NOTE 9 — SHARE-BASED AWARDS AND CASH-BASED INCENTIVE COMPENSATION

On June 16, 2023, the 2023 Incentive Compensation Plan (the “2023 Plan”) was approved by the Company’s shareholders. The 2023 Plan is effective June 16, 2023, and the Company will no longer grant awards pursuant to the W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan, as amended from time to time, or the 2004 Directors Compensation Plan of W&T Offshore, Inc., as amended from time to time (collectively, the “Prior Plans”). Under the 2023 Plan, the Company may issue, subject to the approval of the Board of Directors, stock options, stock appreciation rights, restricted stock (“RSAs”), restricted stock units (“RSUs”), performance awards (“PSUs”), stock awards, dividend equivalents, other stock-based awards, performance units or shares, cash awards, substitute awards or any combination of the foregoing to eligible employees, non-employee directors, and consultants. Any awards granted prior to the effective date of the 2023 Plan are considered to have been granted under the applicable Prior Plan.

Share-Based Awards

Restricted Stock Units

During 2023, the Company granted RSUs to certain employees and non-employee directors under both the 2023 Plan and the Prior Plan. The RSUs granted to employees are a long-term compensation component, subject to service conditions, and generally vest in three equal annual installments. The fair value of the RSUs granted to employees on the date of grant was $6.6 million. The RSUs granted to non-employee directors generally vest one year from the date of the grant or on the date of W&T’s next annual shareholder meeting, subject to certain conditions. The fair value of the RSUs granted to non-employee directors on the date of grant was $0.6 million.

A summary of activity related to RSUs during the nine months ended September 30, 2023 is as follows:

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Performance Share Units

In June 2023, the Company granted PSUs to certain employees under both the 2023 Plan and the Prior Plan. These PSUs vest subject to continued employment and the Company’s total shareholder return (“TSR”) ranking against peer companies’ TSR over a three-year performance period, which ends on December 31, 2025. As these PSUs had both service and market conditions, the Company estimated the fair value of these PSUs using the Monte Carlo simulation model. The fair value of the PSUs on the date of grant was $6.3 million.

A summary of activity related to PSUs during the nine months ended September 30, 2023 is as follows:

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The following table summarizes the assumptions used in the Monte Carlo simulation model to calculate the fair value of the PSUs granted:

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Share-Based Awards to Non-Employee Directors

Under the Prior Plan, the Company issued RSAs to non-employee directors. These RSAs vested over a one-year period. There were no RSAs granted to non-employee directors during the nine months ended September 30, 2023. The non-employee directors were granted RSUs in July 2023 under the 2023 Plan.

A summary of activity related to restricted shares during the nine months ended September 30, 2023 is as follows:

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Share-Based Compensation Expense

The following table presents the compensation costs included in General and administrative expenses in the Condensed Consolidated Statements of Operations (in thousands):

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Cash-Based Incentive Compensation

In addition to share-based awards, the Company also grants short-term cash-based incentive awards to all eligible employees. These awards provide for an annual cash payment equal to an established target cash incentive amount multiplied by a target performance score for the Company (as determined by a set of pre-defined performance metrics) and multiplied by an individual performance multiplier for all eligible employees except Named Executive Officers.

The following table presents the cash-based incentive compensation costs in the Condensed Consolidated Statements of Operations (in thousands):

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