Quarterly report pursuant to Section 13 or 15(d)

Equity-Based Compensation

v3.20.2
Equity-Based Compensation
9 Months Ended
Sep. 30, 2020
Equity-Based Compensation  
Equity-Based Compensation

(11) Equity-Based Compensation

The Company’s general and administrative expenses include equity-based compensation costs related to the Antero Midstream GP LP Long-Term Incentive Plan (“AMGP LTIP”) and the Series B Units prior to the Transactions. Equity-based compensation after the Transactions include (i) costs allocated to Antero Midstream Corporation by Antero Resources for grants made prior to the Transactions pursuant to the Antero Resources Corporation Long-Term Incentive Plan (the “AR LTIP”), (ii) costs related to the Antero Midstream Corporation Long-Term Incentive Plan (the “AM LTIP”) and (iii) the Exchanged B Units (as defined below). Antero Midstream Corporation’s portion of the equity-based compensation expense is included in general and administrative expenses, and recorded as a credit to the applicable classes of equity. Equity-based compensation expense allocated to Antero Midstream Corporation was $3.6 million for the period from March 13, 2019 to September 30, 2019. For the three and nine months ended September 30, 2020, equity-based compensation allocated to Antero Midstream Corporation was $1.2 million and $4.5 million, respectively. For grants made prior to the Transactions, Antero Resources has total unamortized expense related to its various equity-based compensation plans that can be allocated to the Company of approximately $11.4 million as of September 30, 2020, which includes grants made under the Antero Midstream Partners Long Term Incentive Plan (the “AMP LTIP”) prior to the Transactions, which were converted into awards under the AM LTIP. A portion of this will be allocated to Antero Midstream Partners as it is amortized over the remaining service period of the related awards. Antero Midstream Corporation does not reimburse Antero Resources for noncash equity compensation allocated to it for awards issued under the AR LTIP.

Exchanged B Units

Upon Closing of the Transactions, each Series B Unit, vested and unvested, was exchanged for 176.0041 shares of AM common stock (the “Series B Exchange”). A total of 17,353,999 shares of the Company’s common stock were issued in exchange for the 98,600 Series B Units then outstanding (the “Exchanged B Units”). The Company recognized $18 million and $47 million of equity-based compensation expense related to the Series B awards for the three and nine months ended September 30, 2019, respectively, including expenses recognized with respect to the Series B Units prior to the Closing of the Transactions and expenses recognized with respect to the Exchanged B Units following the closing of the Transactions through September 30, 2019. There were no forfeitures after the Series B Exchange was completed.

AMGP LTIP

The Company recognized expense of $0.2 million for the nine months ended September 30, 2019. In connection with the Transactions, the AMGP LTIP was terminated on March 12, 2019. No expense was recognized for the three months ended September 30, 2019.

AM LTIP

The Company is authorized to grant up to 15,398,901 shares of AM common stock to employees and directors under the AM LTIP. The AM LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, RSUs, dividend equivalents, other stock-based awards, cash awards and substitute awards. The terms and conditions of the awards granted are established by the compensation committee of the Board. As of September 30, 2020, a total of 11,263,683 shares were available for future grant under the AM LTIP. For the three and nine months ended September 30, 2019, the Company recognized expense of $1.4 million and $2.8

million, respectively, related to these awards. For the three and nine months ended September 30, 2020, the Company recognized expense of $2.3 million and $5.0 million, respectively, related to these awards.

Restricted Stock Unit Awards

A summary of the RSU awards activity during the nine months ended September 30, 2020 is as follows:

Weighted

Average

Aggregate

Number of

grant date

intrinsic value

    

units

    

fair value

    

(in thousands)

Total AM LTIP RSUs awarded and unvested—December 31, 2019

1,275,990

$

14.38

$

9,685

Granted

2,495,907

$

6.34

Vested

(499,365)

$

14.33

Forfeited

(47,367)

$

14.43

Total AM LTIP RSUs awarded and unvested—September 30, 2020

3,225,165

$

8.17

$

17,319

Intrinsic values are based on the closing price of the Company’s common shares on the referenced dates. At September 30, 2020, unamortized expense of $21 million related to the unvested RSUs is expected to be recognized over a weighted average period of approximately 2.5 years and the Company’s proportionate share will be allocated to it as it is recognized.

Performance Share Unit Awards Based on Return on Invested Capital

In 2020, the likelihood of achieving the performance conditions related to return on invested capital for the performance share unit (“PSU”) awards outstanding was probable and, therefore, for the three and nine months ended September 30, 2020, the Company recognized expense of $0.1 million and $0.2 million, respectively. As of September 30, 2019, the likelihood of achieving the performance conditions of the PSUs decreased to a level of improbable and, therefore, previously recognized expense of $0.2 million was reversed during the three months ended September 30, 2019.

As of September 30, 2020, there was $0.5 million of unamortized equity-based compensation expense related to unvested PSUs that is expected to be recognized over a weighted average period of 1.5 years.

Cash Awards

In January 2020, the Company granted cash awards of $2.2 million to certain executives under the AM LTIP that vest ratably over a period of up to three years. In July 2020, the Company granted additional cash awards of $0.7 million to certain non-executive employees under the AM LTIP plan that vest ratable over a period of four years. As of September 30, 2020, the Company has accrued $1.3 million in other liabilities in the unaudited condensed consolidated balance sheet related to cash awards.