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CAPITAL STOCK
 12 Months Ended
Dec. 31, 2017
Equity [Abstract]  
CAPITAL STOCK
CAPITAL STOCK
Common Stock Outstanding
A summary of the shares issued and outstanding for the years ended December 31, 2017, 2016, and 2015 is presented in the table below.

 
 
2017
 
2016
 
2015
Balance, beginning of year
 
379,439,676

 
378,034,175

 
376,504,892

Shares issued for stock-based compensation plans:
 
 
 
 
 
 
Treasury shares issued
 
1,411

 
11,504

 
17,525

Common shares issued
 
1,513,777

 
1,393,997

 
1,511,758

Balance, end of year
 
380,954,864

 
379,439,676

 
378,034,175


Net Income (Loss) per Common Share
A reconciliation of the components of basic and diluted net income (loss) per common share for the years ended December 31, 2017, 2016, and 2015 is presented in the table below.
 
 
 
2017
 
2016
 
2015
 
 
Income
 
Shares
 
Per Share
 
Loss
 
Shares
 
Per Share
 
Income (Loss)
 
Shares
 
Per Share
 
 
(In millions, except per share amounts)
Basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
1,304

 
381

 
$
3.42

 
$
(1,372
)
 
379

 
$
(3.62
)
 
$
(10,844
)
 
378

 
$
(28.70
)
Income (loss) from discontinued operations
 
—

 
381

 
—

 
(33
)
 
379

 
(0.09
)
 
492

 
378

 
1.30

Income (loss) attributable to common stock
 
$
1,304

 
381

 
$
3.42

 
$
(1,405
)
 
379

 
$
(3.71
)
 
$
(10,352
)
 
378

 
$
(27.40
)
Effect of Dilutive Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options and other
 
$
—

 
2

 
$
(0.01
)
 
$
—

 
—

 
$
—

 
$
—

 
—

 
$
—

Diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
1,304

 
383

 
$
3.41

 
$
(1,372
)
 
379

 
$
(3.62
)
 
$
(10,844
)
 
378

 
$
(28.70
)
Income (loss) from discontinued operations
 
—

 
383

 
—

 
(33
)
 
379

 
(0.09
)
 
492

 
378

 
1.30

Income (loss) attributable to common stock
 
$
1,304

 
383

 
$
3.41

 
$
(1,405
)
 
379

 
$
(3.71
)
 
$
(10,352
)
 
378

 
$
(27.40
)

The diluted EPS calculation excludes options and restricted shares that were anti-dilutive totaling 7.3 million, 4.7 million, and 7.0 million for the years ended December 31, 2017, 2016, and 2015, respectively.
Stock Repurchase Program
Apache’s Board of Directors has authorized the purchase of up to 40 million shares of the Company’s common stock. Shares may be purchased either in the open market or through privately held negotiated transactions. The Company initiated the buyback program on June 10, 2013, and through December 31, 2017, had repurchased a total of 32.2 million shares at an average price of $88.96 per share. The Company is not obligated to acquire any specific number of shares and has not purchased any shares during 2017.
Common Stock Dividend
For each of the years ended December 31, 2017, 2016, and 2015, the Company paid common stock dividends of $1.00 per share.
Stock Compensation Plans
The Company has several stock-based compensation plans, which include stock options, restricted stock, and conditional restricted stock unit plans. On May 12, 2016, the Company’s shareholders approved the 2016 Omnibus Compensation Plan (the 2016 Plan), which is intended to provide eligible employees with equity-based incentives. The 2016 Plan provides for the granting of Incentive Stock Options, Non-Qualified Stock Options, Performance Awards, Restricted Stock Awards, Restricted Stock Units, Stock Appreciation Rights, Cash Awards, or any combination of the foregoing. A total of 16.9 million shares were authorized and available for grant under the 2016 Plan as of December 31, 2017. Previously approved plans remain in effect solely for the purpose of governing grants still outstanding that were issued prior to approval of the 2016 Plan. All new grants are issued from the 2016 Plan.
For 2017, 2016, and 2015, stock-based compensation expensed was $142 million, $131 million, and $100 million, respectively. Costs related to the plans are capitalized or expensed based on the nature of each employee’s activities. A description of the Company’s stock-based compensation plans and related costs follows:
 
 
 
2017
 
2016
 
2015
 
 
(In millions)
Stock-based compensation expensed
 
$
142

 
$
131

 
$
100

Stock-based compensation capitalized
 
41

 
40

 
53

Total stock-based compensation costs
 
$
183

 
$
171

 
$
153


Stock Options
As of December 31, 2017, the Company had issued options to purchase shares of the Company’s common stock under the 2007 Omnibus Equity Compensation Plan, the 2011 Omnibus Equity Compensation Plan (2011 Plan), and the 2016 Plan (together, the Omnibus Plans). New shares of Company stock will be issued for employee stock option exercises. Under the Omnibus Plans, the exercise price of each option equals the closing price of Apache’s common stock on the date of grant. Options issued prior to 2016 generally become exercisable ratably over a four-year period and expire 10 years after granted. Options granted in or after 2016 become exercisable ratably over a three-year period and expire 10 years after granted. The Omnibus Plans were submitted to and approved by the Company’s shareholders.
 
A summary of stock options issued and outstanding under the Omnibus Plans is presented in the table and narrative below:

 
 
2017
 
 
Shares
Under Option
 
Weighted Average
Exercise Price
 
 
(In thousands)
 
 
Outstanding, beginning of year
 
5,113

 
$
84.89

Granted
 
490

 
63.25

Exercised
 
(15
)
 
41.24

Forfeited or expired
 
(995
)
 
82.03

Outstanding, end of year(1)
 
4,593

 
83.37

Expected to vest(2)
 
947

 
51.83

Exercisable, end of year(3)
 
3,646

 
91.56

 
(1)
As of December 31, 2017, options outstanding had a weighted average remaining contractual life of 4.7 years and aggregate intrinsic value of $0.7 million.
(2)
As of December 31, 2017, options expected to vest had a weighted average remaining contractual life of 8.5 years and aggregate intrinsic value of $0.5 million.
(3)
As of December 31, 2017, options exercisable had a weighted average remaining contractual life of 3.7 years and aggregate intrinsic value of $0.2 million.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Assumptions used in the valuation are disclosed in the following table. Expected volatilities are based on historical volatility of the Company’s common stock and other factors. The expected dividend yield is based on historical yields on the date of grant. The expected term of stock options granted represents the period of time that the stock options are expected to be outstanding and is derived from historical exercise behavior, current trends, and values derived from lattice-based models. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.
 
 
2017
 
2016
 
2015
Expected volatility
 
34.58
%
 
32.72
%
 
N/A
Expected dividend yields
 
1.58
%
 
2.42
%
 
N/A
Expected term (in years)
 
6

 
6

 
N/A
Risk-free rate
 
2.02
%
 
1.44
%
 
N/A
Weighted-average grant-date fair value
 
$
19.38

 
$
10.38

 
N/A

The intrinsic values of options exercised during 2017 and 2015 were approximately $0.2 million and $3 million, respectively. There were no options exercised during 2016. As of December 31, 2017, the total compensation cost related to non-vested options not yet recognized was $8 million, which will be recognized over the remaining vesting period of the options.
In January 2018, the Company issued 760,904 options to purchase shares of the Company’s common stock to eligible employees under the 2016 Plan, at an average fair value of $13.15 per share. The total compensation cost of $10 million is estimated to be recognized over a three-year vesting period of these options.
Restricted Stock and Restricted Stock Units
The Company has restricted stock and restricted stock unit plans for eligible employees including officers. The programs created under the Omnibus Plans have been approved by Apache’s Board of Directors. In 2017, the Company awarded 1,947,506 restricted stock units at a weighted-average per-share market price of $62.74. In 2016 and 2015, the Company awarded 4,049,023 and 2,976,562 restricted stock units at a weighted-average per-share market price of $47.37 and $61.65, respectively. The value of the stock issued was established by the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms. During 2017, 2016, and 2015, $108 million, $113 million, and $90 million, respectively, were charged to expense. In 2017, 2016, and 2015, $35 million, $35 million, and $48 million were capitalized, respectively. As of December 31, 2017, there was $158 million of total unrecognized compensation cost related to 4,919,681 unvested restricted stock units. The weighted-average remaining life of unvested restricted stock units is approximately 1.0 years.
 
The fair values of the awards vested during 2017, 2016, and 2015 were approximately $135 million, $151 million, and $149 million, respectively. A summary of restricted stock unit activity for the year ended December 31, 2017, is presented below.
 
 
 
Shares
 
Weighted-
Average Grant-
Date Fair Value
 
 
(In thousands)
 
 
Non-vested at January 1, 2017
 
6,062

 
$
55.11

Granted
 
1,948

 
62.74

Vested
 
(2,288
)
 
58.77

Forfeited
 
(802
)
 
55.54

Non-vested at December 31, 2017
 
4,920

 
56.34


In January 2018, the Company awarded 507,042 restricted stock units and 1,954,474 cash-settled awards (phantom units) at a weighted-average per-share market price of $46.27 under the 2016 Plan to eligible employees. The phantom units represent a hypothetical interest in the Company’s stock and, once vested, are settled in cash. Total compensation cost for restricted stock units and phantom units absent any forfeitures, is estimated to be $23 million and $90 million, respectively, and was calculated based on the fair market value of a share of the Company’s common stock as of the grant date. Compensation cost will be recognized over a three-year vesting period for both plans. The phantom units will be classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of the Company’s common stock.
Performance Program
To provide long-term incentives for Apache employees to deliver competitive returns to the Company’s stockholders, the Company has granted conditional restricted stock units to eligible employees. Apache has a performance program for certain eligible employees with payout for 50 percent of the shares based upon measurement of total shareholder return (TSR) of Apache common stock as compared to a designated peer group during a three-year performance period. Payout for the remaining 50 percent of the shares is based on performance and financial objectives as defined in the plan. The overall results of the objectives are calculated at the end of the award’s stated performance period and, if a payout is warranted, applied to the target number of restricted stock units awarded. The performance shares will immediately vest 50 percent at the end of the three-year performance period, with the remaining 50 percent vesting at the end of the following year. Grants from the performance programs outstanding at December 31, 2017, are as described below:
•
In February 2015, the Company’s Board of Directors approved the 2015 Performance Program, pursuant to the 2011 Plan. Eligible employees received initial conditional restricted stock unit awards totaling 602,304 units. The results for the performance period ending December 31, 2017, yielded a payout of 100 percent of target. A total of 384,967 units were outstanding as of December 31, 2017.
•
In January 2016, the Company’s Board of Directors approved the 2016 Performance Program, pursuant to the 2011 Plan. Eligible employees received initial conditional restricted stock unit awards totaling 871,369. The actual amount of shares awarded will be between zero and 200 percent of target. A total of 749,334 units were outstanding as of December 31, 2017, from which a minimum of zero and a maximum of 1,498,668 units could be awarded.
•
In January 2017, the Company’s Board of Directors approved the 2017 Performance Program, pursuant to the 2016 Plan. Eligible employees received initial conditional restricted stock unit awards totaling 620,885 units. The actual amount of shares awarded will be between zero and 200 percent of target. A total of 559,336 units were outstanding as of December 31, 2017, from which a minimum of zero to a maximum of 1,118,672 units could be awarded.
The fair value cost of the awards was estimated on the date of grant and is being recorded as compensation expense ratably over the vesting terms. During 2017, 2016, and 2015, $23 million, $14 million, and $3 million, respectively, were charged to expense. During 2017, 2016, and 2015, $4 million, $2 million, and $1 million were capitalized, respectively. As of December 31, 2017, there was $38 million of total unrecognized compensation cost related to 1,693,637 unvested conditional restricted stock units. The weighted-average remaining life of the unvested conditional restricted stock units is approximately 1.6 years.

 
 
Shares
 
Weighted
Average Grant-
Date Fair
Value(1)
 
 
(In thousands)
 
 
Non-vested at January 1, 2017
 
1,225

 
$
45.62

Granted
 
621

 
66.97

Forfeited
 
(152
)
 
52.90

Non-vested at December 31, 2017
 
1,694

 
52.39

 
(1)
The fair value of each conditional restricted stock unit award is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all grants made under the plan: (i) a three-year continuous risk-free interest rate; (ii) a constant volatility assumption based on the historical realized stock price volatility of the Company and the designated peer group; and (iii) the historical stock prices and expected dividends of the common stock of the Company and its designated peer group.
In January 2018, the Company’s Board of Directors approved the 2018 Performance Program, pursuant to the 2016 Plan, with terms similar to the 2017 Performance Program described above. Eligible employees received the initial conditional phantom units totaling 872,030 units, with the ultimate number of phantom units to be awarded ranging from zero to a maximum of 1,744,060 units. These phantom units represent a hypothetical interest in the Company’s stock, and, once vested, are settled in cash. The TSR component of the award had a grant date fair value per award of $54.70 based on a Monte Carlo simulation. The grant date fair value per award for the remaining 50 percent was $46.27 based on the fair market value of a share of common stock of the Company as of the grant date. These phantom units will be classified as a liability and remeasured at the end of each reporting period.