INCOME TAXES

12 Months Ended

Dec. 31, 2022

INCOME TAXES

INCOME TAXES

11. INCOME TAXES

Income tax benefit (provision) for the indicated periods is comprised of the following (in thousands):

	Years Ended December 31,
	2022		2021
Current:
Federal	$	—	$	—
State		—		—
		—		—
Deferred:
Federal		—		—
State		—		—
		—		—
Total income tax benefit (provision)	$	—	$	—

The actual income tax benefit (provision) differs from the expected income tax benefit (provision) as computed by applying the United States federal corporate income tax rate of 21% for the periods indicated below, as follows (in thousands):

	Years Ended December 31,
	2022		2021
Expected tax benefit (provision)	$	(3,893)	$	5,947
Change in valuation allowance and related items		6,689		57,845
Attribute reduction		(2,704)		(64,024)
Permanent adjustments		(5)		404
Employee retention credit		—		(153)
Non-deductible compensation		(56)		—
Other		(31)		(19)
Total income tax benefit (provision)	$	—	$	—

The components of net deferred income tax assets (liabilities) recognized are as follows (in thousands):

	December 31, 2022		December 31, 2021
Deferred noncurrent income tax assets:
Net operating loss carry-forwards	$	151,905	$	135,454
Built in loss adjustment Section 382		693		693
Capital loss carryforward		114,725		114,725
Stock-based compensation expense		2,334		1,870
Asset retirement obligations		2,558		2,447
Book-tax differences in property basis		129,427		148,008
Unrealized hedging transactions		8,676		12,929
Disallowed interest Section 163(j)		14,905		15,230
Embedded derivative liability		459		841
Operating lease liability		74		151
Other		874		382
Gross deferred noncurrent income tax assets		426,630		432,730
Valuation allowance		(425,005)		(431,694)
Deferred noncurrent income tax assets	$	1,625	$	1,036
Deferred noncurrent income tax liabilities:
Basis difference in debt	$	(885)	$	(885)
Investment in unconsolidated subsidiary		(580)
Amortization of debt issuance costs		(86)
Lease right of use		(74)		(151)
Deferred noncurrent income tax liabilities	$	(1,625)	$	(1,036)
Net noncurrent deferred income tax assets (liabilities)	$	—	$	—

The amount of U.S. consolidated Net Operating Losses (NOLs) available as of December 31, 2022 after attribute reduction is estimated to be approximately $1.2 billion, but the amount after attribute reduction and the Section 382 limitation is $723.3 million. Of this amount, $92.6 million is subject to the 20 year carryforward period and will expire in 2037. The remaining $630.7 million may be carried forward indefinitely but is in part subject to a Section 382 limitation.

The Company assesses the recoverability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. The Company evaluated possible sources of taxable income that may be available to realize the benefit of deferred tax assets, including projected future taxable income, the reversal of existing temporary differences, taxable income in carryback years and available tax planning strategies in making this assessment. As a result of the Company’s analysis, it was concluded that as of December 31, 2022, a valuation allowance should continue to be applied against the Company’s net deferred tax asset. The Company recorded a valuation allowance as of December 31, 2022 of $425.0 million, a decrease of $6.7 million from December 31, 2021. The Company will continue to monitor facts and circumstances in the reassessment of the likelihood that operating loss carryforwards, credits and other deferred tax assets will be utilized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. For those benefits to be recognized, an income tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company has no unrecognized tax benefits for the year ended December 31, 2022 and 2021. Accordingly, there is no amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate and there is no amount of interest or penalties currently recognized in the consolidated statements of operations in “Interest expense and other” or

consolidated balance sheets as of December 31, 2022 and 2021. In addition, the Company does not believe that there are any positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

Tax audits may be ongoing at any point in time. Tax liabilities are recorded based on estimates of additional taxes which may be due upon the conclusion of these audits. Estimates of these tax liabilities are made based upon prior experience and are updated for changes in facts and circumstances. However, due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of audits may result in liabilities which could be materially different from these estimates.

Generally, the Company’s income tax years 2019 through 2022 remain open for federal purposes and are subject to examination by Federal tax authorities. The Company's income tax returns are also subject to audit by the tax authorities in Louisiana, Mississippi, North Dakota, Oklahoma, Texas, Pennsylvania, Ohio and certain other state taxing jurisdictions where the Company has, or previously had, operations. In certain jurisdictions the Company operates through more than one legal entity, each of which may have different open years subject to examination. The open years for state purposes can vary from the normal three year statue expiration period for federal purposes.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was enacted into law. The IRA contains significant U.S. federal income tax law changes, including the addition of a corporate alternative minimum tax imposed at a rate of fifteen percent (15%) on our global adjusted financial statement income effective as of January 1, 2023. Based on current guidance, we do not expect the IRA to have a material adverse impact on our business, results of operations or financial position. During 2020, the CARES Act and the Consolidated Appropriations Act of 2021 (the CAA) were signed into law. Both the CARES Act and CAA did not have a material impact to the Company’s consolidated financial statements and related disclosures.