Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

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, 2012 and income tax expense attributable thereto were as follows.

(Thousands of dollars)	2012			2011		2010
Income from continuing operations before income taxes
United States	$	229,981			440,753		188,588
Foreign		1,393,001			1,051,891		1,137,064
	$	1,622,982			1,492,644		1,325,652
Income tax expense
Federal – Current	$	(181,003	)		99,451		110,142
Deferred		156,856			43,602		(40,981	)
		(24,147	)		143,053		69,161
State		24,754			30,372		15,486
Foreign – Current		503,674			465,150		303,808
Deferred		154,655			124,598		188,117
		658,329			589,748		491,925
Total	$	658,936			763,173		576,572

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)	2012			2011			2010
Income tax expense based on the U.S. statutory tax rate	$	568,044			522,425			463,978
Foreign income subject to foreign taxes at a rate different than the U.S. statutory rate		5,542			(1,945	)		45,859
State income taxes, net of federal benefit		16,090			19,742			10,066
U.S. tax benefit on certain foreign exploration activities		(108,077	)		0			0
Increase in deferred tax asset valuation allowance related to other foreign exploration expenditures		87,558			102,714			47,128
Impairment of Azurite field with no tax benefit		70,000			129,010			0
Malaysian tax benefits on prior year costs in Block P		0			(25,573	)		0
Other, net		19,779			16,800			9,541
Total	$	658,936			763,173			576,572

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, 2012 and 2011 showing the tax effects of significant temporary differences follows.

(Thousands of dollars)	2012			2011
Deferred tax assets
Property and leasehold costs	$	658,588			627,093
Liabilities for dismantlements		78,100			114,175
Postretirement and other employee benefits		197,912			164,044
Alternative minimum tax		37,253			0
Foreign tax credit carryforwards		18,594			21,368
Other deferred tax assets		32,500			38,341
Total gross deferred tax assets		1,022,947			965,021
Less valuation allowance		(523,966	)		(445,842	)
Net deferred tax assets		498,981			519,179
Deferred tax liabilities
Property, plant and equipment		(808,311	)		(851,330	)
Accumulated depreciation, depletion and amortization		(1,077,867	)		(754,295	)
Other deferred tax liabilities		(70,710	)		(78,751	)
Total gross deferred tax liabilities		(1,956,888	)		(1,684,376	)
Net deferred tax liabilities	$	(1,457,907	)		(1,165,197	)

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 three years ended December 31, 2012 is shown in the following table.

(Thousands of dollars)	2012			2011			2010
Balance at January 1	$	18,857			23,196			25,978
Additions for tax positions related to current year		1,258			1,294			1,225
Settlements due to lapse of time		(3,504	)		(5,633	)		(4,007	)
Balance at December 31	$	16,611			18,857			23,196