Provision (Benefit) for Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Provision (Benefit) for Income Taxes

Provision (Benefit) for Income Taxes

Income (Loss) before taxes is as follows (in thousands):

	Successor					Predecessor
	Year Ended December 31, 2017		Period from April 23, 2016 through December 31, 2016			Period from January 1, 2016 through April 22, 2016		Year Ended December 31, 2015
Income (Loss) Before Income Taxes	$	70,017	$	(156,288	)	$	851,611	$	(1,734,514	)

The following is an analysis of the consolidated income tax provision (benefit) (in thousands):

	Successor					Predecessor
	Year Ended December 31, 2017			Period from April 23, 2016 through December 31, 2016		Period from January 1, 2016 through April 22, 2016		Year Ended December 31, 2015
Current	$	(1,954	)	$	—	$	—	$	(410	)
Deferred	—			—		—		(80,133		)
Total	$	(1,954	)	$	—	$	—	$	(80,543	)

Reconciliations of income taxes computed using the U.S. Federal statutory rate (35%) to the effective income tax rates are as follows (in thousands):

	Successor				Predecessor
	Year Ended December 31, 2017		Period from April 23, 2016 through December 31, 2016		Period from January 1, 2016 through April 22, 2016		Year Ended December 31, 2015
Federal Statutory Rate	35.0	%	35.0	%	35.0	%	35.0	%
State tax provisions (benefits), net of federal benefits	1.6	%	0.9	%	0.9	%	1.0	%
Reorganization Adjustments	—	%	—	%	(1.8	)%	—	%
Expiration/Write-off of NOL Carryovers	13.9	%	(74.9	)%	—	%	—	%
Change in Enacted Tax Rates	55.6	%	—	%	—	%	—	%
Executive Compensation Limitation	0.6	%	—	%	—	%	—	%
Other, net	2.3	%	0.2	%	1.0	%	(0.1	)%
Valuation allowance adjustments	(111.8	)%	38.9	%	(35.1	)%	(31.3	)%
Effective rate	(2.8	)%	—	%	—	%	4.6	%

The tax effects of temporary differences representing the net deferred tax asset (liability) at December 31, 2017 and 2016 were as follows (in thousands):

	Successor
	Year Ended December 31, 2017			Year Ended December 31, 2016
Deferred tax assets:
Federal net operating loss (“NOL”) carryovers	$	58,438		$	40,104
Oil and gas exploration and development costs	—			71,292
Alternative minimum tax credits	138			2,092
Other Carryover Items	619			1,107
Asset Retirement Obligations	2,329			11,447
Derivative Contracts	29			5,802
Unrealized share-based compensation	872			648
Other	2,190			4,164
Valuation allowance	(58,398		)	(136,656		)
Total deferred tax assets	$	6,217		$	—
Deferred tax liabilities:
Oil and gas exploration and development costs	$	(6,054	)	$	—
Other	(163		)	—
Total deferred tax liabilities	(6,217		)	—
Net deferred tax liabilities	$	—		$	—

The 2016 reorganization and emergence from bankruptcy had a significant impact on the Company’s tax attributes. The Company’s net operating loss carryforward (NOL) was $1.3 billion as of December 31, 2016. The Company was able to fully absorb cancellation of debt income (CODI) of $854 million from the reorganization with NOL carryforwards, reducing the available NOL carryforward to $451 million. The Company’s remaining NOL carryforward is severely limited under Sec. 382 due to the change in control annual limitation of $6 million. The NOL carryforward that will expire before utilization due to the IRC Sec. 382 limitation is estimated to be $337 million. A substantial portion of the deferred tax asset associated with the NOLs expected to expire was written off in 2016 and the remaining portion was written off in 2017. The remaining NOL carryforward after excess Sec. 382 limitation is $114 million. The current year taxable loss has increased the available NOL carryforward to $278 million as of December 31, 2017, which will expire in 2033 through 2037 if not utilized in earlier periods.

The Company was in a net deferred tax asset position at December 31, 2017 and 2016. Management has determined that it is not more likely than not that the Company will realize future cash benefits from this additional tax basis and remaining carryover items and accordingly has recorded a full valuation allowance to offset its tax assets. The Company’s valuation allowance balance was $58 million and $137 million at December 31, 2017 and 2016, respectively.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Act"). The Act makes broad and complex changes to the U.S. tax code that includes, among other provisions, a permanent reduction of the U.S. federal corporate tax rate from 35% to 21% and a repeal of the alternative minimum tax regime, both effective January 1, 2018. The remeasurement of the Company’s deferred tax balances to reflect the reduced corporate income tax rate as of December 31, 2017 resulted in a $39 million reduction in the net deferred tax asset balance with a corresponding reduction in the previously established valuation allowance. Under the transition rules related to the repeal of the alternative minimum tax regime, the alternative minimum tax credit carryforward of $2 million will be refundable in 2018 through 2021, if not used to offset regular tax liability. The previously established valuation allowance against the AMT credit carryforward has been released, resulting in a tax benefit of $2 million.

The provisions of the Act, including its extensive transition rules, are complex and interpretive guidance continues to develop. The final application of the Act to the Company’s financial results may differ from what we have provisionally provided for as of December 31, 2017. Changes could arise as regulatory and interpretive action continues to clarify aspects of the Act and as changes are made to estimates that the Company has utilized in calculating the transition impacts.

As of December 31, 2017, we do not have any accrued liability for uncertain tax positions. We do not believe the total of unrecognized tax positions will significantly increase or decrease during the next 12 months.

The Company records interest and penalties related to potential underpayment of any unrecognized tax benefits as a component of income tax expense. The Company has not incurred any interest or penalties associated with unrecognized tax benefits.

Our U.S. federal and state income tax returns from 2015 forward are subject to examination. For years prior to 2015 our U.S federal returns are subject to examination to the extent of our net operating loss (NOL) carryforwards. There are no material unresolved items related to periods previously audited by these taxing authorities.