SHARE-BASED COMPENSATION

12 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

Share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which is generally the vesting period of the equity award.

On December 7, 2006, our board of directors adopted, and our stockholders subsequently approved on February 8, 2007, the Atwood Oceanics, Inc. 2007 Long-Term Incentive Plan (as amended, the “2007 Plan”). The effective date of the 2007 Plan was December 7, 2006, and awards may be made under the 2007 Plan through December 7, 2016. Under our 2007 Plan, up to 4,000,000 shares of common stock were authorized for issuance to eligible participants in the form of restricted stock awards or upon exercise of stock options granted pursuant to the 2007 Plan. We also maintain one other stock incentive plan approved by our shareholders, the Atwood Oceanics, Inc. Amended and Restated 2001 Stock Incentive Plan (as amended, the “2001 Plan”), under which up to 4,000,000 shares of common stock were authorized for issuance to eligible participants in the form of restricted stock awards or upon exercise of stock options granted. No additional options or restricted stock have been available for award under the 2001 Plan since the implementation of the 2007 Plan. All stock incentive plans currently in effect have been approved by our shareholders.

A summary of shares available for issuance and outstanding stock option and restricted stock awards for our two stock incentive plans as of September 30, 2012 is as follows:

	2007 Plan	2001 Plan
Shares available for future awards or grants	1,048,399	—
Outstanding stock option grants	994,525	448,450
Outstanding unvested restricted stock awards	700,508	—

Awards of restricted stock and stock options have both been granted under our stock incentive plans as of September 30, 2012. We deliver newly issued shares of common stock for restricted stock awards upon vesting and upon exercise of stock options.

We recognize compensation expense on grants of share-based compensation awards on a straight-line basis over the required service period for each award. Unrecognized compensation cost, net of estimated forfeitures, related to awards of stock options and restricted stock and the related remaining weighted-average service period is as follows (in thousands, except average service periods):

	September 30,
	2012		2011
Unrecognized Compensation Cost
Stock options	$	6,484	$	4,964
Restricted stock awards	12,999		6,575
Total	$	19,483	$	11,539
Remaining weighted average service period (Years)	2.2		2.3

Stock Options

Under our stock incentive plans, the exercise price of each stock option must be equal to or greater than the fair market value of one share of our common stock on the date of grant, with all outstanding options having a maximum term of 10 years. Options vest ratably over a period ranging from the end of the first to the fourth year from the date of grant for stock options. Each option is for the purchase of one share of our common stock.

The total fair value of stock options vested during fiscal years 2012, 2011 and 2010 was $2.5 million, $2.7 million and $3.0 million, respectively. The per share weighted-average grant-date fair value of stock options granted during fiscal years 2012, 2011 and 2010 was $16.90, $15.72 and $14.69, respectively. We estimate the fair value of each stock option on the date of grant using the Black-Scholes pricing model and the following assumptions:

	Fiscal 2012		Fiscal 2011		Fiscal 2010
Risk-Free Interest Rate	0.9	%	1.9	%	2.1	%
Expected Volatility	44	%	44	%	43	%
Expected Life (Years)	5.4		5.2		5.3
Dividend Yield	None		None		None

The average risk-free interest rate is based on the five-year U.S. treasury security rate in effect as of the grant date. We determined expected volatility using a six-year historical volatility figure and determined the expected term of the stock options using 10 years of historical data. The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the grant date.

A summary of stock option activity for fiscal year 2012 is as follows:

	Number of Options (000s)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value  (000s)
Outstanding at October 1, 2011	1,480		$	25.44	—	$	—
Granted	320		$	41.60
Exercised	(285	)	$	19.39		$	7,944
Forfeited	(65	)	$	36.60
Outstanding at September 30, 2012	1,450		$	29.74	6.1	$	22,663
Exercisable at September 30, 2012	855		$	23.95	4.5	$	18,378

Restricted Stock

We have awarded restricted stock under the 2007 Plan to certain employees and to our non-employee directors. All current awards of restricted stock to employees are subject to a vesting and restriction period ranging from three to four years, subject to early termination as provided in the 2007 Plan. In addition, certain awards of restricted stock to employees are subject to market-based performance conditions. The number of market-based performance restricted shares that vest will depend on the degree of achievement of specified corporate performance criteria which are strictly market-based. All awards of restricted stock to non-employee directors are subject to a vesting and restriction period of a minimum of 13 months, subject to early termination as provided in the 2007 Plan. We value restricted stock awards based on the fair market value of our common stock on the date of grant and also adjust fair market value for any awards subject to market-based performance conditions, where applicable.

A summary of restricted stock activity for fiscal year 2012 is as follows:

	Number of Shares (000s)		Weighted Average Fair Value
Unvested at October 1, 2011	560		$	34.54
Granted	392		$	41.36
Vested	(207	)	$	33.07
Forfeited	(44	)	$	38.49
Unvested at September 30, 2012	701		$	38.54