Quarterly report pursuant to Section 13 or 15(d)

COMMON AND PREFERRED STOCK

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COMMON AND PREFERRED STOCK
6 Months Ended
Jun. 30, 2014
COMMON AND PREFERRED STOCK [Abstract]  
COMMON AND PREFERRED STOCK
NOTE 5    COMMON AND PREFERRED STOCK

The Company’s Articles of Incorporation authorize the issuance of up to 100,000,000 shares.  The shares are classified in two classes, consisting of 95,000,000 shares of common stock, par value $.001 per share, and 5,000,000 shares of preferred stock, par value $.001 per share.  The board of directors is authorized to establish one or more series of preferred stock, setting forth the designation of each such series, and fixing the relative rights and preferences of each such series.  The Company has neither designated nor issued any shares of preferred stock.

Common Stock

The following is a schedule of changes in the number of shares of common stock during the six months ended June 30, 2014 and the year ended December 31, 2013:

   
Six Months Ended
June 30, 2014
   
Year Ended
December 31, 2013
 
Beginning Balance
    61,858,199       63,532,622  
Stock-Based Compensation
    -       57,371  
Stock Options Exercised
    100,000       10,091  
Restricted Stock Grants (Note 6)
    156,960       353,596  
Stock Repurchased
    (1,018,897 )     (2,036,383 )
Other Surrenders
    (66,583 )     (59,098 )
Ending Balance
    61,029,679       61,858,199  

2014 Activity

In the six months ended June 30, 2014, 30,957 shares of common stock were surrendered by certain employees of the Company to cover tax obligations in connection with their restricted stock awards.  The total value of these shares was approximately $457,000, which was based on the market price on the date the shares were surrendered.

In the six months ended June 30, 2014, a former director of the Company exercised an aggregate of 100,000 stock options, which were granted in 2007.  Of those stock options, 35,626 shares were surrendered to cover the aggregate exercise price of approximately $518,000, based on the market price on the date the shares were surrendered.

Stock Repurchase Program
 
In May 2011, the Company’s board of directors approved a stock repurchase program to acquire up to $150 million of the Company’s outstanding common stock.  The stock repurchase program allows the Company to repurchase its shares from time to time in the open market, block transactions and in negotiated transactions.

During the first quarter of 2014, the Company repurchased 1,018,897 shares of its common stock under the stock repurchase program. These shares are now included in the Company’s pool of authorized but unissued shares.  This stock had a cost of approximately $13.7 million.  The Company’s accounting policy upon the repurchase of shares is to deduct its par value from Common Stock and to reflect any excess of cost over par value as a deduction from Additional Paid-in Capital.

Performance Equity Awards

In early 2014, certain of the Company’s executive officers were granted performance equity awards under the 2014 long-term equity incentive program adopted by the compensation committee.  Entitlement to the performance shares will be based on the Company’s 2014 performance relative to established performance goals for proved reserve growth, debt-adjusted proved reserve value per share and year-over-year growth in average stock price relative to a selected peer group.  Participants may earn from zero to 180 percent of their 2014 base salaries and the amounts earned will be settled in restricted shares of common stock that will vest annually over a subsequent three-year service-based vesting period beginning in 2015.  The maximum dollar amount of the performance shares issuable if all participants earned the maximum award would total $3.0 million.  For the three and six month period ended June 30, 2014, the Company has recorded $0.2 million and $0.3 million, respectively, of compensation expense in connection with these performance equity awards.  No such performance equity awards have vested.