13. Stock-based Compensation Plans

Schlumberger has three types of stock-based compensation programs: (i) stock options, (ii) a restricted stock, restricted stock unit and performance share unit program (collectively referred to as “restricted stock”) and (iii) a discounted stock purchase plan (DSPP).

Stock Options

Key employees are granted stock options under Schlumberger stock option plans. For all stock options granted, the exercise price equals the average of the high and low sales prices of Schlumberger stock on the date of grant; the maximum term is ten years, and the options generally vest in increments over five years.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions and resulting weighted-average fair value per share:

	2017			2016			2015
Dividend yield		2.3	%		2.7	%		2.3	%
Expected volatility		27	%		30	%		36	%
Risk-free interest rate		2.4	%		1.7	%		1.7	%
Expected option life in years		7.0			7.0			7.0
Weighted-average fair value per share	$	20.85		$	17.45		$	25.96

The following table summarizes information related to options outstanding and options exercisable as of December 31, 2017:

	(Shares stated in thousands)

	Options Outstanding						Options Exercisable
			Weighted-
			Average
			Remaining		Weighted-				Weighted-
	Options		Contractual Life		Average		Options		Average
Exercise prices range	Outstanding		(in years)		Exercise Price		Exercisable		Exercise Price
$37.85 - $67.87		5,696		4.8	$	56.17		4,132	$	53.91
$68.51 - $71.06		6,665		4.0	$	69.93		6,008	$	69.82
$72.11 - $79.85		9,107		5.5	$	73.97		7,033	$	73.08
$80.53 - $87.38		15,511		6.1	$	84.01		7,186	$	83.68
$88.61 - $114.83		10,231		6.2	$	95.07		5,960	$	95.32
		47,210		5.6	$	79.13		30,319	$	76.71

The weighted-average remaining contractual life of stock options exercisable as of December 31, 2017 was 4.3 years.

The following table summarizes stock option activity during the years ended December 31, 2017, 2016 and 2015:

	(Shares stated in thousands)

	2017					2016					2015
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding at beginning of year		46,502		$	78.31		41,087		$	78.73		38,583		$	76.10
Granted		5,024		$	86.55		7,672		$	76.14		7,118		$	86.86
Assumed in Cameron transaction		-		$	-		3,088		$	63.24		-		$	-
Exercised		(1,156	)	$	57.87		(3,357	)	$	60.70		(2,561	)	$	60.10
Forfeited		(3,160	)	$	86.99		(1,988	)	$	84.60		(2,053	)	$	80.34
Outstanding at year-end		47,210		$	79.13		46,502		$	78.31		41,087		$	78.73

The aggregate intrinsic value of stock options outstanding and stock options exercisable as of December 31, 2017 was $64 million and $56 million, respectively.

The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $26 million, $45 million and $62 million, respectively.

Restricted Stock

Schlumberger grants performance share units to certain executives. The number of shares earned is determined at the end of each performance period, which is generally three years, based on Schlumberger’s achievement of certain predefined targets as defined in the underlying performance share unit agreement. In the event Schlumberger exceeds the predefined target, shares for up to the maximum of 250% of the target award may be awarded. In the event Schlumberger falls below the predefined target, a reduced number of shares may be granted. If Schlumberger falls below the threshold award performance level, no shares will be awarded. As of December 31, 2017, 1.1 million performance share units were outstanding based assuming the achievement of 100% of target.

All other restricted stock awards generally vest at the end of three years.

Restricted stock awards generally do not pay dividends or have voting rights prior to vesting. Accordingly, the fair value of a restricted stock award is the quoted market price of Schlumberger’s stock on the date of grant less the present value of the expected dividends not received prior to vesting.

The following table summarizes information related to restricted stock transactions:

	(Shares stated in thousands)

	2017					2016					2015
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Restricted			Grant Date		Restricted			Grant Date		Restricted			Grant Date
	Stock			Fair Value		Stock			Fair Value		Stock			Fair Value
Unvested at beginning of year		5,112		$	78.31		3,571		$	85.04		4,138		$	80.80
Granted		2,495		$	73.09		1,678		$	68.66		1,254		$	82.37
Assumed in Cameron transaction		-		$	-		1,824		$	72.12		-		$	-
Vested		(1,645	)	$	83.03		(1,720	)	$	72.64		(1,495	)	$	71.30
Forfeited		(534	)	$	80.17		(241	)	$	80.87		(326	)	$	83.86
Unvested at year-end		5,428		$	72.33		5,112		$	78.31		3,571		$	85.04

Discounted Stock Purchase Plan

Under the terms of the DSPP, employees can choose to have a portion of their earnings withheld, subject to certain restrictions, to purchase Schlumberger common stock. The purchase price of the stock is 92.5% of the lower of the stock price at the beginning or end of the plan period at six-month intervals.

The fair value of the employees’ purchase rights under the DSPP was estimated using the Black-Scholes model with the following assumptions and resulting weighted-average fair value per share:

	2017			2016			2015
Dividend yield		2.7	%		2.7	%		2.3	%
Expected volatility		19	%		25	%		27	%
Risk-free interest rate		1.0	%		0.5	%		0.2	%
Weighted-average fair value per share	$	9.46		$	10.37		$	12.45

Total Stock-based Compensation Expense

The following summarizes stock-based compensation expense recognized in income:

(Stated in millions)

	2017		2016		2015
Stock options	$	161	$	175	$	176
Restricted stock		148		47		107
DSPP		34		45		43
	$	343	$	267	$	326

At December 31, 2017, there was $485 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements, of which $246 million is expected to be recognized in 2018, $158 million in 2019, $58 million in 2020, $22 million in 2021 and $1 million in 2022.

As of December 31, 2017, approximately 45 million shares of Schlumberger common stock were available for future grants under Schlumberger’s stock-based compensation programs.