COMMON STOCK

12 Months Ended

Dec. 31, 2021

NOTE 14 - COMMON STOCK

Stock-Based Compensation Plans

2018 Equity Incentive Plan. In 2020, our stockholders approved an amendment to increase the number of shares of our common stock reserved for issuance pursuant to our long-term equity compensation plan for employees and non-employee directors (the “2018 Plan”) from 1,800,000 to 7,050,000 shares. The 2018 Plan expires in March 2028. The capital stock available for issuance under the 2018 Plan consists of shares of the Company’s authorized but unissued common stock or previously issued common stock that has been reacquired by the Company. Additionally, to the extent that an award under the 2018 Plan, in whole or in part, is canceled, expired, forfeited, settled in cash or otherwise terminated without delivery of shares, such shares remain available for issuance. Any shares withheld for taxes cannot be recycled under this plan. Awards may be issued in the form of options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance stock units (“PSUs”) and other stock-based awards. Awards may vest over periods of continued service or upon the satisfaction of performance conditions set at the discretion of the Compensation Committee of our board of directors (the “Compensation Committee”), with a minimum one-year vesting period applicable to most awards. With regard to SARs and options, awards

have a maximum exercisable period of ten years. As of December 31, 2021, there were 4,177,611 shares available for grant under the 2018 Plan.

2010 Long-Term Equity Compensation Plan. Our Amended and Restated 2010 Long-Term Equity Compensation Plan, approved in 2013 (the “2010 Plan”), remains outstanding and we may continue to use the 2010 Plan to grant awards. No awards may be granted under the 2010 Plan on or after June 5, 2023. As of December 31, 2021, there were 314,413 shares available for grant under the 2010 Plan.

2015 SRC Equity Incentive Plan. Pursuant to the closing of the SRC Acquisition, SRC granted PSUs to certain SRC executives (the “SRC PSUs”) under the 2015 SRC Equity Incentive Plan (the “2015 SRC Plan”). The SRC PSUs were converted into 155,928 PDC PSUs and remained subject to the same terms and conditions (including performance-vesting terms) that applied immediately prior to the closing of the SRC Acquisition. As of December 31, 2021, all converted SRC PSUs vested and there were no shares available for grant under the 2015 SRC Plan.

The following table provides a summary of the impact of our outstanding stock-based compensation plans on the results of operations for the periods presented:


	Year Ended December 31,
	2021		2020		2019
	(in thousands)
General and administrative expense	$	21,830	$	21,182	$	22,754
Lease operating expense	1,193		1,018		1,083
Total stock-based compensation expense	$	23,023	$	22,200	$	23,837

Restricted Stock Units

The Company grants to executive officers and employees time-based RSUs, which vest ratably over a three-year service period. The fair value of these time-based RSUs is based on the market price of our common stock on the grant date and is recognized ratably over the requisite service period. The time-based RSUs generally vest ratably on each anniversary following the grant date provided that a participant is continuously employed.

The following table presents the changes in non-vested time-based RSUs to eligible employees, including executive officers, during the year ended December 31, 2021:


	Shares	Weighted Average Grant-Date Fair Value per Share
Non-vested at beginning of period	1,150,970	$	20.14
Granted	657,972	33.64
Vested	(547,985)	24.86
Forfeited	(95,770)	22.74
Non-vested at end of period	1,165,187	25.33

The weighted average grant-date fair value of restricted stock units was $33.64, $11.98 and $40.34 for the years ended December 31, 2021, 2020 and 2019, respectively. The total grant-date fair value of restricted stock units that vested for the years ended December 31, 2021, 2020 and 2019 was $13.6 million, $20.4 million and $16.3 million, respectively. Total compensation cost related to non-vested time-based awards and not yet recognized on the consolidated statements of operations as of December 31, 2021 was $18.2 million. This cost is expected to be recognized over a weighted average period of 1.6 years.

Performance Stock Units

The Company grants to certain executive officers PSUs which are subject to market-based vesting criteria as well as a three-year service period. The market-based shares vest if the participant is continuously employed throughout the performance period and the market-based performance measure is achieved. The fair value of the market-based PSUs is amortized ratably over the requisite service period. All compensation cost related to the market-based awards will be recognized if the requisite service period is fulfilled, even if the market condition is not achieved.

The Compensation Committee awarded a total of 207,655 market-based PSUs to our executive officers during 2021. In addition to continuous employment, the vesting of these PSUs is contingent on a combination of absolute stock performance and our total stockholder return (“TSR”), which is essentially our stock price change including any dividends over a three-year period ending on December 31, 2023, as compared to the TSR of a group of peer companies over the same period. The PSUs will result in a payout between zero and 250 percent of the target PSUs awarded.

The grant-date fair value was estimated using a Monte Carlo valuation model. The Monte Carlo valuation model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. The expected term of the awards was based on the requisite service period. The risk-free interest rate was based on the U.S. Treasury yields in effect at the time of grant and extrapolated to approximate the life of the award. The expected volatility was based on our common stock historical volatility.

The following table summarizes the key assumptions and related information used to determine the grant-date fair value of performance stock units awarded during the periods presented:


	Year Ended December 31,
	2021			2020			2019
Expected term of award (in years)	3			3			3
Risk-free interest rate	0.2		%	1.4		%	2.5		%
Expected volatility	84.6		%	46.6		%	41.4		%
Weighted average grant-date fair value per share	$	54.01		$	33.52		$	56.68

The expected term of the awards is based on the number of years from the grant date through the end of the performance period. The risk-free interest rate was based on the U.S. Treasury yields in effect at the time of grant, extrapolated to approximate the life of the awards. The expected volatility was based on our common stock historical volatility, as well as that of our peer group.

The following table presents the change in non-vested market-based awards during the year ended December 31, 2021:


	Shares	Weighted Average Grant-Date Fair Value per Share
Non-vested at December 31, 2020	499,547	$	38.66
Granted	207,655	54.01
Vested	(267,973)	43.10

Non-vested at December 31, 2021	439,229	43.21

The total grant-date fair value of performance stock units that vested in the years ended December 31, 2021, 2020 and 2019 was $11.6 million, $4.7 million and $2.0 million, respectively. On December 31, 2021, the service period lapsed on 112,045 performance stock units granted in 2019 and 155,928 SRC PSUs that earned 1.90 shares for each vested award resulting in 503,615 aggregate shares of common stock being issued in January 2022. Total compensation cost related to non-vested market-based awards not yet recognized on the consolidated statements of operations as of December 31, 2021 was $10.5 million. This cost is expected to be recognized over a weighted average period of 1.5 years.

Preferred Stock

We are authorized to issue 50,000,000 shares of preferred stock, par value $0.01 per share, which may be issued in one or more series, with such rights, preferences, privileges and restrictions as shall be fixed by our board of directors from time to time. Through December 31, 2021, no shares of preferred stock have been issued.

Stock Repurchase Program

In 2019, our board of directors approved the repurchase of up to $200 million of our outstanding common stock (the “Stock Repurchase Program”). Effective upon the closing of the SRC Acquisition, our board of directors approved an increase and extension to the Stock Repurchase Program from $200 million to $525 million. Repurchases under the Stock Repurchase Program can be made in open markets at our discretion and in compliance with safe harbor provisions, or in privately negotiated transactions. The Stock Repurchase Program does not require any specific number of shares to be acquired, is subject to market conditions and can be modified or discontinued by the board of directors at any time. Pursuant to the Stock Repurchase Program, we repurchased 3.8 million and 1.3 million shares of outstanding common stock at a cost of $159.5 million and $23.8 million during the years ended December 31, 2021 and 2020, respectively. We suspended the program in 2020 due to adverse market conditions but reinstated it in 2021. As of December 31, 2021, $187.3 million remained available under the program for repurchases of our outstanding common stock. In February 2022, our board of directors increased the size of the program to $1.25 billion and extended it through December 31, 2023. The Stock Repurchase Program is being implemented at the discretion of our board of directors and may be suspended, modified, extended or discontinued by our board of directors at any time.

Dividends

In the second quarter of 2021, our board of directors commenced the declaration and payment of quarterly cash dividends of $0.12 per share of our outstanding common stock. In December 2021, our board of directors declared and paid a special dividend of $0.50 per share of our outstanding common stock in addition to the fourth quarter dividend. For the year ended December 31, 2021, our dividends paid totaled $0.86 per share of common stock or $83.6 million. All RSUs and PSUs receive a dividend equivalent per unit, recognized as a liability included in other liabilities on the consolidated balance sheets, until the recipients receive the equivalents upon vesting. Dividends declared were recorded as a reduction of additional paid-in capital as there were no retained earnings as of the date of declaration. Future dividend payments must be approved by our board of directors and will depend on our liquidity, financial requirements, and other factors considered relevant by our board.