Cobalt International Energy, Inc.
Notes to Consolidated Financial Statements (Continued)
14. Equity based Compensation (Continued)
estimate at the time of grant. The Company used the following the weighted average of each
assumption based on the grants in 2014:
2014
Expected Term in Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5
Expected Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.27%
Expected Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—%
Risk-Free Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.69%
The Company estimates expected volatility based on an analysis of its stock price since the IPO
and comparing the stock price volatility for the period from IPO date through December 31, 2014 with
the historical stock price volatility of a similar exploration and production company. The Company
estimates the expected term of its option awards based on the vesting period and average remaining
contractual term, referred to as the ‘‘simplified method’’. The Company uses this method to provide a
reasonable basis for estimating its expected term based on a lack of sufficient historical employee
exercise data on stock option awards.
A summary of the stock options activities for the year ended December 31, 2014 is presented
below:
Weighted Weighted-Average
Average
Remaining
Aggregate
Exercise Contractual Term Intrinsic Value
Shares
Price
(years)
(thousands)
Outstanding at January 1, 2014 . . . . . . . . . . . . . . 2,338,718 $20.24
8.0
$ —
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
812,055 $17.50
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,005) $12.45
$17,837
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . .
(11,221) $24.02
Outstanding at December 31, 2014 . . . . . . . . . . . 3,136,547 $19.52
7.57
$ —
Vested or expected to vest at December 31, 2014 . 1,693,193 $20.82
8.61
$ —
Exercisable at December 31, 2014 . . . . . . . . . . . . 1,411,271 $17.93
6.30
$ —
The weighted-average grant-date fair value of stock options granted during 2014 and 2013 was
$9.12 and $14.08 per option, respectively, using the Black-Scholes option-pricing model. As of
December 31, 2014, $12.2 million of total unrecognized compensation cost related to stock options is
expected to be recognized over a weighted-average period of 2.46 years.
Restricted Stock Units.
On December 3, 2010, the Company granted 198,838 restricted stock units
to employees pursuant to a Restricted Stock Unit (RSU) Award Agreement. Under the RSU Award
Agreement the share-based payment was earned based on the number of successful wells drilled during
the three year period ending December 31, 2013. The RSU award vested within a range of 0% to
200% of the number of RSU shares awarded on scheduled vesting dates contingent upon the
recipient’s continued service at each vesting date and based on the achievement of successful wells
drilled as defined in the RSU Award Agreement. The recipients could not vest in an amount greater
than 200% of the Award or in aggregate 397,676 RSU shares. The percentage of the RSU awards
vested at each of the three year periods ending December 31, 2013 was calculated by the number of
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