Provision (Benefit) for Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Provision (Benefit) for Income Taxes

Provision (Benefit) for Income Taxes

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

	Year Ended December 31, 2022		Year Ended December 31, 2021
Income (Loss) Before Income Taxes	$	350,037	$	93,157

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

	Year Ended December 31, 2022		Year Ended December 31, 2021
Current:
Federal	$	—	$	—
State	(25)		186
Total current income tax provision (benefit)	(25)		186
Deferred:
Federal	7,188		5,500
State	2,437		712
Total deferred income tax provision (benefit)	$	9,625	$	6,212
Total tax expenses	$	9,600	$	6,398

Our effective tax rate for 2022 differs from the statutory rate primarily due to the removal of the full valuation allowance during the fourth quarter of 2022. Reconciliations of income taxes computed using the U.S. Federal statutory rate of (21%) to the effective income tax rate are as follows:

	Year Ended December 31, 2022		Year Ended December 31, 2021
Federal Statutory Rate	21.0	%	21.0	%
State tax provisions (benefits), net of federal benefits	0.7	%	1.0	%
Executive compensation limitation	0.4	%	0.6	%
Other, net	(0.1)	%	0.6	%
Valuation allowance adjustments	(19.3)	%	(16.2)	%
Effective rate	2.7	%	6.9	%

The tax effects of temporary differences representing the net deferred tax asset (liability) at December 31, 2022 and 2021 were as follows (in thousands):

	December 31, 2022		December 31, 2021
Deferred tax assets:
Federal net operating loss (“NOL”) carryovers	$	130,296	$	97,142
Other carryover items	649		642
Asset retirement obligations	2,258		1,306
Share-based compensation	439		579
Lease liability	2,589		3,425
Interest	8,798		—
Derivative contracts	—		11,451
Other	963		2,111
Valuation allowance	—		(67,578)
Total deferred tax assets	$	145,992	$	49,078
Deferred tax liabilities:
Oil and gas exploration and development costs	$	(141,771)	$	(52,219)
Derivative contracts	(16,943)		—
Leased assets	(2,536)		(3,374)
Other	(883)		(1)
Total deferred tax liabilities	(162,133)		(55,594)
Net deferred tax asset (liabilities)	$	(16,141)	$	(6,516)
State net deferred tax liabilities	$	(3,453)	$	(1,016)
Federal net deferred tax liabilities	(12,688)		(5,500)
Net deferred tax asset (liabilities)	$	(16,141)	$	(6,516)

The Company’s valuation allowance balance was $67.6 million at December 31, 2021. There was no valuation allowance at December 31, 2022.

The Company’s NOL carryforward asset is attributable to Federal tax losses of $114.6 million generated from 2013 through 2015, $159.6 million generated in 2017 and $346.2 million generated from 2018 through 2022. The losses generated between 2013 and 2017 will expire between 2033 and 2037 if not utilized. The losses generated from 2018 through 2022 will not expire under the current tax code, but their usage will be limited to 80% of taxable income. We experienced an ownership change within the meaning of Section 382 during 2022 and our annual usage of losses up to the change date in 2022 may be limited; however, at this time, we do no expect any of the losses to expire unused. We generated approximately $151.0 million in NOL carryforward assets in 2022, of which, $53.4 million relates to the time period post ownership change within the meaning of Section 382 and is not subject to limitation. Should we experience another ownership change within the meaning of Section 382, our NOLs could be further limited.

Our U.S. federal and most state income tax returns from 2019 forward are subject to examination. For years prior to 2019 our U.S. federal returns are subject to examination to the extent of our net operating loss (NOL) carryforwards. Our Texas tax returns from 2018 forward are subject to examination. There are no material unresolved items related to periods previously audited by the taxing authorities. On August 15, 2022, President Biden signed the Inflation Reduction Act into law. Management has reviewed the tax provisions of this legislation and has determined that there are no provisions that would have a material impact on the Company.