Kinetik Holdings Inc

12. SHARE-BASED COMPENSATION

The Company has granted various Class A and Class C Shares, restricted stock units (“RSUs”) and performance stock units (“PSUs”) to members of the Board of Directors ( the “Board”) and employees under the Kinetik Holdings Inc. 2019 Omnibus Incentive Plan (the “2019 Plan”).

Class A Shares and Class C Shares

The Class A Shares and Class C Shares were granted at the Closing of the Altus Midstream Company (“ALTM”) business combination upon conversion of previously outstanding incentive units. These shares were held in escrow and will vest over three tofour years. These units are recorded at grant-date fair value, which was determined to be fair value on the closing date of the business combination, and compensation expense is recognized on a straight‑line basis over the vesting period within “General and Administrative Expenses” of the Condensed Consolidated Statements of Operations in accordance with FASB ASC 718, Compensation - Stock Compensation. Forfeitures are recognized as they occur. In addition, upon the Closing of the ALTM business combination,395,416 performance Class A awards were granted that will vest over afour year service period and upon certain shareholder’s selling of the Company’s Class A Common Stock at defined return levels. As the performance outcome is not estimable, no compensation expense is recorded for these performance awards for the three months ended March 31, 2024 and 2023.

The table below summarizes Class A Share and Class C Share activities for the three months ended March 31, 2024:

Table below summarizes aggregate intrinsic value (market value at vesting date) and grant-date fair value of vested Class A Shares for the three months ended March 31, 2024 and 2023:

No vesting or forfeiture occurred for Class C Shares for the three months ended March 31, 2024. No vesting or forfeiture occurred for Class A or Class C Shares for the three months ended March 31, 2023. As of March 31, 2024, there were $61.6 million of unrecognized compensation costs related to unvested Class A Shares and Class C Shares. These costs are expected to be recognized over a weighted average period of 1.55 years.

Restricted Stock Units

Certain RSUs were granted in the first quarter of 2024 to certain executives and employees under the 2019 Plan. Granted RSUs are subject to various service vesting requirements and may be settled only for shares of Class A Common Stock on aone-for-one basis contingent upon continued employment. RSUs are recorded at grant-date fair value and compensation expense is recognized on a straight‑line or graded straight-line basis over the vesting period within “General and Administrative Expenses.”

The table below summarizes RSU activities for the three months ended March 31, 2024:

(1)Number of shares and weighted average fair market value per share here include RSUs issued to new employees that transitioned from ALTM as part of the merger as replacement awards.

Table below summarizes aggregate intrinsic value (market value at vesting date) and grant-date fair value of RSUs for the three months ended March 31, 2024 and 2023.

As of March 31, 2024, there were $18.5 million of unrecognized compensation costs related to the RSUs. These costs are expected to be recognized over a weighted average period of 2.03 years.

Performance Stock Units

The Company granted PSUs pursuant to the 2019 Plan to certain of its employees and executives in the first quarter of 2024. These PSUs vest and become earned upon the achievement of certain performance goals based on the Company’s annualized absolute total stockholder return and the Company’s relative total stockholder return as compared to the performance peer group during the performance period, if the PSUs holders also satisfy the continued employment requirement during the performance period. Depending on the results achieved during thethree-year performance period, the actual number of Class A Common Stock that a holder of the PSUs earns at the end of the performance period may range from 0% to 200% of the target number of PSUs granted. The fair value of the PSUs is determined using a Monte Carlo simulation at the grant date. The Company recognized compensation expense for PSUs on a straight-line basis over the performance period. Any PSU not earned at the end of the performance period will be forfeited.

The table below summarizes PSU activities for the three months ended March 31, 2024:

No vesting or forfeiture occurred for PSUs for the three months ended March 31, 2024.

The table below presents a summary of the grant-date fair value assumptions used to value the PSUs on grant date:

As of March 31, 2024, there were $7.1 million of unrecognized compensation costs related to the PSUs. These costs are expected to be recognized over a weighted average period of 2.75 years.

With respect to above Class A Shares, Class C Shares, RSUs and PSUs, the Company recorded compensation expenses of $22.6 million and $17.5 million for the three months ended March 31, 2024 and 2023, respectively.