11. Share-based Compensation

We have established and maintain a Long-term Incentive Plan (LTIP), as amended, for the granting of restricted common shares, performance share units (PSUs) and stock options to our employees. As of December 31, 2017, the total number of authorized common stock under the LTIP, as amended, was 51.5 million shares, of which we have 20.8 million shares available for issuance. Restricted stock generally vests equally on an annual basis over a three-year term while PSUs generally vest three years from the date of grant. Restricted common shares are valued based on the prevailing market price of our common stock on the date of grant. Stock options vest over three years from the date of grant, have a 10‑year term, and the exercise price equals market price on the date of grant.

The number of shares of common stock to be issued under a 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:

	2017		2016		2015
	(In millions)
Restricted stock	$	56	$	45	$	67
Stock options		9		7		5
Performance share units		21		21		25
Share-based compensation expense before income taxes	$	86	$	73	$	97
Income tax benefit on share-based compensation expense	$	1	$	28	$	36

Based on share‑based compensation awards outstanding at December 31, 2017, unearned compensation expense, before income taxes, will be recognized in future years as follows (in millions): 2018—$65, 2019—$34, and 2020—$5.

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, except per share amounts)
Outstanding at January 1, 2017		1,015		$	69.68		6,592		$	67.15		3,101		$	61.93
Granted		439			52.86		662			51.03		1,216			50.98
Exercised		—			—		(152	)		52.75		—			—
Vested		(265	)		90.37		—			—		(729	)		81.06
Forfeited		(43	)		61.23		(620	)		56.66		(386	)		56.72
Outstanding at December 31, 2017		1,146		$	58.78		6,482		$	66.84		3,202		$	54.04

As of December 31, 2017, there were 6.48 million outstanding stock options (5.22 million exercisable) with a weighted average remaining contractual life of 3.6 years (2.3 years for exercisable options) and an aggregated intrinsic value of $2.2 million ($0.8 million for exercisable options). The weighted average exercise price for options exercisable at December 31, 2017 was $70.65 per share.

The following weighted average assumptions were utilized to estimate the fair value of stock options:

	2017			2016			2015
Risk free interest rate		2.17	%		1.47	%		1.77	%
Stock price volatility		0.333			0.326		0.312
Dividend yield		1.96	%		2.26	%		1.34	%
Expected life in years		6.0			6.0			6.0
Weighted average fair value per option granted	$	14.51		$	11.33		$	21.00

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

	2017			2016			2015
Risk free interest rate		1.55	%		0.96	%		1.02	%
Stock price volatility		0.387		0.329				0.270
Contractual term in years		3.0			3.0			3.0
Grant date price of Hess common stock	$	51.03		$	44.31		$	74.49

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.