NOTE 10 STOCK-BASED COMPENSATION

On March 2, 2016, the Helmerich & Payne, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”) was approved by our stockholders. The 2016 Plan, among other things, authorizes the Human Resources Committee of the Board to grant non-qualified stock options and restricted stock awards to selected employees and to non-employee Directors. 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 10 years after the grant date. Awards outstanding in the Helmerich & Payne, Inc. 2005 Long-Term Incentive Plan and the Helmerich & Payne, Inc. 2010 Long-Term Incentive Plan (collectively the “2010 Plan”) remain subject to the terms and conditions of those plans. During the fiscal year ended September 30, 2018, there were 693,873 non-qualified stock options and 411,977 shares of restricted stock awards granted under the 2016 Plan. An additional 213,904 of restricted stock grants were awarded outside of the 2016 Plan.

A summary of compensation cost for stock-based payment arrangements recognized in general and administrative expense in fiscal years 2018, 2017 and 2016 is as follows:


	September 30,
	2018		2017		2016
	(in thousands)
Compensation expense
Stock options	$	7,913	$	7,439	$	8,290
Restricted stock		23,774		18,744		16,093
	$	31,687	$	26,183	$	24,383

Stock Options

Vesting requirements for stock options are determined by the Human Resources Committee of our Board of Directors. 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.

The weighted-average fair value calculations for options granted within the fiscal period are based on the following weighted-average assumptions set forth in the table below. Options that were granted in prior periods are based on assumptions prevailing at the date of grant.


	2018		2017		2016
Risk-free interest rate (1)	2.2	%	2.0	%	1.8	%
Expected stock volatility (2)	36.1	%	38.9	%	37.6	%
Dividend yield (3)	4.7	%	3.7	%	4.6	%
Expected term (in years) (4)	6.0		5.5		5.5

(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 expect 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, $20.48 and $13.12 per share for fiscal years 2018, 2017 and 2016, respectively.

The following summary reflects the stock option activity for our common stock and related information for fiscal years 2018, 2017 and 2016 (shares in thousands):


	2018			2017			2016
		Weighted-Average			Weighted-Average			Weighted-Average
	Shares	Exercise Price		Shares	Exercise Price		Shares	Exercise Price
Outstanding at October 1,	3,278	$	56.41	3,312	$	51.74	2,776	$	48.51
Granted	694		59.03	396		76.61	876		58.25
Exercised	(375)		36.88	(415)		38.04	(220)		31.52
Forfeited/Expired	(98)		70.77	(15)		68.32	(120)		61.80
Outstanding on September 30,	3,499	$	58.62	3,278	$	56.41	3,312	$	51.74
Exercisable on September 30,	2,193	$	56.31	2,167	$	50.87	2,225	$	46.66
Shares available to grant	5,140			5,624			6,600

The following table summarizes information about stock options at September 30, 2018 (shares in thousands):


	Outstanding Stock Options				Exercisable Stock Options
		Weighted-Average	Weighted-Average			Weighted-Average
Range of Exercise Prices	Options	Remaining Life	Exercise Price		Options	Exercise Price
$0.00 to $21.07	180	0.2	$	21.07	180	$	21.07
$21.07 to $59.76	2,417	5.9		55.16	1,418		53.03
$59.76 to $68.83	358	6.3		68.66	275		68.83
$68.83 to $81.31	544	7.1		79.79	320		79.86
	3,499				2,193

At September 30, 2018, the weighted-average remaining life of exercisable stock options was 4.36 years and the aggregate intrinsic value was $30.9 million with a weighted-average exercise price of $56.31 per share.

The number of options vested or expected to vest at September 30, 2018 was 1,306,087 with an aggregate intrinsic value of $10.6 million and a weighted-average exercise price of $62.49 per share.

As of September 30, 2018, the unrecognized compensation cost related to the stock options was $7.3 million. That cost is expected to be recognized over a weighted-average period of 2.3 years.

The total intrinsic value of options exercised during fiscal years 2018, 2017 and 2016 was $9.9 million, $13.1 million and $6.3 million, respectively.

The grant date fair value of shares vested during fiscal years 2018, 2017 and 2016 was $8.8 million, $6.7 million and $9.6 million, respectively.

Restricted Stock

Restricted stock awards consist of our common stock and are time-vested over three to six years. 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, 2018, there was $34.4 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, 2018, and of changes in restricted stock outstanding during the fiscal years ended September 30, 2018, 2017 and 2016, is as follows (shares in thousands):


	2018			2017			2016
		Weighted-Average			Weighted-Average			Weighted-Average
		Grant Date Fair			Grant Date Fair			Grant Date Fair
	Shares	Value per Share		Shares	Value per Share		Shares	Value per Share
Outstanding at October 1,	659	$	70.76	648	$	64.24	668	$	67.03
Granted	626		59.53	292		78.69	294		58.25
Vested (1)	(258)		70.60	(271)		63.81	(256)		64.75
Forfeited	(26)		66.73	(10)		68.09	(58)		63.65
Outstanding on September 30,	1,001	$	63.74	659	$	70.76	648	$	64.24

(1)

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