Share-Based Compensation

3 Months Ended

Mar. 31, 2016

Note 5 Share-Based Compensation

We have several share-based employee and director compensation plans, which are more fully described in Note 7 — Share-Based Compensation in our 2015 Annual Report. Total share-based compensation expense, which includes stock options and restricted shares, totaled $7.4 million and $13.9 million for the three months ended March 31, 2016 and 2015, respectively, which 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 12 — Segment Information.

Stock Options

The total intrinsic value of options exercised during three months ended March 31, 2015 was $0.1 million. No options were exercised during the three months ended March 31, 2016. The total fair value of options that vested during the three months ended March 31, 2016 and 2015 was $1.6 million and $1.5 million, respectively.

Restricted Stock

During the three months ended March 31, 2016 and 2015, we awarded 1,011,737 and 1,514,934 restricted shares, respectively, to our employees and directors. These awards had an aggregate value at their date of grant of $7.8 million and $19.3 million, respectively, and were scheduled to vest over a period of up to four years. The fair value of restricted shares that vested during the three months ended March 31, 2016 and 2015 was $8.0 million and $15.7 million, respectively. The fair value of these awards is based on the closing price of Nabors stock on the date the awards are granted.

Restricted Stock Based on Performance

During the three months ended March 31, 2015, we awarded 438,307 restricted shares vesting over a period of three years to some of our executives. The performance awards granted were based upon achievement of specific financial or operational objectives. The number of shares granted was determined by the number of performance goals achieved during fiscal year 2014.

Until shares are issued, our awards that are earned based on performance conditions are liability-classified awards. Our accrued liabilities included $3.7 million for such awards at March 31, 2016 for the performance period beginning on January 1, 2015 through December 31, 2015 and $0.6 million for such awards at March 31, 2016 for the performance period beginning January 1, 2016 through December 31, 2016. The fair value of these awards that vested during the three months ended March 31, 2016 and 2015 was $1.5 million and $6.8 million, respectively. The fair value of these awards are estimated at each reporting period, based on internal metrics and marked to market.

Restricted Stock Based on Market Conditions

During the three months ended March 31, 2016 and 2015, we awarded 749,427 and 544,925 restricted shares, respectively, which are equity classified awards and will vest based on our performance compared to our peer group over a three-year period. These awards had an aggregate value at their date of grant of $4.2 million and $4.7 million, respectively, after consideration of all assumptions.

The grant date fair value of these awards was based on a Monte Carlo model, using the following assumptions:


	Three Months Ended
	March 31,
	2016		2015
Risk free interest rate		1.41%		1.18%
Expected volatility		52.00%		50.00%
Closing stock price at grant date	$	8.64	$	12.98
Expected term (in years)		3.0		3.0