Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.6.0.2
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
The income tax provision consists of the following:
 
2016
 
2015
 
2014
 
(In thousands)
Current:
 
 
 
 
 
State
$
(1,330
)
 
$
(1,069
)
 
$
14,384

Federal
(19,770
)
 
(439
)
 
16,039

Deferred:
 
 
 
 
 
State
(386
)
 
(14,218
)
 
4,314

Federal
18,573

 
(240,275
)
 
118,604

Total income tax (benefit) expense provision
$
(2,913
)
 
$
(256,001
)
 
$
153,341


A reconciliation of the statutory federal income tax amount to the recorded expense follows:
 
2016
 
2015
 
2014
 
(In thousands)
(Loss) income before federal income taxes
$
(982,622
)
 
$
(1,480,885
)
 
$
400,744

Expected income tax at statutory rate
(343,918
)
 
(518,310
)
 
140,259

State income taxes
(5,883
)
 
(15,908
)
 
11,570

Other differences
4,293

 
(420
)
 
1,512

Intraperiod tax allocation
(1,349
)
 

 

Changes in valuation allowance
343,944

 
278,637

 

Income tax (benefit) expense recorded
$
(2,913
)
 
$
(256,001
)
 
$
153,341


The tax effects of temporary differences and net operating loss carryforwards, which give rise to deferred tax assets and liabilities at December 31, 2016, 2015 and 2014 are estimated as follows: 
 
2016
 
2015
 
2014
 
(In thousands)
Deferred tax assets:
 
 
 
 
 
Net operating loss carryforward
$
162,073

 
$
46,209

 
$
1,091

Oil and gas property basis difference
386,302

 
292,838

 

Investment in pass through entities
27,469

 
14,034

 

FASB ASC 718 compensation expense
2,084

 
1,922

 
1,562

Business energy investment tax credit
369

 

 

AMT credit
3,842

 
23,629

 
24,053

Charitable contributions carryover
303

 
146

 
150

Unrealized loss on hedging activities
48,317

 

 

Foreign tax credit carryforwards
2,074

 
2,074

 
2,074

Accrued liabilities
397

 

 
1,260

ARO liability
12,107

 
9,415

 

State net operating loss carryover
5,351

 
4,344

 
2,627

Total deferred tax assets
650,688

 
394,611

 
32,817

Valuation allowance for deferred tax assets
(645,841
)
 
(303,246
)
 
(13,522
)
Deferred tax assets, net of valuation allowance
4,847

 
91,365

 
19,295

Deferred tax liabilities:
 
 
 
 
 
Oil and gas property basis difference

 

 
183,767

Investment in pass through entities

 

 
27,938

Non-oil and gas property basis difference
155

 
715

 
849

Unrealized gain on hedging activities

 
66,422

 
37,006

Total deferred tax liabilities
155

 
67,137

 
249,560

Net deferred tax asset (liability)
$
4,692

 
$
24,228

 
$
(230,265
)

The Company has an available federal tax net operating loss carryforward estimated at approximately $463.1 million as of December 31, 2016. This carryforward will begin to expire in the year 2036. Based upon the December 31, 2016 net deferred tax asset position and a significant loss in 2016, management believes that there is sufficient negative evidence to place a valuation allowance on the net deferred tax asset that may not be utilized based upon a more likely than not basis. The Company also has state net operating loss carryovers of $111.9 million that will begin to expire in 2016, alternative minimum tax credits of $3.8 million with no expiration date and federal foreign tax credit carryovers of $2.1 million which begin to expire in 2017. The Company believes that it can utilize an Oklahoma state NOL as well as a portion of the AMT credit through carrybacks and a refundable election. Therefore, the Company has recorded a total valuation allowance of $645.8 million related to the remaining net deferred tax asset.
In 2014, the Company's sale of its remaining shares of Diamondback common stock, as well as its share of the proceeds from Blackhawk's sale of its interest in Ohio Gas Gathering Company, LLC and Ohio Condensate Company, LLC, generated $203.3 million and $83.7 million of taxable gain, respectively, resulting in a deferred tax expense of $79.4 million and $32.3 million, respectively. The Company's current federal tax benefit in 2016 and 2015 is primarily attributable to the Company recording a full cost ceiling impairment of $715.5 million and $1.4 billion against the oil and gas assets, while the federal tax expense in 2014 is a result of operations plus the sale of Diamondback common shares and the sale of assets by Blackhawk.
No amounts for state and federal income taxes payable were owed at December 31, 2016 and 2015.