Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

In 2012, the Company’s Board of Directors (the “Board”) 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.

In 2019, the Board adopted and shareholders approved the 2019 Incentive Plan. In April 2022, the Board adopted, subject to shareholder approval, the first amendment to the 2019 Long-Term Incentive Plan, authorizing an additional 3,725,000 shares of common stock for issuance to employees, directors, contractors or advisors of the Company. In June 2022, the Company’s shareholders approved such amendment. As of December 31, 2022, the 2019 Incentive Plan provided for a maximum of 4,174,443 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 2012 Incentive Plan, but the 2012 Incentive Plan will remain in place until all awards outstanding under that plan have been settled.

The 2012 Incentive Plan and 2019 Incentive Plan are administered by the independent members of the Board, who, upon recommendation of the Strategic Planning and Compensation Committee of the Board, 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.

During the years ended December 31, 2022, 2021 and 2020, the Company granted 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.

In April 2022, the Board adopted, subject to shareholder approval, an Employee Stock Purchase Plan (the “ESPP”). The purpose of the ESPP is to encourage and enable the Company’s eligible employees to acquire an interest in the Company through the ownership of common stock. In June 2022, the Company’s shareholders approved and authorized a maximum of 4.0 million shares of common stock to be purchased under the ESPP. At December 31, 2022, the Company had 3,977,456 remaining shares available for issuance under the ESPP.

Stock Options

Under the 2012 Incentive Plan and the 2019 Incentive Plan, stock option awards have been granted and are outstanding 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 2012 Incentive Plan defines 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. The Company did not grant stock option awards during the years ended December 31, 2022, 2021 and 2020.

Summarized information about stock options outstanding at December 31, 2022 under the 2012 Incentive Plan and the 2019 Incentive Plan (collectively, the “LTIPs”) is as follows.


	Number of options (in thousands)	Weighted average exercise price
Options outstanding at December 31, 2021	603	$	22.92
Options granted	—	$	—
Options exercised	(445)	$	24.35
Options forfeited	(8)	$	14.80
Options expired	—	$	—
Options outstanding at December 31, 2022	150	$	19.11


	Options outstanding at December 31, 2022				Options exercisable at December 31, 2022
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
$14.48 - $14.80	103	2.66	$	14.80	103	$	14.80

$26.86 - $29.68	47	0.74	$	28.60	47	$	28.60

At December 31, 2022, the aggregate intrinsic value for both outstanding and exercisable options was $5.7 million, 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, 2022 was 2.06 years.

The total intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was $14.4 million, $15.8 million and $0.3 million, respectively. At December 31, 2022, the Company did not have any unvested stock options or unrecognized compensation expense associated with unvested stock options.

The fair value of options vested during 2022, 2021 and 2020 was $0.8 million, $3.0 million and $6.7 million, respectively.

Service-Based Restricted Stock, Restricted Stock Units and Common Stock

The Company has granted stock, restricted stock and restricted stock unit awards to employees, consultants, 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 2022, 2021 and 2020 were service-based awards, which will settle in cash or equity, and vest over a one-year to three-year period. Performance-based restricted stock units granted in 2022 and 2021 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 periods ending December 31, 2024 and 2023, respectively, as compared to a designated peer group, and will be settled in equity.

Equity-Based

A summary of the non-vested equity-based restricted stock and restricted stock units as of December 31, 2022 is presented below (in thousands, except fair value).


	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, 2021	589	$	24.59		33	$	33.39	963	$	20.26
Granted	236	$	45.58		16	$	66.16	230	$	65.49
Vested(1)	(126)	$	24.07		(33)	$	33.39	(597)	$	1.74
Forfeited	(41)	$	19.12		—	$	—	—	$	—
Non-vested at December 31, 2022	658	$	24.59		16	$	66.16	596	$	56.31

__________________

(1)On December 31, 2022, 597,414 of the performance-based awards that were granted in 2020 vested. The vested units earned 175% for each vested award representing 1,045,472 aggregate shares of common stock, which were issued on December 31, 2022.

Liability-Based

A summary of the non-vested liability-based restricted stock units as of December 31, 2022 is presented below (in thousands).



Non-vested restricted stock units																														Shares
Non-vested at December 31, 2021																														1,102
Granted																														226
Vested																														(587)
Forfeited																														(19)
Non-vested at December 31, 2022																														722

During the years ended December 31, 2022, 2021 and 2020, the Company settled 587,251, 487,252 and 226,363 liability-based awards, respectively, for $30.8 million, $12.4 million and $2.4 million in cash, respectively.

At December 31, 2022, the aggregate intrinsic value for the restricted stock and restricted stock units outstanding was $114.1 million, of which $41.3 million is expected to be settled in cash as calculated based on the maximum number of shares of restricted stock units vesting, based on the closing price of Matador’s common stock on the appropriate date under the LTIPs.

At December 31, 2022, the total remaining unrecognized compensation expense related to unvested restricted stock and restricted stock units was approximately $56.1 million, of which $23.4 million is expected to be settled in cash, based on the

closing price of Matador’s common stock on the appropriate date under the LTIPs. The weighted average remaining requisite service period (vesting period) of all non-vested restricted stock and restricted stock units was 1.7 years.

The fair value of restricted stock and restricted stock units vested during 2022, 2021 and 2020 was $99.6 million, $51.9 million and $8.4 million, respectively.

Summary

During the years ended December 31, 2022, 2021 and 2020, the total expense attributable to stock options was $0.5 million, $1.0 million and $3.4 million, respectively. During the years ended December 31, 2022, 2021 and 2020, the total expense attributable to restricted stock and restricted stock units was $51.6 million, $36.3 million and $17.7 million, respectively. During the years ended December 31, 2022, 2021 and 2020, the Company capitalized $5.0 million, $7.2 million and $3.6 million, respectively, related to stock-based compensation and expensed the remaining $47.1 million, $30.0 million and $17.6 million, respectively.

The total tax benefit recognized for all stock-based compensation was $11.0 million, $7.9 million and $4.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.