Stock-Based Compensation

As more fully discussed in Note 7 to the Consolidated Financial Statements included in EOG's 2015 Annual Report, EOG maintains various stock-based compensation plans. Stock-based compensation expense is included on the Consolidated Statements of Income and Comprehensive Income based upon the job function of the employees receiving the grants as follows (in millions):



	Three Months Ended March 31,
	2016		2015
Lease and Well	$	10.4	$	12.1
Gathering and Processing Costs	0.3		0.3
Exploration Costs	6.5		7.4
General and Administrative	15.2		13.3
Total	$	32.4	$	33.1

The Amended and Restated EOG Resources, Inc. 2008 Omnibus Equity Compensation Plan (2008 Plan) provides for grants of stock options, stock-settled stock appreciation rights (SARs), restricted stock and restricted stock units, performance units and performance stock and other stock-based awards. At March 31, 2016, approximately 24.1 million common shares remained available for grant under the 2008 Plan. EOG's policy is to issue shares related to the 2008 Plan from previously authorized unissued shares or treasury shares to the extent treasury shares are available.

Stock Options and Stock-Settled Stock Appreciation Rights and Employee Stock Purchase Plan. The fair value of stock option grants and SAR grants is estimated using the Hull-White II binomial option pricing model. The fair value of Employee Stock Purchase Plan (ESPP) grants is estimated using the Black-Scholes-Merton model. Stock-based compensation expense related to stock option, SAR and ESPP grants totaled $13.2 million and $11.6 million during the three months ended March 31, 2016 and 2015, respectively.

Weighted average fair values and valuation assumptions used to value stock option, SAR and ESPP grants during the three-month periods ended March 31, 2016 and 2015 are as follows:



	Stock Options/SARs						ESPP
	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2016			2015
Weighted Average Fair Value of Grants	$	20.87		$	30.35		$	17.56		$	23.39
Expected Volatility	36.45		%	40.01		%	36.79		%	37.47		%
Risk-Free Interest Rate	1.03		%	0.82		%	0.49		%	0.11		%
Dividend Yield	0.86		%	0.73		%	0.82		%	0.72		%
Expected Life	5.3 years			5.3 years			0.5 years			0.5 years

Expected volatility is based on an equal weighting of historical volatility and implied volatility from traded options in EOG's Common Stock. The risk-free interest rate is based upon United States Treasury yields in effect at the time of grant. The expected life is based upon historical experience and contractual terms of stock option, SAR and ESPP grants.

The following table sets forth stock option and SAR transactions for the three-month periods ended March 31, 2016 and 2015 (stock options and SARs in thousands):



	Three Months Ended March 31, 2016				Three Months Ended March 31, 2015
	Number of Stock Options/SARs		Weighted Average Grant Price		Number of Stock Options/SARs		Weighted Average Grant Price
Outstanding at January 1	10,744		$	67.98	10,493		$	64.96
Granted	5		69.03		30		91.85
Exercised ⁽¹⁾	(258	)	43.44		(459	)	47.25
Forfeited	(60	)	85.65		(96	)	77.96
Outstanding at March 31 ⁽²⁾	10,431		$	68.48	9,968		$	65.73
Vested or Expected to Vest ⁽³⁾	10,060		$	68.04	9,586		$	65.09
Exercisable at March 31 ⁽⁴⁾	5,770		$	58.68	4,882		$	49.85


(1)	The total intrinsic value of stock options/SARs exercised for the three months ended March 31, 2016 and 2015 was $7.3 million and $20.1 million, respectively. The intrinsic value is based upon the difference between the market price of EOG's common stock on the date of exercise and the grant price of the stock options/SARs.


(2)	The total intrinsic value of stock options/SARs outstanding at March 31, 2016 and 2015 was $122.1 million and $279.5 million, respectively. At March 31, 2016 and 2015, the weighted average remaining contractual life was 3.9 years and 4.2 years, respectively.


(3)	The total intrinsic value of stock options/SARs vested or expected to vest at March 31, 2016 and 2015 was $121.1 million and $274.1 million, respectively. At March 31, 2016 and 2015, the weighted average remaining contractual life was 3.9 years and 4.1 years, respectively.


(4)	The total intrinsic value of stock options/SARs exercisable at March 31, 2016 and 2015 was $108.7 million and $204.5 million, respectively. At March 31, 2016 and 2015, the weighted average remaining contractual life was 2.7 years and 2.8 years, respectively.

At March 31, 2016, unrecognized compensation expense related to non-vested stock option, SAR and ESPP grants totaled $88.8 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 2.5 years.

Restricted Stock and Restricted Stock Units. Employees may be granted restricted (non-vested) stock and/or restricted stock units without cost to them. Stock-based compensation expense related to restricted stock and restricted stock units totaled $18.7 million and $21.2 million for the three months ended March 31, 2016 and 2015, respectively.

The following table sets forth restricted stock and restricted stock unit transactions for the three-month periods ended March 31, 2016 and 2015 (shares and units in thousands):



	Three Months Ended March 31, 2016				Three Months Ended March 31, 2015
	Number of Shares and Units		Weighted Average Grant Date Fair Value		Number of Shares and Units		Weighted Average Grant Date Fair Value
Outstanding at January 1	4,908		$	70.35	5,394		$	64.39
Granted	284		75.26		438		87.93
Released ⁽¹⁾	(353	)	53.88		(365	)	51.22
Forfeited	(39	)	75.35		(44	)	76.19
Outstanding at March 31 ⁽²⁾	4,800		$	71.81	5,423		$	67.08


(1)	The total intrinsic value of restricted stock and restricted stock units released for the three months ended March 31, 2016 and 2015 was $24.7 million and $32.8 million, respectively. The intrinsic value is based upon the closing price of EOG's common stock on the date the restricted stock and restricted stock units are released.


(2)	The total intrinsic value of restricted stock and restricted stock units outstanding at March 31, 2016 and 2015 was $348.4 million and $497.3 million, respectively.

At March 31, 2016, unrecognized compensation expense related to restricted stock and restricted stock units totaled $156.0 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 2.5 years.

Performance Units and Performance Stock. EOG grants performance units and/or performance stock (Performance Awards) to its executive officers. As more fully discussed in the grant agreements, the performance metric applicable to these performance-based grants is EOG's total shareholder return over a three-year performance period relative to the total shareholder return of a designated group of peer companies (Performance Period). Upon the application of the performance multiple at the completion of the Performance Period, a minimum of 0% and a maximum of 200% of the Performance Awards granted could be outstanding. Subject to the termination provisions set forth in the grant agreements and the applicable performance multiple, the grants of Performance Awards will "cliff" vest five years from the date of grant. The fair value of the Performance Awards is estimated using a Monte Carlo simulation.

At December 31, 2015, 405,000 Performance Awards were outstanding. Upon completion of the Performance Period for the Performance Awards granted in 2012, a performance multiple of 200% was applied to the 2012 grants resulting in an additional grant of 142,556 Performance Awards in February 2016. Performance Awards totaling 134,016 were released during the three months ended March 31, 2016, with a total intrinsic value of $9.7 million, based upon the closing price of EOG's common stock on the release date. Upon the application of the performance multiple at the completion of the remaining Performance Periods, a minimum of 151,096 and a maximum of 675,984 Performance Awards could be outstanding. There were 413,540 Performance Awards outstanding as of March 31, 2016.

Stock-based compensation expense related to the Performance Award grants totaled $0.5 million and $0.3 million for the three months ended March 31, 2016 and 2015, respectively. At March 31, 2016, unrecognized compensation expense related to Performance Awards totaled $5.5 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 3.0 years.