12.  STOCK-BASED COMPENSATION AND OTHER BENEFIT PLANS

Our stock-based compensation has been granted under several stock incentive and long-term incentive plans. The plans authorize the Compensation Committee of our Board of Directors to issue various types of incentive compensation. Currently, we have issued stock options, restricted shares and SARs from the 2014 Long-Term Incentive Plan (“2014 Plan”). At December 31, 2016, 2,810,605 shares were authorized for future grants under this plan.

For each stock option granted, the number of authorized shares under the 2014 Plan will be reduced on a one-for-one basis. For each restricted share granted, the number of shares authorized under the 2014 Plan will be reduced by twice the number of restricted shares. We have no set policy for sourcing shares for option grants. Historically the shares issued under option grants have been new shares.

We record non-cash compensation expense related to stock-based compensation as general and administrative expense. For the years ended December 31, 2016, 2015 and 2014, non-cash compensation expense was $0.2 million, $3.8 million and $3.3 million, related to the issuance of stock options and restricted stock. Because we do not pay significant United States federal income taxes, no amounts were recorded for tax benefits.

Stock options

Stock options have an exercise price that may not be less than the fair market value of the underlying shares on the date of grant. In general, stock options granted to participants will become exercisable over a period determined by the Compensation Committee of our Board of Directors, which in the past has been a five year life, with the options vesting over a service period of up to five years. In addition, stock options will become exercisable upon a change in control, unless provided otherwise by the Compensation Committee. There were no cash proceeds from the exercise of stock options in 2016 and 2015. For 2014 there were cash proceeds from the exercise of stock options of $5.7 million. A portion of the stock options granted in the years ended December 31, 2016, 2015 and 2014 were vested immediately with the remainder vesting over a two-year or three-year period.

We use the Black-Scholes model to calculate the grant date fair value of stock option awards. This fair value is then amortized to expense over the vesting period of the option. During 2016, 2015 and 2014, the weighted average assumptions shown below were used to calculate the weighted average grant date fair value of option grants. Because we have not paid cash dividends and do not anticipate paying cash dividends on the common stock in the foreseeable future, no expected dividend yield was input to the Black-Scholes model.



Stock option activity for the year ended December 31, 2016 is provided below:



The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option. There were no exercises of stock options in 2016 and the intrinsic value of stock options exercised in 2015 and 2014 was $0.3 million and $4.1 million.

As of December 31, 2016, unrecognized compensation cost related to stock options was $0.3 million which is expected to be recognized over a weighted average period of 1.1 years.

Restricted shares 

Restricted stock granted to employees will vest over a period determined by the Compensation Committee which is generally a three-year period, vesting in three equal parts on the first three anniversaries of the date of the grant. Share grants to directors vest immediately and are not restricted. The following is a summary of activity in unvested restricted stock in 2016.



In the year ended December 31, 2016, 40,926 shares were added to treasury due to tax withholding on vesting restricted shares.

The total vest-date fair value of restricted stock awards which vested during 2016, 2015 and 2014 was $0.6 million,  $0.7 million and $0.4 million, respectively. The weighted average grant date fair value per share of restricted stock awards was $1.11,  $3.34 and $6.98 for the years ended December 31, 2016, 2015 and 2014, respectively. 

As of December 31, 2016, unrecognized compensation cost related to restricted stock totaled $0.3 million and is expected to be recognized over a weighted average period of 1.8 years.

Stock appreciation rights (“SARs”)

SARs are granted under the VAALCO Energy, Inc. 2016 Stock Appreciation Rights Plan. A SAR is the right to receive a cash amount equal to the spread with respect to a share of common stock upon the exercise of the SAR. The spread is the difference between the SAR price per share specified in a SAR award on the date of grant (which may not be less than the fair market value of our common stock on the date of grant) and the fair market value per share on the date of exercise of the SAR. SARs granted to participants will become exercisable over a period determined by the Compensation Committee of our Board of Directors. In addition, SARs will become exercisable upon a change in control, unless provided otherwise by the Compensation Committee of our Board of Directors.

The 815,355 SARs granted in the three months ended March 31, 2016 vest over a three-year period with a life of 5 years and have a maximum spread of 300% of the $1.04 SAR price per share specified in a SAR award on the date of grant. Compensation payable related to these awards through December 31, 2016 is not significant.

SAR activity for the year ended December 31, 2016 is provided below:





Other benefit plans

We sponsor a 401(k) plan, with a company match feature, for our employees. Costs incurred in the years ended December 31, 2016, 2015 and 2014 for administering the plan, including the company match feature, were approximately $316,000, $444,000 and $464,000, respectively.