Equity-based compensation expenses are recognized in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations. During the three months ended March 31, 2025 and 2024, the Company recognized $6.9 million and $4.8 million in equity-based compensation expenses related to equity-classified awards, respectively. Equity-based compensation expenses related to liability-classified awards were not material for the three months ended March 31, 2025 and 2024.

Pursuant to the Arrangement Agreement, at the effective time of the Arrangement, all Enerplus equity-based compensation awards became fully vested and paid in cash. The fair value of the equity-classified awards that vested on May 31, 2024 was $102.4 million.

Restricted stock units. Restricted stock units (“RSUs”) are contingent shares that generally vest on either a cliff or graded basis over a one-year, three-year or four-year period (as applicable) and are subject to a service condition. During the three months ended March 31, 2025, the Company granted 173,800 RSUs to employees and non-employee directors of the Company with a weighted average grant date fair value of $122.11 per share.

Performance share units. During the three months ended March 31, 2025, the Company granted PSUs that include (i) total stockholder return (“TSR”) PSUs (“Absolute TSR PSUs”) and (ii) relative TSR PSUs (“Relative TSR PSUs” and collectively with the Absolute TSR PSUs, the “PSUs”), which are eligible to vest and become earned at the end of the applicable performance period on December 31, 2027, subject to the level of achievement with respect to certain performance goals.

The Absolute TSR PSUs are subject to time-based service requirements and market conditions based on the TSR achieved by the Company during the performance period. Depending on the Company’s TSR, award recipients may earn between 0% and 300% of the target number of Absolute TSR PSUs originally granted.

The Relative TSR PSUs are subject to time-based service requirements and market conditions based on a comparison of the TSR achieved by the Company against the TSR achieved by the members of a defined peer group at the end of the performance period. Depending on the Company’s TSR performance relative to the TSR performance of the members of the defined peer group, award recipients may earn between 0% and 200% of the target number of Relative TSR PSUs originally granted.

Any earned PSUs will be settled in shares of the Company’s common stock for up to 100% of the target number of PSUs subject to each applicable award, with any remaining earned PSUs that exceed the target number of PSUs subject to the award being settled in cash based on the fair market value of a share of the Company’s common stock on the applicable payment date. The PSUs are bifurcated and classified as equity-based and liability-based awards based on the probability of achieving various target performance thresholds.

During the three months ended March 31, 2025, the Company granted (i) 24,730 Absolute TSR PSUs to employees of the Company with a weighted average grant date fair value of $170.38 per share and (ii) 74,219 Relative TSR PSUs to employees of the Company with a weighted average grant date fair value of $136.18 per share.

Fair value assumptions. The aggregate grant date fair value of the PSUs was determined by a third-party valuation specialist using a Monte Carlo simulation model which uses a probabilistic approach for estimating the fair value of the awards. The key valuation inputs were: (i) the forecast period, (ii) risk-free interest rate, (iii) the yield curve associated with the Company’s credit rating, (iv) implied equity volatility, (v) stock price on the date of grant and, solely for Relative TSR PSUs, (vi) correlation coefficient. The risk-free interest rates are the U.S. Treasury bond rates on the date of grant that correspond to the performance period. Implied equity volatility is derived by solving for an asset volatility and equity volatility based on the leverage of the Company and each of its peers. For the Relative TSR PSUs, the correlation coefficient measures the strength of the linear relationship between and amongst the Company and its peers based on historical stock price data.

The following table summarizes the assumptions used in the Monte Carlo simulation model to determine the grant date fair value and associated equity-based compensation expenses for the PSUs granted during the three months ended March 31, 2025:

Leveraged stock units. Leveraged stock units (“LSUs”) are contingent shares granted to certain employees that cliff vest over a three-year and four-year period and are subject to a service condition. No LSUs were granted during the three months ended March 31, 2025.

Phantom unit awards. Phantom unit awards represent the right to receive a cash payment equal to the fair market value of one share of common stock upon vesting and vest on a graded basis over a three-year period and are subject to a service condition. During the three months ended March 31, 2025, the Company granted 11,521 phantom unit awards to employees with a weighted average grant date fair value of $122.11 per share.