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SHARE-BASED PAYMENTS | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
SHARE-BASED PAYMENTS | SHARE-BASED PAYMENTS Our Equity Incentive Plan (EIP) provides for the granting of stock-based compensation, including restricted stock unit awards and performance unit awards, to eligible employees and the granting of stock awards to non-employee directors. We have reserved 8.5 million shares of common stock for issuance under the EIP and at December 31, 2023, we had 4.0 million shares available for issuance under the plan. This calculation of available shares reflects shares issued and estimated shares expected to be issued upon vesting of outstanding awards granted under the EIP, excluding estimated forfeitures expected to be returned to the plan. In conjunction with the Magellan Acquisition, we assumed the former Magellan Midstream Partners, L.P. Long-Term Incentive Plan, which was used for the conversion of stock-based compensation upon closing. We reserved 1.0 million shares of common stock for issuance under the assumed plan, and as of December 31, 2023, all of the shares have been granted. The remaining restricted stock unit awards converted in conjunction with the Magellan Acquisition were granted from the shares reserved under the registration statements. Restricted Stock Units - We have granted restricted stock units to key employees that vest at the end of a designated period, typically three years, and entitle the grantee to receive shares of our common stock. Restricted stock unit awards are measured at fair value as if they were vested and issued on the grant date and adjusted for estimated forfeitures. Restricted stock unit awards accrue dividend equivalents in the form of additional restricted stock units prior to vesting. Compensation expense is recognized on a straight-line basis over the vesting period of the award. Magellan Acquisition - As discussed in Note B, we completed the Magellan Acquisition on September 25, 2023. Prior to the acquisition, Magellan had previously issued unit-based awards consisting of time-vested phantom units and performance phantom units, that vested at the end of a designated period, typically three years. Pursuant to the terms of the Merger Agreement, each outstanding unit-based award was converted into a restricted stock unit and measured at their acquisition date fair value as if they were vested and issued on the acquisition date. The fair value attributable to pre-combination service was allocated to consideration transferred and was included as part of the purchase price. The portion attributable to post-combination service is being recognized as compensation expense on a straight-line basis over the remaining vesting period of the awards. Converted restricted stock unit awards accrue dividend equivalents that are paid out in cash at vesting. Approximately $70 million of the converted awards were settled in cash immediately following the closing of the Magellan Acquisition and are not included in restricted stock unit activity disclosures herein. Performance Unit Awards - We have granted performance unit awards to key employees that vest at the end of a three-year period. Upon vesting, a holder of outstanding performance units is entitled to receive a number of shares of our common stock equal to a percentage (0% to 200%) of the performance units granted, based on our total shareholder return over the vesting period, compared with the total shareholder return of a peer group of other energy companies over the same period. Performance unit awards are measured at fair value on the grant date based on a Monte Carlo model and adjusted for estimated forfeitures. Performance unit awards accrue dividend equivalents in the form of additional performance units prior to vesting. Compensation expense is recognized on a straight-line basis over the vesting period of the award. Stock Compensation for Non-Employee Directors - The EIP provides for the granting of nonstatutory stock options and stock bonus awards to non-employee directors, including performance unit awards and restricted stock unit awards. Under the EIP, awards may be granted by the Executive Compensation Committee at any time, until grants have been made for all shares authorized under the EIP. The maximum number of shares of common stock and cash-based awards that can be issued to a participant under the EIP during any year is limited to $0.8 million in value as of the grant date. No performance unit awards or restricted stock unit awards have been made to non-employee directors, and there are no options outstanding. General - For all awards outstanding, we used a 3% forfeiture rate based on historical forfeitures under our share-based payment plans. We currently use treasury stock to satisfy our share-based payment obligations. Compensation expense, exclusive of those recognized within transaction costs, for our share-based payment plans was $63 million, $53 million and $54 million during 2023, 2022 and 2021, respectively, before related tax benefits of $14 million, $13 million and $14 million, respectively. Restricted Stock Unit Activity - As of December 31, 2023, we had $42 million of total unrecognized compensation cost related to our nonvested restricted stock unit awards, which is expected to be recognized over a weighted-average period of 1.7 years. The following tables set forth activity and various statistics for our restricted stock unit awards:
|  | Number of Units |  | Weighted Average Price
Nonvested December 31, 2022 |  | 832,734 |  |  | $ | 58.30 |
Granted (a) |  | 1,667,473 |  |  | $ | 66.50 |
Released to participants (b) |  | (698,906) |  |  | $ | 68.47 |
Forfeited |  | (76,736) |  |  | $ | 58.92 |
Nonvested December 31, 2023 |  | 1,724,565 |  |  | $ | 62.08 |
(a) - Includes 1,346,845 restricted stock unit awards granted in conjunction with the Magellan Acquisition. (b) - Includes 488,929 restricted stock unit awards released to participants in conjunction with the Magellan Acquisition.
|  | 2023 |  | 2022 |  | 2021 |
Weighted-average grant date fair value (per share) |  | $ | 66.50 |  |  | $ | 60.96 |  |  | $ | 46.84 |  |
Fair value of units granted (millions of dollars) |  | $ | 111 |  |  | $ | 20 |  |  | $ | 20 |  |
Grant date fair value of units vested (millions of dollars) |  | $ | 48 |  |  | $ | 14 |  |  | $ | 13 |  |
Performance Unit Activity - As of December 31, 2023, we had $34 million of total unrecognized compensation cost related to the nonvested performance unit awards, which is expected to be recognized over a weighted-average period of 1.7 years. The following tables set forth activity and various statistics related to the performance unit awards and the assumptions used in the valuations at the respective grant dates:
|  | Number of Units |  | Weighted Average Price
Nonvested December 31, 2022 |  | 1,045,706 |  |  | $ | 74.15 |
Granted |  | 369,222 |  |  | $ | 87.46 |
Released to participants |  | (235,874) |  |  | $ | 88.96 |
Forfeited |  | (84,114) |  |  | $ | 77.22 |
Nonvested December 31, 2023 |  | 1,094,940 |  |  | $ | 75.22 |
|  | 2023 |  | 2022 |  | 2021 |
Volatility (a) |  | 63.30% |  | 61.10% |  | 60.30% |
Dividend yield |  | 5.75% |  | 6.15% |  | 8.13% |
Risk-free interest rate |  | 4.43% |  | 1.78% |  | 0.21% |
(a) - Volatility was based on historical volatility over three years using daily stock price observations.
|  | 2023 |  | 2022 |  | 2021 |
Weighted-average grant date fair value (per share) |  | $ | 87.46 |  |  | $ | 79.05 |  |  | $ | 62.03 |  |
Fair value of units granted (millions of dollars) |  | $ | 32 |  |  | $ | 32 |  |  | $ | 34 |  |
Grant date fair value of units vested (millions of dollars) |  | $ | 21 |  |  | $ | 20 |  |  | $ | 20 |  |
Employee Stock Purchase Plan - We have reserved a total of 12 million shares of common stock for issuance under our Employee Stock Purchase Plan (the ESPP). Subject to certain exclusions, all employees are eligible to participate in the ESPP. Employees can choose to have up to 10% of their base pay withheld from each paycheck during the offering period to purchase our common stock, subject to terms and limitations of the plan. The purchase price of the stock is 85% of the lower of its grant date or exercise date market price. Approximately 69%, 68% and 69% of employees participated in the plan in 2023, 2022 and 2021, respectively. Under the plan, we sold 236,108 shares at a weighted average of $52.70 per share in 2023, 235,583 shares at a weighted average of $47.21 per share in 2022 and 277,012 shares at a weighted average of $38.98 per share in 2021. Employee Stock Award Program - Under our Employee Stock Award Program, we issue, for no monetary consideration, to all eligible employees one share of our common stock when the per-share closing price of our common stock on the NYSE is at or above each one-dollar increment above its previous high closing price. We have reserved a total of 900,000 shares of common stock for issuance under this program. No shares were issued to employees under this program in 2023, 2022 or 2021. As of the date of this report, the next award will be issued when our common stock closes at or above $78. Deferred Compensation Plan for Non-Employee Directors - Our Deferred Compensation Plan for Non-Employee Directors provides our non-employee directors the option to defer all or a portion of their compensation for their service on our Board of Directors. Under the plan, directors may elect either a cash deferral option or a phantom stock option. Under the cash deferral option, directors may elect to defer the receipt of all or a portion of their annual retainer fees, which will be credited with interest during the deferral period. Under the phantom stock option, directors may defer all or a portion of their annual retainer fees and receive such fees on a deferred basis in the form of shares of common stock under our EIP, which earn the equivalent of dividends declared on our common stock. Shares are distributed to non-employee directors at the fair market value of our common stock at the date of distribution.

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