The Company uses share-based payments to compensate employees and non-employee directors. The Company recognizes the cost of share-based payments under the fair-value-based method. Share-based awards include equity instruments in the form of stock options, restricted stock or restricted stock units that have included service conditions and, in certain cases, performance conditions. The Company’s share-based awards also include share-settled performance unit awards. Share-settled performance unit awards are accounted for as equity awards. The Company issues shares of common stock when vested stock options are exercised, when restricted stock is granted and when restricted stock units and share-settled performance unit awards vest.

The 2014 Plan was originally approved by the Company’s stockholders effective as of April 17, 2014, and the Board of Directors adopted a resolution that no future grants would be made under any of the Company’s other previously existing plans. On June 29, 2017, the Company’s stockholders approved the amendment and restatement of the 2014 Plan (the “Amended and Restated Plan”) to increase the number of shares available under the plan to 10,049,156 shares. The aggregate number of shares of the Company’s common stock authorized for grant under the Amended and Restated Plan is 18.9 million, which includes 9.1 million shares previously authorized under the 2014 Plan. The Company’s share-based compensation plans at December 31, 2018 are as follows:

Shares Underlying

Authorized

Awards

Available

Plan Name

for Grant

Outstanding

for Grant

Amended and Restated Plan

18,900,000

6,203,695

2,471,800

Patterson-UTI Energy, Inc. 2005 Long-Term Incentive Plan, as amended

—

3,268,500

—

Options granted under the Patterson-UTI Energy, Inc. 2005 Long-Term Incentive Plan (the “2005 Plan”) typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant.

Stock Options—The Company estimates the grant date fair values of stock options using the Black-Scholes-Merton valuation model. Volatility assumptions are based on the historic volatility of the Company’s common stock over the most recent period equal to the expected term of the options as of the date the options are granted. The expected term assumptions are based on the Company’s experience with respect to employee stock option activity. Dividend yield assumptions are based on the expected dividends at the time the options are granted. The risk-free interest rate assumptions are determined by reference to United States Treasury yields. No options were granted during the years ended December 31, 2018 or 2017. Weighted-average assumptions used to estimate grant date fair values for stock options granted during the year ended December 31, 2016 is as follows:

	2016
Volatility		35.11	%
Expected term (in years)		5.00
Dividend yield		2.05	%
Risk-free interest rate		1.40	%

				Weighted-average
	Shares			exercise price
Outstanding at beginning of year		6,037,150		$	20.35
Exercised		(40,000	)	$	12.12
Expired		(496,000	)	$	29.01
Outstanding at end of year		5,501,150		$	19.63
Exercisable at end of year		5,362,269		$	19.66

Options outstanding at December 31, 2018 have no intrinsic value and a weighted-average remaining contractual term of 4.05 years. Options exercisable at December 31, 2018 have no intrinsic value and a weighted-average remaining contractual term of 3.96 years. Additional information with respect to options granted, vested and exercised during the years ended December 31, 2018, 2017 and 2016 follows:

	2018		2017		2016
Weighted-average grant date fair value of stock options granted (per share)	NA		NA		$	4.90
Aggregate grant date fair value of stock options vested during the year (in thousands)	$	1,954	$	4,565	$	4,729
Aggregate intrinsic value of stock options exercised (in thousands)	$	—	$	209	$	366

As of December 31, 2018, options to purchase 138,881 shares were outstanding and not vested. All of these non-vested options are expected to ultimately vest. Additional information as of December 31, 2018 with respect to these non-vested options follows:

Restricted Stock—For all restricted stock awards made to date, shares of common stock were issued when the awards were made. Non-vested shares are subject to forfeiture for failure to fulfill service conditions and, in certain cases, performance conditions. Non-forfeitable dividends are paid on non-vested shares of restricted stock. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period.

				Weighted-
				average Grant
	Shares			Date Fair Value
Non-vested restricted stock outstanding at beginning of year		1,530,338		$	21.41
Vested		(1,085,743	)	$	21.41
Forfeited		(8,371	)	$	21.60
Non-vested restricted stock outstanding at end of year		436,224		$	21.41

As of December 31, 2018, approximately 423,000 million shares of non-vested restricted stock outstanding are expected to vest. Additional information as of December 31, 2018 with respect to these non-vested shares follows:

Restricted Stock Units—For all restricted stock unit awards made to date, shares of common stock are not issued until the units vest. Restricted stock units are subject to forfeiture for failure to fulfill service conditions and, in certain cases, performance conditions. Forfeitable dividend equivalents are accrued on certain restricted stock units that will be paid upon vesting. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period.

							Weighted-average
	Time			Performance			Grant Date Fair
	Based			Based			Value
Non-vested restricted stock units outstanding at beginning of year		1,223,273			114,000		$	19.80
Granted		1,726,865			—		$	19.15
Granted in connection with acquisitions		204,222			359,315		$	16.99
Vested (1)		(413,858	)		(38,000	)	$	19.65
Forfeited		(137,894	)		—		$	19.43
Non-vested restricted stock units outstanding at end of year		2,602,608			435,315		$	18.95

(1)	All of the performance-based restricted stock units that vested during 2018 were granted in 2017.

As of December 31, 2018, approximately 2.9 million non-vested restricted stock units outstanding are expected to vest. Additional information as of December 31, 2018 with respect to these non-vested restricted stock units follows:

Performance Unit Awards. The Company has granted share-settled performance unit awards to certain employees (the “Performance Units”) on an annual basis since 2010. The Performance Units provide for the recipients to receive a grant of shares of common stock upon the achievement of certain performance goals during a specified period established by the Compensation Committee. The performance period for the Performance Units is the three year period commencing on April 1 of the year of grant, except that for the Performance Units granted in 2017 the three-year performance period commenced on May 1.

The performance goals for the Performance Units are tied to the Company’s total shareholder return for the performance period as compared to total shareholder return for a peer group determined by the Compensation Committee. These goals are considered to be market conditions under the relevant accounting standards and the market conditions were factored into the determination of the fair value of the respective Performance Units. Generally, the recipients will receive a target number of shares if the Company’s total shareholder return during the performance period, when compared to the peer group, is at the 50^th percentile. If the Company’s total shareholder return during the performance period, when compared to the peer group, is at the 75^th percentile or higher, then the recipients will receive two times the target number of shares. If the Company’s total shareholder return during the performance period, when compared to the peer group, is at the 25^th percentile, then the recipients will only receive one-half of the target number of shares. If the Company’s total shareholder return during the performance period, when compared to the peer group, is between the 25^th and 75^th percentile, then the shares to be received by the recipients will be determined using linear interpolation for levels of achievement between these points.

For the Performance Units awarded prior to 2016, there is no payout unless the Company’s total shareholder return is positive and, when compared to the peer group, is at or above the 25^thpercentile. In respect of the 2013 Performance Units, for which the performance period ended March 31, 2016, the Company’s total shareholder return for the performance period was negative, the Company’s total shareholder return for the performance period when compared to the peer group was above the 75^th percentile, and there was no payout; provided, however, that pursuant to the terms of those 2013 awards, if, during the two-year period ending March 31, 2018, the Company’s total shareholder return for any 30 consecutive day period equals or exceeds 18 percent on an annualized basis from April 1, 2013 through the last day of such 30 consecutive day period, and the recipient is actively employed by the Company through the last day of the extended performance period, then the Company will issue to the recipient the number of shares equal to the amount the recipient would have been entitled to receive had the Company’s total shareholder return been positive during the initial three-year performance period. The performance criteria for this extended period was not met and therefore there was no payout under the 2013 awards.

For the Performance Units granted in April 2016, if the Company’s total shareholder return is negative, and, when compared to the peer group is at or above the 25th percentile, then the recipients will receive one-half of the number of shares they would have received had the Company’s total shareholder return been positive. For the Performance Units granted in May 2017 and April 2018, the payout is based on relative performance and does not have an absolute performance requirement.

The total target number of shares with respect to the Performance Units for the years 2013-2018 is set forth below:

	2018		2017		2016		2015		2014		2013
	Performance		Performance		Performance		Performance		Performance		Performance
	Unit Awards		Unit Awards		Unit Awards		Unit Awards		Unit Awards		Unit Awards
Target number of shares		310,700		186,198		185,000		190,600		154,000		236,500

As noted above, there was no payout under the 2013 Performance Units. The 2014 Performance Units settled with a negative total shareholder return, so there was no payout under such Performance Units. In April 2018, 381,200 shares were issued to settle the 2015 Performance Units. The Performance Units granted in 2016, 2017, and 2018 have not reached the end of their respective performance periods.

Because the Performance Units are share-settled awards, they are accounted for as equity awards and measured at fair value on the date of grant using a Monte Carlo simulation model. The fair value of the Performance Units is set forth below (in thousands):

	2018		2017		2016		2015		2014		2013
	Performance		Performance		Performance		Performance		Performance		Performance
	Unit Awards		Unit Awards		Unit Awards		Unit Awards		Unit Awards		Unit Awards
Aggregate fair value at date of grant	$	8,004	$	5,780	$	3,854	$	4,052	$	5,388	$	5,564

These fair value amounts are charged to expense on a straight-line basis over the performance period. Compensation expense associated with the Performance Units is set forth below (in thousands):

	2018		2017		2016		2015		2014		2013
	Performance		Performance		Performance		Performance		Performance		Performance
	Unit Awards		Unit Awards		Unit Awards		Unit Awards		Unit Awards		Unit Awards
Year ended December 31, 2018	$	2,001	$	1,927	$	1,285	$	338	NA		NA
Year ended December 31, 2017	NA		$	1,284	$	1,285	$	1,351	$	449	NA
Year ended December 31, 2016	NA		NA		$	963	$	1,351	$	1,796	$	464

Dividends on Equity Awards – Non-forfeitable cash dividends are paid on restricted stock awards and dividend equivalents are paid or accrued on certain restricted stock units. These dividends are recognized as follows: