W&T Offshore, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

SHARE-BASED AWARDS AND CASH BASED AWARDS

SHARE-BASED AWARDS AND CASH BASED AWARDS

9 Months Ended

Sep. 30, 2022

Share-based Payment Arrangement [Text Block]

NOTE 9 — SHARE-BASED AWARDS AND CASH BASED AWARDS

The W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan (as amended from time to time, the “Plan”) was approved by the Company’s shareholders in 2010. Under the Plan, the Company may issue, subject to the approval of the Board of Directors, stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, performance units or shares, cash awards, substitute awards or any combination of the foregoing to employees, directors and consultants.

Share-Based Awards to Employees

Restricted Stock Units (“RSUs”) – During the nine months ended September 30, 2022, the Company granted RSUs under the Plan to certain employees. RSUs outstanding as of September 30, 2022 relate to the 2022 and 2021 grants. The 2022 RSUs granted are a long-term compensation component, subject to service conditions, with one-third of the award vesting each year on January 1, 2023, 2024, and 2025, respectively.

A summary of activity related to RSUs during the nine months ended September 30, 2022 is as follows:


		Weighted
		Average
	Restricted	Grant Date Fair
	Stock Units	Value Per Unit
Nonvested, beginning of period	698,465	$	4.71
Granted	977,681		6.24
Vested⁽¹⁾	(387,285)		5.20
Forfeited	(66,984)		5.16
Nonvested, end of period	1,221,877		5.75

(1)

^{During May and June 2022, approximately}^22,000^{outstanding RSUs awarded in 2021 to}^two^{individuals retiring from their employment with the Company were modified to fully vest upon their retirement, which occurred during May and June 2022, respectively. The remaining unrecognized grant date fair value of the original RSUs was recognized over the requisite period. The incremental cost due to the modification was not materially different from the grant date fair value.}

Performance Share Units (“PSUs”) – During the nine months ended September 30, 2022, the Company granted PSUs under the Plan that are eligible to vest based on continued employment and the Company’s total shareholder return (“TSR”) ranking against peer companies’ TSR over a three-year performance period, which ends on December 31, 2024.

The 2021 grants were subject to performance criteria against the applicable performance period, which ended on December 31, 2021. The PSUs granted during 2021 are eligible to vest based on continued employment through October 1, 2023.

A summary of activity related to PSUs during the nine months ended September 30, 2022 is as follows:


		Weighted
		Average
	Performance	Grant Date Fair
	Share Units	Value Per Unit
Nonvested, beginning of period	196,918	$	5.55
Granted	1,377,501		10.28
Vested ⁽¹⁾	(15,264)		5.57
Forfeited	(57,065)		8.72
Nonvested, end of period	1,502,090		9.77

(1)

^{During May and June 2022, approximately}^10,000^{outstanding PSUs awarded in 2021 to}^two^{individuals retiring from their employment with the Company were modified to fully vest upon their retirement, which occurred during May and June 2022, respectively. The remaining unrecognized grant date fair value of the original RSUs was recognized over the requisite period. The incremental cost due to the modification was not materially different from the grant date fair value.}

The following table summarizes the assumptions used in the Monte Carlo simulations to calculate the fair value of the absolute TSR PSUs granted at the date indicated:


	May 26, 2022
Expected term for performance period (in years)		2.6
Expected volatility		84.4	%
Risk-free interest rate		2.5	%
Fair value (in thousands)	$	14,163

Share-Based Awards to Non-Employee Directors

During the nine months ended September 30, 2022, the Company granted Restricted Shares under the W&T Offshore, Inc. 2004 Directors Compensation Plan to non-employee directors. The Restricted Shares are subject to service conditions and vesting occurs at the end of specified service periods unless otherwise approved by the Board of Directors.

A summary of activity related to Restricted Shares during the nine months ended September 30, 2022 is as follows:


		Weighted
		Average
		Grant Date
	Restricted	Fair Value
	Shares	Per Share
Nonvested, beginning of period	70,226	$	3.65
Granted	42,426		4.95
Vested	(70,226)		3.65
Nonvested, end of period	42,426	$	4.95

Share-Based Compensation Expense

Compensation costs for share-based payments is recognized over the requisite service period. A summary of compensation expense under share-based payment arrangements is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Restricted stock units	$	1,240	$	587	$	2,852	$	1,263
Performance share units		1,352		207		2,154		207
Restricted Shares		53		64		173		309
Total	$	2,645	$	858	$	5,179	$	1,779

Cash-Based Incentive Compensation

In addition to share-based compensation, short-term cash-based incentive awards were granted under the Plan to all eligible employees during the second quarter of 2022 subject to Company performance criteria, individual performance criteria, and continued employment through the payment date. The short-term cash-based incentive awards granted in 2021 were paid in March 2022.

Share-Based Awards and Cash-Based Awards Compensation Expense

A summary of compensation expense related to share-based awards and cash-based awards is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Share-based compensation included in:
General and administrative expenses	$	2,645	$	858	$	5,179	$	1,779
Cash-based incentive compensation included in:
Lease operating expense⁽¹⁾		1,532		1,119		1,994		2,774
General and administrative expenses⁽¹⁾		3,559		2,809		6,164		8,167
Total charged to operating income (loss)	$	7,736	$	4,786	$	13,337	$	12,720

(1)

^{Includes adjustments of accruals to actual payments.}