Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 14.Stock-Based Compensation

Plan Information

On May 17, 2007, our stockholders approved a plan that provides common-stock-based awards to both employees and nonmanagement directors and reserved 19 million new shares for issuance. On May 20, 2010, our stockholders approved an amendment and restatement of the 2007 plan to increase by 11 million the number of new shares authorized for making awards under the plan, among other changes. The plan permits the granting of various types of awards including, but not limited to, restricted stock units and stock options. At December 31, 2012, 27 million shares of our common stock were reserved for issuance pursuant to existing and future stock awards, of which 16 million shares were available for future grants.

Additionally, on May 17, 2007, our stockholders approved an Employee Stock Purchase Plan (ESPP) which authorizes up to 2 million new shares of our common stock to be available for sale under the plan. The ESPP enables eligible participants to purchase our common stock through payroll deductions not exceeding an annual amount of $15,000 per participant. The ESPP provides for offering periods during which shares may be purchased and continues until the earliest of: (1) the Board of Directors terminates the ESPP, (2) the sale of all shares available under the ESPP, or (3) the tenth anniversary of the date the Plan was approved by the stockholders. Offering periods are from January through June and from July through December. Generally, all employees are eligible to participate in the ESPP, with the exception of executives and international employees. The number of shares eligible for an employee to purchase during each offering period is limited to 750 shares. The purchase price of the stock is 85 percent of the lower closing price of either the first or the last day of the offering period. The ESPP requires a one-year holding period before the stock can be sold. Employees purchased 194 thousand shares at an average price of $23.75 per share during 2012. Approximately 616 thousand shares were available for purchase under the ESPP at December 31, 2012.

Total stock-based compensation expense for the years ended December 31, 2012, 2011, and 2010, was $36 million, $52 million, and $48 million, respectively, of which $18 million and $14 million are included in income (loss) from discontinued operations for 2011 and 2010, respectively. Measured but unrecognized stock-based compensation expense at December 31, 2012, was $40 million, which does not include the effect of estimated forfeitures of $1 million. This amount is comprised of $3 million related to stock options and $37 million related to restricted stock units. These amounts are expected to be recognized over a weighted-average period of 1.8 years.

Stock Options

The following summary reflects stock option activity and related information for the year endedDecember 31, 2012.

		Weighted-
		Average		Aggregate
		Exercise		Intrinsic
Stock Options	Options	Price		Value
	(Millions)				(Millions)
Outstanding at December 31, 2011	9.6	$	15.63
Granted	1.1	$	29.11
Exercised	(3.8)	$	13.21
Outstanding at December 31, 2012	6.9	$	19.10	$	94
Exercisable at December 31, 2012	5.1	$	16.68	$	82

The total intrinsic value of options exercised during the years ended December 31, 2012, 2011, and 2010 was $69 million, $55 million, and $20 million, respectively; and the tax benefit realized was $25 million, $21 million, and $7 million, respectively. Cash received from stock option exercises was $50million, $45 million, and $7 million during 2012, 2011, and 2010, respectively. The weighted-average remaining contractual life for stock options outstanding and exercisable at December 31, 2012, was 5.2 years and 4.0 years, respectively.

The estimated fair value at date of grant of options for our common stock granted in each respective year, using the Black-Scholes option pricing model, is as follows:

	2012		2011		2010
Weighted-average grant date fair value of options for our
common stock granted during the year, per share	$	5.65	$	6.28	$	5.71
Weighted-average assumptions:
Dividend yield		3.7%		3.6%		2.6%
Volatility		30.0%		34.6%		39.0%
Risk-free interest rate		1.3%		2.8%		3.0%
Expected life (years)		6.5		6.5		6.5

The expected dividend yield is based on the 2012 dividend forecast and the grant-date market price of our stock. As a result of the 2011 spin-off of WPX, the historical volatility of our stock is not expected to be as representative of expected future volatility. Expected volatility is now based on the average of our peer group 10-year historical volatilityadjusted by a ratio of our implied volatility to the average of our peer group's implied volatility. The adjustment is made because the difference in implied volatility between our peer group and us may indicate that we are expected to be more volatile than our peer group average. The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date. The expected life of the option is based on historical exercise behavior and expected future experience.

Nonvested Restricted Stock Units

The following summary reflects nonvested restricted stock unit activity and related information for the year ended December 31, 2012.

		Weighted-
		Average
Restricted Stock Units Outstanding	Shares	Fair Value*
	(Millions)
Nonvested at December 31, 2011	5.2	$	14.12
Granted	2.0	$	20.61
Forfeited	(0.4)	$	11.55
Vested	(2.9)	$	7.84
Nonvested at December 31, 2012	3.9	$	22.49

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*Performance-based shares are valued utilizinga Monte Carlo valuation method using measures of total shareholder return. All other shares are valued at the grant-date market price or the grant-date market price less dividends projected to be paid over the vesting period.

Value of Restricted Stock Units
		2012			2011	2010
Weighted-average grant date fair value of restricted stock units
	granted during the year, per share	$	20.61	$	23.31	$	16.37
Total fair value of restricted stock units vested
	during the year ($'s in millions)	$	22	$	35	$	29

Performance-based shares granted under the Plan represent 30 percent of nonvested restricted stock units outstanding at December 31, 2012.These grants may be earned at the end of a three-year period based on actual performance against a performance target. Based on the extent to which certain financial targets are achieved, vested shares may range from zero percent to 200 percent of the original grant amount.