9. Shareholders’ Equity and Stock Incentive Plans

Shareholders’ Equity

Common Stock. In November 2013, the Company sold 4.5 million shares of its common stock in an underwritten public offering at a price to the underwriter of $42.24 per share. The Company used the proceeds of approximately $189.7 million, net of offering costs, to fund in part its increased capital expenditure plan that took into account its recently completed Utica Shale acreage acquisition, the second half of the 2013 development of its expanded position in the Utica Shale and the accelerated fracking of a portion of its existing inventory of Eagle Ford wells and for other general corporate purposes.

Warrants. On November 24, 2009, the Company entered into a land agreement with an unrelated third party and its affiliate. The land agreement expired pursuant to its terms on May 31, 2011. Under the land agreement, the Company issued warrants to purchase 31,983 and 28,576 shares of common stock in 2012 and 2011 respectively. In 2013, the Company issued no warrants to purchase shares of common stock. The final issuance of warrants under the land agreement was granted in April 2012. The warrants have an expiration date of August 21, 2017, an exercise price of $22.09, which may be exercised on a “cashless” basis, and are subject to anti-dilution adjustments.

Stock Incentive Plans

The Company has established the Incentive Plan of Carrizo Oil & Gas, Inc., as amended (the “Incentive Plan”), which authorizes the granting of stock options, SARs that may be settled in cash or common stock at the option of the Company, restricted stock awards and restricted stock units to directors, employees and independent contractors. The Company may grant awards of up to 7,245,000 shares (subject to certain limitations on restricted stock and restricted stock units) under the Incentive Plan and through December 31, 2013, has issued stock options, restricted stock awards and restricted stock units covering 5,931,933 shares, net of forfeitures and excluding SARs the Company has elected to settle in cash.

The Company has also established the Carrizo Oil & Gas, Inc. Cash-Settled Stock Appreciation Rights Plan (“Cash SAR Plan”). The Cash SAR Plan authorizes the granting of SARs that may only be settled in cash to employees and independent contractors.

Stock Options. No stock options were granted under the Incentive Plan during 2013, 2012 or 2011. The table below summarizes the activity for stock options for the three years ended December 31, 2013, 2012 and 2011:



	Shares		Weighted- Average Exercise Prices	Weighted- Average Remaining Life (In years)	Aggregate Intrinsic Value (In millions)
For the Year Ended December 31, 2011
Outstanding, beginning of period	414,854		$6.10
Granted	—		—
Exercised	(151,500	)	$4.36
Forfeited	—		—
Outstanding, end of period	263,354		$7.11
Exercisable, end of period	263,354		$7.11
For the Year Ended December 31, 2012
Outstanding, beginning of period	263,354		$7.11
Granted	—		—
Exercised	(20,500	)	$5.50
Forfeited	—		—
Outstanding, end of period	242,854		$7.24
Exercisable, end of period	242,854		$7.24
For the Year Ended December 31, 2013
Outstanding, beginning of period	242,854		$7.24
Granted	—		—
Exercised	(206,501	)	$6.07
Forfeited	—		—
Outstanding, end of period	36,353		$13.91	1.1	$1.1
Exercisable, end of period	36,353		$13.91	1.1	$1.1

At December 31, 2013, all stock options were vested and accordingly, the Company had no unrecognized compensation costs related to outstanding stock options. The total intrinsic value (market price at date of exercise less the exercise price) of stock options exercised during the years ended December 31, 2013, 2012 and 2011 was $4.4 million, $0.4 million, and $3.6 million, respectively, and the Company received $1.3 million, $0.1 million, and $0.1 million in cash in connection with stock option exercises for the years ended December 31, 2013, 2012 and 2011, respectively.

Stock Appreciation Rights. During the years ended December 31, 2013, 2012 and 2011, the Company granted 282,296, 193,336 and 153,801, respectively of SARs under the Cash SAR Plan and SARs under the Incentive Plan that can only be settled in cash. All SARs that have been granted by the Company contain performance and service conditions. The performance conditions have been met for all awards. The table below summarizes the activity for SARs for the three years ended December 31, 2013, 2012 and 2011:



	Shares		Weighted- Average Exercise Prices	Weighted- Average Remaining Life (In years)		Aggregate Intrinsic Value (In millions)
For the Year Ended December 31, 2011
Outstanding, beginning of period	700,749		$18.50
Granted	153,801		$37.99
Exercised	(4,768	)	$20.22
Forfeited	—		—
Outstanding, end of period	849,782		$22.02
Exercisable, end of period	326,128		$18.99
For the Year Ended December 31, 2012
Outstanding, beginning of period	849,782		$22.02
Granted	193,336		$25.56
Exercised	(7,295	)	$20.22
Forfeited	—		—
Outstanding, end of period	1,035,823		$22.69
Exercisable, end of period	613,934		$20.70
For the Year Ended December 31, 2013
Outstanding, beginning of period	1,035,823		$22.69
Granted	282,296		$28.68
Exercised	(207,184	)	$19.30
Forfeited	(24,704	)	$27.77
Outstanding, end of period	1,086,231		$24.78	2.8	21.12	$21.1
Exercisable, end of period	681,867		$22.55	2.7	14.78	$14.8

At December 31, 2013, the liability for SARs outstanding was $20.6 million, of which, $19.3 million is classified as other accrued liabilities representing the portion of the awards that are vested or are expected to vest within the next 12 months, with the remainder of $1.3 million classified as long-term other liabilities, respectively. At December 31, 2012, the liability for SARs outstanding was $7.2 million, of which $6.5 million is classified as other accrued liabilities representing the portion of the awards that are vested or are expected to vest within the next 12 months with the remainder of $0.7 million classified as long-term other liabilities, respectively. The Company paid $3.9 million, $0.1 million and $0.1 million, in connection with SARs exercised during the years ended December 31, 2013, 2012 and 2011, respectively. The following table summarizes the weighted-average assumptions used in the Black-Scholes-Merton option pricing model to calculate the fair value of the SARs granted during 2013, 2012 and 2011:



	December 31, 2013		December 31, 2012		December 31, 2011
Grant date fair value	$13.36		$12.23		$18.50
Volatility factor	44.5	%	48.2	%	61.6	%
Dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.0	%	0.4	%	0.4	%
Expected term (in years)	3.5		3.0		2.9

As of December 31, 2013, unrecognized compensation costs related to unvested SARs was $4.5 million and will be recognized as stock-based compensation expense, net of amounts capitalized over a weighted-average period of 2.2 years.

Restricted Stock Awards and Units. The Company began issuing restricted stock awards in 2005 and restricted stock units in 2009. Although shares of common stock are not released to the employee until vesting, restricted stock awards have the right to vote and accordingly, restricted stock awards are considered issued and outstanding at the date of grant. Restricted stock units do not have the right to vote and are not considered issued and outstanding until converted into common shares and released to the employee upon vesting. The table below summarizes restricted stock award and unit activity for the years ended December 31, 2013, 2012 and 2011:



	Shares/ Units		Weighted-Average Grant Date Fair Value
For the Year Ended December 31, 2011
Unvested restricted stock awards and units, beginning of period	710,955		$20.26
Granted	567,901		$35.27
Vested	(452,585	)	$25.29
Forfeited	(25,773	)	$23.30
Unvested restricted stock awards and units, end of period	800,498		$27.96
For the Year Ended December 31, 2012
Unvested restricted stock awards and units, beginning of period	800,498		$27.96
Granted	854,292		$25.25
Vested	(488,992	)	$25.63
Forfeited	(19,524	)	$27.61
Unvested restricted stock awards and units, end of period	1,146,274		$26.95
For the Year Ended December 31, 2013
Unvested restricted stock awards and units, beginning of period	1,146,274		$26.95
Granted	932,763		$28.16
Vested	(557,136	)	$25.98
Forfeited	(77,034	)	$26.03
Unvested restricted stock awards and units, end of period	1,444,867		$28.03

As of December 31, 2013, unrecognized compensation costs related to unvested restricted stock awards and units was $25.2 million and will be recognized as stock-based compensation expense, net of amounts capitalized over a weighted-average period of 2.1 years. The 2013, 2012 and 2011 grants of certain restricted stock units contained performance and service conditions. The performance conditions have been met for all awards.