Share-Based Compensation Plans | 12 Months Ended |
Dec. 31, 2014 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation Plans | Share-Based Compensation Plans |
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Share-based compensation expense recorded by the Company was as follows: |
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| | Years Ended December 31, |
| | 2014 | | 2013 | | 2012 |
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2010 Executive Performance Incentive Programs | | $ | — | | | $ | — | | | $ | 1,940 | |
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2012 Executive Performance Incentive Program | | 7,743 | | | 6,739 | | | 10,633 | |
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2013 Executive Performance Incentive Program | | 8,208 | | | 6,602 | | | — | |
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2014 Executive Performance Incentive Program | | 9,104 | | | — | | | — | |
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2010 Stock Incentive Award Program | | — | | | — | | | 4,022 | |
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2011 Volume and Efficiency Program | | — | | | 13,834 | | | 5,286 | |
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2011 EQT Value Driver Award Program | | — | | | — | | | 3,033 | |
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2012 EQT Value Driver Award Program | | — | | | 2,327 | | | 11,557 | |
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2013 EQT Value Driver Award Program | | 4,403 | | | 13,050 | | | — | |
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2014 EQT Value Driver Award Program | | 11,510 | | | — | | | — | |
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2014 EQM Value Driver Award Program | | 2,378 | | | — | | | — | |
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Restricted stock awards | | 4,688 | | | 3,033 | | | 2,007 | |
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Non-qualified stock options | | 3,002 | | | 3,805 | | | 3,580 | |
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Other programs, including non-employee director awards | | (409 | ) | | 9,154 | | | 3,763 | |
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Total share-based compensation expense | | $ | 50,627 | | | $ | 58,544 | | | $ | 45,821 | |
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The Company typically uses treasury stock to fund awards that are paid in stock. When an award has graduated vesting, the Company records the expense equal to the vesting percentage on the vesting date. A portion of the expense related to share-based compensation plans is included as an unallocated expense in deriving total operating income for segment reporting purposes. See Note 4. |
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Cash received from exercises under all share-based payment arrangements for employees and directors for the years ended December 31, 2014, 2013 and 2012 were $19.2 million, $32.9 million and $7.9 million, respectively. During the years ended December 31, 2014, 2013 and 2012, share-based payment arrangements paid in stock generated tax benefits of $45.9 million, $14.4 million and $15.1 million, respectively. As a result of the Company’s NOL position in 2012, excess tax benefits of $8.1 million were not recorded in the financial statements as an addition to common stockholders’ equity. |
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Executive Performance Incentive Programs |
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Effective in 2009, the Compensation Committee of the Board of Directors adopted the 2010 Executive Performance Incentive Program (2010 EPIP) and the 2010 July Executive Performance Incentive Program (the 2010 July EPIP, and together with the 2010 EPIP, the 2010 EPIPs) under the 2009 Long-Term Incentive Plan. The 2010 EPIPs were established to provide long-term incentive opportunities to key employees to further align their interest with those of the Company’s shareholders and with the strategic objectives of the Company. The vesting of the units under the 2010 EPIPs occurred on December 31, 2012, after the ordinary close of the respective performance periods. Awards granted were earned based on a combination of the level of total shareholder return relative to the respective peer groups over the period January 1, 2010 (July 1, 2010 for the 2010 July EPIP) through December 31, 2012 and the level of production sales revenues over the period January 1, 2010 (July 1, 2010 for the 2010 July EPIP) through September 20, 2012. The Company accounted for these awards as equity awards using the $60.09 grant date fair value as determined using a Monte Carlo simulation. The Monte Carlo simulation projected the share price, for the Company and its peers, at the ending point of the performance periods. The prices were generated using each company’s annual volatility for the expected term and the commensurate three-year risk-free rate of 1.69%. Based on the Company’s performance relative to the conditions discussed above, 192,744 shares of common stock, valued at $6.9 million based on the Monte Carlo value on the grant date, were distributed on December 31, 2012. |
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Effective in 2012, the Compensation Committee of the Board of Directors adopted the 2012 Executive Performance Incentive Plan (2012 EPIP) under the 2009 Long-Term Incentive Plan. The 2012 EPIP was established to provide long-term incentive opportunities to key employees to further align their interests with those of the Company’s shareholders and with the strategic objectives of the Company. The vesting of the units under the 2012 EPIP will occur upon payment in the first quarter of 2015, following the expiration of the performance period. Awards granted will be earned based on a combination of the level of total shareholder return relative to a predefined peer group and the level of cumulative operating cash flow per share over the period January 1, 2012 through December 31, 2014. The Company accounted for these awards as equity awards using the $123.37 grant date fair value as determined using a Monte Carlo simulation. The Monte Carlo simulation projected the share price, for the Company and its peers, at the ending point of the performance period. The prices were generated using each company’s annual volatility for the expected term and the commensurate three-year risk-free rate of 0.36%. Based on the Company’s performance relative to the conditions discussed above, 307,323 shares of common stock, valued at $37.9 million based on the Monte Carlo value on the grant date, are expected to be distributed during the first quarter of 2015. The total compensation cost capitalized in 2014, 2013 and 2012 was $2.6 million, $8.1 million, and $2.1 million, respectively. |
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The peer companies for the 2012 EPIP are as follows: |
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Cabot Oil & Gas Corp. | National Fuel Gas Company | Sempra Energy | | | | | | | | | | |
Chesapeake Energy Corp. | NStar Electric Co. | SM Energy Company | | | | | | | | | | |
Cimarex Energy Co. | ONEOK, Inc. | Southwestern Energy Company | | | | | | | | | | |
CONSOL Energy Inc. | Penn Virginia Corp. | Spectra Energy Corp | | | | | | | | | | |
Energen Corp. | Pioneer Natural Resources Company | Ultra Petroleum Corp. | | | | | | | | | | |
EOG Resources, Inc. | Plains Exploration & Production Co. | Whiting Petroleum Corp. | | | | | | | | | | |
EXCO Resources, Inc. | Questar Corp. | The Williams Companies, Inc. | | | | | | | | | | |
MarkWest Energy Partners, L.P. | Quicksilver Resources Inc. | | | | | | | | | | | |
MDU Resources Group, Inc. | Range Resources Corp. | | | | | | | | | | | |
Effective in 2013, the Compensation Committee of the Board of Directors adopted the 2013 Executive Performance Incentive Plan (2013 EPIP) under the 2009 Long-Term Incentive Plan. The 2013 EPIP was established to provide long-term incentive opportunities to key employees to further align their interests with those of the Company’s shareholders and with the strategic objectives of the Company. A total of 297,597 units were outstanding at January 1, 2014. Adjusting for 26,534 forfeitures, there were 271,063 outstanding units as of December 31, 2014. The vesting of the units under the 2013 EPIP will occur upon payment after December 31, 2015 (the end of the performance period). The payout factor will vary between zero and 300% of the number of outstanding units contingent upon a combination of the level of total shareholder return relative to a predefined peer group and the level of cumulative operating cash flow per share over the period January 1, 2013 through December 31, 2015. The Company accounted for these awards as equity awards using the grant date fair value as determined using a Monte Carlo simulation. The Monte Carlo simulation projected the share price, for the Company and its peers, at the ending point of the performance period. The prices were generated using each company’s annual volatility for the expected term and the commensurate three-year risk-free rate of 0.36%. As the program includes a performance condition that affects the number of shares that will ultimately vest (the cumulative operating cash flow per share performance condition), in accordance with ASC Topic 718, the Monte Carlo simulation computed a grant date fair value for each possible performance condition outcome on the grant date. The Company reevaluates the then-probable outcome at each reporting period, in order to record expense at the probable outcome grant date fair value. As of December 31, 2014, the compensation expense was recorded using a grant date fair value of $140.00 per unit, which was the grant date fair value computed for the outcome which management estimated to be most probable. The total compensation cost capitalized in 2014 and 2013 was $5.5 million and $5.0 million, respectively. As of December 31, 2014, $12.6 million of unrecognized compensation cost (assuming no changes to the performance condition achievement level) related to the 2013 EPIP was expected to be recognized by December 31, 2015. |
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The peer companies for the 2013 EPIP are as follows: |
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Cabot Oil & Gas Corp. | MDU Resources Group, Inc. | Sempra Energy | | | | | | | | | | |
Chesapeake Energy Corp. | National Fuel Gas Company | SM Energy Company | | | | | | | | | | |
Cimarex Energy Co. | Newfield Exploration Company | Southwestern Energy Company | | | | | | | | | | |
Concho Resources, Inc | ONEOK, Inc. | Spectra Energy Corp | | | | | | | | | | |
CONSOL Energy Inc. | Pioneer Natural Resources Company | Ultra Petroleum Corp. | | | | | | | | | | |
Energen Corp. | Plains Exploration & Production Co. | Whiting Petroleum Corp. | | | | | | | | | | |
EOG Resources, Inc. | Questar Corp. | The Williams Companies, Inc. | | | | | | | | | | |
EXCO Resources, Inc. | Quicksilver Resources Inc. | | | | | | | | | | | |
MarkWest Energy Partners, L.P. | Range Resources Corp. | | | | | | | | | | | |
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Effective in 2014, the Compensation Committee of the Board of Directors adopted the 2014 Executive Performance Incentive Plan (2014 EPIP) under the 2009 Long-Term Incentive Plan. The 2014 EPIP was established to provide long-term incentive opportunities to key employees to further align their interests with those of the Company’s shareholders and with the strategic objectives of the Company. A total of 278,440 units were granted in 2014 and no additional units may be granted. Adjusting for 19,210 forfeitures, there were 259,230 outstanding units as of December 31, 2014. The vesting of the units under the 2014 EPIP will occur upon payment after December 31, 2016 (the end of the performance period). The payout factor will vary between zero and 300% of the number of outstanding units contingent upon a combination of the level of total shareholder return relative to a predefined peer group and the level of production sales volume growth over the period January 1, 2014 through December 31, 2016. The Company accounted for these awards as equity awards using the grant date fair value as determined using a Monte Carlo simulation. The Monte Carlo simulation projected the share price, for the Company and its peers, at the ending point of the performance period. The prices were generated using each company’s annual volatility for the expected term and the commensurate three-year risk-free rate of 0.78%. As the program includes a performance condition that affects the number of shares that will ultimately vest (the cumulative total sales volume growth performance condition), in accordance with ASC Topic 718, the Monte Carlo simulation computed a grant date fair value for each possible performance condition outcome on the grant date. The Company reevaluates the then-probable outcome at each reporting period, in order to record expense at the probable outcome grant date fair value. As of December 31, 2014, the compensation expense was recorded using a grant date fair value of $167.12 per unit, which was the grant date fair value computed for the outcome which management estimated to be most probable. The total compensation cost capitalized in 2014 was $4.6 million. As of December 31, 2014, $27.3 million of unrecognized compensation cost (assuming no changes to the performance condition achievement level) related to the 2014 EPIP was expected to be recognized over the next two years. |
The peer companies for the 2014 EPIP are as follows: |
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Cabot Oil & Gas Corp. | MarkWest Energy Partners, L.P. | Range Resources Corp. | | | | | | | | | | |
Chesapeake Energy Corp. | National Fuel Gas Company | SM Energy Company | | | | | | | | | | |
Cimarex Energy Co. | Newfield Exploration Company | Southwestern Energy Company | | | | | | | | | | |
Concho Resources, Inc. | Noble Energy, Inc. | Spectra Energy Corp | | | | | | | | | | |
CONSOL Energy Inc. | ONEOK, Inc. | Ultra Petroleum Corp. | | | | | | | | | | |
Continental Resources, Inc. | Pioneer Natural Resources Company | Whiting Petroleum Corp. | | | | | | | | | | |
Energen Corp. | QEP Resources, Inc. | The Williams Companies, Inc. | | | | | | | | | | |
EOG Resources, Inc. | Questar Corp. | | | | | | | | | | | |
EXCO Resources, Inc. | Quicksilver Resources, Inc. | | | | | | | | | | | |
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2010 Stock Incentive Award Program |
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Effective in 2010, the Compensation Committee of the Board of Directors adopted the 2010 Stock Incentive Award Program (2010 SIA) under the 2009 Long-Term Incentive Plan. The 2010 SIA was established to provide long-term incentive opportunities to key employees to further align their interests with those of the Company’s shareholders and with the strategic objectives of the Company. The payout opportunity with respect to the performance awards was contingent upon adjusted 2010 earnings before interest, taxes, depreciation and amortization (EBITDA) performance as compared to the Company’s annual business plan and individual, business unit and Company value drive performance over the period January 1, 2010 through December 31, 2010. The vesting of the awards occurred on December 31, 2012. The vesting resulted in 294,925 awards including accrued dividends, valued at $12.6 million based on the grant date fair value, being distributed in Company common stock on December 31, 2012. |
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Value Driver Award Programs |
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Effective in 2011, the Compensation Committee of the Board of Directors adopted the 2011 Value Driver Award Program (2011 EQT VDA) under the 2009 Long-Term Incentive Plan. The 2011 EQT VDA was established to align the interests of key employees with the interests of shareholders and customers and the strategic objective of the Company. Under the 2011 EQT VDA, 50% of the units confirmed vested upon payment following the first anniversary of the grant date; the remaining 50% of the units confirmed vested on December 31, 2012. The payments were contingent upon adjusted 2011 EBITDA performance as compared to the Company’s annual business plan and individual, business unit and Company value drive performance over the period January 1, 2011 through December 31, 2011. The two tranches of awards vested and were distributed in cash payments of $14.6 million in February 2012 and $15.3 million on December 31, 2012. The Company accounted for these awards as liability awards and as such, recorded compensation expense for the remeasurement of the fair value of the awards at the end of each reporting period. Due to the graded vesting of the award, the Company recognized compensation cost over the requisite service period for each separately vesting tranche of the award as though the award was, in substance, multiple awards. |
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Effective in 2012, the Compensation Committee of the Board of Directors adopted the 2012 Value Driver Award Program (2012 EQT VDA) under the 2009 Long-Term Incentive Plan. The 2012 EQT VDA was established to align the interests of key employees with the interests of shareholders and customers and the strategic objectives of the Company. Under the 2012 EQT VDA, 50% of the units confirmed vested upon payment following the first anniversary of the grant date; the remaining 50% of the units confirmed vested upon the payment date following the second anniversary of the grant date. The payments were contingent upon adjusted 2012 EBITDA performance as compared to the Company’s annual business plan and individual, business unit and Company value driver performance over the period January 1, 2012 through December 31, 2012. The two tranches of awards vested and 204,679 awards including accrued dividends were distributed in Company common stock in January 2013 and 194,943 awards including accrued dividends were distributed in February 2014. The Company accounted for these awards as equity awards using the $54.79 grant date fair value per unit which was equal to the Company’s common stock price on the date prior to the date of grant. Due to the graded vesting of the award, the Company recognized compensation cost over the requisite service period for each separately vesting tranche of the award as though the award was, in substance, multiple awards. |
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Effective in 2013, the Compensation Committee of the Board of Directors adopted the 2013 Value Driver Award Program (2013 EQT VDA) under the 2009 Long-Term Incentive Plan. The 2013 EQT VDA was established to align the interests of key employees with the interests of shareholders and customers and the strategic objectives of the Company. Under the 2013 EQT VDA, 50% of the units confirmed vested upon payment following the first anniversary of the grant date; the remaining 50% of the units confirmed will vest upon the payment date following the second anniversary of the grant date. The payments are contingent upon adjusted 2013 EBITDA performance as compared to the Company’s annual business plan and individual, business unit and Company value driver performance over the period January 1, 2013 through December 31, 2013. As of January 1, 2014, 614,048 awards including accrued dividends were outstanding under the 2013 EQT VDA. The first tranche of the confirmed awards vested and 306,076 were distributed in Company common stock in February 2014. The remainder of the confirmed awards are expected to vest and be paid in Company common stock in the first quarter of 2015. As of December 31, 2014, 279,761 awards including accrued dividends were outstanding under the 2013 EQT VDA. The Company accounts for these awards as equity awards using the $58.98 grant date fair value per unit which was equal to the Company’s common stock price on the date prior to the date of grant. Due to the graded vesting of the award, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award was, in substance, multiple awards. The total compensation cost capitalized was $2.9 million and $14.1 million in 2014 and 2013, respectively. |
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Effective in 2014, the Compensation Committee of the Board of Directors adopted the 2014 Value Driver Award Program (2014 EQT VDA) under the 2009 Long-Term Incentive Plan. The 2014 EQT VDA was established to align the interests of key employees with the interests of shareholders and customers and the strategic objectives of the Company. Under the 2014 EQT VDA, 50% of the units confirmed will vest upon payment following the first anniversary of the grant date; the remaining 50% of the units confirmed will vest upon the payment date following the second anniversary of the grant date. The payments are contingent upon adjusted 2014 EBITDA performance as compared to the Company’s annual business plan and individual, business unit and Company value driver performance over the period of January 1, 2014 through December 31, 2014. As of December 31, 2014, 375,426 awards including accrued dividends were outstanding under the 2014 EQT VDA. The first tranche of the confirmed awards are expected to vest and be paid in cash in the first quarter of 2015. The remainder of the confirmed awards are expected to vest and be paid in cash in the first quarter of 2016. The Company accounts for these awards as liability awards and as such, records compensation expense for the remeasurement of the fair value of the awards at the end of each reporting period. Due to the graded vesting of the awards, the Company recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award was, in substance, multiple awards. The total compensation cost capitalized was $9.8 million in 2014. The total liability recorded for the 2014 EQT VDA was $21.3 million as of December 31, 2014. |
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2011 Volume and Efficiency Program |
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Effective in 2011, the Compensation Committee of the Board of Directors adopted the 2011 Volume and Efficiency Program (2011 VEP) under the 2009 Long-Term Incentive Plan. The 2011 VEP was established to align the interests of key employees with the interests of shareholders and customers and the strategic objectives of the Company. The vesting of the stock units granted under the 2011 VEP occurred upon payment in February 2014 following the expiration of the performance period on December 31, 2013. The vesting resulted in approximately 663,350 awards including accrued dividends being distributed in Company common stock in February 2014. The Company accounted for these awards as equity awards using the $48.06 grant date fair value per unit which was equal to the Company’s common stock price on the grant date. The total compensation cost capitalized was $2.8 million and $2.5 million in 2013 and 2012, respectively. |
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Restricted Stock Awards |
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The Company granted 89,500, 101,510 and 103,730 restricted stock awards during the years ended December 31, 2014, 2013 and 2012, respectively, to key employees of the Company. The restricted shares granted will be fully vested at the end of the three-year period commencing with the date of grant, assuming continued employment. The weighted average fair value of these restricted stock grants, based on the grant date fair value of the Company’s common stock, was approximately $95, $71 and $54 for the years ended December 31, 2014, 2013 and 2012, respectively. The total fair value of restricted stock awards vested during the years ended December 31, 2014, 2013 and 2012 was $1.5 million, $4.3 million and $1.6 million, respectively. |
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As of December 31, 2014, $9.4 million of unrecognized compensation cost related to nonvested restricted stock awards was expected to be recognized over a remaining weighted average vesting term of approximately 1.5 years. |
A summary of restricted stock activity as of December 31, 2014, and changes during the year then ended, is presented below: |
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Restricted Stock | | Non- | | Weighted | | Aggregate | |
Vested | Average | Fair Value | |
Shares | Fair Value | | |
Outstanding at January 1, 2014 | | 182,378 | | | $ | 61.98 | | | $ | 11,302,992 | | |
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Granted | | 89,500 | | | $ | 94.91 | | | 8,494,746 | | |
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Vested | | (27,310 | ) | | $ | 53.82 | | | (1,469,604 | ) | |
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Forfeited | | (14,578 | ) | | $ | 75.64 | | | (1,102,723 | ) | |
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Outstanding at December 31, 2014 | | 229,990 | | | $ | 74.9 | | | $ | 17,225,411 | | |
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Non-Qualified Stock Options |
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The fair value of the Company’s option grants was estimated at the dates of grant using a Black-Scholes option-pricing model with the assumptions indicated in the table below for the years ended December 31, 2014, 2013 and 2012. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the date of grant. The dividend yield is based on the dividend yield of the Company’s common stock at the time of grant. Expected volatilities are based on historical volatility of the Company’s common stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding based on historical option exercise experience. |
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| | Years Ended December 31, | | | | | | |
| | 2014 | | 2013 | | 2012 | | | | | | |
Risk-free interest rate | | 1.72% | | 0.76% | | 0.89% | | | | | | |
Dividend yield | | 0.15% | | 0.22% | | 1.64% | | | | | | |
Volatility factor | | 24.80% | | 31.69% | | 31.44% | | | | | | |
Expected term | | 5 years | | 5 years | | 5 years | | | | | | |
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The Company granted 133,500, 259,600 and 278,300 stock options during the years ended December 31, 2014, 2013 and 2012, respectively. The weighted average grant date fair value of the options was $22.25, $16.72 and $13.19 for the years ended December 31, 2014, 2013 and 2012, respectively. The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $14.4 million, $22.8 million, and $11.8 million, respectively. |
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As of December 31, 2014, $1.9 million of unrecognized compensation cost related to outstanding nonvested stock options was expected to be recognized by December 31, 2016. |
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A summary of option activity as of December 31, 2014, and changes during the year then ended, is presented below: |
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Non-qualified Stock Options | | Shares | | Weighted | | Weighted | | Aggregate | | | |
Average | Average | Intrinsic | | | |
Exercise | Remaining | Value | | | |
Price | Contractual | | | | |
| Term | | | | |
Outstanding at January 1, 2014 | | 1,482,001 | | | $49.77 | | | | | | | |
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Granted | | 133,500 | | | $89.78 | | | | | | | |
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Exercised | | (277,033 | ) | | $48.27 | | | | | | | |
Forfeited | | — | | | $— | | | | | | | |
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Outstanding at December 31, 2014 | | 1,338,468 | | | $54.08 | | 6.35 years | | $30,823,027 | | | |
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Exercisable at December 31, 2014 | | 1,079,968 | | | $49.09 | | 5.83 years | | $28,733,027 | | | |
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Non-employee Directors’ Share-Based Awards |
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The Company has historically granted to non-employee directors share-based awards which vest upon grant of the awards. The value of the share-based awards will be paid in cash or Company common stock upon the directors’ termination of service on the Company’s Board of Directors. For awards which will be paid in cash, the Company accounts for these awards as liability awards and as such records compensation expense for the remeasurement of the fair value of the awards at the end of each reporting period. For awards which will be settled in Company common stock, the Company accounts for these awards as equity awards. A total of 197,778 non-employee director share-based awards including accrued dividends were outstanding as of December 31, 2014. A total of 17,900, 25,500 and 28,140 share-based awards were granted to non-employee directors during the years ended December 31, 2014, 2013 and 2012, respectively. The weighted average fair value of these grants, based on the Company’s common stock price on the grant date, was $89.78, $58.98 and $53.47 for the years ended December 31, 2014, 2013 and 2012, respectively. |
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EQM Awards |
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At the closing of the Partnership’s IPO in July 2012, the Compensation Committee of the Board of Directors and the general partner of the Partnership granted certain key Company employees performance awards under the EQM Total Return Program representing 146,490 common units of the Partnership. The performance condition related to the performance awards will be satisfied on December 31, 2015 if the total unitholder return realized on the Partnership’s common units from the date of grant is at least 10%. If the unitholder return performance condition is not achieved as of December 31, 2015, the performance condition will nonetheless be satisfied if the 10% unitholder return threshold is satisfied as of the end of any calendar quarter ending after December 31, 2015 and on or before December 31, 2017. If earned, the units are expected to be distributed in Partnership common units. |
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The Company accounted for the EQM Total Return Program awards as equity awards using a $20.02 grant date fair value per unit as determined using a fair value model. The model projected the unit price for Partnership common units at the ending point of the performance period. The price was generated using annual historical volatilities of peer group companies for the expected term of the awards, which was based upon the performance period. The range of expected volatilities calculated by the valuation model was 27% - 72%, and the weighted-average expected volatility was approximately 38%. Additional assumptions included the risk-free rate for periods within the contractual life of the awards based on the U.S. Treasury yield curve in effect at the time of grant and an expected Partnership distribution growth rate of 10%. As of December 31, 2013, 142,500 of these performance awards were outstanding. Adjusting for 2,520 forfeitures, there were 139,980 awards outstanding as of December 31, 2014. As of December 31, 2014, there was $0.8 million of unrecognized compensation cost related to the EQM Total Return Program which is expected to be recognized by December 31, 2015. |
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Additionally, the general partner of the Partnership has granted Partnership common unit-based phantom awards to its independent directors, which vested upon grant. The value of the phantom awards will be paid in Partnership common units upon the director’s termination of service on the general partner’s Board of Directors. The Company accounts for these awards as equity awards and as such recorded compensation expense for the fair value of the awards at the grant date fair value. A total of 11,759 independent director unit-based awards including accrued distributions were outstanding as of December 31, 2014. A total of 2,580, 3,790 and 4,780 unit-based awards were granted to independent directors during the years ended December 31, 2014, 2013 and 2012, respectively. The weighted average fair value of these grants, based on the Partnership’s common unit price on the grant date, was $58.79, $37.92 and $24.30 for the years ended December 31, 2014, 2013 and 2012, respectively. |
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Effective in 2014, the Compensation Committee of the Board of Directors and the Board of Directors of the Partnership’s general partner adopted the 2014 EQM Value Driver Award Program (2014 EQM VDA) under the 2009 Long-Term Incentive Plan and the Partnership’s 2012 Long-Term Incentive Plan. The 2014 EQM VDA was established to align the interests of key employees with the interests of Partnership unitholders and customers and the strategic objectives of the Partnership. Under the 2014 EQM VDA, 50% of the units confirmed will vest upon payment following the first anniversary of the grant date; the remaining 50% of the units confirmed will vest upon the payment date following the second anniversary of the grant date. The performance metrics are the Partnership’s 2014 adjusted EBITDA performance as compared to the Partnership’s annual business plan and individual, business unit and value driver performance over the period of January 1, 2014 through December 31, 2014. As of December 31, 2014, 62,845 awards including accrued dividends were outstanding under the 2014 EQM VDA. The first tranche of the confirmed awards is expected to vest and be distributed in Partnership common units in the first quarter of 2015. The remainder of the confirmed awards is expected to vest and be paid in Partnership common units in the first quarter of 2016. The Partnership accounts for these awards as equity awards using the $58.79 grant date fair value per unit which was equal to the Partnership’s common unit price on the date prior to the date of grant. Due to the graded vesting of the awards, the Partnership recognizes compensation cost over the requisite service period for each separately vesting tranche of the award as though the award was, in substance, multiple awards. The total compensation cost capitalized in 2014 was $0.3 million. As of December 31, 2014, there was $0.9 million of unrecognized compensation cost related to the 2014 EQM VDA which is expected to be recognized by December 31, 2015. |
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2015 Value Driver Award Programs and 2015 Executive Performance Incentive Program |
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Effective in 2015, the Compensation Committee of the Board of Directors adopted the 2015 EQT Value Driver Award Program (2015 EQT VDA) and the 2015 Executive Performance Incentive Program (2015 EPIP) under the 2014 Long-Term Incentive Plan. The 2015 EQT VDA and 2015 EPIP were established to align the interests of key employees with the interests of shareholders and customers and the strategic objectives of the Company. |
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A total of 281,460 units were granted under the 2015 EQT VDA. Fifty percent of the units confirmed under the 2015 EQT VDA will vest upon the payment date following the first anniversary of the grant date; the remaining 50% of the confirmed units under the 2015 EQT VDA will vest upon the payment date following the second anniversary of the grant date. The payout will vary between zero and 300% of the number of outstanding units contingent upon adjusted 2015 EBITDA performance as compared to the Company’s annual business plan and individual, business unit and Company value driver performance over the period January 1, 2015 through December 31, 2015. If earned, the 2015 EQT VDA units are expected to be distributed in Company common stock. The Company did not record any obligation or expense related to the 2015 EQT VDA as of December 31, 2014. |
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A total of 369,290 units were granted under the 2015 EPIP. The vesting of the units under the 2015 EPIP will occur upon payment after December 31, 2017 (the end of the three years performance period). The payout will vary between zero and 300% of the number of outstanding units contingent upon a combination of the level of total shareholder return relative to a predefined peer group and the level of production sales volume growth over the period January 1, 2015 through December 31, 2017. If earned, the 2015 EPIP units are expected to be distributed in Company common stock. The Company did not record any expense related to the 2015 EPIP as of December 31, 2014. |
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2015 Stock Options |
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Effective January 1, 2015, the Compensation Committee of the Board of Directors granted 158,200 non-qualified stock options to key employees of the Company. The 2015 options are ten years options, with an exercise price of $75.70, and are subject to three years cliff vesting. The Company did not record any expense related to 2015 stock options as of December 31, 2014. |