COMMON STOCK PLANS

Stock Incentive Plan: The Stock Incentive Plan provides for the grant of performance share awards and restricted stock units and restricted stock. The Stock Incentive Plan also provides for the grant of non-qualified stock options and incentive stock options to officers and key employees. Under the Stock Incentive Plan, established in 1997, 3,327,232 shares of Energen common stock are reserved for issuance, adjusted for stock splits, with 1,444,057 available for future grants as of December 31, 2017.

Performance Share Awards: The Stock Incentive Plan provides for the grant of performance share awards to eligible employees based on predetermined Energen performance criteria at the end of an award period. The Stock Incentive Plan provides that payment of earned performance share awards be made in the form of Energen common stock.

A summary of performance share award activity as of December 31, 2017, and transactions during the years ended December 31, 2017, 2016 and 2015 is presented below:



	Performance Share Awards
	Shares		Weighted Average Price
Nonvested at December 31, 2014	212,968		$	71.53
Granted (three-year vesting period)	120,372		83.94
Vested and paid	(77,257	)	61.36
Nonvested at December 31, 2015	256,083		80.43
Granted (three-year vesting period)	167,016		25.34
Vested and paid	(74,176	)	63.88
Forfeited	(12,481	)	72.30
Nonvested at December 31, 2016	336,442		57.03
Granted (two-year vesting period)	3,116		96.54
Granted (three-year vesting period)	137,084		66.89
Vested and paid	(59,530	)	93.52
Forfeited	(17,075	)	48.55
Nonvested at December 31, 2017	400,037		$	55.65

Energen recorded expense of $7.4 million, $6.2 million and $6.7 million for the years ended December 31, 2017, 2016 and 2015, respectively, for performance share awards with a related deferred income tax benefit of $1.4 million, $1.2 million and $2.4 million, after consideration of certain executive compensation limits under IRC Section 162(m). As of December 31, 2017, there was $7.2 million of total unrecognized compensation cost related to performance share awards. These awards have a remaining weighted average requisite service period of 1.12 years.

Restricted Stock: In addition, the Stock Incentive Plan provides for the grant of restricted stock and restricted stock units (restricted stock awards) which have been valued based on the quoted market price of Energen’s common stock at the date of grant. Restricted stock awards vest within three years from grant date. A summary of restricted stock award activity as of December 31, 2017, and transactions during the years ended December 31, 2017, 2016 and 2015 is presented below:



	Restricted Stock
	Awards		Weighted Average Price
Nonvested at December 31, 2014	99,574		$	59.60
Restricted stock units granted	99,814		65.15
Vested	(14,446	)	53.20
Nonvested at December 31, 2015	184,942		63.09
Restricted stock units granted	197,473		29.89
Vested	(56,337	)	54.70
Forfeited	(435	)	40.73
Nonvested at December 31, 2016	325,643		44.44
Restricted stock units granted	128,272		52.42
Vested	(45,576	)	65.68
Forfeited	(2,803	)	44.68
Nonvested at December 31, 2017	405,536		$	44.58

Energen recorded expense of $6.7 million, $5.3 million and $6.0 million for the years ended December 31, 2017, 2016 and 2015, respectively, related to restricted stock awards, with a related deferred income tax benefit of $1.3 million, $1.1 million and $1 million, respectively, after consideration of certain executive compensation limits under IRC Section 162(m). As of December 31, 2017, there was $2.3 million of total unrecognized compensation cost related to nonvested restricted stock awards recorded in premium on capital stock. These awards have a remaining requisite service period of 1.18 years.

Stock Options: The Stock Incentive Plan provides for the grant of non-qualified stock options, incentive stock options, or a combination thereof to officers and key employees. Options granted under the Stock Incentive Plan provide for the purchase of Energen common stock at not less than the fair market value on the date the option was granted. The sale or transfer of the shares is limited during certain periods. All outstanding options are non-qualified, are fully vested and expire 10 years from the grant date.

A summary of stock option activity as of December 31, 2017, and transactions during the years ended December 31, 2017, 2016 and 2015 are presented below:



	Stock Options
	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2014	757,071		$	54.88
Exercised	(23,680	)	41.42
Outstanding at December 31, 2015	733,391		55.32
Exercised	(22,490	)	44.60
Outstanding at December 31, 2016	710,901		55.66
Exercised	(6,052	)	48.36
Expired	(27,284	)	58.40
Outstanding at December 31, 2017	677,565		$	55.61
Exercisable at December 31, 2015	622,156		$	53.80
Exercisable at December 31, 2016	676,271		$	54.79
Exercisable at December 31, 2017	677,565		$	55.61

In 2017, Energen’s stock option expense was not significant. Energen recorded stock option expense of $0.1 million and $0.4 million during the years ended December 31, 2016 and 2015, respectively, with a related deferred tax benefit of $44,000 and $0.1 million, respectively.

The total intrinsic value of stock options exercised during the year ended December 31, 2017, was $17,271. During the year ended December 31, 2017, Energen received cash of $0.3 million from the exercise of stock options. The total intrinsic value for outstanding options as of December 31, 2017, was $3.1 million, all of which were exercisable. The fair value of options vested for the year ended December 31, 2017 was $1.0 million. As of December 31, 2017, there was no unrecognized compensation cost related to outstanding nonvested stock options.

The following table summarizes options outstanding as of December 31, 2017:



Exercise Prices	Shares	Weighted Average Remaining Contractual Life
$60.56	48,560	0.07 years
$29.79	21,791	1.00 year
$46.69	26,481	2.00 years
$54.99	101,285	3.00 years
$54.11	254,426	4.00 years
$48.36	117,446	5.00 years
$80.48	3,686	5.79 years
$72.39	101,451	6.00 years
$79.63	2,439	6.00 years
$29.79-$80.48	677,565	3.88 years

All stock options are exercisable as of December 31, 2017.

Stock Appreciation Rights Plan: The Energen Stock Appreciation Rights Plan provides for the payment of cash incentives measured by the long-term appreciation of Energen common stock. Officers of Energen are not eligible to participate in this Plan. These awards are liability awards which settle in cash and are remeasured each reporting period until settlement. These awards have a three year requisite service period.

A summary of stock appreciation rights activity as of December 31, 2017, and transactions during the years ended December 31, 2017, 2016 and 2015 are presented below:



	Stock Appreciation Rights Plan
	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2014	275,150		$	52.96
Exercised/forfeited	(10,283	)	55.18
Outstanding at December 31, 2015	264,867		52.88
Exercised/forfeited	(12,338	)	61.51
Outstanding at December 31, 2016	252,529		52.46
Exercised/forfeited	(12,285	)	50.43
Outstanding at December 31, 2017	240,244		$	52.56

Energen issued the following awards with stock appreciation rights. Energen uses the Black-Scholes pricing model to calculate the fair values of the rights awarded. Certain stock appreciation rights have been modified subsequent to the original grant date. For purposes of this valuation the following assumptions were used to derive the fair values as of December 31, 2017:



Grant date	1/22/2014	1/22/2014	1/22/2014	1/24/2013	1/24/2013	1/24/2013
		(modified)	(modified)		(modified)	(modified)
Awards granted	46,710	15,517	522	63,436	20,218	768
Fair market value of award	$11.53	$6.92	$4.93	$18.89	$16.21	$14.43
Expected life of award	3.03 years	1.63 years	1.13 years	2.53 years	1.63 years	1.13 years
Risk-free interest rate	1.98%	1.86%	1.79%	1.92%	1.86%	1.79%
Annualized volatility rate	38.1%	38.1%	38.1%	38.1%	38.1%	38.1%
Dividend yield	—%	—%	—%	—%	—%	—%



Grant date	1/24/2013	1/26/2011	1/26/2011	1/27/2010	1/28/2009	2/4/2008
	(modified)		(modified)
Awards granted	3,578	182,199	7,785	171,749	305,257	67,093
Fair market value of award	$11.69	$12.54	$7.64	$15.12	$28.06	$0.25
Expected life of award	0.50 years	1.54 years	0.50 years	1.04 years	0.54 years	0.05 years
Risk-free interest rate	1.53%	1.86%	1.53%	1.77%	1.54%	1.25%
Annualized volatility rate	38.1%	38.1%	38.1%	38.1%	38.1%	38.1%
Dividend yield	—%	—%	—%	—%	—%	—%

Income associated with stock appreciation rights of $0.5 million and $3.2 million was recorded for the years ended December 31, 2017 and 2015, respectively. Expense associated with stock appreciation rights of $2.6 million was recorded for the year ended 2016. During the year ended December 31, 2017, the total intrinsic value of stock appreciation rights exercised was $34,000. During the year ended December 31, 2017, Energen paid $23,000 in settlement of stock appreciation rights.

Petrotech Incentive Plan: The Energen Resources’ Petrotech Incentive Plan provides for the grant of stock equivalent units which may include market conditions. Officers of Energen are not eligible to participate in this Plan. These awards are liability awards which are remeasured each reporting period and settle in cash at completion of the vesting period. Stock equivalent units with service conditions are valued based on Energen’s stock price at the end of the period adjusted to remove the present value of future dividends.

A summary of Petrotech unit activity as of December 31, 2017, and transactions during the years ended December 31, 2017, 2016 and 2015 are presented below:



	Petrotech Incentive Plan
	Shares
Outstanding at December 31, 2014	213,870
Granted (three-year vesting period)	128,519
Granted (two-year vesting period)	297
Granted (16 month vesting period)	1,648
Paid	(78,430	)
Forfeited	(22,158	)
Outstanding at December 31, 2015	243,746
Paid	(67,392)
Forfeited	(32,111)
Outstanding at December 31, 2016	144,243
Paid	(55,973)
Forfeited	(4,095)
Outstanding at December 31, 2017	84,175

Energen recognized expense of $1.8 million, $5.4 million and $3.0 million during 2017, 2016 and 2015, respectively, related to these units.

1997 Deferred Compensation Plan: The 1997 Deferred Compensation Plan allows officers and non-employee directors to defer certain compensation. Amounts deferred by a participant under the 1997 Deferred Compensation Plan are credited to accounts maintained for a participant in either a stock account or an investment account. The stock account tracks the performance of Energen’s common stock, including reinvestment of dividends. The investment account tracks the performance of certain mutual funds. Energen has funded, and presently plans to continue funding, a trust in a manner that generally tracks participants’ accounts under the 1997 Deferred Compensation Plan. While intended for payment of benefits under the 1997 Deferred Compensation Plan, the trust’s assets remain subject to the claims of our creditors. Amounts earned under the 1997 Deferred Compensation Plan and invested in Energen common stock held by the trust have been recorded as treasury stock, along with the related deferred compensation obligation in the consolidated statements of shareholders’ equity. As of December 31, 2017, there were 568,688 shares reserved for issuance from the 1997 Deferred Compensation Plan.

1992 Energen Corporation Directors Stock Plan: In 1992 Energen adopted the Energen Corporation Directors Stock Plan to pay a portion of the compensation of its non-employee directors in shares of Energen common stock. Under the Plan, 14,000 shares, 25,470 shares and 11,550 shares were awarded during the years ended December 31, 2017, 2016 and 2015, respectively, leaving 76,904 shares reserved for issuance as of December 31, 2017.

Stock Repurchase Authorization: By resolution adopted October 22, 2014, the Board of Directors authorized Energen to repurchase up to 3,600,000 shares of Energen common stock. The resolution does not have an expiration date and does not limit Energen’s authorization to acquire shares in connection with tax withholdings and payment of exercise price on stock compensation plans. There were no shares repurchased pursuant to its repurchase authorization for the years ended December 31, 2017, 2016 and 2015. As of December 31, 2017, a total of 3,373,161 shares remain authorized for future repurchase. Energen also acquires shares in connection with withholdings from participants to satisfy tax obligations under Energen’s stock compensation plans. For the years ended December 31, 2017, 2016 and 2015, Energen acquired 60,762 shares, 88,320 shares and 73,126 shares, respectively, in connection with its stock compensation plans.