Note 15. Stock-Based Compensation

We recognized total stock-based compensation expense as follows:

	Year Ended December 31,
	2011			2010			2009
(millions)
Stock-Based Compensation Expense Included in
General and Administrative Expense	$	42		$	39		$	36
Exploration Expense and Other		16			15			13
Total Stock-Based Compensation Expense	$	58		$	54		$	49
Tax Benefit Recognized	$	(20	)	$	(19	)	$	(17	)

Stock Option and Restricted Stock Plans and Incentive Plan Our stock option and restricted stock plans and incentive plan are described below.

1992 Stock Option and Restricted Stock Plan Under the Noble Energy, Inc. 1992 Stock Option and Restricted Stock Plan, as amended (the 1992 Plan), the Compensation, Benefits and Stock Option Committee of the Board of Directors (the Committee) may grant stock options and award restricted stock to our officers or other employees and those of our subsidiaries. On April 26, 2011, our stockholders approved the amendment and restatement of the 1992 Plan to increase the number of shares of our common stock authorized for issuance under the plan from 24 million to 31 million shares and to modify certain plan provisions. At December 31, 2011, 16,216,198 shares of our common stock were reserved for issuance, including 9,143,929 shares available for future grants and awards, under the 1992 Plan.

Stock options are issued with an exercise price equal to the market price of our common stock on the date of grant, and are subject to such other terms and conditions as may be determined by the Committee. Unless granted by the Committee for a shorter term, the options expire ten years from the grant date. Option grants generally vest ratably over a three-year period.

Restricted stock awards made under the 1992 Plan are subject to such restrictions, terms and conditions, including forfeitures, if any, as may be determined by the Committee. During the Restricted Period, unless specifically provided otherwise in accordance with the terms of the 1992 Plan, the recipient of Restricted Stock would be the record owner of the shares and have all the rights of a stockholder with respect to the shares, including the right to vote and the right to receive dividends or other distributions made or paid with respect to the shares. Restricted stock awards generally vest over three years. Shares of restricted stock time-vest 20% after year one, an additional 30% after year two and the remaining 50% after year three.

2004 Long-Term Incentive Plan Under the Noble Energy, Inc. 2004 Long-Term Incentive Plan (the 2004 LTIP), the Committee may make incentive awards to our key employees and those of our subsidiaries. Incentive compensation is based upon the attainment of specific market and performance goals established by the Committee. Awards may be in the form of stock options or restricted stock or in the form of performance units or other incentive measurements providing for the payment of bonuses in cash, or in any combination thereof, as determined by the Committee in its discretion. Stock options granted and restricted stock awarded under the 2004 LTIP are granted and awarded pursuant to the terms of the 1992 Plan.

2005 Stock Plan for Non-Employee Directors The 2005 Stock Plan for Non-Employee Directors of Noble Energy, Inc. (the 2005 Plan) provides for grants of stock options and awards of restricted stock to our non-employee directors. The 2005 Plan superseded and replaced the 1988 Nonqualified Stock Option Plan for Non-Employee Directors. The total number of shares of our common stock that may be issued under the 2005 Plan is 800,000. At December 31, 2011, 705,778 shares of our common stock were reserved for issuance, including 504,841 shares available for future grants and awards under the 2005 Plan.

The 2005 Plan provides for the granting to a non-employee director of up to a maximum of 11,200 stock options on the date of election to the Board of Directors, annual grants of 2,800 options per non-employee director on February 1 of each year, and discretionary grants by the Board of Directors (with the February 1 annual and the discretionary grants made to a non-employee director during any calendar year being limited to a combined maximum of 11,200 options). Options are issued with an exercise price equal to the market price of our common stock on the date of grant and may be exercised one year after the date of grant. The options expire ten years from the date of grant.

The 2005 Plan also provides for the awarding to a non-employee director of up to a maximum of 4,800 shares of restricted stock on the date of election to the Board of Directors, annual awards of 1,200 shares of restricted stock per non-employee director on February 1 of each year, and discretionary awards by the Board of Directors (with the February 1 annual and the discretionary awards made to a non-employee director during any calendar year being limited to a combined maximum of 4,800 shares of restricted stock). Restricted stock is restricted for a period of at least one year from the date of award.

1988 Nonqualified Stock Option Plan for Non-Employee Directors The 1988 Nonqualified Stock Option Plan for Non-Employee Directors of Noble Energy, Inc., as amended, (the 1988 Plan) provided for the issuance of stock options to our non-employee directors. Options issued under the 1988 Plan may be exercised one year after grant and expire ten years from the grant date. The 1988 Plan provided for the granting of a fixed number of stock options to each non-employee director annually (10,000 stock options for the first calendar year of service and 5,000 stock options for each year thereafter) on February 1 of each year. The 1988 Plan was terminated in 2005, and no additional options can be granted thereunder.

Stock Option Grants The fair value of each stock option granted was estimated on the date of grant using a Black-Scholes-Merton option valuation model that used the assumptions described below:

Expected term The expected term represents the period of time that options granted are expected to be outstanding, which is the grant date to the date of expected exercise or other expected settlement for options granted. The hypothetical midpoint scenario we use considers our actual exercise and post-vesting cancellation history and expectations for future periods, which assumes that all vested, outstanding options are settled halfway between their vesting date and their expiration date.

Expected volatility The expected volatility represents the extent to which our stock price is expected to fluctuate between the grant date and the expected term of the award. We use the historical volatility of our common stock for a period equal to the expected term of the option prior to the date of grant. We believe that historical volatility produces an estimate that is representative of our expectations about the future volatility of our common stock over the expected term.

Risk-free rate The risk-free rate is the implied yield available on US Treasury securities with a remaining term equal to the expected term of the option. We base our risk-free rate on a weighting of five and seven year US Treasury securities as of the date of grant.

Dividend yield The dividend yield represents the value of our stock's annualized dividend as compared to our stock's average price for the three-year period ended prior to the date of grant. It is calculated by dividing one full year of our expected dividends by our average stock price over the three-year period ended prior to the date of grant.

The assumptions used in valuing stock options granted were as follows:

	Year Ended December 31,
	2011			2010			2009
(weighted averages)
Expected Term (in Years)		5.7			5.6			5.5
Expected Volatility		36.2	%		35.4	%		43.0	%
Risk-Free Rate		2.2	%		2.6	%		2.0	%
Expected Dividend Yield		1.1	%		1.1	%		1.2	%
Weighted Average Grant-Date Fair Value	$	30.17		$	25.05		$	19.14

Stock option activity was as follows:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(per share)		(in years)	(in millions)
Outstanding at December 31, 2010		6,266,960		$	52.87
Granted		992,488			90.34
Exercised		(837,096	)		45.59
Forfeited		(56,536	)		75.01
Outstanding at December 31, 2011		6,365,816		$	59.47	6.1	$	223
Exercisable at December 31, 2011		4,315,415		$	51.13	5.1	$	187

The total intrinsic value of options exercised was $40 million in 2011, $68 million in 2010, and $19 million in 2009.

As of December 31, 2011, $30 million of compensation cost related to unvested stock options granted under the Plans remained to be recognized. The cost is expected to be recognized over a weighted-average period of 1.3 years. We issue new shares of our common stock to settle option exercises. Dividends are not paid on unexercised options.

Restricted Stock Awards Restricted stock activity was as follows:

	Shares Subject to Service Conditions			Weighted Average Award Date Fair Value
				(per share)
Outstanding at December 31, 2010		1,232,867		$	66.11
Awarded		407,336			90.32
Vested		(633,312	)		67.84
Forfeited		(27,634	)		73.26
Outstanding at December 31, 2011		979,257		$	74.87

The total fair value of restricted stock that vested was $57 million in 2011, $43 million in 2010, and $4 million in 2009.

The weighted average award-date fair value of restricted stock awarded was $90.32 per share in 2011, $75.07 per share in 2010, and $51.63 per share in 2009.

Awards of time-vested restricted stock (shares subject to service conditions) were valued at the price of our common stock at the date of award.

As of December 31, 2011, $37 million of compensation cost related to all of our unvested restricted stock awarded under the Plans remained to be recognized. The cost is expected to be recognized over a weighted-average period of 1.3 years. Common stock dividends accrue on restricted stock awards and are paid upon vesting. We issue new shares of our common stock when awarding restricted stock.