Chesapeake Energy 2013 Annual Report Download - page 120

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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The vesting of certain stock option grants may result in state and federal income tax benefits related to the
difference between the market price of the common stock at the date of vesting and the date of grant. During the years
ended December 31, 2013 and 2012, we recognized excess tax benefits related to stock options of $1 million and $2
million, respectively. During the year ended December 31, 2011, we recognized a reduction in tax benefits related to
stock options of $3 million. All amounts were recorded as adjustments to additional paid-in capital and deferred income
taxes.
We recorded the following compensation related to restricted stock and stock options during the years ended
December 31, 2013, 2012 and 2011:
Years Ended December 31,
2013 2012 2011
($ in millions)
Natural gas and oil properties ................................................................... $ 52 $ 71 $ 112
General and administrative expenses ...................................................... 60 71 92
Natural gas, oil and NGL production expenses......................................... 21 24 33
Marketing, gathering and compression expenses .................................... 7 15 17
Oilfield services expenses ........................................................................ 10 10 11
Total ................................................................................................. $ 150 $ 191 $ 265
Liability-Classified Awards
Performance Share Units. In 2012 and 2013, we granted PSUs to senior management under our Long Term
Incentive Plan which settle in cash at the end of their respective performance periods and which vest ratably over their
respective terms. The 2012 awards were granted in one, two and three-year tranches and are settled in cash on the
first, second and third anniversary dates of the awards, and the 2013 awards are settled in cash on the third anniversary
of the awards. The ultimate number of units earned is based on the achievement of relative and absolute total
shareholder return (TSR) and production and proved reserve growth performance goals. The market condition is a
function of TSR, and generally requires a Monte Carlo simulation to determine the fair value.
For PSUs granted in 2012, each of the TSR and operational payout components can range from 0% to 125%
resulting in a maximum total payout of 250%. For PSUs granted in 2013, the TSR component can range from 0% to
125% and each of the two operational components can range from 0% to 62.5%; however, the maximum total payout
is capped at 200% in all cases and at 100% in situations where the Company’s absolute TSR is less than zero. The
following table presents a summary of our PSU awards as of December 31, 2013:
Units
Fair Value
as of
Grant Date Fair Value
Liability for
Vested
Amount
($ in millions)
2012 Awards (a)
Payable 2014............................................ 278,083 $ 8 $ 11 $ 11
Payable 2015............................................ 834,248 23 31 30
Total 2012 Awards................................ 1,112,331 $ 31 $ 42 $ 41
2013 Awards
Payable 2016............................................ 1,600,438 $ 35 $ 58 $ 49
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(a) In 2013, we paid $2 million related to 2012 PSU awards.