 through December 31, 2016 and the period from January 1, 2016 through September 9, 2016 the Company recognized $21.5 million and $4.9 million, respectively, of stock-based compensation expense. Stock-based compensation expense is recorded as a component of “General and administrative” on the consolidated statements of operations. Stock Options From time to time, the Company grants stock options under the Plan covering shares of common stock to employees of the Company. Stock options, when exercised, are settled through the payment of the exercise price in exchange for new shares of stock underlying the option. These awards typically vest over a three year period at a rate of one-third on the annual anniversary date of the grant and expire ten years from the grant date. Immediately prior to emergence from chapter 11 bankruptcy, all outstanding stock options under the Predecessor incentive plan were cancelled. Refer to Note 2, “Reorganization,” for further details. The weighted average grant date fair value of options granted during the year ended December 31, 2018 was $3.5 million. During the year ended December 31, 2018, the Company received $0.3 million from the exercise of stock options. At December 31, 2018, the Company had $5.2 million of unrecognized compensation expense related to non-vested stock options to be recognized over a weighted-average vesting period of 0.9 years. The weighted average grant date fair value of options granted during the year ended December 31, 2017 was $7.8 million. At December 31, 2017, the Company had $13.0 million of unrecognized compensation expense related to non-vested stock options to be recognized over a weighted-average vesting period of 1.2 years. The weighted average grant date fair value of options granted during the period from September 10, 2016 through December 31, 2016 was $32.3 million. No options were granted during the period January 1, 2016 through September 9, 2016. At December 31, 2016, the Company had $26.5 million of unrecognized compensation expense related to non-vested stock options to be recognized over a weighted-average period of 1.7 years. The following table sets forth the stock option transactions for the periods indicated:
|  |  |  | Weighted |  | Aggregate |  | Weidhted Average
|  |  |  | Average |  | Intrinsic |  | Remaining
|  |  |  | Exercise Price |  | Value (1) |  | Contractual Life
|  | Number |  | Per Share |  | (In thousands) |  | (Years)
Outstanding at December 31, 2015 (Predecessor) |  | 4,860,133 |  | $ | 17.80 |  | $ | — |  |  | 8.4
Granted |  | — |  |  | — |  |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |  |
Forfeited |  | (695,302) |  |  | 21.17 |  |  |  |  |  |
Cancelled (2) |  | (4,164,831) |  |  | 17.23 |  |  |  |  |  |
Outstanding at September 9, 2016 (Predecessor) |  | — |  | $ | — |  | $ | — |  |  | —
Outstanding at September 9, 2016 (Successor) |  | — |  | $ | — |  | $ | — |  |  | —
Granted |  | 5,319,400 |  |  | 9.22 |  |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |  |
Forfeited |  | — |  |  | — |  |  |  |  |  |
Outstanding at December 31, 2016 (Successor) |  | 5,319,400 |  | $ | 9.22 |  | $ | 631 |  |  | 9.7
Granted |  | 1,790,605 |  |  | 7.72 |  |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |  |
Forfeited |  | (374,102) |  |  | 8.82 |  |  |  |  |  |
Outstanding at December 31, 2017 (Successor) |  | 6,735,903 |  | $ | 8.84 |  | $ | 29 |  |  | 8.9
Granted |  | 1,206,800 |  |  | 5.65 |  |  |  |  |  |
Exercised |  | (41,667) |  |  | 7.75 |  |  | 29 |  |  |
Forfeited |  | (432,110) |  |  | 8.68 |  |  |  |  |  |
Outstanding at December 31, 2018 (Successor) |  | 7,468,926 |  | $ | 8.34 |  | $ | — |  |  | 8.1
(1) The period end intrinsic value of stock options was calculated as the amount by which the closing market price on December 31, 2018, 2017 and 2016 of the underlying stock exceeded the exercise price of the option. The intrinsic value of stock options exercised during the year ended December 31, 2018 was calculated as the amount by which the market price at the time of exercise of the underlying stock exceeded the exercise price of the option. No stock options were exercised during the year ended December 31, 2017 or 2016. (2) Immediately prior to emergence from chapter 11 bankruptcy, all outstanding options under the Predecessor incentive plan were cancelled. Options outstanding at December 31, 2018 consisted of the following:
Outstanding |  | Exercisable(1)
|  |  |  |  |  |  | Weighted Average |  |  |  |  |  |  |  |  |  | Weighted Average
|  |  |  | Weighted Average |  | Remaining |  |  |  | Weighted Average |  | Aggregate |  | Remaining
Range of Grant |  |  |  | Exercise Price |  | Contractual Life |  |  |  | Exercise Price |  | Intrinsic |  | Contractual Life
Prices Per Share |  | Number |  | per Share |  | (Years ) |  | Number |  | per Share |  | Value |  | (Years )
$5.65 - $7.75 |  | 2,783,493 |  | $ | 6.85 |  | 8.7 |  | — |  | $ | — |  | $ | — |  | —
$8.93 - $9.24 |  | 4,685,433 |  |  | 9.23 |  | 7.7 |  | — |  |  | — |  |  | — |  | —
| (1) |  | At December 31, 2018, none of the Company’s options were exercisable due to service performance conditions or option exercise prices above the current market value of the underlying stock.
The assumptions used in calculating the Black-Scholes-Merton valuation model fair value of the Company’s stock options for the years ended December 31, 2018 and 2017 and the period from September 10, 2016 through December 31, 2016 are set forth in the following table:
|  | Successor |
|  |  |  |  |  |  |  | Period from |
|  |  |  |  |  |  |  | September 10, 2016 |
|  | Years Ended December 31, |  | through |
|  | 2018 |  | 2017 |  | December 31, 2016 |
Weighted average value per option granted during the period |  | $ | 2.92 |  | $ | 4.36 |  | $ | 6.07 |
Assumptions: |  |  |  |  |  |  |  |  |  |
Stock price volatility(1) |  |  | 52.08 | % |  | 60.18 | % |  | 56.29 | %
Risk free rate of return |  |  | 2.63 | % |  | 1.94 | % |  | 1.34 | %
Expected term |  |  | 6 | years |  | 6 | years |  | 6 | years
| (1) |  | Due to the Company’s limited historical data, expected volatility was estimated using volatilities of similar entities whose share or option prices and assumptions were publicly available.
Restricted Stock From time to time, the Company grants shares of restricted stock to employees and non-employee directors of the Company. Employee shares typically vest over a three year period at a rate of one-third on the annual anniversary date of the grant, and the non-employee directors' shares vest six months from the date of grant. Certain shares granted under the Plan specifically related to the Company’s emergence from chapter 11 bankruptcy vested on or before September 30, 2017. Immediately prior to emergence from chapter 11 bankruptcy, all outstanding unvested restricted stock awards granted under the Predecessor Incentive Plan were vested. Refer to Note 2, "Reorganization," for further details. The weighted average grant date fair value of shares granted during the year ended December 31, 2018 was $12.7 million. At December 31, 2018, the Company had $6.1 million of unrecognized compensation expense related to non-vested restricted stock awards to be recognized over a weighted-average vesting period of 1.1 years. The weighted average grant date fair value of shares granted during the year ended December 31, 2017 was $14.3 million. At December 31, 2017, the Company had $3.2 million of unrecognized compensation expense related to non-vested restricted stock awards to be recognized over a weighted-average vesting period of 1.4 years. The weighted average grant date fair value of shares granted during the period from September 10, 2016 through December 31, 2016 was $27.3 million. No restricted shares were granted from the period January 1, 2016 through September 9, 2016. At December 31, 2016, the Company had $11.5 million of unrecognized compensation expense related to non-vested restricted stock awards to be recognized over a weighted-average period of 0.9 years. The following table sets forth the restricted stock transactions for the periods indicated:
|  |  |  | Weighted |  | Aggregate
|  |  |  | Average Grant |  | Intrinsic
|  | Number of |  | Date Fair Value |  | Value (1)
|  | Shares |  | Per Share |  | (In thousands)
Unvested outstanding shares at December 31, 2015 (Predecessor) |  | 2,870,405 |  | $ | 7.55 |  | $ | 3,617
Granted |  | — |  |  | — |  |  |
Vested |  | (436,256) |  |  | 18.50 |  |  |
Accelerated vesting (2) |  | (1,917,072) |  |  | 5.39 |  |  |
Forfeited |  | (517,077) |  |  | 6.31 |  |  |
Unvested outstanding shares at September 9, 2016 (Predecessor) |  | — |  | $ | — |  | $ | —
Unvested shares outstanding at September 9, 2016 (Successor) |  | — |  | $ | — |  | $ | —
Granted |  | 2,991,202 |  |  | 9.14 |  |  |
Vested |  | (1,253,125) |  |  | 9.24 |  |  |
Forfeited |  | — |  |  | — |  |  |
Unvested outstanding shares at December 31, 2016 (Successor) |  | 1,738,077 |  | $ | 9.06 |  | $ | 16,234
Granted |  | 2,022,432 |  |  | 7.07 |  |  |
Vested |  | (2,516,647) |  |  | 8.39 |  |  |
Forfeited |  | (498,355) |  |  | 7.41 |  |  |
Unvested outstanding shares at December 31, 2017 (Successor) |  | 745,507 |  | $ | 7.05 |  | $ | 5,643
Granted |  | 2,326,961 |  |  | 5.47 |  |  |
Vested |  | (537,411) |  |  | 5.89 |  |  |
Forfeited |  | (262,164) |  |  | 6.29 |  |  |
Unvested shares outstanding at December 31, 2018 (Successor) |  | 2,272,893 |  | $ | 5.80 |  | $ | 3,864
(1) The intrinsic value of restricted stock was calculated as the closing market price on December 31, 2018, 2017 and 2016 of the underlying stock multiplied by the number of restricted shares. The total fair value of shares vested was $2.0 million, $16.1 million, $11.6 million and $0.9 million for the years ended December 31, 2018 and 2017, the period from September 10, 2016 through December 31, 2016, and the period from January 1, 2016 through September 9, 2016, respectively. (2) Immediately prior to emergence from chapter 11 bankruptcy, all outstanding unvested restricted stock under the Predecessor incentive plan were vested.

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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