Stockholders' Equity | 9 Months Ended |
Oct. 31, 2013 |
Stockholders' Equity [Abstract] | ' |
Stockholders' Equity | ' |
7. Stockholders’ Equity |
|
Common Stock |
|
The following transactions occurred during the nine months ended October 31, 2013 with regard to shares of the Company’s common stock: |
|
| · | | On March 8, 2013, the Company sold to two affiliates of NGP Triangle Holdings, LLC (“NGP”) an aggregate of 9,300,000 million shares of common stock in a private placement at $6.00 per share for aggregate consideration of $55.8 million. The Company paid approximately $0.1 million in expenses related to this offering. | | | | | | | |
| · | | We issued 540,124 shares of common stock (net of shares surrendered for related employee payroll tax withholding) for restricted stock units that vested during the period. | | | | | | | |
| · | | We issued 5,000 shares of common stock at $7.24 per share to a consultant for services provided to TUSA. | | | | | | | |
| · | | On August 2, 2013, the Company issued 325,000 shares of common stock to an unaffiliated oil and gas company at $7.50 per share for total consideration of $2.4 million. | | | | | | | |
| · | | In August and September, 2013, the Company sold 17,250,000 shares of common stock at $6.25 per share in a public offering for gross proceeds of $107.8 million. The Company paid approximately $6.0 million in expenses related to this offering. | | | | | | | |
| · | | On August 28, 2013, the Company sold 11,350,000 shares of common stock to an unaffiliated entity at $7.20 per share for total consideration of $81.7 million. The Company paid approximately $0.9 million in expenses related to this offering. | | | | | | | |
| · | | We issued 93,333 shares of common stock for the exercise of stock options. | | | | | | | |
|
Private Placement |
|
On August 6, 2013, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with TIAA Oil and Gas Investments, LLC (“TOGI”). As permitted under the terms of the Stock Purchase Agreement, on August 28, 2013, TOGI assigned its rights and obligations to purchase 11,350,000 shares of the Company’s common stock under the Stock Purchase Agreement to ActOil Bakken, LLC (“ActOil”), which is an affiliate of TOGI. |
|
Also, on August 28, 2013, the Company issued to ActOil 11,350,000 shares of common stock at $7.20 per share for gross proceeds to the Company of $81.7 million ($80.8 million net after transaction costs), which were used to consummate the August 28, 2013 Kodiak property acquisition. Concurrently with the issuance, the Company entered into a Rights Agreement (the “Rights Agreement”) with ActOil. Under the Rights Agreement, ActOil is entitled to certain demand registration rights and unlimited piggyback registration rights under the Securities Act of 1933, as amended. The Stock Purchase Agreement restricts ActOil from selling, pledging or otherwise disposing of the Company’s common stock acquired by ActOil for a period of 180 days after August 28, 2013, without the Company’s consent, which covers the period through and including February 24, 2014. |
|
The Rights Agreement also grants ActOil the preemptive right to purchase its pro rata share on a fully diluted basis of any future equity offerings by the Company until such time as ActOil and its affiliates cease to hold at least the lesser of (i) 50% of the shares of common stock acquired by ActOil pursuant to the Stock Purchase Agreement and (ii) 10% of the Company’s then-outstanding shares of the common stock (a “Termination Event”). Such rights are subject to customary exclusions such as securities offered in connection with employee benefits plans, business combinations, pro-rata distributions, and stockholder rights plans. |
|
Pursuant to the Rights Agreement, on the date on which the aggregate amount paid to the Company by ActOil and certain of its affiliates as consideration for shares of common stock exceeds $150.0 million, ActOil will be entitled to designate one director to serve on the Board of Directors of the Company until such time as a Termination Event occurs. |
|
The Rights Agreement further provides that, for so long as ActOil holds (i) 50% of the common stock purchased by ActOil under the Stock Purchase Agreement, and (ii) 10% of the then issued and outstanding common stock, without the prior written consent of ActOil, the Company and its subsidiaries shall not incur any indebtedness unless the Consolidated Leverage Ratio (as defined in the Rights Agreement) does not exceed 5.0 to 1.0 (provided that debt outstanding under the Company’s senior credit facility and its 5% convertible note issued in July 2012 are excluded from such calculation). |
|
Public Equity Offering |
|
On August 8, 2013, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Wells Fargo Securities, LLC, as representative of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which the Company agreed to issue and sell to the Underwriters in a firm commitment offering (the “Offering”) 15,000,000 shares of common stock at a price to the public of $6.25 per share. Pursuant to the Underwriting Agreement, the Company also granted to the Underwriters a 30-day over-allotment option to purchase up to an additional 2,250,000 shares of common stock at the same public offering price. The Offering was made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-171958) previously filed with the Securities and Exchange Commission on January 31, 2011. The Offering closed on August 14, 2013. On September 6, 2013, the Underwriters exercised their 30-day over-allotment option to purchase an additional 2,250,000 shares of the Company’s common stock at a price to the public of $6.25 per share. The over-allotment option closed on September 11, 2013. |
|
The total gross proceeds to the Company from the Offering were approximately $107.8 million ($101.8 million net, after deducting underwriting discounts and commissions and other estimated offering expenses). The Company intends to use the net proceeds from the Offering and the exercise of the Underwriters’ over-allotment option to fund its drilling and development program, to pursue select acquisition opportunities and for other general corporate purposes, including working capital. |
|
The Underwriting Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, customary indemnification obligations of the Company and the Underwriters, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Underwriting Agreement. |
|
Restricted Stock Units |
|
During the nine months ended October 31, 2013, the Company granted 1,235,633 restricted stock units as compensation to officers, directors, employees, and a consultant. The restricted stock units vest over one to five years. As of October 31, 2013, there was approximately $14.7 million of total unrecognized compensation expense related to unvested restricted stock units. This compensation expense is expected to be recognized over the remaining vesting period of the related awards of approximately 2.5 years. When restricted stock units vest, the holder has the right to receive one share of the Company’s common stock per vesting unit. |
|
The following table summarizes the status of restricted stock units outstanding: |
| | | | | | | | | | |
| | | | | | | | | | |
| | Number of Shares | | Weighted- Average Award Date Fair Value | | | | | |
Restricted stock units outstanding - January 31, 2013 | | 2,424,085 | | $ | 6.68 | | | | | |
Units granted during the nine months ended October 31, 2013 | | 1,235,633 | | $ | 6.64 | | | | | |
Units forfeited during the nine months ended October 31, 2013 | | -23,319 | | $ | 6.54 | | | | | |
Units that vested during the nine months ended October 31, 2013 | | -762,915 | | $ | 7.21 | | | | | |
Restricted stock units outstanding - October 31, 2013 | | 2,873,484 | | $ | 6.04 | | | | | |
| | | | | | | | | | |
|
For the three and nine months ended October 31, 2013, the Company recorded stock-based compensation related to restricted stock units of $2.0 million and $4.4 million, respectively, in general and administrative expenses. An additional $0.4 million and $1.0 million of stock based compensation was capitalized to oil and natural gas properties during the three and nine months ended October 31, 2013, respectively. |
|
For the three and nine months ended October 31, 2012, the Company recorded stock-based compensation related to restricted stock units of $1.5 million and $4.3 million, respectively, in general and administrative expenses. An additional $0.4 million and $0.7 million of stock based compensation was capitalized to oil and natural gas properties during the three and nine months ended October 31, 2012. |
|
Stock Options |
|
On July 4, 2013, the Company entered into a CEO Stand-Alone Stock Option Agreement with the Company’s President and Chief Executive Officer (the “CEO Option Grant”). The CEO Option Grant is a stand-alone stock option agreement unrelated to the Company’s existing Amended and Restated 2011 Omnibus Incentive Plan. As such, the CEO Option Grant required stockholder approval before any shares of the Company’s common stock could be issued thereunder. The options under the CEO Option Grant were granted as of the execution date thereof; however, the options granted thereunder were not exercisable, and would have expired and become null and void in their entirety, if they were not approved by the stockholders of the Company on or before July 4, 2015. Thus, no compensation expense was recognized for these option grants prior to being approved by the stockholders. At the Company’s Annual Meeting of Stockholders held on August 30, 2013, the CEO Option Grant was approved. |
|
The CEO Option Grant covers a total of 6.0 million shares of Company common stock and is divided into five tranches, each with a different exercise price, as follows: |
|
| | | | | | | | | | |
| | | | | | |
Name of Tranche | | Number of Shares | | Exercise Price | | | | | | |
“$7.50 Tranche” | | 750,000 | | $7.50 per share | | | | | | |
“$8.50 Tranche” | | 750,000 | | $8.50 per share | | | | | | |
“$10.00 Tranche” | | 1,500,000 | | $10.00 per share | | | | | | |
“$12.00 Tranche” | | 1,500,000 | | $12.00 per share | | | | | | |
“$15.00 Tranche” | | 1,500,000 | | $15.00 per share | | | | | | |
| | | | | | |
|
Each tranche of the CEO Option Grant vests and becomes exercisable on the same vesting schedule, with 10% of each tranche becoming vested and exercisable on each of the first two anniversaries of the grant date, 50% of each tranche becoming vested and exercisable on the third anniversary of the grant date, 20% of each tranche becoming vested and exercisable on the fourth anniversary of the grant date, and the remaining 10% of each tranche becoming vested and exercisable on the fifth anniversary of the grant date. Once any portion of the CEO Option Grant becomes vested, it is exercisable until the option expires. The options expire on July 4, 2023. |
|
Compensation expense related to stock options is calculated using the Black Scholes valuation model. Expected volatility is generally based on the historical volatility of (a) Triangle’s common stock and (b) for expected terms exceeding three years, the historical volatility of similar companies with significant exploration and production activity in the Bakken over a historical period consistent with that of the expected term of the options. Triangle’s historical volatility before January 2011 related to high-risk, unsuccessful exploration in Nova Scotia and is not representative of expected future volatility for Triangle. The expected term of the options is estimated based on factors such as vesting periods, contractual expiration dates, historical trends in the Company’s common stock price and historical exercise behavior. The risk-free rate for the expected term (from service inception to option exercise) of the options is based on the yields of U.S. Treasury instruments with lives comparable to the estimated expected option term or life. |
|
The following assumptions were used for the Black‑Scholes model to calculate the share‑based compensation expense for the CEO Option Grant for the period presented: |
|
| | | | | | | | | | |
| | | | | | | |
Risk free rate | | | 2.18% | | | | | | | |
Dividend yield | | | - | | | | | | | |
Expected volatility | | | 62% | | | | | | | |
Weighted average expected stock option life (years) | | | 6.3 | | | | | | | |
| | | | | | | | | | |
|
The following table summarizes the status of stock options outstanding under the Rolling Plan (for a discussion of the Rolling Plan, see Note 10 – Share-Based Compensation in our audited financial statements included in our Fiscal 2013 Form 10-K) and the CEO Option Grant: |
| | | | | | | | | | |
| | | | | | | | | | |
| | Number of Shares | | Weighted Average Exercise Price | | | | | |
Options outstanding - January 31, 2013 (231,666 exercisable) | | 231,666 | | $ | 1.48 | | | | | |
Options exercised | | -93,333 | | $ | 1.25 | | | | | |
Options granted | | 6,000,000 | | $ | 11.25 | | | | | |
Options outstanding - October 31, 2013 (138,333 exercisable) | | 6,138,333 | | $ | 11.03 | | | | | |
The following table presents additional information related to the stock options outstanding under the Rolling Plan and the CEO Option Grant at October 31, 2013: |
|
|
|
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Remaining | | | | | | |
Exercise Price | | | Contractual Life | | Number of shares |
per Share | | | (years) | | Outstanding | | Exercisable |
$ | 3.00 | | | 0.24 | | | 30,000 | | | 30,000 |
$ | 1.25 | | | 1.08 | | | 108,333 | | | 108,333 |
$ | 7.50 | | | 9.68 | | | 750,000 | | | - |
$ | 8.50 | | | 9.68 | | | 750,000 | | | - |
$ | 10.00 | | | 9.68 | | | 1,500,000 | | | - |
$ | 12.00 | | | 9.68 | | | 1,500,000 | | | - |
$ | 15.00 | | | 9.68 | | | 1,500,000 | | | - |
| | | | | | | 6,138,333 | | | 138,333 |
| | | | | | | | | | |
Weighted average exercise price per share | $ | 11.03 | | $ | 1.63 |
| | | | | | | | | | |
Weighted average remaining contractual life | | 9.48 | | | 0.90 |
|
As of October 31, 2013, all compensation expense related to stock options under the Rolling Plan had been recognized as they became fully vested in fiscal year 2013. Total compensation expense related to the CEO Option Grant of $0.6 million was recognized for the three and nine months ended October 31, 2013. The aggregate intrinsic value of all options as of October 31, 2013 was $5.9 million. As of October 31, 2013, there was approximately $18.7 million of total unrecognized compensation expense related to unvested stock options. |
|
RockPile Share-Based Compensation |
|
At October 31, 2013, RockPile had 30.0 million Series A Units authorized by the LLC Agreement (as defined below) with approximately 25.5 million Series A Units outstanding, all of which are owned by Triangle. Series A Units were issued to the three parties who had contributed the initial $24.0 million in RockPile’s paid-in capital prior to October 31, 2011. Triangle had contributed $20.0 million and received 20.0 million Series A Units on October 31, 2011. On December 28, 2012, Triangle acquired an aggregate of 4.0 million Series A Units from the other two original owners of Series A Units. On February 15, 2013, Triangle made an additional capital contribution of $5.0 million to acquire an additional approximately 1.5 million Series A Units. |
|
Effective October 22, 2012, RockPile’s Board of Managers approved the Second Amended and Restated Limited Liability Company Agreement, as further amended on February 20, 2013 (“LLC Agreement”), which includes provisions allowing RockPile to make equity grants in the form of restricted units (“Series B Units”) pursuant to Restricted Unit Agreements. The LLC Agreement, which was executed by RockPile and its members on October 31, 2012, authorizes RockPile to issue an aggregate of up to 6.0 million Series B Units in multiple series designated by a sequential number (i.e., Series B-1, Series B-2, etc.) with the right to re-issue forfeited or redeemed Series B Units. As of October 31, 2013, RockPile had granted approximately 4.1 million Series B Units, of which approximately 2.4 million were unvested at that date, to certain employees in key positions at RockPile. |
|
The Series B Units are intended to constitute interests in future profits, i.e., “profit interests” within the meaning of Internal Revenue Service Revenue Procedures 93-27 and 2001-43. Accordingly, the capital account associated with each Series B Unit at the time of its issuance shall be nil. RockPile’s Board of Managers may designate a “Liquidation Value” applicable to each tranche of a Series B Unit so as to constitute a net profits interest in RockPile. The Liquidation Value shall equal the dollar amount per unit that would, in the reasonable determination of RockPile’s Board of Directors, be distributed with respect to the initial Series B tranche if, immediately prior to the issuance of a new Series B tranche, the assets of RockPile were sold for their fair market value and the proceeds (net of any liabilities of RockPile) were distributed. |
|
RockPile’s Series A Units are entitled to a return of contributed capital and an 8.0% preferred return on such capital before Series B Units participate in profits. The initial Series B tranche (Series B-1 Units) participates pro-rata with the Series A Units once the preferred return has been achieved. However, no distributions shall be made with respect to any Series B-1 Units until total cumulative distributions to the Series A Units total $40.0 million. After distributions totaling $40.0 million have been made to the Series A Units, future distributions will be allocated to the Series B-1 Units until the per unit profits distributed to the Series B-1 Units is equivalent to the per unit profits distributed to the Series A Units. Thereafter, all further distributions would be distributed on a pro-rata basis. Subsequent issuances of Series B Units will begin participating on a pro rata basis once the per unit profits allocated to the Series B-1 Units reaches the Liquidation Value of the subsequent Series B Unit issuance. |
|
Series B Units currently have from 2 to 44 months remaining until fully vested. Compensation costs are determined using a Black-Scholes option pricing model based upon the grant date calculated fair market value of the award and is recognized ratably over the applicable vesting period. |
|
Series B Units are valued using a waterfall valuation approach beginning with the initial asset valuation contained in the LLC Agreement with each tranche of Series B Units constituting a waterfall valuation event. Additionally, due to the limited operating history of RockPile, its private ownership and the nature of the equity grants, RockPile has made use of estimates as it relates to employee termination and forfeiture rates, used different valuation techniques including income and/or market approaches, and utilized certain peer group derived information. The assumptions used in the Black-Scholes option pricing model consist of the underlying equity value, the estimated time to liquidity which is based upon the projected exit path, volatility based upon the midpoint volatility of a publicly traded peer group, and the risk-free interest rate which is based upon the rate for zero coupon U.S. Government issues with a term equal to the expected life. |
|
A summary of RockPile’s Series B Unit activity and vesting for the nine months ended October 31, 2013 is as follows: |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Series B-1 Units | | | Series B-2 Units | | | Series B-3 Units | |
Units unvested at January 31, 2013 | | | 1,441,667 | | | 60,000 | | | - | |
Units granted | | | - | | | - | | | 910,000 | |
Units vested | | | - | | | -15,000 | | | - | |
Units unvested at October 31, 2013 | | | 1,441,667 | | | 45,000 | | | 910,000 | |
| | | | | | | | | | |
Weighted average award date unit fair value | | $ | 0.44 | | $ | 0.29 | | $ | 0.70 | |
Remaining vesting period (years) | | | 0.68 | | | 1.83 | | | 3.53 | |
| | | | | | | | | | |
|
Non-cash compensation cost related to the Series B Units was $0.1 million and $0.5 million for the three and nine months ended October 31, 2013, respectively. |
|
As of October 31, 2013, there was approximately $0.9 million of unrecognized compensation cost related to non-vested Series B Units. We expect to recognize such cost on a pro-rata basis on the Series B Units vesting schedule during the next four fiscal years. |
|