Income Taxes (Tables)

3 Months Ended

Mar. 31, 2023

Schedule of Effective Income Tax Rate Reconciliation

The following table presents a reconciliation between the income tax provision computed by applying the federal statutory rate to income before income taxes and our effective income tax expense (benefit) during the periods indicated:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Income tax expense at statutory rate	$	12,556	$	(9,844)
State income tax expense, net of federal benefit	1,685		(1,641)

Non-controlling interest in Superior	—		(850)
Change in valuation allowance (1)	(94,728)		17,974
Revaluation of deferred tax assets and liabilities due to state income tax rate change	5,698		—
Warrant liability revaluation	—		(5,339)
Other permanent items	143		(300)
Income tax expense (benefit)	$	(74,646)	$	—

1. The Company reviews available positive and negative evidence to assess the need for a valuation allowance against the Company's deferred tax assets. On the basis of this assessment, a full valuation allowance was recorded against the Company's net deferred tax assets in 2020 and maintained through December 31, 2022. The Company subsequently recorded net income attributable to Unit Corporation of $148.4 million and $60.6 million during 2022 and 2021, respectively. After considering these positive results, the resulting significant three-year cumulative income position, and other available positive and negative evidence, the Company determined that it is more likely than not that a portion of the net deferred tax assets would be realized. Accordingly, the Company released a portion of its valuation allowance contributing to a $94.7 million net change in the valuation allowance during the three months ended March 31, 2023 with a corresponding income tax benefit recorded in our unaudited condensed consolidated statements of operations.

Schedule of Deferred Tax Assets and Liabilities

The following table presents the components of our deferred tax assets and liabilities:


	March 31, 2023		December 31, 2022
	(In thousands)
Deferred tax assets:
Allowance for losses and nondeductible accruals	$	14,048	$	15,662
Net operating loss carryforward (1)	71,519		81,199
Non-producing oil and natural gas properties	36,416		37,493
Producing oil and natural gas properties	10,495		17,044
Alternative minimum tax and research and development tax credit carryforward	1,738		1,738
Gross deferred tax assets	134,216		153,136
Valuation allowance (2)	(46,637)		(141,365)
Total deferred tax assets	87,579		11,771
Deferred tax liabilities:
Contract drilling and other equipment	(12,354)		(11,365)
Investment in Superior	(389)		(406)
Total deferred tax liabilities	(12,743)		(11,771)
Deferred tax assets, net	$	74,836	$	—

1.As of December 31, 2022, the Company had an expected federal net operating loss carryforward of $331.4 million of which $136.4 million is subject to expiration between 2036 and 2037.

2.The Company has retained a partial valuation allowance on its deferred tax assets as of March 31, 2023 primarily due to uncertainty in forecasting the timing of future tax benefit recognition related to certain non-producing oil and gas properties and allowance for losses and nondeductible accruals.