Annual report pursuant to Section 13 and 15(d)

Share-Based Compensation

v3.8.0.1
Share-Based Compensation
 12 Months Ended
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
NOTE 8 — SHARE-BASED COMPENSATION
At a special meeting of stockholders on February 9, 2017, Magellan stockholders approved the Tellurian Inc. 2016 Omnibus Incentive Compensation Plan, as amended (the “Omnibus Plan”), which replaced the Amended and Restated Tellurian Investments Inc. 2016 Omnibus Incentive Plan (the “Legacy Plan”). We have granted equity to employees, outside directors, and consultants under the Omnibus Plan and the Legacy Plan. No further awards can be made under the Legacy Plan. The maximum number of shares of Tellurian common stock authorized for issuance under the Omnibus Plan is 40 million shares of common stock.
For the year ended December 31, 2017, share-based compensation expense related to all share-based awards totaled approximately $23.0 million, approximately $2 million of which was issued in settlement of bonuses accrued at December 31, 2016. For the year ended December 31, 2016, share-based compensation expense related to all share-based awards totaled approximately $24.5 million. As of December 31, 2017, unrecognized compensation expense, based on the grant date fair value, for all share-based awards totaled approximately $147.2 million.
Restricted Stock and Restricted Stock Units
Omnibus Plan participants may be granted restricted stock and/or restricted stock units (collectively, “Restricted Stock”). Upon vesting of restricted stock, shares of common stock are released to the employee. Upon vesting, restricted stock units will be converted into shares of common stock and released to the employee. As of December 31, 2017, there was no Restricted Stock that will be settled in cash.
During the year ended December 31, 2017, the Company granted Restricted Stock with service-based and performance-based vesting criteria. Of the performance-based awards, 19.6 million shares vest based upon an affirmative final investment decision by the Company’s board of directors, as defined in the award agreements, and no expense has been recognized in connection with these awards. Additionally, a portion of the performance awards vest based on the achievement of certain project development activities.
The fair value of the Restricted Stock was established by the market price on the date of grant and, for service-based awards, is being recognized as compensation expense ratably over the vesting term.
The following table provides a summary of our Restricted Stock transactions for the year ended December 31, 2017 (shares and units in thousands):
 
Shares
 
Weighted-Average Grant
Date Fair Value
Unvested at January 1, 2017
8,848

 
$
3.52

Granted
12,422

 
9.59

Vested
(398
)
 
9.28

Forfeited
(384
)
 
11.14

Unvested at December 31, 2017
20,488

 
 

The total grant date fair value of restricted stock vested during the year ended December 31, 2017 was approximately $3.7 million.
Stock Options
During the year ended December 31, 2017, Omnibus Plan participants were granted non-qualified options to purchase shares of common stock. Stock options are granted at a price not less than the market price of the common stock on the date of grant. Stock options vest equally over a three-year period from the date of grant. Options shall be exercisable at such time and under such conditions set forth in the underlying award agreement, but in no event shall any option be exercisable later than the tenth anniversary of the date of its grant. The fair value of each stock option award is estimated using the Black-Scholes option pricing model.
The following table provides a summary of our stock option transactions for the year ended December 31, 2017 (stock options in thousands):
 
Stock Options
 
Weighted Average
Exercise Price
Outstanding at January 1, 2017
—

 
$
—

Granted
2,015

 
10.32

Exercised
—

 
—

Forfeited or Expired
(4
)
 
10.32

Outstanding at December 31, 2017
2,011

 
$
10.32

Exercisable at December 31, 2017
—

 
$
—


Valuation assumptions used to value stock options for the year ended December 31, 2017, were as follows:
Expected term (in years)
6.0

Expected volatility
22.13
%
Expected dividend yields
—
%
Risk-free rate
2.05
%

Due to our limited history, the Company has elected to apply the simplified method to determine the expected term. Additionally, due to our limited history, expected volatility is based on the implied volatility of the Company's peer group as identified by our board of directors. The expected dividend yield is based on historical yields on the date of grant. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.
The weighted average grant date fair value of stock options granted during the year ended December 31, 2017, was $2.72. There were no stock options exercised during the year ended December 31, 2017, and there were no stock options granted or exercised during the year ended December 31, 2016.