Note 3. Income Taxes

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Text Block]

Note 3.   Income Taxes

Major components of our income tax provision (benefit) for the three and nine months ended September 30, 2012 and 2011 are as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012			2011
Current:
Federal	$	5,102		$	3,854	$	8,630		$	7,965
State		425			886		978			1,364
Foreign		114			115		344			344
Total current income tax provision		5,641			4,855		9,952			9,673
Deferred:
Federal and state deferred income tax provision (benefit)		(5,627	)		22,470		(1,930	)		60,790
Total income tax provision	$	14		$	27,325	$	8,022		$	70,463

Our ability to utilize our deferred tax assets depends on future taxable income generated from operations. For the nine months ended September 30, 2012, there were no circumstances that caused us to change our assessment of the ability to generate future taxable income to realize our deferred tax assets.  After a deferred benefit of $1.9 million during the first nine months of 2012, the net deferred tax asset at September 30, 2012 was $117.8 million. The deferred benefit realized through September 30, 2012 is primarily the result of temporary differences related to exploration expenses and unrealized losses on derivative contracts.  It is possible that the valuation allowance on our deferred tax asset will change in the future as a result of the analysis of our long-range forecasts, with a resulting tax provision or benefit.

The current income tax provisions for the nine months ended September 30, 2012 and 2011 vary from the amounts that would have resulted from applying the statutory income tax rate to pre-tax income primarily due to the effects of percentage depletion for all periods presented and the change in valuation allowance related to foreign operations during the nine months ended September 30, 2012.