Income Taxes

12 Months Ended

Dec. 31, 2016

Income Taxes

Income Taxes

13. Income Taxes

        Under the Plan, a substantial portion of the Company's pre-petition debt securities were extinguished. Absent an exception, a debtor recognizes cancellation of indebtedness income ("CODI") upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code of 1986, as amended ("IRC"), provides that a debtor in a bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued. As a result of the market value of equity upon emergence from Chapter 11 bankruptcy proceedings, the estimated amount of U.S. CODI is approximately $1.2 billion, which will reduce the value of the Company's U.S. net operating losses and other assets. The actual reduction in tax attributes does not occur until the first day of the Company's tax year subsequent to the date of emergence, or January 1, 2017.

        The Company anticipates a full reduction of its federal and state NOL carryforwards and a reduction of the tax basis in its fixed assets effective January 1, 2017, pursuant to IRC section 108. The anticipated result of this reduction is reflected in the deferred tax table below.

        As of December 31, 2016, the Company has recorded a full valuation allowance against its net deferred tax assets of $160.8 million, of which $157.1 million relates to deferred tax assets on the Company's property and equipment. The Company's valuation allowance decreased by $532.6 million from December 31, 2015 to December 31, 2016, which was primarily a result of the reduction in the Company's tax attributes pursuant to IRC Section 108.

        As of December 31, 2016, the Company has not recorded a reserve for any uncertain tax positions. The Company believes that there are no new items, nor changes in facts or judgments that should impact the Company's tax position. No federal income tax payments are expected in the upcoming four quarterly reporting periods.

	Successor		Predecessor
	For the Period October 21, 2016 through December 31, 2016		For the Period January 1, 2016 through October 20, 2016
					For the Years Ended December 31,
					2015			2014
	(in thousands)		(in thousands)
Current
United States	$	—	$	—	$	—		$	—
State		—		—		—			809
Total current		—		—		—			809
Deferred
United States		—		—		(3,864	)		3,863
State		—		—		(5,777	)		1,723
Total deferred		—		—		(9,641	)		5,586
Total income tax provision (benefit)	$	—	$	—	$	(9,641	)	$	6,395

        The Company's estimated income tax expense differs from the amount derived by applying the statutory federal rate to pretax income principally due the effect of the following items:

	Successor			Predecessor
	For the Period October 21, 2016 through December 31, 2016			For the Period January 1, 2016 through October 20, 2016
							Years Ended December, 31
							2015			2014
	(in thousands)			(in thousands)
Income (loss) before taxes	$	9,930		$	1,323,079		$	(1,806,836	)	$	123,324
Statutory rate		35	%		35	%		35	%		35	%
Income tax provision (benefit) computed at statutory rate		3,475			463,078			(632,393	)		43,164
Reconciling items:
State income taxes, net of federal benefit		296			39,424			(65,904	)		4,398
Change in valuation allowance		(3,876	)		(528,706	)		689,419			(42,134	)
Change in state rate		(1	)		(153	)		(612	)		(414	)
Bankruptcy items		—			12,262			—			—
Deferred tax true-ups		74			9,891			—			—
Other, net		32			4,204			(151	)		1,381
Total income tax provision (benefit)	$	—		$	—		$	(9,641	)	$	6,395

        Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of our deferred taxes are detailed in the table below (in thousands):

	Successor			Predecessor
	As of December 31, 2016			As of December 31, 2015
Deferred tax assets—current
Derivative instruments and other	$	—		$	—
Less valuation allowance		—			—
Total deferred tax assets, current	$	—		$	—
Deferred tax assets—noncurrent
Federal tax loss carryforwards		—			146,641
State tax loss carryforwards		—			13,848
Employee benefit plans		3,649			1,160
Oil and gas properties and equipment		157,113			465,028
Debt restructuring		—			66,693
Other		27			—
Less valuation allowance		(160,789	)		(693,370	)
Total deferred tax assets, noncurrent	$	—		$	—
Deferred tax liabilities—current
Derivative instruments and other		—			—
Total deferred tax liabilities—current	$	—		$	—
Deferred tax liabilities—noncurrent
Oil and gas properties and equipment		—			—
Total deferred tax liabilities, noncurrent	$	—		$	—
Reflected in the accompanying balance sheet as:
Net deferred tax asset, current	$	—		$	—
Net deferred tax liability, current	$	—		$	—
Net deferred tax asset, noncurrent	$	—		$	—
Net deferred tax liability, noncurrent	$	—		$	—