2. Stock-Based Compensation

As more fully discussed in Note 6 to the Consolidated Financial Statements included in EOG's 2011 Annual Report, EOG maintains various stock-based compensation plans. Stock-based compensation expense is included in the Consolidated Statements of Income and Comprehensive Income based upon the job function of the employee receiving the grants as follows (in millions):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011

Lease and Well	$	9.9	$	9.5	$	26.4	$	24.4
Gathering and Processing Costs		0.3		0.2		0.8		0.6
Exploration Costs		7.4		7.8		20.3		19.4
General and Administrative		28.3		24.1		53.8		50.6
Total	$	45.9	$	41.6	$	101.3	$	95.0

______________________________________________________________________________________________________________________________________

The EOG Resources, Inc. 2008 Omnibus Equity Compensation Plan, as amended (2008 Plan), provides for grants of stock options, stock-settled stock appreciation rights (SARs), restricted stock, restricted stock units and other stock-based awards. At September 30, 2012, approximately 3.3 million common shares remained available for grant under the 2008 Plan. EOG's policy is to issue shares related to the 2008 Plan from previously authorized unissued shares or treasury shares to the extent treasury shares are available.

Stock Options and Stock-Settled Stock Appreciation Rights and Employee Stock Purchase Plan. The fair value of stock option and SAR grants is estimated using the Hull-White II binomial option pricing model. The fair value of all Employee Stock Purchase Plan (ESPP) grants is estimated using the Black-Scholes-Merton model. Stock-based compensation expense related to stock option, SAR and ESPP grants totaled $16.5 million and $13.5 million during the three months ended September 30, 2012 and 2011, respectively, and $37.8 million and $33.4 million during the nine months ended September 30, 2012 and 2011, respectively.

Weighted average fair values and valuation assumptions used to value stock option, SAR and ESPP grants during the nine-month periods ended September 30, 2012 and 2011 were as follows:

	Stock Options/SARs						ESPP
	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011

Weighted Average Fair Value of Grants	$	37.94		$	29.87		$	25.17		$	22.35
Expected Volatility		39.68	%		40.92	%		41.04	%		29.68	%
Risk-Free Interest Rate		0.45	%		0.58	%		0.11	%		0.18	%
Dividend Yield		0.6	%		0.7	%		0.6	%		0.7	%
Expected Life	5.6 yrs			5.6 yrs			0.5 yrs			0.5 yrs

______________________________________________________________________________________________________________________________________

Expected volatility is based on an equal weighting of historical volatility and implied volatility from traded options in EOG's common stock. The risk-free interest rate is based upon United States Treasury yields in effect at the time of grant. The expected life is based upon historical experience and contractual terms of stock option, SAR and ESPP grants.

EOG RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

The following table sets forth stock option and SAR transactions for the nine-month periods ended September 30, 2012 and 2011 (stock options and SARs in thousands):

	Nine Months Ended					Nine Months Ended
	September 30, 2012					September 30, 2011
				Weighted					Weighted
	Number of			Average		Number of			Average
	Stock			Grant		Stock			Grant
	Options/SARs			Price		Options/SARs			Price

Outstanding at January 1		8,374		$	70.01		8,445		$	64.49
Granted		1,223			111.91		1,470			85.25
Exercised ⁽¹⁾		(2,044	)		53.52		(1,150	)		48.41
Forfeited		(124	)		89.95		(133	)		87.75
Outstanding at September 30 ⁽²⁾		7,429		$	81.11		8,632		$	69.80

Vested or Expected to Vest ⁽³⁾		7,184		$	80.57		8,387		$	69.29

Exercisable at September 30 ⁽⁴⁾		4,315		$	69.87		5,382		$	59.25

______________________________________________________________________________________________________________________________________

(1)

The total intrinsic value of stock options/SARs exercised for the nine months ended September 30, 2012 and 2011 was $110.8 million and $69.3 million, respectively. The intrinsic value is based upon the difference between the market price of EOG's common stock on the date of exercise and the grant price of the stock options/SARs.

(2)	The total intrinsic value of stock options/SARs outstanding at September 30, 2012 and 2011 was $231.1 million and $91.0 million, respectively. At September 30, 2012 and 2011, the weighted average remaining contractual life was 4.1 years and 3.9 years, respectively.

(3)	The total intrinsic value of stock options/SARs vested or expected to vest at September 30, 2012 and 2011 was $227.3 million and $91.0 million, respectively. At September 30, 2012 and 2011, the weighted average remaining contractual life was 4.0 years and 3.8 years, respectively.

(4)	The total intrinsic value of stock options/SARs exercisable at September 30, 2012 and 2011 was $182.7 million and $90.9 million, respectively. At September 30, 2012 and 2011, the weighted average remaining contractual life was 2.7 years and 2.6 years, respectively.

At September 30, 2012, unrecognized compensation expense related to non-vested stock option and SAR grants totaled $100.7 million. This unrecognized expense will be amortized on a straight-line basis over a weighted average period of 2.8 years.

Restricted Stock and Restricted Stock Units. Employees may be granted restricted (non-vested) stock and/or restricted stock units without cost to them. Stock-based compensation expense related to restricted stock and restricted stock units totaled $23.1 million and $28.1 million for the three months ended September 30, 2012 and 2011, respectively, and $57.2 million and $61.6 million for the nine months ended September 30, 2012 and 2011, respectively.

EOG RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

The following table sets forth restricted stock and restricted stock units transactions for the nine-month periods ended September 30, 2012 and 2011 (shares and units in thousands):

	Nine Months Ended					Nine Months Ended
	September 30, 2012					September 30, 2011
				Weighted					Weighted
	Number of			Average		Number of			Average
	Shares and			Grant Date		Shares and			Grant Date
	Units			Fair Value		Units			Fair Value

Outstanding at January 1		4,240		$	82.93		4,009		$	79.13
Granted		757			112.13		917			90.93
Released ⁽¹⁾		(977	)		72.97		(410	)		65.77
Forfeited		(106	)		88.36		(202	)		82.51
Outstanding at September 30 ⁽²⁾		3,914		$	90.91		4,314		$	82.75

______________________________________________________________________________________________________________________________________

(1)

The total intrinsic value of restricted stock and restricted stock units released for the nine months ended September 30, 2012 and 2011 was $110.7 million and $40.0 million, respectively. The intrinsic value is based upon the closing price of EOG's common stock on the date restricted stock and restricted stock units are released.

(2)	The total intrinsic value of restricted stock and restricted stock units outstanding at September 30, 2012 and 2011 was $438.6 million and $306.4 million, respectively.

At September 30, 2012, unrecognized compensation expense related to restricted stock and restricted stock units totaled $151.8 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 2.5 years.

Performance Units and Performance Stock. In September 2012, as a new element of the long-term incentive component of EOG's executive officer compensation program, EOG granted an aggregate of 54,526 performance units and 16,752 shares of performance stock to its executive officers (in each case under the terms of the 2008 Plan), which units and shares remained outstanding at September 30, 2012. As more fully discussed in the grant agreements, the performance metric applicable to these performance-based grants is EOG's total shareholder return over a three-year performance period relative to the total shareholder return of a designated group of peer companies. Upon the application of the performance multiple at the completion of the performance period, a minimum of zero and a maximum of 142,556 performance units/shares could be outstanding. Subject to the termination provisions set forth in the grant agreements and the applicable performance multiple, the grants of performance units/shares will "cliff" vest five years from the date of grant.

The fair value of the performance units and performance stock is estimated using a Monte Carlo simulation. Stock-based compensation expense related to performance unit and performance stock grants totaled $6.3 million for both the three months and nine months ended September 30, 2012. Weighted average fair values and valuation assumptions used to value performance unit and performance stock grants for the nine months ended September 30, 2012 were: Weighted Average Fair Value of Grants, $134.09; Expected Volatility, 36.39%; Risk-Free Interest Rate, 0.39%; and Dividend Yield, 0.06%.

Expected volatility is based on the term-matched historical volatility over the simulated term, which is calculated as the time between the grant date and the end of the performance period. The risk-free interest rate is based on a 3.26 year zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve on the grant date.

At September 30, 2012, unrecognized compensation expense related to performance units and performance stock totaled $3.1 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 3.3 years.