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Stock Based Compensation
6 Months Ended
Jun. 30, 2021
Share-based Payment Arrangement [Abstract]  
Stock Based Compensation Stock Based Compensation
On October 8, 2018, the Company’s board of directors adopted the “Magnolia Oil & Gas Corporation Long Term Incentive Plan” (the “Plan”), effective as of July 17, 2018. A total of 16.8 million shares of Class A Common Stock have been authorized for issuance under the Plan as of June 30, 2021. The Company grants stock based compensation awards in the form of restricted stock units (“RSU”), performance stock units (“PSU”), and performance restricted stock units (“PRSU”) to eligible employees and directors to enhance the Company and its affiliates’ ability to attract, retain, and motivate persons who make important contributions to the Company and its affiliates by providing these individuals with equity ownership opportunities. Shares issued as a result of awards granted under the Plan are generally new shares of Class A Common Stock.

Stock based compensation expense is recognized net of forfeitures within “General and administrative expenses” and “Lease operating expenses” on the consolidated statements of operations and was $3.5 million and $3.1 million for the three months ended June 30, 2021 and 2020, respectively, and $6.2 million and $5.9 million for the six months ended June 30, 2021 and 2020,
respectively. The Company has elected to account for forfeitures of awards granted under the Plan as they occur in determining compensation expense.

The following table presents a summary of Magnolia’s unvested RSU, PSU, and PRSU activity for the three months ended June 30, 2021.

Restricted Stock UnitsPerformance Stock UnitsPerformance Restricted Stock Units
UnitsWeighted Average Grant Date Fair ValueUnitsWeighted Average Grant Date Fair ValueUnitsWeighted Average Grant Date Fair Value
Unvested at March 31, 20211,587,243 $8.46 757,944 $11.10 1,001,079 $9.33 
Granted148,996 11.82 — — 9,412 12.19 
Vested(183,523)6.65 (8,333)14.58 — — 
Forfeited— — — — — — 
Unvested at June 30, 20211,552,716 $9.00 749,611 $11.06 1,010,491 $9.36 

The following table presents a summary of Magnolia’s unvested RSU, PSU, and PRSU activity for the six months ended June 30, 2021.

Restricted Stock UnitsPerformance Stock UnitsPerformance Restricted Stock Units
UnitsWeighted Average Grant Date Fair ValueUnitsWeighted Average Grant Date Fair ValueUnitsWeighted Average Grant Date Fair Value
Unvested at December 31, 20201,686,637 $8.51 841,425 $10.95 — $— 
Granted455,128 10.39 — — 1,012,330 9.36 
Vested(524,040)8.50 (16,666)14.58 — — 
Forfeited(65,009)9.96 (75,148)9.13 (1,839)9.33 
Unvested at June 30, 20211,552,716 $9.00 749,611 $11.06 1,010,491 $9.36 

Restricted Stock Units

The Company grants service-based RSU awards to employees and non-employee directors, which generally vest ratably over a three-year service period, in the case of awards to employees, and vest in full after one year, in the case of awards to directors. RSUs represent the right to receive shares of Class A Common Stock at the end of the vesting period equal to the number of RSUs that vest. RSUs are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases to be an employee or director of the Company prior to vesting of the award. Compensation expense for the service-based RSU awards is based upon the grant date market value of the award and such costs are recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award, as if the award was, in-substance, multiple awards. Unrecognized compensation expense related to unvested RSUs as of June 30, 2021 was $9.6 million, which the Company expects to recognize over a weighted average period of 2.0 years.

Performance Stock Units and Performance Restricted Stock Units

The Company grants PRSUs to certain employees. Each PRSU represents the contingent right to receive one share of Class A Common Stock once the PRSU is both vested and earned. PRSUs generally vest either ratably over a three-year service period or at the end of a three-year service period, in each case, subject to the recipient’s continued employment or service through each applicable vesting date. Each PRSU is earned based on whether Magnolia’s stock price achieves a target average stock price for any 20 consecutive trading days during the five-year performance period. If PRSUs are not earned by the end of the five-year performance period (“Performance Condition”), the PRSUs will be forfeited and no shares of Class A Common Stock will be issued, even if the vesting conditions have been met. Compensation expense for the PRSU awards is based upon grant date fair market value of the award, calculated using a Monte Carlo simulation, as presented below, and such costs are recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award, as if the award was, in-substance, multiple awards, as applicable. Unrecognized compensation expense related to unvested PRSUs as of June 30, 2021 was $8.3 million, which the Company expects to recognize over a weighted average period of 2.8 years.
The Company grants PSUs to certain employees. Each PSU, to the extent earned, represents the contingent right to receive one share of Class A Common Stock and the awardee may earn between zero and 150% of the target number of PSUs granted based on the total shareholder return (“TSR”) of the Class A Common Stock relative to the TSR achieved by a specific industry peer group over a three-year performance period, the last day of which is also the vesting date. In addition to the TSR conditions, vesting of the PSUs is subject to the awardee’s continued employment through the date of settlement of the PSUs, which will occur within 60 days following the end of the performance period. Unrecognized compensation expense related to unvested PSUs as of June 30, 2021 was $1.6 million, which the Company expects to recognize over a weighted average period of 1.1 years.

The grant date fair values of the PRSUs granted during the six months ended June 30, 2021 and the PSUs granted during the six months ended June 30, 2020, were $9.5 million and $2.5 million, respectively. Since the Performance Condition was met on March 17, 2021, the fair value of the PRSUs granted after this date was based upon the grant date market value of the award. The fair values of the awards granted prior to March 17, 2021 were determined using a Monte Carlo simulation. The following table summarizes the Monte Carlo simulation assumptions used to calculate the grant date fair value of the PRSUs in 2021 and the PSUs in 2020.
Six Months Ended
PRSU and PSU Grant Date Fair Value AssumptionsJune 30, 2021June 30, 2020
Expected term (in years)
3.642.85
Expected volatility55.18%33.50%
Risk-free interest rate0.56%1.16%