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STOCKHOLDERS' EQUITY | 12 Months Ended
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Dec. 31, 2020
STOCKHOLDERS' EQUITY |
STOCKHOLDERS' EQUITY | 13. STOCKHOLDERS’ EQUITY Common Stock On October 8, 2019, upon emergence from chapter 11 bankruptcy, all existing shares of Predecessor common stock were cancelled and the Successor Company issued approximately 16.2 million shares of new common stock. Refer to Note 2, “Reorganization,” for further details. On October 8, 2019, upon emergence from chapter 11 bankruptcy, the Successor Company filed an amended and restated certificate of incorporation with the Delaware Secretary of State to provide for, among other things, (i) the total number of shares of all classes of capital stock that the Successor Company has the authority to issue is 101,000,000 of which 100,000,000 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 until the 2021 Annual Meeting of Stockholders, and (iii) 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. In addition, the amended and restated certificate of incorporation stipulates provisions for the right of removal of directors, specifically that prior to the 2021 Annual Meeting, any Group II Director (as defined in the certificate of incorporation) may be removed with or without cause by 85% of the shares then entitled to vote at an election of directors (which voting threshold has been increased solely with respect to such class of directors from a majority of shares then entitled to vote at an election of directors). Beginning at the 2021 Annual Meeting, any director of either class may be removed with or without cause by a majority of shares entitled to vote. On February 9, 2018 (Predecessor), 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 October 8, 2019, upon emergence from chapter 11 bankruptcy, by operation of the Plan and the confirmation order, all existing warrants of the Predecessor Company were cancelled and the Successor Company entered into a warrant agreement (the Warrant Agreement) with Broadridge Corporate Issuer Solutions, Inc. as the warrant agent, pursuant to which the Successor Company issued three series of warrants (the Series A Warrants, the Series B Warrants and the Series C Warrants and together, the Warrants, and the holders thereof, the Warrant Holders), on a pro rata basis to pre-emergence holders of the Company’s Existing Equity Interests pursuant to the Plan. Each Warrant represents the right to purchase one share of common stock at the applicable exercise price, subject to adjustment as provided in the Warrant Agreement and as summarized below. On the Effective Date, the Company issued (i) Series A Warrants to purchase an aggregate of 1,798,322 shares of common stock, with an initial exercise price of $40.17 per share, (ii) Series B Warrants to purchase an aggregate of 2,247,985 shares of common stock, with an initial exercise price of $48.28 per share and (iii) Series C Warrants to purchase an aggregate of 2,890,271 shares of common stock, with an initial exercise price of $60.45 per share. Each series of Warrants issued under the Warrant Agreement has a three-year term, expiring on October 8, 2022. The strike price of each series of Warrants issued under the Warrant Agreement increases monthly at an annualized rate of 6.75%, compounding monthly, as provided in the Warrant Agreement. As of December 31, 2020 (Successor), the Company had 1.8 million, Series A, 2.2 million Series B and 2.9 million Series C warrants outstanding with corresponding exercise prices of $42.65, $51.43 and $64.59, respectively. The Warrants do not grant the Warrant Holder any voting or control rights or dividend rights, or contain any negative covenants restricting the operation of the Company’s business. Refer to Note 2 “Reorganization,” for further details. On September 9, 2016, the Predecessor Company issued 4.7 million warrants. The warrants could be exercised to purchase 4.7 million shares of the Predecessor Company's common stock at an exercise price of $14.04 per share. The holders were entitled to exercise the warrants in whole or in part at any time prior to expiration on September 9, 2020. Upon emergence from chapter 11 bankruptcy, all of these outstanding warrants were cancelled. Refer to Note 2 “Reorganization,” for further details. Incentive Plans On September 9, 2016, the Predecessor Company’s board of directors adopted the 2016 Long‑Term Incentive Plan (the 2016 Plan). Immediately prior to emergence from chapter 11 bankruptcy, the 2016 Plan was cancelled and all outstanding stock-based compensation awards granted thereunder were either vested or cancelled. On January 29, 2020, the Successor Company’s board of directors adopted the 2020 Long-Term Incentive Plan (the 2020 Plan). An aggregate of approximately 1.5 million shares of the Successor Company’s common stock were available for grant pursuant to awards under the 2020 Plan. As of December 31, 2020 (Successor), a maximum of 0.2 million shares of the Successor Company’s common stock remained reserved for issuance under the 2020 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 year ended December 31, 2020 (Successor), the Company recognized $2.6 million related to stock-based compensation recorded as a component of “General and administrative” on the consolidated statement of operations. For the period of October 2, 2019 through December 31, 2019 (Successor) and the period of January 1, 2019 through October 1, 2019 (Predecessor), the Company recognized zero and a credit of $8.0 million, respectively, related to stock-based-compensation recorded as a component of "General and administrative" on the consolidated statement of operations. During 2019 (both in Successor and Predecessor periods), senior executives departed the Company. In accordance with the terms of these senior executives' employment agreements, unvested stock options and unvested shares of restricted stock were modified to vest immediately upon termination or approval by the Bankruptcy Court. For the period of January 1, 2019 through October 1, 2019 (Predecessor), the Company recognized incremental reductions to stock-based compensation expense of $9.5 million associated with these modifications. For the year ended December 31, 2018 (Predecessor), the Company recognized $15.3 million related to stock-based compensation recorded as a component of "General and administrative" on the consolidated statement of operations. Stock Options From time to time, the Company grants stock options under the 2020 Plan covering shares of common stock to employees of the Successor Company and granted stock options under the 2016 Plan covering shares of common stock to employees of the Predecessor Company. Stock options, when exercised, are settled through the payment of the exercise price in exchange for new shares of stock underlying the option. Awards granted under the 2020 Plan typically vest over a four year period at a rate of one-fourth on the annual anniversary date of the grant and expire seven years from the date of grant. Awards granted under the 2016 Plan typically vested over a three year period at a rate of one-third on the annual anniversary date of the grant and expired ten years from the grant date. The aggregate grant date fair value of options granted during the year ended December 31, 2020 (Successor) was $1.9 million. At December 31, 2020 (Successor), the Company had $0.9 million of unrecognized compensation expense related to non-vested stock-options to be recognized over a weighted-average period of 1.7 years. No stock options were granted during the period of October 2, 2019 through December 31, 2019 (Successor) or the period of January 1, 2019 through October 1, 2019 (Predecessor). The aggregate grant date fair value of options granted during the year ended December 31, 2018 (Predecessor) was $3.5 million. During the year ended December 31, 2018, the Predecessor Company received $0.3 million from the exercise of stock options. At December 31, 2018, the Predecessor 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. Immediately prior to emergence from chapter 11 bankruptcy, all outstanding stock options under the 2016 Plan were cancelled. Refer to Note 2, “Reorganization,” for further details. The following table sets forth the stock option transactions for the periods indicated:
|  | Number |  | Weighted Average Exercise Price Per Share |  | Aggregate Intrinsic Value(1) (In thousands) |  | Weighted Average Remaining Contractual Life (Years)
Outstanding at December 31, 2017 (Predecessor) |  | 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 (Predecessor) |  | 7,468,926 |  | $ | 8.34 |  | $ | — |  | 8.1
Granted |  | — |  |  | — |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |
Forfeited |  | (5,182,238) |  |  | 8.38 |  |  |  |  |
Cancelled(2) |  | (2,286,688) |  |  | 8.26 |  |  |  |  |
Outstanding at October 1, 2019 (Predecessor) |  | — |  | $ | — |  | $ | — |  | —
Outstanding at October 1, 2019 (Successor) |  | — |  | $ | — |  | $ | — |  | —
Granted |  | — |  |  | — |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |
Forfeited |  | — |  |  | — |  |  |  |  |
Outstanding at December 31, 2019 (Successor) |  | — |  | $ | — |  | $ | — |  | —
Granted |  | 557,844 |  |  | 28.32 |  |  |  |  |
Exercised |  | — |  |  | — |  |  |  |  |
Forfeited |  | (79,692) |  |  | 28.32 |  |  |  |  |
Outstanding at December 31, 2020 (Successor) |  | 478,152 |  | $ | 28.32 |  | $ | — |  | 6.2
| (1) |  | The period end intrinsic value of stock options was calculated as the amount by which the closing market price on December 31, 2020 (Successor) and 2018 (Predecessor) 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 (Predecessor) 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.
| (2) |  | Immediately prior to emergence from chapter 11 bankruptcy, all outstanding options under the 2016 Plan were cancelled.
Options outstanding at December 31, 2020 (Successor) 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 )
$ | 18.91 |  | 159,384 |  | $ | 18.91 |  | 6.2 |  | — |  | $ | — |  | $ | — |  | —
| 28.23 |  | 159,384 |  |  | 28.23 |  | 6.2 |  | — |  |  | — |  |  | — |  | —
| 37.83 |  | 159,384 |  |  | 37.83 |  | 6.2 |  | — |  |  | — |  |  | — |  | —
| (1) |  | At December 31, 2020 (Successor), none of the Company’s stock options were exercisable due to service performance conditions or options exercise prices above 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 years ended December 31, 2020 (Successor) and 2018 (Predecessor) are set forth in the following table:
|  | Successor |  |  |  | Predecessor |
|  | Year Ended |  |  |  | Year Ended |
|  | December 31, 2020 |  |  |  | December 31, 2018 |
Weighted average value per option granted during the period |  | $ | 3.36 |  |  |  | $ | 2.92 |
Assumptions: |  |  |  |  |  |  |  |  |
Stock price volatility(1) |  |  | 61.87 | % |  |  |  | 52.08 | %
Risk free rate of return |  |  | 1.21 | % |  |  |  | 2.63 | %
Expected term |  |  | 4.75 | years |  |  |  | 6 | years
| (1) |  | Due to the Successor and Predecessor 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 units (RSUs) under the 2020 Plan to employees of the Successor Company and granted shares of restricted stock under the 2016 Plan to employees and non-employee directors of the Predecessor Company. Under the 2020 Plan, employee RSUs will vest and convert to shares typically over a four year period at a rate of one-fourth on the annual anniversary date of the grant or when the performance or market conditions described below occur. Under the 2016 Plan, employee shares of restricted stock typically vested 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 of restricted stock vested six months from the date of grant. During the year ended December 31, 2020 (Successor), the Company granted 1.0 million shares of RSUs with the vesting conditions and fair values described below under the 2020 Plan to employees of the Company. At December 31, 2020 (Successor), the Company had $4.1 million of unrecognized compensation expense related to non-vested RSU awards to be recognized over a weighted-average period of 2.5 years.
| · |  | 0.4 million RSUs granted will vest over four years at a rate one-fourth on the annual anniversary of date of the grant. The aggregate grant date fair value of these RSUs was $5.0 million.
| · |  | 0.2 million RSUs granted will vest in full only upon achievement of certain business combination goals, as defined in the award agreements. The aggregate grant date fair value of these RSUs was $2.1 million. As of December 31, 2020 (Successor), a business combination, as defined in the award agreements, had not been consummated and was not considered probable. As such, no expense has been recognized for the RSUs with business combination vesting conditions.
| · |  | 0.4 million RSUs granted will vest in full or in part or may terminate based on the Company’s total shareholder return relative to the total shareholder return of certain of its peer companies as defined in the award agreements over the performance period ending on February 20, 2024. The aggregate grant date fair value of these RSUs was $2.3 million.
No shares of restricted stock were granted during the period of October 2, 2019 through December 31, 2019 (Successor). The aggregate grant date fair value of shares granted during the period from January 1, 2019 through October 1, 2019 (Predecessor) was $5.4 million. The aggregate grant date fair value of shares granted during the year ended December 31, 2018 (Predecessor) was $12.7 million. At December 31, 2018, the Predecessor 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. Immediately prior to emergence from chapter 11 bankruptcy, all outstanding unvested restricted stock granted under the 2016 Plan was vested. Refer to Note 2, "Reorganization," for further details. The following table sets forth the restricted stock transactions for the periods indicated:
|  | Number of Shares |  | Weighted Average Grant Date Fair Value Per Share |  | Aggregate Intrinsic Value(1) (In thousands)
Unvested outstanding shares at December 31, 2017 (Predecessor) |  | 745,507 |  | $ | 7.05 |  | $ | 5,643
Granted |  | 2,326,961 |  |  | 5.47 |  |  |
Vested |  | (537,411) |  |  | 5.89 |  |  |
Forfeited |  | (262,164) |  |  | 6.29 |  |  |
Unvested outstanding shares at December 31, 2018 (Predecessor) |  | 2,272,893 |  | $ | 5.80 |  | $ | 3,864
Granted |  | 4,163,348 |  |  | 1.29 |  |  |
Vested |  | (1,611,465) |  |  | 4.65 |  |  |
Accelerated vesting(2) |  | (2,724,086) |  |  | 2.07 |  |  |
Forfeited |  | (2,100,690) |  |  | 2.58 |  |  |
Unvested outstanding shares at October 1, 2019 (Predecessor) |  | — |  | $ | — |  | $ | —
Unvested outstanding shares at October 1, 2019 (Successor) |  | — |  | $ | — |  | $ | —
Granted |  | — |  |  | — |  |  |
Vested |  | — |  |  | — |  |  |
Forfeited |  | — |  |  | — |  |  |
Unvested outstanding shares at December 31, 2019 (Successor) |  | — |  | $ | — |  | $ | —
Granted |  | 987,590 |  |  | 9.46 |  |  |
Vested |  | — |  |  | — |  |  |
Forfeited |  | (113,456) |  |  | 9.36 |  |  |
Unvested outstanding shares at December 31, 2020 (Successor) |  | 874,134 |  | $ | 9.48 |  | $ | 3,287
| (1) |  | The intrinsic value of restricted stock was calculated as the closing market price on December 31, 2020 (Successor) and 2018 (Predecessor) of the underlying stock multiplied by the number of restricted shares that would be issuable. The total fair value of shares vested was $1.8 million and $2.0 million for the period of January 1, 2019 through October 1, 2019 (Predecessor) and the year ended December 31, 2018 (Predecessor), respectively.
| (2) |  | Immediately prior to emergence from chapter 11 bankruptcy, all outstanding unvested restricted stock under the 2016 Plan was vested.
The assumptions used in calculating the Monte Carlo valuation model fair value of the Company’s RSUs with performance based vesting conditions for the year ended December 31, 2020 (Successor) are set forth in the following table:
|  | Successor |
|  | Year Ended |
|  | December 31, 2020 |
Weighted average value per performance based RSUs granted during the period |  | $ | 6.13 |
Assumptions: |  |  |  |
Stock price volatility(1) |  |  | 51.79 | %
Risk free rate of return |  |  | 1.22 | %
Expected term |  |  | 3.9 | years
| (1) |  | Due to the Successor Company’s limited historical data, expected volatility was estimated using volatilities of peer entities as defined in the award agreements whose share prices and assumptions were publicly available.

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