Equity-Based Compensation

Restricted stock awards. The Company has granted restricted stock awards to employees and directors under its Amended and Restated 2010 Long Term Incentive Plan, the majority of which vest over a three-year period. 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. Compensation expense is recognized ratably over the requisite service period.

During the nine months ended September 30, 2017, employees and non-employee directors of the Company were granted restricted stock awards equal to 1,624,810 shares of common stock with a $15.08 weighted average grant date per share value. Equity-based compensation expense recorded for restricted stock awards for the three and nine months ended September 30, 2017 was $4.9 million and $15.2 million, respectively, and $4.8 million and $15.5 million for the three and nine months ended September 30, 2016, respectively. Equity-based compensation expense is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.

Performance share units. The Company has granted performance share units (“PSUs”) to officers of the Company under its Amended and Restated 2010 Long Term Incentive Plan. The PSUs are awards of restricted stock units, and each PSU that is earned represents the right to receive one share of the Company’s common stock.

During the nine months ended September 30, 2017, officers of the Company were granted 509,800 PSUs with a $16.89 weighted average grant date per share value. Equity-based compensation expense recorded for PSUs for the three and nine months ended September 30, 2017 was $1.6 million and $5.1 million, respectively, and $1.0 million and $3.2 million for the three and nine months ended September 30, 2016, respectively. Equity-based compensation expense is included in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations.

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 performance periods. Depending on the Company’s TSR performance relative to the defined peer group, award recipients will earn between 0% and 200% of the initial 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.

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, initial value, risk-free interest rate, volatility 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 was calculated from the daily historical returns of 30-day volume weighted average stock prices 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.

The following assumptions were used for the Monte Carlo model to determine the grant date fair value and associated equity-based compensation expense of the PSUs granted during the nine months ended September 30, 2017:



Risk-free interest rate	1.18% - 1.66%
Oasis volatility	17.16	%

OMP unit-based compensation. In September 2017, OMP GP adopted the Oasis Midstream Partners LP 2017 Long Term Incentive Plan (“OMP LTIP”). The OMP LTIP provides for the grant, from time to time at the discretion of the board of directors of OMP GP, of options, unit appreciation rights, restricted units, phantom units, unit awards, substitute awards, other unit-based awards or cash awards and includes any tandem distribution equivalent rights with respect to certain awards. The purpose of awards under the OMP LTIP is to provide additional incentive compensation to individuals providing services to OMP, and to align the economic interests of such individuals with the interests of OMP’s unitholders.

The aggregate number of common units that may be issued pursuant to any and all awards under the OMP LTIP shall initially be equal to 1,842,500 common units, subject to proportionate adjustment in the event of unit splits and similar events. Additionally, each year, the total number of common units that may be issued pursuant to the OMP LTIP shall increase by 1% of the number of common units outstanding on a fully diluted basis (calculated by adding to the number of common units outstanding, all outstanding securities convertible into common units on such date on an as-converted basis). Common units subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminated without delivery of common units will be available for delivery pursuant to other awards.

In connection with the OMP IPO, certain directors of OMP were granted 11,766 restricted unit awards which vest over a one-year period with a weighted average grant date fair value of $17.00 per common unit. OMP accounted for these restricted unit awards as equity awards, pursuant to the FASB’s authoritative guidance for share-based payments. Equity-based compensation expense is recognized ratably over the requisite service period. Equity-based compensation expense recorded for restricted unit awards for the three and nine months ended September 30, 2017 is included in general and administrative expenses on the the Company’s Condensed Consolidated Statements of Operations.