Share-Based Compensation

3 Months Ended

Dec. 31, 2011

Share-Based Compensation [Abstract]

Share-Based Compensation

2. 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. As of December 31, 2011, unrecognized compensation cost, net of estimated forfeitures, related to stock options and restricted stock awards was approximately $19.3 million and $9.2 million, respectively, which we expect to recognize over a weighted average period of approximately 2.8 years.

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 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 from the end of the first to the fourth year from the date of grant under the Atwood Oceanics, Inc. 2007 Long-Term Incentive Plan (as amended, the "2007 Plan") and the Atwood Oceanics, Inc. Amended and Restated 2001 Stock Incentive Plan and from the end of the second to the fifth year from the date of grant under the option agreements for the Atwood Oceanics, Inc. 1996 Incentive Equity Plan. Each option is for the purchase of one share of our common stock.

The per share weighted average fair value of stock options granted during the three months ended December 31, 2011 was $16.90. We estimated the fair value of each stock option then outstanding using the Black-Scholes pricing model and the following assumptions for the three months ended December 31, 2011:

Risk-Free Interest Rate	0.9	%
Expected Volatility	44	%
Expected Life (Years)	5.4
Dividend Yield	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. We have never paid any cash dividends on our common stock.

A summary of stock option activity during the three months ended December 31, 2011 is as follows:

	Number of Options (000s)			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life (Years)		Aggregate Intrinsic Value (000s)
Outstanding at September 30, 2011		1,480		$	25.44		6.1	$	13,198
Granted		320		$	41.60
Exercised		(4	)	$	19.56			$	87
Forfeited		(6	)	$	38.57
Outstanding at December 31, 2011		1,790		$	28.30		6.5	$	20,563
Exercisable at December 31, 2011		1,138		$	22.79		5.0	$	19,532

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 are subject to market conditions. 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.

A summary of restricted stock activity for the three months ended December 31, 2011 is as follows:

	Number of Shares (000s)			Wtd. Avg. Fair Value
Unvested at September 30, 2011		560		$	34.54
Granted		372		$	41.12
Vested		(188	)	$	32.53
Forfeited		(4	)	$	33.51
Unvested at December 31, 2011		740		$	38.37