Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Share-based Compensation and Cash-based Incentive Compensation

v3.19.3
Note 9 - Share-based Compensation and Cash-based Incentive Compensation
9 Months Ended
Sep. 30, 2019
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
9.
Share-Based Compensation and Cash-Based Incentive Compensation
 
Awards to Employees.
In
2010,
the W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan (as amended from time to time, the “Plan”) was approved by our shareholders.  During
2019,
2018
and
2017,
the Company granted restricted stock units (“RSUs”) under the Plan to certain of its employees.  RSUs are a long-term compensation component, and are subject to satisfaction of certain predetermined performance criteria and adjustments at the end of the applicable performance period based on the results achieved.  In addition to share-based awards, the Company
may
grant to its employees cash-based incentive awards under the Plan, which
may
be used as short-term and long-term compensation components of the awards, and are subject to satisfaction of certain predetermined performance criteria.
 
As of
September 
30,
2019,
there were
11,852,592
shares of common stock available for issuance in satisfaction of awards under the Plan.  The shares available for issuance are reduced on a
one
-for-
one
basis when RSUs are settled in shares of common stock, which shares of common stock are issued net of withholding tax through the withholding of shares.  The Company has the option following vesting to settle RSUs in stock or cash, or a combination of stock and cash. The Company expects to settle RSUs that vest in the future using shares of common stock.
 
RSUs currently outstanding relate to the
2019,
2018
and
2017
grants.  The
2019
grants are subject to pre-determined performance criteria which will be measured using
2019
performance results.  The
2018
and
2017
grants were subject to predetermined performance criteria applied against the applicable performance period.  All the RSUs currently outstanding are subject to employment-based criteria and vesting generally occurs in
December
of the
second
year after the grant.  See the table below for anticipated vesting by year.
 
We recognize compensation cost for share-based payments to employees over the period during which the recipient is required to provide service in exchange for the award.  Compensation cost is based on the fair value of the equity instrument on the date of grant.  The fair values for the RSUs granted during
2019,
2018
and
2017
were determined using the Company’s closing price on the grant date. We also estimate forfeitures, resulting in the recognition of compensation cost only for those awards that are expected to actually vest.
 
All RSUs awarded are subject to forfeiture until vested and cannot be sold, transferred or otherwise disposed of during the restricted period.
 
A summary of activity related to RSUs during the
nine
 months ended
September 
30,
2019
is as follows:
 
   
Restricted Stock Units
 
     
 
 
 
Weighted Average
 
     
 
 
 
Grant Date Fair
 
   
Units
   
Value Per Unit
 
Nonvested, December 31, 2018
   
3,355,917
    $
3.90
 
Granted    
990,608
     
4.51
 
Forfeited (1)
   
(1,075,864
)    
3.12
 
Nonvested, September 30, 2019
   
3,270,661
     
4.34
 
 
 
(
1
)
Primarily related to former executives' forfeitures.
 
For the outstanding RSUs issued to the eligible employees as of
September 30, 2019,
vesting is expected to occur as follows (subject to forfeitures): 
 
   
Restricted Stock Units
 
2019
   
1,485,510
 
2020
   
852,535
 
2021    
932,616
 
Total
   
3,270,661
 
 
Awards to Non-Employee Directors
.
  Under the W&T Offshore, Inc.
2004
Directors Compensation Plan (as amended from time to time, the “Director Compensation Plan”), shares of restricted stock (“Restricted Shares”) have been granted to the Company’s non-employee directors.  Grants to non-employee directors were made during
2019,
2018
and 
2017.
  As of
September 
30,
2019,
there were
82,620
 shares of common stock available for issuance in satisfaction of awards under the Director Compensation Plan.  The shares available are reduced on a
one
-to-
one
basis when Restricted Shares are granted.
 
We recognize compensation cost for share-based payments to non-employee directors over the period during which the recipient is required to provide service in exchange for the award.  Compensation cost is based on the fair value of the equity instrument on the date of grant.  The fair values for the Restricted Shares granted were determined using the Company’s closing price on the grant date. 
No
forfeitures were estimated for the non-employee directors’ awards.
 
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.  Restricted Shares cannot be sold, transferred or disposed of during the restricted period.  The holders of Restricted Shares generally have the same rights as a shareholder of the Company with respect to such Restricted Shares, including the right to vote and receive dividends or other distributions paid with respect to the Restricted Shares.
 
A summary of activity related to Restricted Shares during the
nine
 months ended
September 
30,
2019
is as follows:
 
   
Restricted Shares
 
     
 
 
 
Weighted Average
 
     
 
 
 
Grant Date Fair
 
   
Shares
   
Value Per Share
 
Nonvested, December 31, 2018
   
181,832
    $
3.08
 
Granted
   
46,360
     
6.04
 
Vested
   
(105,012
)    
2.67
 
Nonvested, September 30, 2019
   
123,180
     
4.55
 
 
For the Restricted Shares vested during the
nine
 months ended
September 
30,
2019,
the grant date value was
$0.3
million and the vested date value, as determined on the vesting dates, was
$0.5
million.
 
For the outstanding Restricted Shares issued to the non-employee directors as of
September 
30,
2019,
vesting is expected to occur as follows (subject to any forfeitures):
 
   
Restricted Shares
 
2020
   
78,424
 
2021
   
29,300
 
2022
   
15,456
 
Total
   
123,180
 
 
Share-Based Compensation.  
Share-based compensation expense is recorded in the line
General and administrative expense
s in the Condensed Consolidated Statements of Operations.  The tax benefit related to compensation expense recognized under share-based payment arrangements was
not
meaningful and was minimal due to our income tax situation.  A summary of incentive compensation expense under share-based payment arrangements is as follows (in thousands):
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2019
   
2018
   
2019
   
2018
 
Share-based compensation expense from:
                               
Restricted stock units (1)
  $
1,178
    $
1,303
    $
2,219
    $
3,598
 
Restricted Shares
   
70
     
70
     
210
     
210
 
Total
  $
1,248
    $
1,373
    $
2,429
    $
3,808
 
 
 
(
1
)
For the
nine
 months ended
September 
30,
2019,
share-based compensation expense includes adjustments for former executives' forfeitures.
 
Unrecognized Share-Based Compensation.
  
As of
September 
30,
2019,
unrecognized share-based compensation expense related to our awards of RSUs and Restricted Shares was
$5.9
 million and
$0.4
 million, respectively.  Unrecognized share-based compensation expense will be recognized through
November 2021 
for RSUs and
April 2022 
for Restricted Shares.
 
Cash-Based Incentive Compensation.  
In addition to share-based awards, cash-based awards were granted under the Plan to eligible employees in
2019,
2018
and
2017.
  For
2018,
there were
two
cash-based awards consisting of a long-term award and a short-term award.  All cash-based awards are performance-based awards consisting of predetermined performance criteria applied against the applicable performance period.  Expense for each award is recognized over the service period once the applicable financial condition is expected to be met, and the business criteria and individual performance criteria can be reasonably estimated for the applicable period.
 
  For the
2019
 short-term, cash-based awards, incentive compensation expense was determined based on estimates of the Company achieving certain performance metrics for
2019
 and is being recognized over the
May 2019
to
February 2020
period.  The
2019
 short-term, cash-based awards will be eligible for payment during
March 2020, 
subject to participants meeting certain employment-based criteria.
 
 
For the
2018
long-term, cash-based awards, incentive compensation expense was determined based on the Company achieving certain performance metrics for
2018
and is being recognized over the
September 2018
to
November 2020
period.  The
2018
long-term, cash-based awards will be eligible for payment on
December 14, 2020
subject to participants meeting certain employment-based criteria.
 
 
For the
2018
short-term, cash-based awards, incentive compensation expense was determined based on the Company achieving certain performance metrics for
2018
combined with individual performance criteria for
2018
and was recognized over the
January 2018
to
February 2019
period.  The
2018
short-term, cash-based awards were paid during
March 2019.
 
 
For the
2017
short-term, cash-based awards, incentive compensation expense was determined based on the Company achieving certain performance metrics for
2017
combined with individual performance criteria for
2017
and was recognized over the
January 2017
to
February 2018
period.  The
2017
short term, cash-based awards were paid during
March 2018.
 
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,
 
   
2019
   
2018
   
2019
   
2018
 
Share-based compensation included in:
                               
General and administrative expenses
  $
1,248
    $
1,373
    $
2,429
    $
3,808
 
Cash-based incentive compensation included in:
                               
Lease operating expense (1)
   
672
     
837
     
951
     
2,240
 
General and administrative expenses (1)
   
1,679
     
1,534
     
5,017
     
5,597
 
Total charged to operating income
  $
3,599
    $
3,744
    $
8,397
    $
11,645
 
 
 
(
1
)
Includes adjustments of accruals to actual payments.