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STOCK-BASED INCENTIVE PLANS | 12 Months Ended
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Dec. 31, 2020
Share-based Payment Arrangement [Abstract] |
STOCK-BASED INCENTIVE PLANS |
NOTE 14 - STOCK-BASED INCENTIVE PLANS
Occidental issues stock-based awards to employees in accordance with the terms of the shareholder approved 2015 Long-Term Incentive Plan. An aggregate of 133 million shares of Occidental common stock were authorized for issuance and approximately 11.6 million shares had been allocated to employee awards through December 31, 2020. As of December 31, 2020, approximately 88.3 million shares were available for grants of future awards. The plan requires each share covered by an award (other than options) to be counted as if three shares were issued in determining the number of shares that are available for future awards. Accordingly, the number of shares available for future awards may be less than 88.3 million depending on the type of award granted, and shares available for future awards may increase by the number of shares that are forfeited, canceled, or correspond to the portion of any stock-based awards settled in cash, including awards that were issued under a previous plan that remain outstanding. Current outstanding awards include RSUs, stock options, CROCEIs and TSRIs. During 2020, non-employee directors were granted awards for 144,603 shares of common stock. Compensation expense for these awards was measured using the closing quoted market price of Occidental’s common stock on the grant date and was fully recognized at that time. For the year ended December 31, 2020, Occidental incurred expenses of $202 million related to stock-based incentive plans, of which $59 million was related to the Acquisition. For the year ended December 31, 2019, expense related to stock-based incentive plans was $208 million of which $31 million was related to the Acquisition. For the year ended December 31, 2018, Occidental incurred expenses of $180 million related to stock-based incentive plans. The income tax benefit associated with this expense was $42 million, $43 million and $47 million in the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, unrecognized compensation expense for all unvested stock-based incentive awards was $254 million. This expense is expected to be recognized over a weighted-average period of 1.7 years. Occidental accounts for forfeitures as they occur. RSUs Certain employees are awarded the right to receive RSUs, some of which have performance criteria, and are in the form of, or equivalent in value to, actual shares of Occidental common stock. Depending on their terms, RSUs may be settled in stock or may be cash settled liabilities. These awards vest from one to four years following the grant date, however, certain of the RSUs are forfeitable if performance objectives are not satisfied by the seventh anniversary of the grant date. For certain RSUs, dividend equivalents are paid during the vesting period. CASH-SETTLED RSU LIABILITY AWARDS The weighted-average, grant-date fair values of cash-settled RSUs granted in 2020, 2019 and 2018 were $40.86, $42.62 and $75.86 per share, respectively. Cash-Settled RSUs resulted in payments of $3 million, $4 million and $18 million, during the years ended December 31, 2020, 2019 and 2018, respectively. STOCK-SETTLED RSU EQUITY AWARDS The weighted-average, grant-date fair values of the stock-settled RSUs granted in 2020, 2019, and 2018 were $41.60, $58.73 and $69.87, respectively. The fair value of RSUs settled in shares during the years ended December 31, 2020, 2019 and 2018 was $62 million, $148 million and $109 million, respectively. A summary of changes in Occidental’s unvested cash- and stock-settled RSUs during the year ended December 31, 2020, is presented below:
|  | Cash-Settled |  | Stock-Settled
thousands, except fair values |  | RSUs |  | Weighted-Average Grant-Date Fair Value |  | RSUs |  | Weighted-Average Grant-Date Fair Value
Unvested at January 1 |  | 4,347 |  |  |  | $ | 43.46 |  |  | 4,395 |  |  |  | $ | 65.88 |
Granted |  | 1,500 |  |  |  | $ | 40.86 |  |  | 4,299 |  |  |  | $ | 41.60 |
Vested |  | (114) |  |  |  | $ | 61.61 |  |  | (2,328) |  |  |  | $ | 64.19 |
Forfeitures |  | (276) |  |  |  | $ | 42.68 |  |  | (510) |  |  |  | $ | 48.89 |
Unvested at December 31 |  | 5,457 |  |  |  | $ | 42.41 |  |  | 5,856 |  |  |  | $ | 50.21 |
TSRIs Certain executives are awarded TSRIs that vest at the end of a three-year period following the grant date. Payout is based upon Occidental’s absolute total shareholder return and performance relative to its peers. TSRIs have payouts that range from 0% to 200% of the target award and settle in stock once certified. Dividend equivalents for TSRIs are accumulated and paid upon certification of the award. The fair value of TSRIs settled in shares during the years ended December 31, 2020, 2019 and 2018 was $9 million, $4 million and $12 million, respectively. The fair values of TSRIs are initially determined on the grant date using a Monte Carlo simulation model based on Occidental’s assumptions, noted in the following table, and the volatility from corresponding peer group companies. The expected life is based on the vesting period (Term). The risk-free interest rate is the implied yield available on zero coupon T-notes (U.S. Treasury Strip) at the time of grant with a remaining term equal to the Term. The dividend yield is the expected annual dividend yield over the Term, expressed as a percentage of the stock price on the grant date. Estimates of fair value may not accurately predict the value ultimately realized by the employees who receive the awards, and the ultimate value may not be indicative of the reasonableness of the original estimates of fair value made by Occidental. The grant-date assumptions used in the Monte Carlo simulation models for the estimated payout level of TSRIs were as follows:
|  | TSRIs
|  | 2020 |  | 2019 |  | 2018
Assumptions used: |  |  |  |  |  |
Risk-free interest rate |  | 1.4% |  | 2.5% |  | 2.3%
Volatility factor |  | 26% |  | 22% |  | 24%
Expected life (years) |  | 3 |  | 3 |  | 3
Grant-date fair value of underlying Occidental common stock |  | $ | 41.60 |  | $ | 67.19 |  | $ | 69.87
A summary of Occidental’s unvested TSRIs as of December 31, 2020 and changes during the year ended December 31, 2020 is presented below:
|  | TSRIs
thousands, except fair values |  | Awards |  | Weighted-Average Grant-Date Fair Value of Occidental Stock
Unvested at January 1 |  | 1,537 |  |  |  | $ | 67.70 |
Granted |  | 641 |  |  |  | $ | 41.60 |
Vested (a) |  | (563) |  |  |  | $ | 67.21 |
Forfeitures |  | (81) |  |  |  | $ | 52.47 |
Unvested at December 31 |  | 1,534 |  |  |  | $ | 58.02 |
(a)Presented at the target payouts. The weighted-average payout at vesting was 40% of the target, resulting in the issuance of approximately 223,000 shares of Occidental common stock. STOCK OPTIONS In 2020, certain employees were granted options that vest over three years, expire on the tenth anniversary of the grant date, and settle in stock or cash. Exercise prices of the options were equal to the quoted market value of Occidental’s stock on the grant date. These options had a grant date fair value of $3.19, as estimated by the Black Scholes model. The inputs to this model are presented below:
|  | Options
|  | 2020 |
Assumptions used: |  |  |
Risk-free interest rate |  | 1.5% |
Volatility factor |  | 25% |
Expected life (years) |  | 6 |
Dividend yield |  | 7.6% |
Grant-date fair value of underlying Occidental common stock |  | $ | 41.60 |
A summary of Occidental’s outstanding stock options as of December 31, 2020 and changes during the year ended December 31, 2020 is presented below:
|  | Vested |  | Unvested
thousands, except fair values |  | Options | Weighted Average Strike Price |  | Options | Weighted Average Strike Price
January 1 |  | 530 |  | $ | 79.98 |  |  | — |  |
Granted |  | — |  |  |  | 2,573 |  | $ | 41.60 |
Anti-dilution adjustment |  | 21 |  | $ | 76.96 |  |  | 101 |  | $ | 40.03 |
Vested |  | — |  |  |  | — |  |
Expirations and Forfeitures, respectively |  | — |  |  |  | — |  |
December 31 |  | 551 |  | $ | 76.96 |  |  | 2,674 |  | $ | 40.03 |
The intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 were insignificant. The issuance of the Common Stock Warrants, see N ote 13 - Stockholders’ Equi ty, triggered certain anti-dilution provisions for both vested and unvested options, which resulted in an increase of the number of options exercisable and a decrease in the exercise price. As of December 31, 2020, the remaining life of fully vested options was 1.1 years. CROCEI Certain executives are awarded CROCEI awards that vest at the end of a three-year period if performance targets based on cash return on capital employed are met. These awards are settled in stock upon certification of the performance target, with payouts that range from 0% to 200% of the target award. Dividend equivalents are accumulated and paid upon certification of the award.
|  | CROCEI
thousands, except fair values |  | Awards |  | Weighted-Average Grant-Date Fair Value of Occidental Stock
Unvested at January 1 |  | 154 |  |  |  | $ | 68.44 |
Granted |  | 197 |  |  |  | $ | 41.60 |
Vested (a) |  | (154) |  |  |  | $ | 68.47 |
Forfeited |  | — |  |  |  |
Unvested at December 31 |  | 197 |  |  |  | $ | 41.60 |
(a)Presented at the target payouts. The weighted-average payout at vesting was 58% of the target resulting in the issuance of approximately 89,700 shares.

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