(13) STOCK-BASED COMPENSATION PLANS

Stock-Based Awards

In 2005, we began granting SARs which represent the right to receive a payment equal to the excess of the fair market value of shares of our common stock on the date the right is exercised over the value of the stock on the date of grant. All SARs granted under our Amended and Restated 2005 Equity-Based Incentive Compensation Plan (the “2005 Plan”) will be settled in shares of stock, vest over a three-year period and have a maximum term of five years from the date they are granted. In 2011, the Compensation Committee of the Board of Directors began granting restricted stock units under our equity-based stock compensation plans. These restricted stock units, which we refer to as restricted stock Equity Awards, vest over a three-year period. All awards granted have been issued at prevailing market prices at the time of grant and the vesting of these shares is based upon an employee’s continued employment with us.

In first quarter 2014, the Compensation Committee began granting performance share unit (“PSU”) awards under our 2005 Plan. The number of shares to be issued is determined by our total shareholder return compared to the total shareholder return of a predetermined group of peer companies over the performance period. The grant date fair value of the PSU awards is determined using a Monte Carlo simulation and is recognized as stock-based compensation expense over the three-year performance period. The actual payout of shares granted depends on our total shareholder return compared to our peer companies and will be between zero and 150%.

The Compensation Committee also grants restricted stock to certain employees and non-employee directors of the Board of Directors as part of their compensation. Upon grant of these restricted shares, which we refer to as restricted stock Liability Awards, the shares generally are placed in our deferred compensation plan and, upon vesting, employees are allowed to take withdrawals either in cash or in stock based on their distribution elections. Compensation expense is recognized over the vesting period, which is typically three years for employee grants and immediate vesting for non-employee directors. All restricted stock awards are issued at prevailing market prices at the time of the grant and vesting is based upon an employee’s continued employment with us. Prior to vesting, all restricted stock awards have the right to vote such shares and receive dividends thereon. These Liability Awards are classified as a liability and are remeasured at fair value each reporting period. This mark-to-market adjustment is reported as deferred compensation plan expense in the accompanying consolidated statements of operations.

Total Stock-Based Compensation Expense

Stock-based compensation represents amortization of restricted stock, PSUs and SARs expense. Unlike the other forms of stock-based compensation, the mark-to-market adjustment of the liability related to the vested restricted stock held in our deferred compensation plan is directly tied to the change in our stock price and not directly related to the functional expenses and therefore, is not allocated to the functional categories. The following table details the allocation of stock-based compensation to functional expense categories (in thousands):

		Three Months Ended March 31,
		2016		2015
Direct operating expense	$	588	$	886
Brokered natural gas and marketing expense		516		506
Exploration expense		690		732
General and administrative expense		11,113		11,080
Termination costs		¾		1,287
Total stock-based compensation	$	12,907	$	14,491

Performance Share Unit Awards

The following is a summary of our non-vested PSU awards outstanding at March 31, 2016:

	Number of Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2015		262,124		$	64.77
Units granted ^(a)		118,193			30.47
Units vested		(42,546	)		60.75
Units forfeited		¾			¾
Outstanding at March 31, 2016		337,771		$	53.28

^(a) Amounts granted reflect the number of performance units granted; however, the actual payout of shares will be between zero percent and 150% of the performance units granted depending on the total shareholder return ranking compared to the peer companies at the end of the three-year performance period.

The following assumptions were used to estimate the fair value of PSUs granted during first quarter 2016:

		Three Months Ended March 31,
		2016			2015
Risk-free interest rate		0.85	%		1.05	%
Expected annual volatility		51.7	%		33.9	%
Weighted average grant date fair value per unit	$	30.47		$	55.17

We recorded PSU compensation expense of $2.5 million in first quarter 2016 compared to $1.3 million in the same period of 2015.

Restricted Stock Awards

Equity Awards

In first quarter 2016, we granted 927,000 restricted stock Equity Awards to employees at an average grant price of $28.04 compared to 548,000 restricted stock Equity Awards granted to employees at an average grant price of $52.25 in first quarter 2015. These awards generally vest over a three-year period. We recorded compensation expense for these Equity Awards of $5.8 million in first quarter 2016 compared to $7.8 million in the same period of 2015. Equity Awards are not issued to employees until they are vested. Employees do not have the option to receive cash.

Liability Awards

In first quarter 2016, we granted 136,000 shares of restricted stock Liability Awards as compensation to employees at an average price of $28.40 with vesting generally over a three-year period. In first quarter 2015, we granted 95,000 shares of Liability Awards as compensation to employees at an average price of $52.25 with vesting generally over a three-year period. We recorded compensation expense for Liability Awards of $3.7 million in the first quarter 2016 compared to $3.9 million in the same period of 2015. Substantially all of these awards are held in our deferred compensation plan, are classified as a liability and are remeasured at fair value at the end of each reporting period. This mark-to-market adjustment is reported as deferred compensation expense in our consolidated statements of operations (see additional discussion below). The following is a summary of the status of our non-vested restricted stock outstanding at March 31, 2016:

	Equity Awards					Liability Awards
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2015		436,764		$	59.74		308,737		$	65.80
Granted		927,266			28.04		136,275			28.40
Vested		(135,715	)		49.30		(69,683	)		65.22
Forfeited		(30,281	)		50.73		(4,038	)		52.45
Outstanding at March 31, 2016		1,198,034		$	36.61		371,291		$	52.32

Stock Appreciation Right Awards

We have one active equity-based stock plan which we refer to as the 2005 Plan. Under this plan, incentive and non-qualified stock options, SARs, and various other awards may be issued to non-employee directors and employees pursuant to decisions of the Compensation Committee, which is comprised of only non-employee, independent directors. There were 1.4 million SARs outstanding at March 31, 2016. Information with respect to SARs activity is summarized below:

	Shares			Weighted Average Exercise Price
Outstanding at December 31, 2015		1,510,977		$	63.73
Exercised		¾			—
Expired/forfeited		(102,661	)		49.18
Outstanding at March 31, 2016		1,408,316		$	64.79

Deferred Compensation Plan

Our deferred compensation plan gives non-employee directors and officers the ability to defer all or a portion of their salaries and bonuses and invest in Range common stock or make other investments at the individual’s discretion. Range provides a partial matching contribution which vests over three years. The assets of the plan are held in a grantor trust, which we refer to as the Rabbi Trust, and are therefore available to satisfy the claims of our general creditors in the event of bankruptcy or insolvency. Our stock held in the Rabbi Trust is treated as a liability award as employees are allowed to take withdrawals from the Rabbi Trust either in cash or in Range stock. The liability for the vested portion of the stock held in the Rabbi Trust is reflected as deferred compensation liability in the accompanying consolidated balance sheets and is adjusted to fair value each reporting period by a charge or credit to deferred compensation plan expense on our consolidated statements of operations. The assets of the Rabbi Trust, other than our common stock, are invested in marketable securities and reported at their market value as other assets in the accompanying consolidated balance sheets. The deferred compensation liability reflects the vested market value of the marketable securities and Range stock held in the Rabbi Trust. Changes in the market value of the marketable securities and changes in the fair value of the deferred compensation plan liability are charged or credited to deferred compensation plan expense each quarter. Due to an increase in the Range stock price since December 31, 2015, we recorded a mark-to-market loss of $16.1 million in first quarter 2016 compared to a gain of $5.6 million in first quarter 2015. The Rabbi Trust held 2.8 million shares (2.4 million of which were vested) of Range stock at March 31, 2016 compared to 2.8 million shares (2.5 million of which were vested) at December 31, 2015.