5.Income Taxes

The tax effects of temporary differences that gave rise to the deferred tax liabilities and deferred tax assets are as follows:


	As of December 31,
	2014		2013
Deferred tax assets:
Net operating loss carry-forward	$	24,978	$	20,892
Asset retirement obligation		3,173		3,022
Stock-based compensation		102		963
Accrued compensation		40		25
Provision for gas-to-liquids advance		411		-
Net gas imbalance		148		134
Other		65		64
Total deferred tax assets		28,917		25,100
Valuation allowance		(1,202)		-
Net deferred tax assets		27,715		25,100

Deferred tax liabilities:
Derivative instruments		(2,362)		(65)
Net basis difference in oil and gas properties		(25,353)		(26,271)
Net deferred tax liability	$	-	$	(1,236)

In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which the use of such net operating losses are allowed. Among other items, management considers the scheduled reversal of deferred tax liabilities, tax planning strategies asset dispositions and projected future taxable income. Some or all of this valuation allowance may be reversed in future periods against future income. At December 31, 2014 and 2013, the Company had recorded a valuation allowance against certain deferred tax assets of $1,202 and $0, respectively.

At December 31, 2014, the Company had a net operating loss carry-forward for regular income tax reporting purposes of approximately $70.6 million, which will expire beginning in 2021.

The income tax benefit differs from the amount that would be computed by applying the U.S. federal income tax rate of 35% to pretax income as a result of the following:


	For the year ended December 31,
	2014		2013
Expected federal tax rate	35.00	%	35.00	%
Excess detriment on stock options/awards	-10.99		-
Effect of permanent differences	-0.73		-0.30
Valuation allowance	-13.62		-
State tax rate	0.47		0.87
Other	3.89		-1.82
Effective tax rate	14.02	%	33.75	%

Tax effects from any uncertain tax positions are recognized in the financial statements only if the position is more likely than not of being sustained if the position were to be challenged by a taxing authority. The Company has not recorded any liabilities, or interest and penalties, as of December 31, 2014 related to uncertain tax positions.

The Company files income tax returns in the U.S. and various state jurisdictions. The Company currently has no federal or state income tax examinations underway for any of these jurisdictions. Furthermore, the Company is no longer subject to U.S. federal income tax examinations by the Internal Revenue Service for tax years before 2011 and for state and local tax authorities for years before 2010.