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Common Stock
 12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
Common Stock

13. Common Stock

NOV has authorized 1 billion shares of $0.01 par value common stock. The Company also has authorized 10 million shares of $0.01 par value preferred stock, none of which is issued or outstanding.

Cash dividends aggregated $79 million and $78 million for the years ended December 31, 2023 and 2022, respectively. The declaration and payment of future dividends is at the discretion of the Company’s Board of Directors and will be dependent upon the Company’s results of operations, financial condition, capital requirements and other factors deemed relevant by the Company’s Board of Directors.

Total compensation cost that has been charged against income for all share-based compensation arrangements was $66 million, $67 million and $78 million for 2023, 2022 and 2021, respectively. The total income tax benefit recognized before consideration of valuation allowance in the consolidated statements of income for all share-based compensation arrangements was $7 million, $3 million and $2 million for 2023, 2022 and 2021, respectively.

The Company’s stock-based compensation plan, known as the NOV Inc. Long-Term Incentive Plan (the “NOV Plan”), was approved by shareholders on May 11, 2018 and amended and restated on May 24, 2022. The NOV Plan provides for the granting of stock options, restricted stock, restricted stock units, performance awards, phantom shares, stock appreciation rights, stock payments and substitute awards. The number of shares authorized under the NOV Plan is 55.7 million. The NOV Plan is also subject to a fungible ratio concept, such that the issuance of stock options and stock appreciation rights reduces the number of available shares under the NOV Plan on a 1-for-1 basis, and the issuance of other awards reduces the number of available shares under the NOV Plan on a 1.5-for-1 basis. At December 31, 2023, approximately 12.9 million shares remained available for future grants under the NOV Plan.

The Company also has outstanding awards under its other stock-based compensation plan known as the National Oilwell Varco, Inc. Long-Term Incentive Plan (the “Plan”), however the Company is no longer granting new awards under the Plan. The Plan provides for the granting of stock options, performance-based share awards, restricted stock, phantom shares, stock payments and stock appreciation rights (“SARs”). The number of shares authorized under the Plan is 69.4 million. The Plan is subject to a fungible ratio concept, such that the issuance of stock options and SARs reduces the number of available shares under the Plan on a 1-for-1 basis, and the issuance of other awards reduces the number of available shares under the Plan on a 3-for-1 basis.

Stock Options

Options granted under our stock-based compensation plans generally vest over a three-year period starting one year from the date of grant and expire ten years from the date of grant. The purchase price of options granted may not be less than the closing market price of NOV common stock on the date of grant.

Stock option information summarized below includes amounts for the NOV Plan and the Plan and stock plans of acquired companies. Options outstanding at December 31, 2023 under the stock option plans have exercise prices between $15.00 and $69.00 per share, and expire at various dates from February 26, 2024 to February 24, 2033.

The following summarizes options activity:

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

 

 

Number

 

 

Average

 

 

Number

 

 

Average

 

 

Number

 

 

Average

 

 

 

of

 

 

Exercise

 

 

of

 

 

Exercise

 

 

of

 

 

Exercise

 

 

 

Shares

 

 

Price

 

 

Shares

 

 

Price

 

 

Shares

 

 

Price

 

Shares under option at beginning
   of year

 

 

21,080,388

 

 

$

38.68

 

 

 

21,276,961

 

 

$

42.09

 

 

 

21,005,502

 

 

$

45.70

 

Granted

 

 

1,014,002

 

 

 

21.76

 

 

 

1,492,020

 

 

 

16.73

 

 

 

1,669,511

 

 

 

15.00

 

Forfeited

 

 

(1,908,768

)

 

 

57.61

 

 

 

(1,574,642

)

 

 

65.44

 

 

 

(1,398,052

)

 

 

63.65

 

Exercised

 

 

(210,519

)

 

 

16.68

 

 

 

(113,951

)

 

 

17.77

 

 

 

—

 

 

 

—

 

Shares under option at end of year

 

 

19,975,103

 

 

$

36.25

 

 

 

21,080,388

 

 

$

38.68

 

 

 

21,276,961

 

 

$

42.09

 

Exercisable at end of year

 

 

17,437,459

 

 

$

38.85

 

 

 

17,988,842

 

 

$

42.46

 

 

 

18,039,330

 

 

$

46.27

 

 

The following summarizes information about stock options outstanding at December 31, 2023:

 

 

 

Weighted-Avg

 

 

Options Outstanding

 

 

Options Exercisable

 

 

 

Remaining

 

 

 

 

 

Weighted-Avg

 

 

 

 

 

Weighted-Avg

 

Range of Exercise Price

 

Contractual Life

 

 

Shares

 

 

Exercise Price

 

 

Shares

 

 

Exercise Price

 

$15.00 - $30.00

 

 

5.83

 

 

 

8,405,053

 

 

$

21.82

 

 

 

5,867,409

 

 

$

23.32

 

$30.01 - $50.00

 

 

2.82

 

 

 

6,307,350

 

 

 

36.25

 

 

 

6,307,350

 

 

 

36.25

 

$50.01 - $69.00

 

 

0.81

 

 

 

5,262,700

 

 

 

59.29

 

 

 

5,262,700

 

 

 

59.29

 

Total

 

 

3.56

 

 

 

19,975,103

 

 

$

36.25

 

 

 

17,437,459

 

 

$

38.85

 

 

 

The weighted-average fair value of options granted during 2023, 2022 and 2021, was approximately $9.75, $6.28, and $5.75 per share, respectively, as determined using the Black-Scholes option-pricing model. The total intrinsic value of options exercised was $1 million during 2023 and 2022.

The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise activity. The use of the Black Scholes model requires the use of actual employee exercise activity data and the use of a number of complex assumptions including expected volatility, risk-free interest rate, expected dividends and expected term.

 

 

 

Year Ended December 31,

 

Valuation Assumptions:

 

2023

 

 

2022

 

 

2021

 

Expected volatility

 

 

45.7

%

 

 

43.6

%

 

 

43.4

%

Risk-free interest rate

 

 

4.1

%

 

 

1.9

%

 

 

0.6

%

Expected dividend yield

 

 

0.9

%

 

 

1.2

%

 

 

0.0

%

Expected term (in years)

 

 

5.8

 

 

 

5.4

 

 

 

5.1

 

 

The Company used the actual volatility for traded options for the past 10 years prior to option date as the expected volatility assumption required in the Black Scholes model.

The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The dividend yield assumption is based on the history and expectation of dividend payouts. The estimated expected term is based on actual employee exercise activity for the past ten years. Forfeitures are accounted for as they occur.

The following summary presents information regarding outstanding options at December 31, 2023 and changes during 2023 with regard to options under all stock option plans:

 

 

 

 

 

 

Weighted-
Average

 

 

Weighted
Average
Remaining
Contractual

 

 

Aggregate

 

 

 

Shares

 

 

Exercise
Price

 

 

Term
(years)

 

 

Intrinsic
Value

 

Outstanding at December 31, 2022

 

 

21,080,388

 

 

$

38.68

 

 

 

4.01

 

 

$

—

 

Granted

 

 

1,014,002

 

 

$

21.76

 

 

 

 

 

 

 

Forfeited

 

 

(1,908,768

)

 

$

57.61

 

 

 

 

 

 

 

Exercised

 

 

(210,519

)

 

$

16.68

 

 

 

 

 

 

 

Outstanding at December 31, 2023

 

 

19,975,103

 

 

$

36.25

 

 

 

3.56

 

 

$

—

 

Exercisable at December 31, 2023

 

 

17,437,459

 

 

$

38.85

 

 

 

2.90

 

 

$

—

 

 

At December 31, 2023, total unrecognized compensation cost related to nonvested stock options was $11 million. This cost is expected to be recognized over a weighted-average period of three years. The total fair value of stock options vested in 2023, 2022 and 2021 was approximately $9 million, $10 million and $12 million, respectively. Cash received from option exercises for 2023 was $4 million. Cash received from option exercises was $2 million and zero in 2022 and 2021, respectively. The actual tax benefit (expense) realized for the tax deductions from share based compensation was zero in 2023, 2022, and 2021.

 

Stock Appreciation Rights

On December 20, 2017, the Company made a tender offer to exchange SARs issued to certain employees on February 24, 2016 (“2016 SARs”) for cash, amended SARs, and new stock options. The transaction was structured to provide the employees an equal long-term incentive compensation value, while alleviating volatility in the Company’s earnings caused by required mark-to-market accounting on outstanding SARS. Of the outstanding 2016 SARs, 94.75% were exchanged resulting in a total cash payment of $14 million and granting of 3,613,707 new stock options on the exchange date with an exercise price of $34.32 and a fair value of $8.47, with vesting matched to the exchanged 2016 SARs.

The following summary presents information regarding outstanding SARs:

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

 

Number

 

 

Average

 

 

Number

 

 

Average

 

 

 

of

 

 

Exercise

 

 

of

 

 

Exercise

 

 

 

Shares

 

 

Price

 

 

Shares

 

 

Price

 

Shares under SARs at beginning of year

 

 

1,105,106

 

 

$

28.39

 

 

 

1,193,934

 

 

$

28.40

 

Granted

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Forfeited

 

 

(48,301

)

 

 

28.83

 

 

 

(88,828

)

 

 

28.61

 

Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Shares under SARs at end of year

 

 

1,056,805

 

 

$

28.37

 

 

 

1,105,106

 

 

$

28.39

 

Exercisable at end of year

 

 

1,056,805

 

 

$

28.37

 

 

 

1,105,106

 

 

$

28.39

 

 

The Company recognized no expense in 2023, 2022, or 2021. There was no liability for cash-settled SARs at December 31, 2023.

 

Restricted Shares

The Company issues restricted stock awards and restricted stock units to officers and key employees in addition to stock options. On February 23, 2023, under the NOV Plan, the Company granted 1,014,002 stock options with a fair value of $9.75 per option and an exercise price of $21.76 per share; 2,228,226 restricted stock units with a fair value of $21.76 per share; and performance share awards (PSAs) to senior management employees with potential payouts varying from zero to 960,478 shares. The stock options vest over a three-year period from the grant date. The restricted stock units vest in three equal annual installments commencing on the first anniversary of the grant date. The 2023 PSAs can be earned based on performance against two established goals over a three-year period: 85% with a TSR (total shareholder return) goal and 15% with an internal NVA (“NOV Value Added”, a return on capital metric) goal. TSR performance is determined by comparing the Company’s TSR with the TSR of the members of the Philadelphia Stock Exchange’s Oil Services Sector Index (OSX) for the three-year performance period. The TSR portion of the performance share awards is subject to a vesting cap equal to 100% of Target Level if the Company’s absolute TSR is negative, regardless of relative TSR results. Conversely, if the Company’s absolute TSR is greater than 15% annualized over the three-year performance period the payout amount shall not be less than 50% of Target Level, regardless of relative TSR results. The NVA goal is based on the Company’s improvement in NVA from the beginning of the performance period until the end of the performance period. NVA is calculated as an amount equal to the Company’s (a) gross cash earnings less (b) average gross operating assets times an amount equal to a required return on assets, with certain adjustments.

 

On May 17, 2023 the Company granted 84,000 restricted stock units with a fair value of $15.00 per share. The restricted stock units were granted to non-employee members of the board of directors and vest on the first anniversary of the grant date.

The following summary presents information regarding outstanding restricted shares:

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

 

2021

 

 

 

 

 

Weighted-

 

 

 

 

 

Weighted-

 

 

 

 

 

Weighted-

 

 

Number

 

 

Average

 

 

Number

 

 

Average

 

 

Number

 

 

Average

 

 

of

 

 

Grant Date

 

 

of

 

 

Grant Date

 

 

of

 

 

Grant Date

 

 

Units

 

 

Fair Value

 

 

Units

 

 

Fair Value

 

 

Units

 

 

Fair Value

 

Nonvested at beginning of year

 

7,188,183

 

 

$

18.30

 

 

 

6,936,574

 

 

$

21.32

 

 

 

6,073,963

 

 

$

31.85

 

Granted

 

2,792,465

 

 

$

22.70

 

 

 

3,509,425

 

 

$

17.67

 

 

 

3,772,842

 

 

$

15.03

 

Vested

 

(3,045,126

)

 

$

21.77

 

 

 

(2,863,385

)

 

$

17.11

 

 

 

(2,672,507

)

 

$

15.38

 

Forfeited

 

(320,044

)

 

$

23.89

 

 

 

(394,431

)

 

$

26.00

 

 

 

(237,724

)

 

$

63.65

 

Nonvested at end of year

 

6,615,478

 

 

$

19.86

 

 

 

7,188,183

 

 

$

18.30

 

 

 

6,936,574

 

 

$

21.32

 

 

At December 31, 2023, there was approximately $68 million of unrecognized compensation cost related to nonvested restricted stock awards and restricted stock units, which is expected to be recognized over a weighted-average period of two years.