Employee Benefit Plans

Stock-Based Compensation

During 2018, EOG maintained various stock-based compensation plans as discussed below. EOG recognizes compensation expense on grants of stock options, SARs, restricted stock and restricted stock units, performance units and grants made under the EOG Resources, Inc. Employee Stock Purchase Plan (ESPP). Stock-based compensation expense is calculated based upon the grant date estimated fair value of the awards, net of forfeitures, based upon EOG's historical employee turnover rate. Compensation expense is amortized over the shorter of the vesting period or the period from date of grant until the date the employee becomes eligible to retire without company approval.

Stock-based compensation expense is included on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) based upon the job functions of the employees receiving the grants. Compensation expense related to EOG's stock-based compensation plans for the years ended December 31, 2018, 2017 and 2016 was as follows (in millions):



	2018		2017		2016

Lease and Well	$	51	$	41	$	38
Gathering and Processing Costs	1		1		1
Exploration Costs	25		23		21
General and Administrative	78		69		68
Total	$	155	$	134	$	128

The Amended and Restated EOG Resources, Inc. 2008 Omnibus Equity Compensation Plan (2008 Plan) provides for grants of stock options, SARs, restricted stock and restricted stock units, performance stock and performance units, and other stock-based awards.

Beginning with the grants made effective September 25, 2017, the Compensation Committee of the Board of Directors of EOG (Committee) approved revised vesting schedules for grants of stock options, SARs, restricted stock and restricted stock units, and performance units. These revised vesting schedules will apply to all future grants as well, until revised, amended or otherwise determined by the Committee.



Grant Type	Previous Vesting Schedule	Revised Vesting Schedule
Stock Options/SARs	Vesting in 25% increments on each of the first four anniversaries of the date of grant	Vesting in increments of 33%, 33% and 34% on each of the first three anniversaries, respectively, of the date of grant

Restricted Stock/Restricted Stock Units	"Cliff" vesting five years from the date of grant	"Cliff" vesting three years from the date of grant

Performance Units	"Cliff" vesting five years from the date of grant (except for the December 2016 grant, which will "cliff" vest approximately three years from the date of grant)	"Cliff" vesting approximately 41 months from the date of grant - specifically, on the February 28^th immediately following the Committee’s certifications contemplated by the form of award agreement governing grants of performance units

At December 31, 2018, approximately 13.7 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.

During 2018, 2017 and 2016, EOG issued shares in connection with stock option/SAR exercises, restricted stock and performance stock grants, restricted stock unit and performance unit releases and ESPP purchases. Effective January 1, 2017, with the adoption of ASU 2016-09, EOG began recognizing income tax associated with excess tax benefits and tax deficiencies as discrete benefits and expenses, respectively, in the income tax provision. Net excess tax benefits recognized within the income tax provision were $20 million and $32 million for the twelve months ended December 31, 2018 and 2017, respectively. Prior to the adoption of ASU 2016-09, EOG recognized, as an adjustment to Additional Paid in Capital, federal income tax benefits of $29 million for 2016 related to the exercise of stock options/SARs and the release of restricted stock, restricted stock units, performance stock and performance units.

Stock Options and Stock-Settled Stock Appreciation Rights and Employee Stock Purchase Plan. Participants in EOG's stock-based compensation plans (including the 2008 Plan) have been or may be granted options to purchase shares of Common Stock. In addition, participants in EOG's stock plans (including the 2008 Plan) have been or may be granted SARs, representing the right to receive shares of Common Stock based on the appreciation in the stock price from the date of grant on the number of SARs granted. Stock options and SARs are granted at a price not less than the market price of the Common Stock on the date of grant. Terms for stock options and SARs granted have generally not exceeded a maximum term of seven years. EOG's ESPP allows eligible employees to semi-annually purchase, through payroll deductions, shares of Common Stock at 85 percent of the fair market value at specified dates. Contributions to the ESPP are limited to 10 percent of the employee's pay (subject to certain ESPP limits) during each of the two six-month offering periods each year.

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 ESPP grants is estimated using the Black-Scholes-Merton model. Stock-based compensation expense related to stock option, SAR and ESPP grants totaled $60 million, $56 million and $57 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Weighted average fair values and valuation assumptions used to value stock option, SAR and ESPP grants for the years ended December 31, 2018, 2017 and 2016 were as follows:



	Stock Options/SARs									ESPP
	2018			2017			2016			2018			2017			2016

Weighted Average Fair Value of Grants	$	33.46		$	23.95		$	25.78		$	25.75		$	22.20		$	19.21
Expected Volatility	28.23		%	28.28		%	31.54		%	24.59		%	27.12		%	36.55		%
Risk-Free Interest Rate	2.68		%	1.52		%	0.78		%	1.89		%	0.88		%	0.44		%
Dividend Yield	0.72		%	0.75		%	0.76		%	0.64		%	0.71		%	0.82		%
Expected Life	5.0 years			5.1 years			5.4 years			0.5 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 the stock option and SAR transactions for the years ended December 31, 2018, 2017 and 2016 (stock options and SARs in thousands):



	2018				2017				2016
	Number of Stock Options/ SARs		Weighted Average Grant Price		Number of Stock Options/ SARs		Weighted Average Grant Price		Number of Stock Options/ SARs		Weighted Average Grant Price

Outstanding at January 1	9,103		$	83.89	9,850		$	75.53	10,744		$	67.98
Granted	1,906		126.49		2,274		96.27		1,855		94.82
Exercised ⁽¹⁾	(2,493	)	72.21		(2,574	)	61.12		(2,376	)	54.56
Forfeited	(206	)	94.43		(447	)	93.84		(373	)	87.38
Outstanding at December 31	8,310		96.90		9,103		83.89		9,850		75.53
Stock Options/SARs Exercisable at December 31	3,969		85.82		4,510		75.76		5,613		66.48


(1)	The total intrinsic value of stock options/SARs exercised during the years 2018, 2017 and 2016 was $118 million, $95 million and $84 million, respectively. The intrinsic value is based upon the difference between the market price of the Common Stock on the date of exercise and the grant price of the stock options/SARs.

At December 31, 2018, there were 8.0 million stock options/SARs vested or expected to vest with a weighted average grant price of $96.43 per share, an intrinsic value of $34.6 million and a weighted average remaining contractual life of 4.4 years.

The following table summarizes certain information for the stock options and SARs outstanding and exercisable at December 31, 2018 (stock options and SARs in thousands):



Stock Options/SARs Outstanding							Stock Options/SARs Exercisable
Range of Grant Prices	Stock Options/ SARs	Weighted Average Remaining Life (Years)	Weighted Average Grant Price		Aggregate Intrinsic Value⁽¹⁾		Stock Options/ SARs	Weighted Average Remaining Life (Years)	Weighted Average Grant Price		Aggregate Intrinsic Value ⁽¹⁾

$ 50.00 to $ 82.99	1,528	3	$	65.46			1,183	2	$	64.27
83.00 to 95.99	2,046	4	91.48				1,290	3	89.50
96.00 to 96.99	1,961	6	96.29				618	5	96.29
97.00 to 125.99	957	3	102.77				872	3	101.91
126.00 to 129.99	1,818	7	127.01				6	1	127.00
	8,310	5	96.90		$	35,083	3,969	3	85.82		$	28,993


(1)	Based upon the difference between the closing market price of the Common Stock on the last trading day of the year and the grant price of in-the-money stock options and SARs.

At December 31, 2018, unrecognized compensation expense related to non-vested stock option and SAR grants totaled $106 million. This unrecognized expense will be amortized on a straight-line basis over a weighted average period of 1.7 years.

At the 2018 Annual Meeting of Stockholders, EOG stockholders approved an amendment and restatement of the ESPP to (among other changes) increase the number of shares available for grant. At December 31, 2018, approximately 2.5 million shares of Common Stock remained available for grant under the ESPP. The following table summarizes ESPP activity for the years ended December 31, 2018, 2017 and 2016 (in thousands, except number of participants):



	2018		2017		2016

Approximate Number of Participants	1,934		1,870		1,746
Shares Purchased	180		180		212
Aggregate Purchase Price	$	14,887	$	13,997	$	13,787

Restricted Stock and Restricted Stock Units. Employees may be granted restricted (non-vested) stock and/or restricted stock units without cost to them. Upon vesting of restricted stock, shares of Common Stock are released to the employee. Upon vesting, restricted stock units are converted into shares of Common Stock and released to the employee. Stock-based compensation expense related to restricted stock and restricted stock units totaled $81 million, $68 million and $60 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The following table sets forth the restricted stock and restricted stock unit transactions for the years ended December 31, 2018, 2017 and 2016 (shares and units in thousands):



	2018				2017				2016
	Number of Shares and Units		Weighted Average Grant Date Fair Value		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	3,905		$	88.57	3,962		$	79.63	4,908		$	70.35
Granted	812		117.55		1,095		97.34		853		88.01
Released ⁽¹⁾	(740	)	78.16		(929	)	61.51		(1,465	)	53.95
Forfeited	(185	)	92.12		(223	)	85.45		(334	)	77.29
Outstanding at December 31 ⁽²⁾	3,792		96.64		3,905		88.57		3,962		79.63


(1)	The total intrinsic value of restricted stock and restricted stock units released during the years ended December 31, 2018, 2017 and 2016 was $84 million, $91 million and $124 million, respectively. The intrinsic value is based upon the closing price of EOG's common stock on the date restricted stock and restricted stock units are released.


(2)	The total intrinsic value of restricted stock and restricted stock units outstanding at December 31, 2018, 2017 and 2016 was $331 million, $421 million and $401 million, respectively.

At December 31, 2018, unrecognized compensation expense related to restricted stock and restricted stock units totaled $172 million. Such unrecognized expense will be recognized on a straight-line basis over a weighted average period of 1.9 years.

Performance Units and Performance Stock. EOG has granted performance units and/or performance stock (Performance Awards) to its executive officers annually since 2012. 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. The fair value of the Performance Awards is estimated using a Monte Carlo simulation. Stock-based compensation expense related to the Performance Award grants totaled $14 million, $10 million and $11 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Weighted average fair values and valuation assumptions used to value Performance Awards during the years ended December 31, 2018, 2017 and 2016 were as follows:



	2018			2017			2016

Weighted Average Fair Value of Grants	$	136.74		$	113.81		$	119.10
Expected Volatility	29.92		%	32.19		%	32.48		%
Risk-Free Interest Rate	2.85		%	1.60		%	1.15		%

Expected volatility is based on the term-matched historical volatility over the simulated term, which is calculated as the time between the grant date and the end of the Performance Period. The risk-free interest rate is derived from the Treasury Constant Maturities yield curve on the grant date.

The following table sets forth the Performance Award transactions for the years ended December 31, 2018, 2017 and 2016 (shares and units in thousands):



	2018						2017				2016
	Number of Units and Shares				Weighted Average Price per Grant Date		Number of Units and Shares		Weighted Average Price per Grant Date		Number of Units and Shares		Weighted Average Price per Grant Date

Outstanding at January 1	502				$	90.96	545		$	80.92	405		$	74.93
Granted	113				125.73		78		96.29		132		100.95
Granted for Performance Multiple ⁽¹⁾	72				101.87		119		84.43		142		56.21
Released ⁽²⁾	(148	)			84.43		(240	)	66.69		(134	)	56.21
Forfeited	—				—		—		—		—		—
Outstanding at December 31 ⁽³⁾	539		(4	)	101.53		502		90.96		545		80.92


(1)	Upon completion of the Performance Period for the Performance Awards granted in 2014, 2013 and 2012, a performance multiple of 200% was applied to each of the grants resulting in additional grants of Performance Awards in February 2018, 2017 and 2016.


(2)	The total intrinsic value of Performance Awards released during the years ended December 31, 2018, 2017 and 2016 was $18 million, $24 million and $10 million, respectively.


(3)	The total intrinsic value of Performance Awards outstanding at December 31, 2018, 2017 and 2016 was $47 million, $54 million and $55 million, respectively.


(4)	Upon the application of the relevant performance multiple at the completion of each of the remaining Performance Periods, a minimum of 144 and a maximum of 934 Performance Awards could be outstanding. The intrinsic value is based upon the closing price of EOG's common stock on the date Performance Awards are released.

At December 31, 2018, unrecognized compensation expense related to Performance Awards totaled $10 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 1.7 years.

Upon completion of the Performance Period for the Performance Awards granted in 2015, a performance multiple of 200% was applied to the 2015 grants resulting in an additional grant of 71,805 Performance Awards in February 2019.

Pension Plans. EOG has a defined contribution pension plan in place for most of its employees in the United States. EOG's contributions to the pension plan are based on various percentages of compensation and, in some instances, are based upon the amount of the employees' contributions. EOG's total costs recognized for the plan were $43 million, $37 million and $34 million for 2018, 2017 and 2016, respectively.

In addition, EOG's Trinidadian subsidiary maintains a contributory defined benefit pension plan and a matched savings plan. EOG's United Kingdom subsidiary maintained a pension plan which included a non-contributory defined contribution pension plan and a matched defined contribution savings plan. These pension plans are available to most employees of the Trinidadian subsidiary and were available to most employees of the United Kingdom subsidiary. EOG's combined contributions to these plans were $1 million, for each of 2018, 2017 and 2016, respectively. The United Kingdom operations were sold in the fourth quarter of 2018.

For the Trinidadian defined benefit pension plan, the benefit obligation, fair value of plan assets and accrued benefit cost totaled $11 million, $9 million and $0.2 million, respectively, at December 31, 2018, and $10 million, $8 million and $0.2 million, respectively, at December 31, 2017.

Postretirement Health Care. EOG has postretirement medical and dental benefits in place for eligible United States and Trinidad employees and their eligible dependents, the costs of which are not material.