Equity Incentive Compensation Plans and Other Benefit Plans

The Company's 2010 Equity Incentive Plan (the 2010 Plan), approved by the Company's shareholders in May 2010, provides for granting of equity compensation up to an aggregate of 1,000,000 shares of Common Stock. The purpose of the 2010 Plan is to encourage ownership in the Company by key personnel whose long-term service is considered essential to the Company's continued progress and, thereby, align participants' and shareholders' interests. Stock options, stock appreciation rights (SARs), cash awards and stock awards, including restricted shares and stock units, may be granted under the 2010 Plan. The exercise price of an option may not be less than the fair market value of one share of Common Stock on the date of grant. Stock options and restricted stock awards granted under the 2010 Plan have historically vested either in increments of 25% on each of the first four anniversary dates of the date of grant or 100% after three years. Stock options and restricted stock units (RSUs) granted to non-employee directors have historically vested immediately. Options granted under the 2010 Plan have a term of 10 years. As of December 31, 2011, the Company had 697,596 shares available to be issued under the 2010 Plan.

The 2005 Equity Incentive Plan (the 2005 Plan), approved by the Company's shareholders in May 2005, provides for granting of equity compensation up to an aggregate of 2,900,000 shares of Common Stock. The purpose of the 2005 Plan is to encourage ownership in the Company by key personnel whose long-term service is considered essential to the Company's continued progress and, thereby, align participants' and shareholders' interests. Stock options, stock appreciation rights (SARs), cash awards and stock awards, including restricted shares and stock units, may be granted under the 2005 Plan. The exercise price of an option shall not be less than the fair market value of one share of Common Stock on the date of grant. Stock options and restricted stock awards granted under the 2005 Plan have historically vested in increments of 25% on each of the first four anniversary dates of the date of grant or 100% after three years. Stock options and RSUs granted to non-employee directors have historically vested immediately. Options granted under the 2005 Plan have a term of 10 years. As of December 31, 2011, the Company had 189,297 shares available to be issued under the 2005 Plan.

Total compensation expense recognized in the Statements of Operations for grants under the Company's equity incentive plans was $9.0 million, $8.3 million and $7.7 million in 2011, 2010 and 2009, respectively.

Stock Options

The following table summarizes stock option activity for the years ended December 31, 2011, 2010 and 2009:



	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)(1)		Number of Shares Exercisable
Outstanding at January 1, 2009	2,421,650		$	25.16	$	—	1,842,532
Granted	—		—
Exercised	(62,050	)	13.52		560
Cancelled/expired	(83,580	)	28.48
Outstanding as of December 31, 2009	2,276,020		25.36		15,296		2,008,325
Granted	—		—
Exercised	(227,100	)	19.40		3,570
Cancelled/expired	(31,695	)	35.51
Outstanding at December 31, 2010	2,017,225		25.87		35,974		1,884,937
Granted	89,865		48.50
Exercised	(579,635	)	17.47		17,746
Cancelled/expired	(6,765	)	45.92
Outstanding at December 31, 2011	1,520,690		$	30.32	$	17,798	1,434,020

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(1)	The intrinsic value of a stock option is the amount by which the market value of the underlying stock at the end of the related period exceeds the exercise price of the option.

In March 2011, 89,865 stock options were granted under the 2010 Plan to certain executive officers and other officers of the Company with exercise prices equal to the closing market price of the Company's Common Stock on the grant date. These stock options generally vest ratably over a four-year service period from the grant date and are exercisable immediately upon vesting through the tenth anniversary of the grant date.

The fair value of each option granted was estimated using the Black-Scholes option pricing model. Expected volatility was calculated based on the historical volatility of the Company's Common Stock, and the risk-free interest rate was based on U.S. treasury yield curve rates with maturities consistent with the expected life of each stock option. The key assumptions used in computing the weighted average fair market value of stock options granted were as follows:



	2011
Expected volatility	45.00	%
Risk-free rate	2.54	%
Dividend yield	0.62	%
Expected term (in years)	6.0

The following table summarizes information about stock options outstanding at December 31, 2011:



	Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighed Average Exercise Price		Aggregate Intrinsic Value (in thousands)	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighed Average Exercise Price		Aggregate Intrinsic Value (in thousands)
$7.00-$15.00	199,000	2.13	$	12.36	5,902	199,000	2.13	$	12.36	$	5,902
$15.01-$25.00	287,000	2.90	21.60		5,861	287,000	2.90	21.60		5,861
$25.01-$35.00	655,001	4.51	31.65		6,792	655,001	4.51	31.65		6,792
$35.01-$48.50	379,689	6.79	44.01		—	293,019	6.09	42.68		—
	1,520,690	4.47	$	30.32	17,798	1,434,020	4.18	$	29.22	$	18,360

As of December 31, 2011, there was $1.3 million of total unrecognized compensation expense related to outstanding stock options, which is expected to be recognized over the next 3.25 years.

Restricted Stock Units

The following table summarizes RSU activity for the years ended December 31, 2011, 2010 and 2009:



	RSUs		Weighted Average Intrinsic Value at Grant Date		Vest Date Fair Value (in thousands)
Outstanding at January 1, 2009	966,198		$	20.83
Granted	294,504		26.72
Issued	(107,375	)	28.98		$	2,574
Canceled/expired	(46,034	)	25.08
Outstanding at December 31, 2009(1)(2)	1,107,293		$	22.14
Granted	34,529		30.94
Issued	(246,633	)	28.98		$	7,813
Canceled/expired	(37,829	)	22.20
Outstanding at December 31, 2010(1)(2)	857,360		$	19.67
Granted	159,333		47.98
Issued	(62,127	)	26.18		$	2,588
Canceled/expired	(39,544	)	25.12
Outstanding at December 31, 2011(1)(2)	915,022		$	23.88

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(1)	The balance outstanding includes RSUs granted to the non-employee directors that 100% vested at date of grant but are subject to a deferral election before the corresponding shares of Common Stock are issued. For the years ended December 31, 2011, 2010 and 2009, 30,544, 10,522 and 10,522 RSUs have vested, but the corresponding shares of Common Stock have not been issued.

(2)

The balance outstanding includes RSUs granted to executive officers and other officers that have vested in accordance with the RSU agreement, but are subject to a deferral election before the corresponding shares of Common Stock are issued. For the years ended December 31, 2011, 2010 and 2009, 483,908, 289,335, and 124,799 RSUs have vested, but the corresponding shares of Common Stock have not been issued.

The grant date fair value of RSUs issued under the 2005 Plan was determined by reference to the average high and low stock price of a share of Common Stock on the date of grant. The grant date fair value of RSUs issued under the 2010 Plan was determined by reference to the closing price of a share of Common Stock on the date of grant. The Company uses historical data and projections to estimate expected restricted stock forfeitures. The expected forfeitures are then included as part of the grant date estimate of compensation cost.

As of December 31, 2011, there was $7.9 million of total unrecognized compensation expense related to RSUs granted. That cost is expected to be recognized over 3.25 years.

Performance Share Program

The following table summarizes performance share award activity for the years ended December 31, 2011, 2010 and 2009:



	Performance Share Awards		Weighted Average Grant Date Fair Value		Vest Date Fair Value (in thousands)
Outstanding at January 1, 2009	—		$	—
Granted	—		—
Issued	—		—		$	—
Canceled/expired	—		—
Outstanding at December 31, 2009	—		$	—
Granted	103,794		31.20
Issued	—		—		$	—
Canceled/expired	—		—
Outstanding at December 31, 2010	103,794		$	31.20
Granted	65,620		51.86
Issued	—		—		$	—
Canceled/expired	(6,565	)	44.20
Outstanding at December 31, 2011	162,849		$	39.00

In March 2011, 65,620 RSUs that are subject to internal performance metrics and market based vesting criteria in addition to a three-year service condition (performance share awards), were granted to executive officers and other officers. The ultimate vesting of performance share awards is contingent upon meeting the established criteria. From January 1, 2011 to December 31, 2013, the Company must maintain an interest coverage ratio of at least 2.5 to 1.0. The number of performance share awards that ultimately vest is based on two equally weighted performance factors: (i) average daily production growth with respect to certain of the Company's assets on an annual basis and (ii) total shareholder return as compared to the Company's defined peer group for years 2011-2013.

For the portion of the performance share awards subject to internal performance metrics, the grant date fair value was determined by reference to the closing price of a share of Common Stock on the date of grant. The Company recognizes compensation expense when it becomes probable that these conditions will be achieved. However, any such compensation expense recognized is reversed if vesting does not actually occur.

For the portion of the performance share awards subject to market based vesting criteria, the grant date fair value was estimated using a Monte Carlo valuation model. The Monte Carlo model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility was calculated based on the historical volatility of the Company's Common Stock, and the risk-free interest rate is based on U.S. treasury yield curve rates with maturities consistent with the three-year vesting period. The key assumptions used in valuing the market-based portion of the performance share awards were as follows:



	2011		2010
Number of simulations	100,000		100,000
Expected volatility	44	%	79	%
Risk-free rate	1.15	%	1.36	%

The total grant date fair value of the market-based portion of the performance share awards issued in 2011 and 2010, as determined by the Monte Carlo valuation model, was $1.1 million and $1.0 million, respectively, and is being recognized ratably over the respective three-year vesting period. Compensation expense for the market-based portion of the performance share awards is not reversed if vesting does not actually occur.

As of December 31, 2011, there was $1.4 million of total unrecognized compensation cost related to performance share awards granted. This cost is expected to be recognized over 2 years.

Director Fees

The Company's directors may elect to receive their annual retainer and meeting fees in the form of the Company's Common Stock issued pursuant to the Company's Non-Employee Director Deferred Stock and Compensation Plan (the Deferred Plan). The plan permits eligible directors, in recognition of their contributions to the Company, to receive compensation for service and to defer recognition of their compensation in whole or in part to a stock unit account or an interest account. When the eligible director ceases to be a director, the distribution from the stock unit account is made in shares of Common Stock. The distribution from the interest account is made in cash. Shares of Common Stock earned and deferred in accordance with the Deferred Plan as of December 31, 2011, 2010 and 2009 were 13,647, 38,462, and 124,686, respectively.

Amounts allocated to the stock unit account have the right to receive a "dividend equivalent" equal to the dividends declared and paid by the Company. The dividend equivalent is treated as reinvested in an additional number of units and credited to the director's account using an established market value. Amounts allocated to the interest account are credited with interest at an established interest rate.

Other Employee Benefits—401(k) Plan

The Company sponsors a defined contribution thrift plan under section 401(k) of the Internal Revenue Code to assist all employees in providing for retirement or other future financial needs. The Company currently matches 100% of each employee's contribution up to 8% of an employee's eligible compensation. The Company's contributions to the 401(k) Plan, net of forfeitures, for the years ended December 31, 2011, 2010 and 2009 were $1.8 million, $1.5 million and $1.4 million, respectively. Employees are eligible to participate in the 401(k) Plan on their date of hire and approximately 98% of the Company's employees participated in the 401(k) Plan in 2011.