Stock-Based Compensation
 3 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Note 6—Stock-Based Compensation
Long Term 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 March 31, 2018, the Company had 10,691,760 shares of Class A Common Stock available for future grants. The LTIP provides for grants of stock options (including incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock, dividend equivalents, restricted stock units and other stock or cash-based awards.
Stock-based compensation expense is recognized within both General and administrative expenses and Exploration expense in the Consolidated Statements of Operations. The expense amounts in the table below may not be representative of future expense amounts to be recognized as the value of future awards may vary from historical award amounts. Upon adoption of ASU 2016-09 in October 2016, the Company elected to account for forfeitures of awards granted under the LTIP as they occur in determining compensation expense.
 
For the Three Months Ended March 31,
(in thousands)
2018
 
2017
Restricted stock awards
$
1,775

 
$
856

Stock option awards
2,206

 
1,754

Performance stock units
352

 
—

Total stock-based compensation expense
$
4,333

 
$
2,610


Restricted Stock
The following table provides information about restricted stock awards outstanding during the three months ended March 31, 2018:
 
Awards
 
Weighted Average Grant Date Fair Value
Unvested balance as of December 31, 2017
1,009,716

 
$
17.64

Granted
199,320

 
$
19.00

Vested
(63,367
)
 
$
18.50

Forfeited
(25,948
)
 
$
16.85

Unvested balance as of March 31, 2018
1,119,721

 
$
17.85


The Company grants service-based restricted stock awards to executive officers and employees, which generally vest ratably over a three-year service period, and to directors, which generally vest over a one-year service period. Compensation cost for the service-based restricted stock awards is based upon the grant-date fair value of the award, and such costs are recognized ratably over the applicable vesting period. The weighted average grant-date fair value for restricted stock awards granted was $19.00 per share and $18.82 per share for the three months ended March 31, 2018 and 2017, respectively. The total fair value of restricted stock awards that vested during the three-month period ended March 31, 2018 was $1.2 million. Unrecognized compensation cost related to restricted shares that were unvested as of March 31, 2018 was $16.6 million, which the Company expects to recognize over a weighted average period of 2.2 years.
Stock Options
Stock options that have been granted under the LTIP expire ten years from the grant date and vest ratably over a three-year service period. The exercise price for an option granted under the LTIP is the closing price of the Company’s Class A Common Stock as reported on the 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 three months ended March 31, 2018:
 
For the Three Months Ended March 31,
 
2018
 
2017
Weighted average grant-date fair value per share
$
7.96

 
7.21

Expected term (in years)
6

 
6

Expected stock volatility
37
%
 
38.2
%
Dividend yield
—
%
 
—
%
Risk-free interest rate
2.3
%
 
2.0
%

The following table provides information about stock option awards outstanding during the three months ended March 31, 2018:
 
Options
 
Weighted Average Exercise Price
 
Weighted Average Remaining Term
(in years)
 
Aggregate Intrinsic Value
(in thousands)
Outstanding as of December 31, 2017
4,290,001

 
$
16.15

 
 
 
 
Granted
37,000

 
$
20.00

 
 
 
 
Exercised
(10,000
)
 
$
16.43

 
 
 
 
Forfeited
(47,668
)
 
$
14.95

 
 
 
 
Outstanding as of March 31, 2018
4,269,333

 
$
16.20

 
8.78
 
$
9,417

Exercisable as of March 31, 2018
1,211,612

 
$
15.83

 
8.69
 
$
2,911

Unvested Options at March 31, 2018
3,057,721

 
$
16.28

 
8.81
 
$
6,506


As of March 31, 2018, there was $16.6 million of unrecognized compensation cost related to unvested stock options, which the Company expects to recognize on a pro-rata basis over a weighted average period of 1.77 years.
Performance Stock Units
During the three months ended March 31, 2018, there was no significant performance stock units activity. As of March 31, 2018, there was $3.2 million of unrecognized compensation cost related to performance stock units that were unvested, which the Company expects to recognize on a pro-rata basis over a weighted average period of 2.3 years.