Stock-Based Compensation:

For the years ended December 31, our stock-based compensation expense consisted of the following:



	2014			2013			2012
	(In millions)
Equity awards	$	47		$	48		$	46
Liability awards:
Stockholder Value Appreciation Program	38			18			—
Cash-settled restricted stock units	20			9			1
Total liability awards	58			27			1
Total stock-based compensation	105			75			47
Capitalized in oil and gas properties	(40		)	(20		)	(12		)
Net stock-based compensation expense	$	65		$	55		$	35

As of December 31, 2014, we had approximately $70 million of total unrecognized stock-based compensation expense related to unvested stock-based compensation awards. The full amount is expected to be recognized within four years.

Equity Awards

Equity awards consist of service-based and performance- or market-based restricted stock units, stock options and stock purchase options under the Employee Stock Purchase Plan.

Stock-based compensation classified as equity awards to employees and non-employee directors are currently granted under the 2011 Omnibus Stock Plan (2011 Plan). The fair value of grants is determined utilizing the Black-Scholes option-pricing model for stock options and a Monte Carlo lattice-based model for our performance- and market-based restricted stock and restricted stock units. Compensation expense for equity awards is expected to be recognized on a straight-line basis over the applicable remaining vesting periods.

Shares available for grant under our 2011 Plan are reduced by 1.87 times the number of shares of restricted stock or restricted stock units awarded under the plan and are reduced by 1 times the number of shares subject to stock options awarded under the plan. At December 31, 2014, we had approximately (1) 2.3 million additional shares available for issuance pursuant to our existing plan if all future awards under our 2011 Plan are stock options, or (2) 1.2 million additional shares available for issuance pursuant to our existing plan if all future awards under our 2011 Plan are restricted stock or restricted stock units. Thus far, the majority of the awards under our 2011 Plan have been granted as restricted stock unit awards.

Restricted Stock. At December 31, 2014, our employees held approximately 1.9 million shares of non-vested restricted stock and restricted stock units. These shares primarily vest over three to five years and vesting is dependent upon the employee’s continued service with our Company. In addition, at December 31, 2014, our employees held approximately 0.9 million shares of restricted stock subject to performance-based vesting criteria (all of which are currently considered market-based restricted stock under authoritative accounting guidance). To the extent we have treasury shares available, we utilize treasury shares when restricted stock is issued or restricted stock units vest.

The following table provides information about restricted stock and restricted stock unit activity.



	Service-Based Shares		Performance/ Market-Based Shares		Total Shares		Weighted- Average Grant Date Fair Value per Share
	(In thousands, except per share data)
Non-vested shares outstanding at January 1, 2012	2,123		357		2,480		$	49.52
Granted	1,589		184		1,773		35.29
Forfeited	(364	)	(14	)	(378	)	47.34
Vested	(977	)	(89	)	(1,066	)	41.70
Non-vested shares outstanding at December 31, 2012	2,371		438		2,809		43.31
Granted	2,428		300		2,728		27.24
Forfeited	(605	)	(32	)	(637	)	39.47
Vested	(1,195	)	—		(1,195	)	39.64
Non-vested shares outstanding at December 31, 2013	2,999		706		3,705		33.31
Granted	465		338		803		25.42
Forfeited	(416	)	(69	)	(485	)	25.14
Vested	(1,146	)	(30	)	(1,176	)	36.64
Non-vested shares outstanding at December 31, 2014	1,902		945		2,847		$	30.05

The total fair value of restricted stock and restricted stock units that vested during the years ended December 31, 2014, 2013 and 2012 was $43 million, $47 million and $44 million, respectively.

Stock Options. Options generally expire ten years from the date of grant and become exercisable at the rate of 20% per year. The exercise price of options cannot be less than the fair market value per share of our common stock on the date of grant. We issue new shares of stock when stock options are exercised.

The excess tax benefit realized from stock options exercised is recognized as a credit to additional paid-in capital and is calculated as the amount by which the tax deduction we receive exceeds the deferred tax asset associated with recorded stock-based compensation expense. We did not realize an excess tax benefit from stock-based compensation for 2014, 2013 or 2012 because we did not have sufficient taxable income to fully realize the deduction. At December 31, 2014, we had unrecognized net operating losses of $99 million related to stock-based compensation.

The following table below provides information about stock option activity.



	Number of Shares Underlying Options		Weighted- Average Exercise Price per Share		Weighted- Average Grant Date Fair Value per Share		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value⁽¹⁾
	(In thousands)						(In years)	(In millions)
Outstanding at January 1, 2012	1,059		$	36.31			4.0	$	7
Granted	—		—		$	—
Exercised	(94	)	19.52					1
Forfeited	(64	)	36.19
Outstanding at December 31, 2012	901		38.06				3.3	1
Granted	—		—		—
Exercised	(53	)	19.68					1
Forfeited	(161	)	37.26
Outstanding at December 31, 2013	687		39.68				1.9	—
Granted	—		—		—
Exercised	(134	)	29.32					1
Forfeited	(252	)	40.10
Outstanding at December 31, 2014	301		$	43.93			2.2	$	—
Exercisable at December 31, 2014	301		$	43.93			2.2	$	—

_________________


(1)	The intrinsic value of a stock option is the amount by which the market value of our common stock at the indicated date, or at the time of exercise, exceeds the exercise price of the option.

On December 31, 2014, the last reported sales price of our common stock on the New York Stock Exchange was $27.12 per share.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2014:



Options Outstanding					Options Exercisable
Range of Exercise Prices	Number of Shares Underlying Options	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price per Share		Number of Shares Underlying Options	Weighted- Average Exercise Price per Share
	(In thousands)	(In years)			(In thousands)
$27.51 to $35.00	66	0.1	$	31.94	66	$	31.94
35.01 to 41.72	27	0.3	38.44		27	38.44
41.73 to 48.45	208	3.1	48.45		208	48.45
	301	2.2	$	43.93	301	$	43.93

Employee Stock Purchase Plan. In May 2010, our stockholders approved the Newfield Exploration Company 2010 Employee Stock Purchase Plan with one million shares of our common stock available for issuance. Pursuant to our employee stock purchase plan, for each six-month period beginning on January 1 or July 1 during the term of the plan, each eligible employee has the opportunity to purchase our common stock for a purchase price equal to 85% of the lesser of the fair market value of our common stock on the first or last day of the period. Each employee may purchase up to $25,000 in common stock per calendar year. Employees of our foreign subsidiaries are not eligible to participate in the plan.

During 2014, options to purchase 168,394 shares of our common stock were issued under our employee stock purchase plan. The weighted-average fair value of each option was $7.91 per share. The fair value of the options granted was determined using the Black-Scholes option valuation method assuming no dividends, a risk-free weighted-average interest rate of 0.07%, an expected life of six months and weighted-average volatility of 32.05%. At December 31, 2014, approximately 356,000 shares of our common stock remained available for issuance under the current plan.

During 2013, options to purchase 178,733 shares of our common stock were issued under our employee stock purchase plan. The weighted-average fair value of each option was $6.59 per share. The fair value of the options granted was determined using the Black-Scholes option valuation method assuming no dividends, a risk-free weighted-average interest rate of 0.10%, an expected life of six months and weighted-average volatility of 39.45%.

During 2012, options to purchase 165,722 shares of our common stock were issued under our employee stock purchase plan. The weighted-average fair value of each option was $9.86 per share. The fair value of the options granted was determined using the Black-Scholes option valuation method assuming no dividends, a risk-free weighted-average interest rate of 0.10%, an expected life of six months and weighted-average volatility of 49.43%.

Liability Awards

Liability awards consist of performance awards that are settled in cash instead of shares as discussed below.

Stockholder Value Appreciation Program. In September 2013, the Compensation and Management Development Committee of the Board approved the SVAP to be administered under the 2011 Plan. The SVAP pays substantially all full-time domestic, nonexecutive employees a cash payment based on a percentage of salary upon each incremental $5 increase in our 30 -calendar day average share price. Each price threshold can be reached only once during the term of the program. The SVAP's performance period lasts through December 31, 2015. Each price trigger that is reached results in an approximately $13 million payment.

The first price threshold that triggered a payment under the SVAP was $27.50 during the fourth quarter of 2013. The second and third price thresholds for the SVAP were $32.50 and $37.50, respectively, which were reached during the second quarter of 2014. The fourth price threshold for the SVAP of $42.50 was reached in July 2014.

Based on the valuation of the SVAP as of December 31, 2014, the fair value was $4 million, of which $3 million has been accrued. The total expected cost was determined using a Monte Carlo simulation assuming no dividends, a risk-free weighted-average interest rate of 0.27%, a plan term of one year and an average of implied and historical stock price volatility of 47%. An additional $1 million is expected to be recognized over the remaining service period of the plan. Future changes in our stock price could cause the total cost of the plan to be significantly different than our estimates as of December 31, 2014.

Cash-Settled Restricted Stock Units. We also have granted cash-settled restricted stock units to employees that vest over three years. As of December 31, 2014, we accrued $12 million for future cash settlement upon vesting of awards. The value of the awards, and the associated stock-based compensation expense, is based on the Company's stock price at the end of each period. During the year ended December 31, 2014, we granted approximately 759,000 cash-settled restricted stock units to employees. During the year ended December 31, 2014, approximately 587,000 cash-settled restricted stock units vested and settled for approximately $19 million. During the year ended December 31, 2013, approximately 85,000 cash-settled restricted units vested and settled for approximately $2 million. As of December 31, 2014, we had approximately 1.2 million cash-settled restricted stock units outstanding and related unrecognized stock-based compensation expense of approximately $18 million.