Stock Options and Other Share-Based Compensation

Stock Options and Other Share-Based Compensation

Compensation expense for stock options for 2025, 2024 and 2023 was $73 ($56 after tax), $90 ($68 after tax) and $85 ($65 after tax), respectively. In addition, compensation expense for stock appreciation rights, restricted stock, performance shares and restricted stock units for 2025, 2024 and 2023 was $399 ($303 after tax), $510 ($388 after tax) and $(100) ($(76) after tax), respectively. No significant stock-based compensation cost was capitalized at December 31, 2025, or December 31, 2024.

Cash received in payment for option exercises under all share-based payment arrangements for 2025, 2024 and 2023 was $374, $356 and $263, respectively. Actual tax benefits realized for the tax deductions from option exercises were $29, $24 and $20 for 2025, 2024 and 2023, respectively.

Cash paid to settle performance shares, restricted stock units and stock appreciation rights was $405, $395 and $566 for 2025, 2024 and 2023, respectively.

On May 25, 2022, stockholders approved the Chevron 2022 Long-Term Incentive Plan (2022 LTIP). Awards under the 2022 LTIP may take the form of, but are not limited to, stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares and non-stock grants. From May 2022 through May 2032, no more than 104 million shares may be issued under the 2022 LTIP. For awards issued on or after May 25, 2022, no more than 48 million of those shares may be issued in the form of full value awards such as share-settled restricted stock, share-settled restricted stock units, share-settled performance shares and other share-settled awards that do not require full payment in cash or property for shares underlying such awards by the award recipient. Contractual terms of equity awards vary between three years for the performance shares and special restricted stock units with cliff vesting at the end of the contractual period, five years for standard restricted stock units with cliff vesting at the end of the contractual period and 10 years for the stock options and stock appreciation rights with graded vesting provisions by which one-third of each award vests around each of the first, second and third anniversaries of the date of grant. Commencing for grants issued in January 2023 and after, standard restricted stock units vest ratably on an annual basis over a three-year period. Forfeitures of performance shares, restricted stock units, and stock appreciation rights are recognized as they occur. Forfeitures of stock options are estimated using historical forfeiture data dating back to 1990.

Fair Value and Assumptions The fair market values of stock options and stock appreciation rights granted in 2025, 2024 and 2023 were measured on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


	Year ended December 31
	2025			2024			2023
Expected term in years1	6.5			6.5			6.4
Volatility2	33.0		%	33.0		%	32.5		%
Risk-free interest rate based on zero coupon U.S. treasury note	4.34		%	3.98		%	3.43		%
Dividend yield	4.5		%	4.1		%	3.5		%
Weighted-average fair value per option granted	$	37.60		$	38.00		$	45.82

1 Expected term is based on historical exercise and post-vesting cancellation data.

2 Volatility rate is based on historical stock prices over an appropriate period, generally equal to the expected term.

A summary of option activity during 2025 is presented below:


	Shares (Thousands)	Weighted-Average Exercise Price			Averaged Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2025	23,168		$	122.62
Granted	3,879		$	130.05
Exercised	(3,801)		$	98.52
Forfeited	(1,082)		$	209.13
Outstanding at December 31, 2025	22,164		$	123.78	5.10		$	704
Exercisable at December 31, 2025	18,050		$	116.44	4.32		$	703

The total intrinsic value (i.e., the difference between the exercise price and the market price) of options exercised during 2025, 2024 and 2023 was $227, $190 and $167, respectively. During this period, the company continued its practice of issuing treasury shares upon exercise of these awards.

As of December 31, 2025, there was $379 of total unrecognized before-tax compensation cost related to nonvested share-based compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted-average period of 1.7 years.

At January 1, 2025, the number of LTIP performance shares outstanding was equivalent to 3,859,439 shares. During 2025, 1,502,047 performance shares were granted, 1,379,521 shares vested with cash proceeds distributed to recipients and 347,810 shares were forfeited. At December 31, 2025, there were 3,634,155 performance shares outstanding, of which 1,681,470 are payable in cash and 1,952,685 are payable in shares. The fair value of the liability recorded for these instruments payable in cash was $65 and was measured largely using the Monte Carlo simulation method.

At January 1, 2025, the number of restricted stock units outstanding was equivalent to 5,399,798 shares. During 2025, 1,905,275 restricted stock units were granted, 1,449,539 units vested with cash proceeds distributed to recipients and 424,979 units were forfeited. At December 31, 2025, there were 5,430,555 restricted stock units outstanding, of which 2,711,265 are payable in cash and 2,719,290 are payable in shares. The fair value of the liability recorded for the vested portion of these instruments payable in cash was $342, valued at the stock price as of December 31, 2025. In addition, outstanding stock appreciation rights that were granted under the LTIP totaled 412,784 equivalent shares as of December 31, 2025. The fair value of the liability recorded for the vested portion of these instruments was $18.