Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The income tax provision consists of the following:
 
2017
 
2016
 
2015
 
(In thousands)
Current:
 
 
 
 
 
State
$
2,167

 
$
(1,330
)
 
$
(1,069
)
Federal
3,362

 
(19,770
)
 
(439
)
Deferred:
 
 
 
 
 
State
(118
)
 
(386
)
 
(14,218
)
Federal
(3,602
)
 
18,573

 
(240,275
)
Total income tax expense (benefit) provision
$
1,809

 
$
(2,913
)
 
$
(256,001
)

A reconciliation of the statutory federal income tax amount to the recorded expense follows:
 
2017
 
2016
 
2015
 
(In thousands)
Income (loss) before federal income taxes
$
436,961

 
$
(982,622
)
 
$
(1,480,885
)
Expected income tax at statutory rate
152,936

 
(343,918
)
 
(518,310
)
State income taxes
2,299

 
(5,883
)
 
(15,908
)
Other differences
5,731

 
4,293

 
(420
)
Intraperiod tax allocation

 
(1,349
)
 

Remeasurement due to Tax Cut and Jobs Act
190,034

 

 

Change in valuation allowance due to current year activity
(158,704
)
 
343,944

 
278,637

Change in valuation allowance due to Tax Cuts and Jobs Act
(190,487
)
 

 

Income tax expense (benefit) recorded
$
1,809

 
$
(2,913
)
 
$
(256,001
)

The tax effects of temporary differences and net operating loss carryforwards, which give rise to deferred tax assets and liabilities at December 31, 2017, 2016 and 2015 are estimated as follows: 
 
2017
 
2016
 
2015
 
(In thousands)
Deferred tax assets:
 
 
 
 
 
Net operating loss carryforward
$
120,626

 
$
162,073

 
$
46,209

Oil and gas property basis difference
151,260

 
386,302

 
292,838

Investment in pass through entities
12,343

 
27,469

 
14,034

FASB ASC 718 compensation expense
813

 
2,084

 
1,922

Business energy investment tax credit
369

 
369

 

AMT credit

 
3,842

 
23,629

Charitable contributions carryover
255

 
303

 
146

Unrealized loss on hedging activities

 
48,317

 

Foreign tax credit carryforwards
2,074

 
2,074

 
2,074

Accrued liabilities
285

 
397

 

ARO liability
15,897

 
12,107

 
9,415

Non-oil and gas property basis difference
171

 

 

State net operating loss carryover
6,954

 
5,351

 
4,344

Total deferred tax assets
311,047

 
650,688

 
394,611

Valuation allowance for deferred tax assets
(298,830
)
 
(645,841
)
 
(303,246
)
Deferred tax assets, net of valuation allowance
12,217

 
4,847

 
91,365

Deferred tax liabilities:
 
 
 
 
 
Non-oil and gas property basis difference

 
155

 
715

Unrealized gain on hedging activities
11,009

 

 
66,422

Total deferred tax liabilities
11,009

 
155

 
67,137

Net deferred tax asset
$
1,208

 
$
4,692

 
$
24,228


The Company has an available federal tax net operating loss carryforward estimated at approximately $574.4 million as of December 31, 2017. This carryforward will begin to expire in the year 2023. Based upon the December 31, 2017 net deferred tax asset position and a recent history of cumulative losses, 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 $121.3 million that began to expire in 2017 and federal foreign tax credit carryovers of $2.1 million which began to expire in 2017. The Company believes that it can utilize an Oklahoma state NOL through carrybacks. Therefore, the Company has recorded a total valuation allowance of $298.8 million related to the remaining net deferred tax asset.
The Tax Act was enacted on December 22, 2017. The Tax Act reduces the US federal corporate tax rate from 35% to 21% effective January 1, 2018. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the statutory rate, the Company has remeasured its deferred tax balances, the effects of which are reflected in the rate reconciliation shown in the table above. The Company has applied the provisions of SEC Staff Accounting Bulletin No. 118 ("SAB 118"). SAB 118 allows for a measurement period in which companies can either use provisional estimates for changes resulting from the Tax Act or apply the tax laws that were in effect immediately prior to the Tax Act being enacted if estimates cannot be determined at the time of the preparation of the financial statements until the actual impacts can be determined. The Company has recorded a provisional estimate of $0.5 million benefit for the impact of the Tax Act within its December 31, 2017 financial statements. The Company will continue to evaluate the impacts of the Tax Act on deferred taxes, compensation and international provisions and will record adjustments, as needed, based on changes to its estimates.
The Company's income tax benefit in 2016 and 2015 was 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. The Company's income tax expense in 2017 is primarily the result of a change in state income tax positions.
As of December 31, 2017, the amount of unrecognized tax benefits related to federal and state tax liabilities associated with uncertain tax positions was immaterial.