Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock Options

A summary of the stock option activity for the nine months ended September 30, 2019 is presented below.



	Number of Shares		Weighted Average Exercise Price
Outstanding at January 1, 2019	4,557,186		$	5.14
Granted	—		$	—
Exercised	(212,242	)	$	5.49
Forfeited	(20,011	)	$	14.00
Expired	—		$	—
Outstanding at September 30, 2019	4,324,933		$	5.08
Exercisable at September 30, 2019	3,967,091		$	4.28

There were no new stock option grants during the nine months ended September 30, 2019 and 2018. As of September 30, 2019, the aggregate intrinsic value for our outstanding stock options was $20.8 million, and the aggregate intrinsic value for our exercisable stock options was $20.8 million. The aggregate intrinsic value for the exercised stock options during the nine months ended September 30, 2019 was $2.9 million. The remaining exercise period for the outstanding and exercisable stock options as of September 30, 2019, was 5.1 years and 5.0 years, respectively. For the nine months ended September 30, 2019 and 2018, we recognized $0.4 million and $0.5 million, respectively, in stock compensation expense related to these stock option awards.

Restricted Stock Units

During the nine months ended September 30, 2019, we granted a total of 385,661 restricted stock units ("RSUs") to employees, officers and directors pursuant to the ProPetro Holding Corp. 2017 Incentive Award Plan (the "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. During the nine months ended September 30, 2019 and 2018, the recorded stock compensation expense for all RSUs was $2.3 million and $2.0 million, respectively. As of September 30, 2019, the total unrecognized compensation expense for all RSUs was approximately $7.4 million, and is expected to be recognized over a weighted average period of approximately 2.0 years.

The following table summarizes RSUs activity during the nine months ended September 30, 2019:



	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2019	473,505		$	16.52
Granted	385,661		$	20.95
Vested	(214,872	)	$	15.89
Forfeited	(58,619	)	$	18.72
Canceled	—		$	—
Outstanding at September 30, 2019	585,675		$	19.45

Performance Share Units

During the nine months ended September 30, 2019, we granted 199,413 performance share units ("PSUs") to certain key employees and officers under the Incentive Plan. 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. During the nine months ended September 30, 2019 and 2018, the recorded stock compensation expense for the PSUs was $2.6 million and $1.3 million, respectively.

The following table summarizes information about PSUs activity during the nine months ended September 30, 2019:



Period Granted	Target Shares Outstanding at January 1, 2019	Target Shares Granted	Target Shares Vested	Target Shares Forfeited		Target Shares Outstanding at September 30, 2019	Weighted Average Grant Date Fair Value per Share
2017	169,635	—	—	(18,143	)	151,492	$	10.73
2018	178,975	—	—	(17,341	)	161,634	$	27.51
2019	—	199,413	—	(18,676	)	180,737	$	34.82
Total	348,610	199,413	—	(54,160	)	493,863	$	25.04

The total stock compensation expense for the nine months ended September 30, 2019 and 2018 for all stock awards was $5.2 million and $3.8 million, respectively. The total unrecognized compensation expense as of September 30, 2019 was approximately $15.4 million, and is expected to be recognized over a weighted average period of approximately 1.9 years.