Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

14.  Income Taxes

The provision (benefit) for income taxes consisted of:

	2023		2022		2021
	(In millions)
United States
Federal
Current	$	—	$	—	$	—
Deferred taxes and other accruals	31		22		12
State	7		5		3
	38		27		15
Foreign
Current (a)	537		789		478
Deferred taxes and other accruals	158		283		107
	695		1,072		585
Provision (Benefit) For Income Taxes	$	733	$	1,099	$	600

(a)Primarily comprised of Guyana in 2023, Guyana and Libya in 2022, and Libya in 2021.

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

	2023		2022		2021
	(In millions)
United States (a)	$	(191)	$	569	$	143
Foreign	2,662		2,977		1,347
Income (Loss) Before Income Taxes	$	2,471	$	3,546	$	1,490

(a)Includes substantially all of our interest expense, corporate expense, the results of commodity hedging activities, and amounts attributable to noncontrolling interests.

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

	2023		2022		2021
U.S. statutory rate	21.0	%	21.0	%	21.0	%
Effect of foreign operations (a)	7.5		16.5		28.0
State income taxes, net of federal income tax	0.2		0.1		0.2
Valuation allowance on current year operations	4.5		(4.8)		(5.3)
Release of valuation allowance	(1.3)		—		—
Noncontrolling interests in Midstream	(2.0)		(1.6)		(4.0)
Equity and executive compensation	(0.2)		(0.2)		0.4
Total	29.7	%	31.0	%	40.3	%

(a)The variance in effective income tax rates attributable to the effect of foreign operations is primarily driven by Guyana in 2023 and Libya in 2022 and 2021.

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

	2023		2022
	(In millions)
Deferred Tax Liabilities
Property, plant and equipment and investments	$	(2,117)	$	(1,742)
Other	(108)		(99)
Total Deferred Tax Liabilities	(2,225)		(1,841)
Deferred Tax Assets
Net operating loss carryforwards	4,406		4,226
Tax credit carryforwards	109		98
Property, plant and equipment and investments	413		233
Accrued compensation, deferred credits and other liabilities	109		85
Asset retirement obligations	296		279
Other	256		293
Total Deferred Tax Assets	5,589		5,214
Valuation allowances (a)	(3,652)		(3,658)
Total deferred tax assets, net of valuation allowances	1,937		1,556
Net Deferred Tax Assets (Liabilities)	$	(288)	$	(285)

(a)In 2023, the valuation allowance decreased by $6 million (2022: decrease of $180 million; 2021: decrease of $1,553 million).

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

	2023		2022
	(In millions)
Deferred income taxes (long-term asset)	$	320	$	133
Deferred income taxes (long-term liability)	(608)		(418)
Net Deferred Tax Assets (Liabilities)	$	(288)	$	(285)

At December 31, 2023, we have a gross deferred tax asset related to net operating loss carryforwards of $4,406 million before application of valuation allowances.  The deferred tax asset is comprised of $127 million attributable to foreign net operating losses which will begin to expire in 2025, $3,778 million attributable to U.S. federal operating losses which will begin to expire in 2034, and $501 million attributable to losses in various U.S. states which will begin to expire in 2024.  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 $38 million of U.S. federal and $8 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, 2023, we have U.S. state tax credit carryforwards of $27 million, which will begin to expire in 2034, $81 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, 2023, the Consolidated Balance Sheet reflects a $3,652 million (2022: $3,658 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 certain other jurisdictions. The reduction in valuation allowance year over year is primarily due to a partial release of the valuation allowance in Malaysia, partially offset with an increase in deferred tax asset balances in other jurisdictions. 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.  In December 2023, the valuation allowance established against a portion of the net deferred tax assets in Malaysia, related to the Marginal Field tax ring-fence was released in the amount of $33 million as a result of the emergence from a cumulative loss position and positive evidence from forecasted pre-tax income from operations. The remaining valuation allowance in Malaysia is associated with net deferred tax assets of other tax ring-fences which lack sufficient positive evidence to support realizability. While we emerged from a recent cumulative loss position in the U.S. (non-Midstream) in 2023, the cumulative income position is near breakeven. Until we see a more significant and sustained pattern of objectively verifiable income, we do not assign significant weight to subjective long-term projections of future income and thus maintain a full valuation allowance against our U.S. (non-Midstream) federal and state deferred tax assets. If anticipated future earnings are exceeded, sufficient positive evidence may become available to support the release of valuation allowance in the future. This would result in the recognition of certain deferred tax assets on the balance sheet and a decrease to income tax expense for the period in which the release is recognized.

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

	2023		2022		2021
	(In millions)
Balance at January 1	$	120	$	133	$	166
Additions based on tax positions taken in the current year	—		17		12
Additions based on tax positions of prior years	—		—		3
Reductions based on tax positions of prior years	(9)		(30)		(48)
Balance at December 31	$	111	$	120	$	133

There is no balance at December 31, 2023 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, 2023, we have no accrued interest and penalties related to unrecognized tax benefits (2022: $0 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.