Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

14.  Income Taxes

The provision (benefit) for income taxes consisted of:

	2022		2021		2020
	(In millions)
United States
Federal
Current	$	—	$	—	$	(4)
Deferred taxes and other accruals	22		12		6
State	5		3		(1)
	27		15		1
Foreign
Current (a)	789		478		48
Deferred taxes and other accruals	283		107		(60)
	1,072		585		(12)
Provision (Benefit) For Income Taxes	$	1,099	$	600	$	(11)

(a)Primarily comprised of Libya and Guyana in 2022 and Libya in 2021 and 2020.

Income (loss) before income taxes consisted of the following:

	2022		2021		2020
	(In millions)
United States (a)	$	569	$	143	$	(1,509)
Foreign	2,977		1,347		(1,341)
Income (Loss) Before Income Taxes	$	3,546	$	1,490	$	(2,850)

(a)Includes substantially all of our interest expense, corporate expense and the results of commodity hedging activities.

The difference between our effective income tax rate and the U.S. statutory rate is reconciled below:

	2022		2021		2020
U.S. statutory rate	21.0	%	21.0	%	21.0	%
Effect of foreign operations (a)	16.5		28.0		12.1
State income taxes, net of federal income tax	0.1		0.2		0.1
Valuation allowance on current year operations	(4.8)		(5.3)		(36.5)
Noncontrolling interests in Midstream	(1.6)		(4.0)		1.7
Credits	—		—		2.0
Equity and executive compensation	(0.2)		0.4		(0.1)
Other	—		—		0.1
Total	31.0	%	40.3	%	0.4	%

(a)The variance in effective income tax rates attributable to the effect of foreign operations is primarily driven by Libya.

The components of deferred tax liabilities and deferred tax assets at December 31, were as follows:

	2022		2021
	(In millions)
Deferred Tax Liabilities
Property, plant and equipment and investments	$	(1,742)	$	(1,712)
Other	(99)		(38)
Total Deferred Tax Liabilities	(1,841)		(1,750)
Deferred Tax Assets
Net operating loss carryforwards	4,226		4,323
Tax credit carryforwards	98		89
Property, plant and equipment and investments	233		258
Accrued compensation, deferred credits and other liabilities	85		71
Asset retirement obligations	279		258
Other	293		277
Total Deferred Tax Assets	5,214		5,276
Valuation allowances (a)	(3,658)		(3,838)
Total deferred tax assets, net of valuation allowances	1,556		1,438
Net Deferred Tax Assets (Liabilities)	$	(285)	$	(312)

(a)In 2022, the valuation allowance decreased by $180 million (2021: decrease of $1,553 million; 2020: increase of $657 million).

In the Consolidated Balance Sheet, deferred tax assets and liabilities are netted by taxing jurisdiction and are recorded at December 31, as follows:

	2022		2021
	(In millions)
Deferred income taxes (long-term asset)	$	133	$	71
Deferred income taxes (long-term liability)	(418)		(383)
Net Deferred Tax Assets (Liabilities)	$	(285)	$	(312)

At December 31, 2022, we have recognized a gross deferred tax asset related to net operating loss carryforwards of $4,226 million before application of valuation allowances.  The deferred tax asset is comprised of $128 million attributable to foreign net operating losses which will begin to expire in 2025, $3,607 million attributable to U.S. federal operating losses which will begin to expire in 2034, and $491 million attributable to losses in various U.S. states which will begin to expire in 2023.  The deferred tax asset attributable to foreign net operating losses, net of valuation allowances, is $23 million.  A full valuation allowance is established against the deferred tax asset attributable to U.S. federal and state net operating losses, except for $24 million of U.S. federal and $5 million of U.S. state deferred tax assets attributable to Midstream activities for which separate U.S. federal and state tax returns are filed.  At December 31, 2022, we have U.S. state tax credit carryforwards of $24 million, which will begin to expire in 2034, $74 million of other business credit carryforwards, which will begin to expire in 2036, and foreign tax credit carryforwards of $1 million, which will begin to expire in 2024. A full valuation allowance is established against the deferred tax asset attributable to these credits.

At December 31, 2022, the Consolidated Balance Sheet reflects a $3,658 million (2021: $3,838 million) valuation allowance against the net deferred tax assets for multiple jurisdictions based on application of the relevant accounting standards.  Hess continues to maintain a full valuation allowance against its deferred tax assets in the U.S. (non-Midstream) and Malaysia, and certain other jurisdictions, and did so against its deferred tax assets in Denmark prior to its sale in 2021 (see Note 11, Dispositions). The reduction in valuation allowance year over year is primarily due to a reduction in deferred tax asset balances in the U.S. (non-Midstream) and Malaysia. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets.  A recent cumulative loss incurred in the U.S. and Malaysia constitutes significant objective negative evidence.  Such objective negative evidence limits our ability to consider subjective positive evidence, such as our projections of future taxable income, resulting in the recognition of a valuation allowance against the net deferred tax assets for these jurisdictions.  The amount of the deferred tax asset considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight can be given to subjective evidence. There is a reasonable possibility that if anticipated future earnings come to fruition and no other unforeseen negative evidence materializes, sufficient positive evidence may become available to support the release of all or a portion of the Company's valuation allowance in these jurisdictions in the near term. This would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the release is recorded.

Below is a reconciliation of the gross beginning and ending amounts of unrecognized tax benefits:

	2022		2021		2020
	(In millions)
Balance at January 1	$	133	$	166	$	168
Additions based on tax positions taken in the current year	17		12		2
Additions based on tax positions of prior years	—		3		1
Reductions based on tax positions of prior years	(30)		(48)		(2)
Reductions due to settlements with taxing authorities	—		—		(1)
Reductions due to lapses in statutes of limitation	—		—		(2)
Balance at December 31	$	120	$	133	$	166

There is no balance at December 31, 2022 for unrecognized tax benefits that, if recognized would impact our effective income tax rate.  Over the next 12 months, we have no unrecognized benefit that is reasonably possible to decrease due to settlements with taxing authorities or other resolutions, as well as lapses in statutes of limitation.  At December 31, 2022, we have no accrued interest and penalties related to unrecognized tax benefits (2021: $6 million).

We file income tax returns in the U.S. and various foreign jurisdictions.  We are no longer subject to examinations by income tax authorities in most jurisdictions for years prior to 2009.