Share-Based Compensation

Incentive Plans

Our incentive plans permit the grant of options, stock appreciation rights, RSAs, restricted share units (“RSUs”), performance share awards, performance unit awards (“PUs”), other share-based awards and cash-based awards to any employee, non-employee directors and other individual service providers or any affiliate. Compensation expense is recognized on a straight-line basis over the requisite service period for the separately vesting portion of each award.

The provisions of each award vary based on the type of award granted and are determined by the Compensation Committee of our Board of Directors. Those awards, such as stock options that are based on a specific contractual term, will be granted with a term not to exceed 10 years. Upon grant of an RSA, the recipient has the rights of a shareholder, including but not limited to the right to vote such shares and the right to receive any dividends paid on such shares, but not the right to disposition prior to vesting. Recipients of RSU awards do not have the rights of a shareholder until such date as the shares are issued or transferred to the recipient. As of December 31, 2016, approximately 25 million shares were available for grant under our incentive plans.

Share-Based Compensation Expense

We recognized the following share-based compensation expense during each of the years ended December 31, 2016, 2015 and 2014:



	Year Ended December 31,
(Dollars in millions)	2016		2015		2014
Share-based compensation	$	87	$	73	$	56
Related tax (provision) benefit	—		14		12

Options

Stock options were granted with an exercise price equal to or greater than the fair market value of our shares as of the date of grant. We used the Black-Scholes option pricing model to determine the fair value of stock options awarded. The estimated fair value of our stock options was expensed over their vesting period, which was generally one to four years. There were no stock options granted during 2016, 2015 or 2014. The intrinsic value of stock options exercised during 2015 and 2014 was $15 million and $13 million, respectively. No stock options were exercised during 2016. All options were fully vested.

A summary of option activity for the year ended December 31, 2016, is presented below:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Term	Aggregate Intrinsic Value
	(In thousands)					(In thousands)
Outstanding at December 31, 2015	2,503		$	14.67	0.93 years	$	36
Exercised	—		—
Expired	(1,905	)	15.32
Outstanding and Vested at December 31, 2016	598		12.59		0.91 years	—

Exercisable at December 31, 2016	—		—		0.00 years	—

Restricted Share Awards and Restricted Share Units

RSAs and RSUs vest based on continued employment, generally over a two to five-year period. The fair value of RSAs and RSUs is determined based on the closing price of our shares on the date of grant. The total fair value, less assumed forfeitures, is expensed over the vesting period. The weighted-average grant date fair value of RSAs and RSUs granted during the years ended December 31, 2016, 2015 and 2014 was $6.20, $11.94 and $18.98, respectively. The total fair value of RSAs and RSUs vested during the years ended December 31, 2016, 2015 and 2014 was $38 million, $37 million and $52 million, respectively. As of December 31, 2016, there was $83 million of unrecognized compensation expense related to unvested RSAs and RSUs, which is expected to be recognized over a weighted average period of two years. A summary of RSA and RSU activity for the year ended December 31, 2016 is presented below:



	RSA		Weighted Average Grant Date Fair Value		RSU		Weighted Average Grant Date Fair Value
	(In thousands)				(In thousands)
Non-Vested at December 31, 2015	871		$	14.85	11,964		$	12.94
Granted	—		—		8,142		6.20
Vested	(625	)	14.26		(5,833	)	12.02
Forfeited	(109	)	14.95		(1,479	)	12.26
Non-Vested at December 31, 2016	137		17.42		12,794		9.15

Performance Units

The performance units we granted in 2016 and 2015 vest over three years and the performance units we granted prior to 2014 vest at the end of a three-year period assuming continued employment and the Company’s achievement of certain market-based performance goals. Depending on the performance levels achieved in relation to the predefined targets, shares may be issued for up to 200% of the units awarded. If the established performance goals are not met, the performance units will expire unvested and no shares will be issued. The grant date fair value of the performance units we have granted was determined through use of the Monte Carlo simulation method. The assumptions used in the Monte Carlo simulation during the year ended December 31, 2016, included a risk-free rate of 0.80%, volatility of 68.0% and a zero dividend yield. The weighted-average grant date fair value of the performance units we granted during the years ended December 31, 2016, 2015 and 2014 was $5.11, $10.45 and $14.31, respectively. For the years ended December 31, 2016 and 2015, we did not issue any shares. The total fair value of shares issued in connection with performance units during the years ended December 31, 2014 was $11 million. For the year ended December 31, 2014, 541 thousand shares of stock were issued for the performance units related to the departure of certain former executive officers. As of December 31, 2016, there was $7 million of unrecognized compensation expense related to performance units, which is expected to be recognized over a weighted average period of two years.

A summary of performance unit activity for the year ended December 31, 2016, is presented below:



	Performance Units		Weighted Average Grant Date Fair Value
	(In thousands)
Non-vested at December 31, 2015	2,857		$	11.17
Granted	2,112		5.11
Vested	—		—
Forfeited	(3,037	)	9.56
Non-vested at December 31, 2016	1,932		7.08

Employee Stock Purchase Plan

In June 2016, our shareholders adopted our ESPP and approved 12 million shares to be reserved for issuance under the plan. The ESPP permits eligible employees to make payroll deductions to purchase Weatherford stock. Each offering period has a six-month duration beginning on either March 1 or September 1. Shares are purchased at 90% of the lower of the closing price for our common stock on the first or last day of the offering period. As the inaugural offering period is still in progress, no shares have been issued under the ESPP as of December 31, 2016.