In 2003, the Company’s Board of Directors and shareholders approved the 2003 Plan. The 2003 Plan, as amended, provided that a maximum of 3,481,569 shares of common stock in the aggregate could be issued pursuant to options or restricted stock grants. The persons eligible to receive awards under the 2003 Plan included employees, directors, contractors or advisors of the Company.

In 2012, the Board of Directors adopted and shareholders approved the 2012 Incentive Plan. The 2012 Incentive Plan provided for a maximum of 8,700,000 shares of common stock in the aggregate that could be issued pursuant to options, restricted stock, stock appreciation rights, restricted stock units or other performance award grants. The persons eligible to receive awards under the 2012 Incentive Plan included employees, directors, contractors or advisors of the Company.

In 2019, the Board of Directors adopted and shareholders approved the 2019 Incentive Plan. As of December 31, 2019, the 2019 Incentive Plan provided for a maximum of 3,433,671 shares of common stock in the aggregate that may be issued pursuant to grants of options, restricted stock, stock appreciation rights, restricted stock units or other performance award grants. The persons eligible to receive awards under the 2019 Incentive Plan include employees, directors, contractors or advisors of the Company. The primary purpose of the 2019 Incentive Plan is to attract and retain key employees, directors, contractors or advisors of the Company. With the adoption of the 2019 Incentive Plan, the Company does not expect to make any future awards under the 2003 Plan or the 2012 Incentive Plan, but both plans will remain in place until all awards outstanding under such plans have been settled. As of February 25, 2020, no awards remained outstanding under the 2003 Plan.

The 2003 Plan, the 2012 Incentive Plan and the 2019 Incentive Plan are administered by the independent members of the Board of Directors, which, upon recommendation of the Strategic Planning and Compensation Committee of the Board of Directors, determine the number of options, restricted shares or other awards to be granted, the effective dates, the terms of the grants and the vesting periods. The Company typically uses newly issued shares of common stock to satisfy option exercises or restricted share grants. At December 31, 2018, all stock-based compensation awards granted since 2012 had been granted under the 2012 Incentive Plan and substantially all are equity-based awards for which the fair value is fixed at the grant date, while all stock-based compensation awards granted prior to January 1, 2012 were granted under the 2003 Plan and were liability-based awards for which the fair value was remeasured at each reporting period.

During the year ended December 31, 2019, the Company began granting both equity-based and liability-based awards under the 2019 Incentive Plan. The fair value of equity-based awards is fixed at the grant date, while the fair value of liability-based awards is remeasured at each reporting period.

Under the 2003 Plan, the 2012 Incentive Plan and the 2019 Incentive Plan, stock option awards have been granted to purchase the Company’s common stock at an exercise price equal to the fair market value on the date of grant, a typical vesting period of three or four years and a typical maximum term of five, six or 10 years. The 2003 Plan and the 2012 Incentive Plan define fair market value as the closing price of Matador’s common stock on the date of grant. Under the 2019 Incentive Plan, such fair market value of a stock option is determined using the closing price of Matador’s common stock on the trading day prior to the date of grant. All option awards granted under the 2003 Plan and still outstanding as of December 31, 2019 were settled in the first quarter of 2020.



	2019	2018	2017
Stock option pricing model	Black Scholes Merton	Black Scholes Merton	Black Scholes Merton
Expected option life	0.14 years	1.14 years	2.14 years
Risk-free interest rate	1.54%	2.48%	1.98%
Volatility	32.38%	37.94%	43.60%
Dividend yield	—%	—%	—%
Estimated forfeiture rate	—%	—%	—%

The weighted average grant date fair value for stock option awards granted under the 2012 Incentive Plan and the 2019 Incentive Plan were estimated using the following weighted average assumptions during the years ended December 31, 2019, 2018 and 2017.



	2019	2018	2017
Stock option pricing model	Black Scholes Merton	Black Scholes Merton	Black Scholes Merton
Expected option life	4.00 years	4.00 years	4.00 years
Risk-free interest rate	1.46%	2.51%	1.77%
Volatility	48.52%	45.17%	47.00%
Dividend yield	—%	—%	—%
Estimated forfeiture rate	4.43%	2.24%	3.66%
Weighted average fair value of stock option awards granted during the year	$5.04	$12.64	$10.49

The Company estimated the future volatility of its common stock using the historical value of its stock for a period of time commensurate with the expected term of the stock option. The expected term was estimated using the simplified method outlined in Staff Accounting Bulletin Topic 14. The risk-free interest rate is the rate for constant yield U.S. Treasury securities with a term to maturity that is consistent with the expected term of the award.



	Number of options (in thousands)		Weighted average exercise price
Options outstanding at December 31, 2018	3,225		$	23.48
Options granted	540		$	14.80
Options exercised	(223	)	$	14.93
Options forfeited	(10	)	$	27.91
Options expired	(272	)	$	23.22
Options outstanding at December 31, 2019	3,260		$	22.64



	Options outstanding at December 31, 2019				Options exercisable at December 31, 2019
Range of exercise prices	Shares outstanding (in thousands)	Weighted average remaining contractual life	Weighted average exercise price		Shares exercisable (in thousands)	Weighted average exercise price
$9.00	65	0.14	$	9.00	65	$	9.00
$13.22 - $15.40	933	3.74	$	14.87	395	$	14.97
$20.01 - $22.70	663	0.20	$	21.94	658	$	21.95
$25.31 - $29.68	1,599	3.37	$	28.01	897	$	27.66

At December 31, 2019, the aggregate intrinsic value was $3.3 million for outstanding options and $1.8 million for exercisable options, based on the closing price of Matador’s common stock on the appropriate date under the LTIPs. The remaining weighted average contractual term of exercisable options at December 31, 2019 was 1.69 years.

The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017 was $0.8 million, $7.0 million and $13.2 million, respectively. The tax related benefit realized from the exercise of stock options totaled $2.8 million, $5.7 million and $5.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

At December 31, 2019, the total remaining unrecognized compensation expense related to unvested stock options was approximately $5.5 million and the weighted average remaining requisite service period (vesting period) of all unvested stock options was 1.72 years.

The Company has granted stock, restricted stock and restricted stock unit awards to employees, outside directors and advisors of the Company under the LTIPs. The stock and restricted stock are issued upon grant, with the restrictions, if any, being removed upon vesting. The equity-based restricted stock units are issued upon vesting, unless the recipient makes an election to defer issuance for a set term after vesting. Liability-based restricted stock units are settled in cash upon vesting. Restricted stock and restricted stock units granted in 2018 and 2017 were service-based awards and vest over the service period, which is one to four years. Restricted stock and restricted stock units granted in 2019 were either service-based awards, which will settle in cash or equity, or performance-based restricted stock units, which vest in an amount between zero and 200% of the target units granted based on the Company’s relative total shareholder return over the three-year period ending December 31, 2021, as compared to a designated peer group, and will be settled in stock. All restricted stock and restricted stock unit awards outstanding at December 31, 2019 were granted under the 2012 Incentive Plan and the 2019 Incentive Plan.



	Restricted Stock				Restricted Stock Units
	Service Based				Service Based				Performance Based
Non-vested restricted stock and restricted stock units	Shares		Weighted average fair value		Shares		Weighted average fair value		Shares	Weighted average fair value
Non-vested at December 31, 2018	1,356		$	25.87	58		$	27.48	—	$	—
Granted	240		$	19.36	100		$	16.06	428	$	20.00
Vested	(674	)	$	23.02	(57	)	$	27.47	—	$	—
Forfeited	(25	)	$	28.39	(9	)	$	17.31	—	$	—
Non-vested at December 31, 2019	897		$	26.19	92		$	16.06	428	$	20.00

At December 31, 2019, the aggregate intrinsic value for the restricted stock and restricted stock units outstanding was $37.7 million, of which $12.3 million is expected to be settled in cash as calculated based on the maximum number of shares of restricted stock and restricted stock units vesting, based on the closing price of Matador’s common stock on the appropriate date under the LTIPs.

At December 31, 2019, the total remaining unrecognized compensation expense related to unvested restricted stock and restricted stock units was approximately $28.3 million, of which $9.1 million is expected to be settled in cash, and the weighted average remaining requisite service period (vesting period) of all non-vested restricted stock and restricted stock units was 1.80 years.

During the years ended December 31, 2019, 2018 and 2017, the total expense attributable to stock options was $6.4 million, $6.3 million and $7.1 million, respectively. At December 31, 2019, 2018 and 2017, the Company recorded a decrease of $0.1 million to current liabilities, a decrease of $1.1 million to long-term liabilities and an increase of $0.4 million to long-term liabilities, respectively, related to its outstanding liability-based stock options. The Company did not settle any liability-based awards in cash for the years ended December 31, 2019, 2018 and 2017, respectively. During the years ended December 31, 2019, 2018 and 2017, the total expense attributable to restricted stock and restricted stock units was $20.2 million, $15.3 million and $12.9 million, respectively. During the years ended December 31, 2019, 2018 and 2017, the Company capitalized $5.0 million, $4.4 million and $4.1 million, respectively, related to stock-based compensation and expensed the remaining $21.6 million, $17.2 million and $16.7 million, respectively.