Share-Based Compensation

9 Months Ended

Sep. 30, 2013

Share-Based Compensation

Share-Based Compensation

Note 5 Share-Based Compensation

Our share-based employee and director compensation plans are more fully described in Note 8 — Share-Based Compensation in our 2012 Annual Report. Total share-based compensation expense, which includes stock options and restricted stock, totaled $7.1 million and $4.8 million for the three months ended September 30, 2013 and 2012, respectively, and $45.9 million and $13.5 million for the nine months ended September 30, 2013 and 2012, respectively. Total share-based compensation expense for the nine months ended September 30, 2013 included a one-time stock grant valued at $27.0 million, which vested immediately, in connection with the termination of the 2009 employment agreement with Anthony Petrello, our Chairman, President and Chief Executive Officer. This share-based compensation expense has been recognized in (Losses) gains on sales and disposals of long-lived assets and other expense (income), net in our consolidated statement of income (loss).  See discussion of Mr. Petrello’s 2013 employment agreement at Note 9 — Commitments and Contingencies. All other share-based compensation expense is included in direct costs and general and administrative expenses in our consolidated statements of income (loss). Share-based compensation expense has been allocated to our various operating segments.  See Note 13 — Segment Information.

During the nine months ended September 30, 2013 and 2012, we awarded 4,729,193 and 934,648 shares of restricted stock, respectively, vesting over periods of up to four years, to our employees and directors.  Some of the restricted stock awards made during the nine months ended September 30, 2013 contain provisions relating to market conditions or performance measures, which may affect the grant date or vesting of such awards. All of these awards had an aggregate value at their grant date of $76.8 million and $19.4 million, respectively.  The fair value of restricted stock that vested during the nine months ended September 30, 2013 and 2012 was $36.6 million and $9.4 million, respectively.

During the nine months ended September 30, 2013 and 2012, we awarded options vesting over periods up to four years to purchase 53,672 and 653,699 of our common shares, respectively, to our employees and directors.  The fair value of stock options granted during the nine months ended September 30, 2013 and 2012 was calculated using the Black-Scholes option pricing model and the following weighted-average assumptions:

	Nine Months
	Ended September 30,
	2013			2012
Weighted average fair value of options granted	$	6.21		$	9.42
Weighted average risk free interest rate	0.71		%	0.63		%
Dividend yield	.82		%	0.00		%
Volatility (1)	51.01		%	55.77		%
Expected life	4.0 years			4.0 years

(1) Expected volatilities are based on implied volatilities from publicly traded options to purchase Nabors’ common shares, historical volatility of Nabors’ common shares and other factors.

The total intrinsic value of stock options exercised during the nine months ended September 30, 2013 and 2012 was $3.2 million and $5.7 million, respectively.  Additionally, the intrinsic value of stock options surrendered during the nine months ended September 30, 2012 was $17.9 million.  The total fair value of stock options that vested during the nine months ended September 30, 2013 and 2012 was $4.0 million and $7.6 million, respectively.