STOCK-BASED COMPENSATION

12 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

NOTE 12 STOCK-BASED COMPENSATION

On March 3, 2020, the Helmerich & Payne, Inc. 2020 Omnibus Incentive Plan (the “2020 Plan”) was approved by our stockholders. The 2020 Plan replaces our stockholder-approved Helmerich & Payne, Inc. 2016 Omnibus Incentive Plan (the "2016 Plan"). The 2020 Plan is a stock and cash-based incentive plan that, among other things, authorizes the Board or Human Resources Committee of the Board to grant executive officers, employees and non-employee directors stock options, stock appreciation rights, restricted shares and restricted share units (including performance share units), share bonuses, other share-based awards and cash awards. Restricted stock may be granted for no consideration other than prior and future services. The purchase price per share for stock options may not be less than market price of the underlying stock on the date of grant.  Stock options expire ten years after the grant date.  Awards outstanding under the Helmerich & Payne, Inc. 2005 Long-Term Incentive Plan, the Helmerich & Payne, Inc. 2010 Long-Term Incentive Plan and the 2016 Plan remain subject to the terms and conditions of those plans. Beginning with fiscal year 2019, we replaced stock options with performance share units as a component of our executives' long-term equity incentive compensation. As a result, there were no stock options granted during the fiscal years ended September 30, 2020 and 2019. We have also eliminated stock options as an element of our non-employee director compensation program. The Board has determined to award stock-based compensation to non-employee directors solely in the form of restricted stock. During the fiscal year ended September 30, 2020, 727,009 shares of restricted stock awards and 258,857 performance share units were granted under the 2016 Plan and 54,118 shares of restricted stock awards were granted under the 2020 Plan.

A summary of compensation cost for stock-based payment arrangements recognized in drilling services operating expense, research and development expense and selling, general and administrative expense in fiscal years 2020, 2019 and 2018 is as follows:

	September 30,
(in thousands)	2020			2019		2018
Stock-based compensation expense
Stock options	$	1,753		$	3,721	$	7,913
Restricted stock	30,605			26,149		23,774
Performance share units	7,454			4,422		—
Stock-based compensation benefit included in restructuring charges	(3,483		)	—		—
	$	36,329		$	34,292	$	31,687

Of the total stock-based compensation expense, $9.1 million was recorded in drilling services operating expense, $0.8 million was recorded in research and development expense, $29.9 million in selling, general and administrative expense and $(3.5) million was recorded in restructuring charges during the year ended September 30, 2020 on our Consolidated Statements of Operations.

Stock Options

Vesting requirements for stock options are determined by the Human Resources Committee of the Board. Options currently outstanding began vesting one year after the grant date with 25 percent of the options vesting for four consecutive years.

We use the Black-Scholes formula to estimate the fair value of stock options granted to employees.  The fair value of the options is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which are generally the vesting periods.

	2018
Risk-free interest rate (1)	2.2	%
Expected stock volatility (2)	36.1	%
Dividend yield (3)	4.7	%
Expected term (in years) (4)	6.0

(1) The risk-free interest rate is based on U.S. Treasury securities for the expected term of the option.

(2) Expected volatilities are based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the option.

(3) The dividend yield is based on our current dividend yield.

(4) The expected term of the options granted represents the period of time that they are expected to be outstanding. We estimate term of option granted based on historical experience with grants and exercise.

Based on these calculations, the weighted-average fair value per option granted to acquire a share of common stock was $13.17 per share for fiscal year 2018.

The following summary reflects the stock option activity for our common stock and related information for fiscal years 2020, 2019 and 2018:

	2020				2019				2018
(shares in thousands)	Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
Outstanding at October 1,	3,238		$	60.86	3,499		$	58.62	3,278		$	56.41
Granted	—		—		—		—		694		59.03
Exercised	(201	)	38.02		(217	)	24.46		(375	)	36.88
Forfeited/Expired	(174	)	61.76		(44	)	62.14		(98	)	70.77
Outstanding on September 30,	2,863		$	62.41	3,238		$	60.86	3,499		$	58.62
Exercisable on September 30,	2,516		$	62.38	2,482		$	60.38	2,193		$	56.31

The following table summarizes information about stock options at September 30, 2020 (shares in thousands):

	Outstanding Stock Options				Exercisable Stock Options
Range of Exercise Prices	Shares	Weighted-Average Remaining Life	Weighted-Average Exercise Price		Shares	Weighted-Average Exercise Price
$40.00 to $55.00	472	1.82	$	51.86	462	$	51.83
$55.00 to $70.00	1,918	5.07	60.56		1,641	60.82
$70.00 to $85.00	473	4.92	80.47		412	80.43
	2,863				2,515

At September 30, 2020, the weighted-average remaining life of exercisable stock options was 4.16 years and the aggregate intrinsic value was zero with a weighted-average exercise price of $62.38 per share.

The number of options vested or expected to vest at September 30, 2020 was 347,093 with an aggregate intrinsic value of zero and a weighted-average exercise price of $62.63 per share.

As of September 30, 2020, the unrecognized compensation cost related to the stock options was $1.2 million. That cost is expected to be recognized over a weighted-average period of 1.22 years.

The total intrinsic value of options exercised during fiscal years 2020, 2019 and 2018 was $0.3 million, $7.9 million and $9.9 million, respectively.

The grant date fair value of shares vested during fiscal years 2020, 2019 and 2018 was $6.0 million, $8.0 million and $8.8 million, respectively.

Restricted Stock

Restricted stock awards consist of our common stock and are time-vested over four years. Non-forfeitable dividends are paid on non-vested shares of restricted stock. We recognize compensation expense on a straight-line basis over the vesting period. The fair value of restricted stock awards is determined based on the closing price of our shares on the grant date. As of September 30, 2020, there was $31.4 million of total unrecognized compensation cost related to unvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 2.4 years.

A summary of the status of our restricted stock awards as of September 30, 2020, and of changes in restricted stock outstanding during the fiscal years ended September 30, 2020, 2019 and 2018, is as follows:

	2020				2019				2018
(shares in thousands)	Shares		Weighted-Average Grant Date Fair Value per Share		Shares		Weighted-Average Grant Date Fair Value per Share		Shares		Weighted-Average Grant Date Fair Value per Share
Non-vested restricted stock outstanding at October 1,	1,085		$	61.28	1,001		$	63.74	659		$	70.76
Granted (1)	781		39.99		475		58.45		626		59.53
Vested (2)	(501	)	59.46		(371	)	64.32		(258	)	70.60
Forfeited	(85	)	48.98		(20	)	60.85		(26	)	66.73
Non-vested restricted stock outstanding at September 30,	1,280		$	49.81	1,085		$	61.28	1,001		$	63.74

(1) The number of restricted stock awards granted includes phantom shares that confer the benefits of owning company stock without the actual ownership or transfer of any shares. There were 20,616 phantom shares granted during fiscal year 2020.

(2) The number of restricted stock awards vested includes shares that we withheld on behalf of our employees to satisfy the statutory tax withholding requirements.

Performance Share Units

We have made awards to certain employees that are subject to market-based performance conditions ("performance share units"). Subject to the terms and conditions set forth in the applicable performance share unit award agreements and the 2016 Plan, grants of performance share units are subject to a vesting period of three years (the “Vesting Period”) that is dependent on the achievement of certain performance goals. Such performance share unit awards consist of two separate components. Performance share units that comprise the first component are subject to a three-year performance cycle. Performance share units that comprise the second component are further divided into three separate tranches, each of which is subject to a separate one-year performance cycle within the full three-year performance cycle.  The vesting of the performance share units is generally dependent on (i) the achievement of the Company’s total shareholder return (“TSR”) performance goals relative to the TSR achievement of a peer group of companies (the “Peer Group”) over the applicable performance cycle, and (ii) the continued employment of the recipient of the performance share unit award throughout the Vesting Period.

At the end of the Vesting Period, recipients receive dividend equivalents, if any, with respect to the number of vested performance share units. The vesting of units ranges from zero to 200 percent of the units granted depending on the Company’s TSR relative to the TSR of the Peer Group on the vesting date.

The grant date fair value of performance share units was determined through use of the Monte Carlo simulation method. The Monte Carlo simulation method requires the use of highly subjective assumptions. Our key assumptions in the method include the price and the expected volatility of our stock and our self-determined Peer Group companies' stock, risk free rate of return and cross-correlations between the Company and our Peer Group companies. The valuation model assumes dividends are immediately reinvested. As of September 30, 2020, there was $6.6 million of unrecognized compensation cost related to unvested performance share units. That cost is expected to be recognized over a weighted-average period of 1.9 years.

A summary of the status of our performance share units as of September 30, 2020 and changes in non-vested performance share units outstanding during the fiscal year ended September 30, 2020 is presented below:

	2020				2019
(in thousands, except per share amounts)	Shares		Weighted-Average Grant Date Fair Value per Share		Shares	Weighted-Average Grant Date Fair Value per Share
Non-vested performance share units outstanding at September 30, 2019	145		$	62.66	—	$	—
Granted	259		43.40		145	62.66
Forfeited	(67	)	46.35		—	—
Non-vested performance share units outstanding at September 30, 2020	337		$	51.09	145	$	62.66

The weighted-average fair value calculations for performance share units granted within the fiscal period are based on the following weighted-average assumptions set forth in the table below. 

	2020		2019
Risk-free interest rate (1)	1.6	%	2.7	%
Expected stock volatility (2)	34.8	%	35.9	%
Expected term (in years)	3.2		3.0

(1) The risk-free interest rate is based on U.S. Treasury securities for the expected term of the performance share units.

(2)

Expected volatilities are based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the performance share units.