11. Share-based Compensation

The Corporation granted restricted common shares, performance share units (PSUs) and stock options to employees under its 2008 Long‑term Incentive Plan (LTIP), as amended. Outstanding restricted stock and PSUs generally vest three years from the date of grant. Outstanding stock options vest over three years from the date of grant and have a 10‑year term and an exercise price equal to the market price on the date of grant.

The number of shares of common stock to be issued under the PSU agreement is based on a comparison of the Corporation’s total shareholder return (TSR) to the TSR of a predetermined group of peer companies over a three‑year performance period ending December 31 of the year prior to settlement of the grant. Payouts of the performance share awards will range from 0% to 200% of the target awards based on the Corporation’s TSR ranking within the peer group. Dividend equivalents for the performance period will accrue on performance shares, but will only be paid out on earned shares after the performance period.

Share‑based compensation expense consisted of the following:

	Before Income Taxes						After Income Taxes
	2014		2013		2012		2014		2013		2012
	(In millions)
Restricted stock	$	62	$	31	$	57	$	39	$	19	$	35
Stock options		2		13		34		1		8		21
Performance share units		19		10		8		12		6		5
Total*	$	83	$	54	$	99	$	52	$	33	$	61

*	Includes pre‑tax share‑based compensation expense included in Income from continuing operations of approximately $87 million, $60 million and $83 million for 2014, 2013 and 2012, respectively.

The Corporation reversed share‑based compensation expenses totaling $33 million ($25 million for restricted stock, $7 million for PSUs and $1 million for stock options) in 2013 for grants that were not expected to vest as a result of the Corporation’s transformation to a pure play E&P company.

Based on share‑based compensation awards outstanding at December 31, 2014, unearned compensation expense, before income taxes, will be recognized in future years as follows (in millions): 2015—$66, 2016—$39 and 2017—$7.

The Corporation’s share‑based compensation activity consisted of the following:

	Performance Share Units					Stock Options					Restricted Stock
	Performance Share Units			Weighted- Average Fair Value on Date of Grant		Options			Weighted- Average Exercise Price per Share		Shares of Restricted Common Stock			Weighted- Average Price on Date of Grant
	(In thousands)					(In thousands)					(In thousands)
Outstanding at January 1, 2014		635		$	89.45		10,141		$	63.08		2,865		$	69.36
Granted		298			90.32		163			80.35		1081			81.20
Exercised		—			—		(3,327	)		54.99		—			—
Vested		—			—		—			—		(510	)		82.42
Forfeited		(133	)		88.60		(211	)		85.07		(535	)		68.74
Outstanding at December 31, 2014		800		$	89.91		6,766		$	66.79		2,901		$	71.58

The table below summarizes information regarding the outstanding and exercisable stock options as of December 31, 2014:

	Outstanding Options			Exercisable Options
	Options	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price per Share	Options		Weighted-Average Exercise Price per Share



Range of Exercise Prices
	(In thousands)	(Years)		(In thousands)
$20.00 – $40.00	65	1	$ 29.96	65	$	29.96
$40.01 – $50.00	684	2	49.42	681		49.44
$50.01 – $60.00	1,927	4	55.08	1,921		55.08
$60.01 – $80.00	1,302	4	60.68	1,302		60.68
$80.01 – $120.00	2,788	5	82.85	2,625		83.00
	6,766	4	$ 66.79	6,594	$	66.47

The following weighted average assumptions were utilized to estimate the fair value of PSU awards:

	2014			2013
Risk free interest rate		0.65	%		0.36	%
Stock price volatility		.359			.359
Contractual term in years		3.0			3.0
Grant date price of Hess common stock	$	80.35		$	69.49

The risk free interest rate is based on the vesting period of the award and is obtained from published sources. The stock price volatility is determined from the historical stock prices of the peer group using the vesting period. The contractual term is equivalent to the vesting period.

Restricted common shares are valued based on the prevailing market price of the Corporation’s common stock on the date of grant.

In May 2008, shareholders approved the 2008 LTIP, which was amended in May 2010 and May 2012 to increase the number of new shares of common stock available for awards. At December 31, 2014, the Corporation had 8.5 million shares that remain available for issuance under the 2008 LTIP, as amended, out of the total of 29.0 million shares of common stock authorized for issuance under the 2008 LTIP, as amended.