Equity Based Compensation
 6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Equity Based Compensation
Note 6—Equity Based Compensation
The Company has recognized stock-based compensation cost as shown below. Historical amounts may not be representative of future amounts as the value of future awards may vary from historical amounts.
(in thousands)
For the Three Months Ended June 30, 2017
 
For the Six Months Ended June 30, 2017
Restricted stock awards
$
1,018

 
$
1,874

Stock option awards
1,967

 
3,721

Total equity based compensation expense
$
2,985

 
$
5,595


Equity Incentive Plan
On October 7, 2016, the stockholders of the Company approved the Centennial Resource Development, Inc. 2016 Long Term Incentive Plan (the “LTIP”). An aggregate of 16,500,000 shares of Class A Common Stock were authorized for issuance under the LTIP, and as of June 30, 2017, the Company had 11,866,072 shares of Class A Common Stock available for future grants. The LTIP provides for grants of stock options, including incentive stock options (“ISOs”) and nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash based awards.
Restricted Stock
The following table provides information about restricted stock awards granted during the six months ended June 30, 2017:
 
Awards
 
Weighted Average Grant-Date Fair Value
Service-based stock awards:
 
 
 
Outstanding as of December 31, 2016
256,597

 
$
20.03

Vested
—

 
$
—

Granted
324,010

 
$
18.77

Canceled
(6,679
)
 
$
18.81

Outstanding as of June 30, 2017
573,928

 
$
19.33


Compensation cost for the service-based vesting restricted shares is based upon the grant-date market value of the award. Such costs are recognized ratably over the applicable vesting period. Unrecognized compensation cost related to unvested restricted shares at June 30, 2017 was $8.8 million. The Company expects to recognize that cost over a weighted average period of 2.4 years.
Stock Options
Options that have been granted under the LTIP expire ten years from the grant date and have service-based vesting schedules of three years. The exercise price for an option under the LTIP is the closing price of the Company’s Class A Common Stock as reported by NASDAQ on the date of grant.
Compensation cost related to stock options is based on the grant-date fair value of the award, recognized ratably over the applicable vesting period. The Company estimates the fair value using the Black-Scholes option-pricing model. Expected volatilities are based on the re-levered asset volatility implied by a set of comparable companies. Expected term is based on the simplified method, and is estimated as the average of the weighted average vesting term and the time to expiration as of the grant date. The Company uses U.S. Treasury bond rates in effect at the grant date for its risk-free interest rates.
The following table summarizes the assumptions and related information used to determine the grant date fair value of stock options awarded during the six months ended June 30, 2017:
 
Six Months Ended June 30, 2017
Weighted average grant-date fair value
$
7.15

Expected term (in years)
6

Expected stock volatility
38.1
%
Dividend yield
—
%
Risk-free interest rate
2.0
%

Information about outstanding stock options is summarized in the table below:
 
Options
 
Weighted Average Exercise Price
 
Weighted Average Remaining Term
(in years)
 
Aggregate Intrinsic Value
(in thousands)
Outstanding as of December 31, 2016
2,735,500

 
$
14.67

 
5.8

 
$
13,804

Exercised
—

 
$
—

 
—

 
$
—

Granted
1,547,500

 
$
17.97

 
5.6

 
$
36

Forfeited
(223,000
)
 
$
14.54

 
5.3

 
$
289

Outstanding as of June 30, 2017
4,060,000

 
$
15.94

 
5.5

 
$
3,018

Exercisable as of June 30, 2017
—

 
$
—

 
—

 
$
—


As of June 30, 2017, there was $21.2 million of unrecognized compensation cost related to non-vested stock options. The Company expects to recognize that cost on a pro rata basis over a weighted average period of 2.5 years.