Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Stock Options

There were no new stock option grants during the three months ended March 31, 2022. As of March 31, 2022, the aggregate intrinsic value for our outstanding stock options was $2.3 million, and the aggregate intrinsic value for our exercisable stock options was $2.3 million. The aggregate intrinsic value for the exercised stock options during the three months ended March 31, 2022 was approximately $0.8 million. The remaining exercise period for both the outstanding and exercisable stock options as of March 31, 2022 was 3.4 years.

A summary of the stock option activity for the three months ended March 31, 2022 is presented below (in thousands, except for weighted average price):


	Number of Shares	Weighted Average Exercise Price
Outstanding at January 1, 2022	798	$	9.77
Granted	—	$	—
Exercised	(105)	$	4.00
Forfeited	—	$	—
Expired	—	$	—
Outstanding at March 31, 2022	693	$	10.65
Exercisable at March 31, 2022	693	$	10.65

Restricted Stock Units

During the three months ended March 31, 2022, we granted 560,274 restricted stock units ("RSUs") to employees, officers and directors pursuant to the ProPetro Holding Corp. 2020 Long Term Incentive Plan (the "2020 Incentive Plan"), which generally vest ratably over a three-year vesting period, in the case of awards to employees and officers, and generally vest in full after one year, in the case of awards to directors. RSUs are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases to be an employee or director of the Company prior to vesting of the award. Each RSU represents the right to receive one share of common stock. The grant date fair value of the RSUs is based on the closing share price of our common stock on the date of grant. As of March 31, 2022, the total unrecognized compensation expense for all RSUs was approximately $11.3 million, and is expected to be recognized over a weighted average period of approximately 2.3 years.

On March 31, 2022, the Company modified the RSUs previously granted to a former officer in 2019, 2020 and 2021 to accelerate the vesting of such RSUs in connection with his separation agreement. As a result of this modification, we recorded an incremental stock expense of $1.3 million during the three months ended March 31, 2022.

The following table summarizes RSUs activity during the three months ended March 31, 2022 (in thousands, except for weighted average fair value):


	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2022	1,413	$	9.19
Granted	560	$	12.44
Vested	(737)	$	9.10
Forfeited	(2)	$	9.77
Canceled	—	$	—
Outstanding at March 31, 2022	1,234	$	10.72

Performance Share Units

During the three months ended March 31, 2022, we granted 327,939 performance share units ("PSUs") to certain key employees and officers as new awards under the 2020 Incentive Plan. Each PSU earned represents the right to receive either one share of common stock or, as determined by the administrator in its sole discretion, a cash amount equal to fair market value of one share of common stock or amount of cash on the day immediately preceding the settlement date. The actual number of shares of common stock that may be issued under the PSUs ranges from 0% up to a maximum of 200% of the target number of PSUs granted to the participant, based on our total shareholder return ("TSR") relative to a designated peer group, generally at the end of a three year period. In addition to the TSR conditions, vesting of the PSUs is generally subject to the

recipient’s continued employment through the end of the applicable performance period. Compensation expense is recorded ratably over the corresponding requisite service period. The grant date fair value of PSUs is determined using a Monte Carlo probability model. Grant recipients do not have any shareholder rights until performance relative to the peer group has been determined following the completion of the performance period and shares have been issued.

In connection with a former officer’s separation agreement, on March 31, 2022, the Company modified the PSUs previously granted to such former officer in 2020 and 2021 to provide for deemed satisfaction of the service requirement applicable to such PSUs as of March 31, 2022, such that such PSUs shall remain outstanding and eligible to vest based on our TSR relative to a designated peer group over the applicable performance period. As a result of these modifications, we recorded an incremental stock expense of $3.7 million during the three months ended March 31, 2022.

The following table summarizes information about PSUs activity during the three months ended March 31, 2022 (in thousands, except for weighted average fair value):


Period Granted	Target Shares Outstanding at January 1, 2022		Target Shares Granted		Target Shares Vested		Target Shares Forfeited		Target Shares Outstanding at March 31, 2022		Weighted Average Grant Date FV Per Share
2019	126		—		(126)		—		—		$	27.49
2020	809		—		—		—		809		$	8.30
2021	651		—		—		—		651		$	14.76
2022	—		328		—		—		328		$	19.99
Total	1,586		328		(126)		—		1,787		$	12.80
Weighted Average FV Per Share	$	12.48	$	19.99	$	27.49	$	—	$	12.80

The total stock-based compensation expense for the three months ended March 31, 2022 and 2021 for all stock awards was $11.4 million and $2.5 million, respectively. The total unrecognized stock-based compensation expense as of March 31, 2022 was approximately $24.9 million, and is expected to be recognized over a weighted average period of approximately 2.2 years.