Share-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Compensation

Share-Based Compensation

Note 7 Share-Based Compensation

Total share-based compensation expense, which includes stock options and restricted shares, was $15.8 million, $15.8 million and $19.2 million for 2023, 2022 and 2021, respectively. Compensation expense related to awards of restricted shares totaled $15.8 million, $15.8 million and $19.1 million 2023, 2022 and 2021, respectively, which is included in general and administrative and research and engineering expenses in our consolidated statements of income (loss). Share-based compensation expense has been allocated to our various reportable segments. See Note 18—Segment Information.

In addition to the time-based restricted stock share-based awards, historically we have provided two types of performance share awards: the first, based on our performance measured against pre-determined performance metrics (“Performance Shares”) and the second, based on market conditions measured against a predetermined peer group (“TSR Shares”).

In 2020, under the Amended and Restated 2016 Stock Plan, the company introduced new Performance-Based Restricted Stock Units (“PSUs”) to move away from Performance Shares. PSUs are granted at the beginning of the one-year performance period and they are earned at the end of the same period, depending on performance.

Stock Option Plans

As of December 31, 2023, we had several stock plans under which options to purchase our common shares could be granted to key officers, directors and managerial employees of Nabors and its subsidiaries. Options granted under the plans have fair market value on the date of the grant. Options granted under the plans generally are exercisable in varying cumulative periodic installments after one year. In the case of certain key executives and directors, options granted may vest immediately on the grant date. Options granted under the plans expire ten years from the date of grant. There are approximately 0.4 million common shares available for issuance in the form of either restricted shares or stock options, under these plans as of December 31, 2023.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model which uses assumptions for the risk-free interest rate, volatility, dividend yield and the expected term of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equal to the expected term of the option. Expected volatilities are based on implied volatilities from traded options on Nabors’ common shares, historical volatility of Nabors’ common shares, and other factors. We use historical data to estimate the expected term of the options and employee terminations within the option-pricing model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of the options represents the period of time that the options granted are expected to be outstanding.

Stock option transactions under our various stock-based employee compensation plans are presented below:

				Weighted-
		Weighted-		Average
		Average		Remaining		Aggregate
		Exercise		Contractual		Intrinsic
Options	Shares	Price		Term		Value
	(In thousands, except exercise price and term)
Options outstanding as of December 31, 2022	16	$	391.76
Expired	—		817.91
Options outstanding as of December 31, 2023	16	$	362.76	4.22	years	$	—
Options exercisable as of December 31, 2023	16	$	362.76	4.22	years	$	—

During 2021, we awarded options vesting immediately to purchase 963 of our common stock to certain of our directors. During 2022, we awarded options vesting immediately to purchase 1,056 of our common stock to certain of our directors. No stock options were awarded during 2023. There were no unvested options outstanding at the end of 2021, 2022 or 2023.

The fair value of stock options granted during 2022 and 2021 was calculated using the Black-Scholes option pricing model and the following weighted-average assumptions:

	2022		2021
Weighted average fair value of options granted	$	111.23	$	72.69
Weighted average risk free interest rate		3.69%		0.72%
Dividend yield		0.00%		0.00%
Volatility (1)		111.5%		102.5%
Expected life (in years)		4.0		4.0

(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.

There were no options exercised during 2023, 2022 or 2021. The total fair value of options that vested during the years ended December 31, 2022 and 2021 was $0.2 million and $0.1 million, respectively.

Restricted Shares

Our stock plans allow grants of restricted shares. Restricted shares are issued on the grant date but cannot be sold or transferred. Restricted share values are based on stock value at grant date. Restricted shares vest in varying periodic installments ranging up to four years.

A summary of our restricted shares as of December 31, 2023, and the changes during the year then ended, is presented below:

		Weighted-Average
		Grant-Date Fair
Restricted shares	Outstanding	Value
	(In thousands, except fair value)
Unvested as of December 31, 2022	163	$	126.26
Granted	103		160.49
Vested	(62)		135.53
Forfeited	(19)		142.76
Unvested as of December 31, 2023	185	$	140.56

During 2023, 2022 and 2021, we awarded 103,465, 112,203 and 82,722 restricted shares, respectively, to our employees and directors. These awards had an aggregate value at their date of grant of $16.6 million, $14.8 million and $8.7 million, respectively, and were scheduled to vest over a period of up to four years. The fair value of restricted shares that vested during 2023, 2022 and 2021 was $8.4 million, $6.3 million and $2.5 million, respectively.

As of December 31, 2023, there was $18.5 million of total future compensation cost related to unvested restricted share awards that are expected to vest. That cost is expected to be recognized over a weighted-average period of 2.52 years.

Restricted Shares Based on Performance Conditions

The Performance Share awards granted were based upon achievement of specific financial or operational objectives. During January 2020, we awarded 59,490 restricted shares with an aggregate fair value at their date of grant of $8.8 million. The number of shares granted was determined by the percentage of performance goals achieved during fiscal year 2020 vesting over a period of three years to some of our executives.

The following table sets forth information regarding outstanding restricted shares based on performance conditions as of December 31, 2023:

		Weighted-Average
		Grant-Date Fair
Performance based restricted shares	Outstanding	Value
	(In thousands, except fair value)
Outstanding as of December 31, 2022	20	$	148.00
Vested	(20)		148.00
Outstanding as of December 31, 2023	—	$	—

During 2023, 2022 and 2021, we granted awards to certain of our executive officers covering a total of 60,633, 49,065 and 95,902 PSUs, respectively. The number of earned PSUs that ultimately vest over three years, following conclusion of the performance period, is determined based upon on achievement of specific financial or operational goals. The number of PSUs that can be earned, range from a minimum of 30% of the PSU awards to a maximum of 200%, of the PSUs granted.

The following table sets forth information regarding outstanding PSUs based on performance conditions as of December 31, 2023:

		Weighted-Average
		Grant-Date Fair
Restricted Stock Units	Outstanding	Value
	(In thousands, except fair value)
Outstanding as of December 31, 2022	113	$	85.31
Granted	61		121.61
Vested	(59)		96.85
Forfeited	(12)		146.36
Outstanding as of December 31, 2023	103	$	92.84

Restricted Shares Based on Market Conditions

During 2023, 2022 and 2021, we granted awards for 29,621, 47,622 and 61,997 TSR Shares, respectively, which are equity classified awards and will vest on our performance compared to our peer group over a three-year period. These awards had an aggregate fair value at their date of grant of $2.5 million, $2.3 million and $2.2 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:

		Year Ended December 31,
	2023		2022		2021
Risk free interest rate		4.13%		1.03%		0.18%
Expected volatility		94.00%		92.00%		108.00%
Closing stock price at grant date	$	154.87	$	81.09	$	60.62
Expected term (in years)		3.0		3.0		3.0

The following table sets forth information regarding outstanding restricted shares based on market conditions as of December 31, 2023:

		Weighted-Average
		Grant-Date Fair
Market based restricted shares	Outstanding	Value
	(In thousands, except fair value)
Outstanding as of December 31, 2022	133	$	53.03
Granted	30		92.35
Vested	(13)		111.00
Forfeited	(73)		45.58
Outstanding as of December 31, 2023	77	$	65.62

As of December 31, 2023, there was $2.6 million of total future compensation cost related to unvested TSR Share awards. The TSR Shares will amortize over a weighted average remaining period of 1.71 years.