Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Components of Income from Continuing Operations Before Income Taxes and Income Tax Expense

The components of income from continuing operations before income taxes for each of the three years ended December 31, 2011 and income tax expense attributable thereto were as follows.

(Thousands of dollars)	2011		2010			2009
Income from continuing operations before income taxes
United States	$	440,753		188,588			261,005
Foreign		1,110,230		1,200,122			974,408
	$	1,550,983		1,388,710			1,235,413
Income tax expense
Federal – Current	$	99,451		110,142			100,276
Deferred		43,602		(40,981	)		2,078
		143,053		69,161			102,354
State		30,372		15,486			7,087
Foreign – Current		497,446		347,746			318,619
Deferred		139,180		176,758			93,499
		636,626		524,504			412,118
Total	$	810,051		609,151			521,559

Reconciliation of Income Taxes Based on U.S. Statutory Tax Rate to Income Tax Expense

The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense.

(Thousands of dollars)	2011			2010		2009
Income tax expense based on the U.S. statutory tax rate	$	542,844			486,049		432,395
Foreign income subject to foreign taxes at a rate different than the U.S. statutory rate		10,053			56,367		33,395
State income taxes, net of federal benefit		19,742			10,066		4,607
Increase in deferred tax asset valuation allowance related to foreign exploration expenditures		102,714			47,128		34,431
Impairment of Azurite field with no tax benefit		129,010			0		0
Malaysian tax benefits on prior year costs in Block P		(25,573	)		0		0
Increase in United Kingdom oil and gas tax rate		14,461			0		0
Other, net		16,800			9,541		16,731
Total	$	810,051			609,151		521,559

Analysis of Deferred Tax Assets and Deferred Tax Liabilities Showing Tax Effects of Significant Temporary Differences

An analysis of the Company’s deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 showing the tax effects of significant temporary differences follows.

(Thousands of dollars)	2011			2010
Deferred tax assets
Property and leasehold costs	$	627,093			391,168
Liabilities for dismantlements		114,175			97,149
Postretirement and other employee benefits		164,044			137,709
Foreign tax credit carryforwards		21,368			47,725
Other deferred tax assets		38,341			47,511
Total gross deferred tax assets		965,021			721,262
Less valuation allowance		(445,842	)		(305,349	)
Net deferred tax assets		519,179			415,913
Deferred tax liabilities
Property, plant and equipment		(851,330	)		(729,699	)
Accumulated depreciation, depletion and amortization		(754,295	)		(702,512	)
Deferred major repair costs		(11,257	)		(35,848	)
Other deferred tax liabilities		(67,494	)		(96,838	)
Total gross deferred tax liabilities		(1,684,376	)		(1,564,897	)
Net deferred tax liabilities	$	(1,165,197	)		(1,148,984	)

Reconciliation of Beginning and Ending Amount of Consolidated Liability for Unrecognized Income Tax Benefits

A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the years ended December 31, 2011 and 2010 follows.

(Thousands of dollars)	2011			2010
Balance at January 1	$	23,196			25,978
Additions for tax positions related to current year		1,294			1,225
Settlements due to lapse of time		(5,633	)		(4,007	)
Balance at December 31	$	18,857			23,196