Income Taxes

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements [Abstract]

Income Taxes [Text Block]

5.  Income Taxes

The principal components of EOG's net deferred income tax liabilities at December 31, 2011 and 2010 were as follows (in thousands):

	2011			2010
Current Deferred Income Tax Assets (Liabilities)
Commodity Hedging Contracts	$	-		$	(7,141	)
Deferred Compensation Plans		-			13,216
Other		-			3,185
Total Net Current Deferred Income Tax Assets	$	-		$	9,260
Noncurrent Deferred Income Tax Assets (Liabilities)
United Kingdom Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization	$	(57,850	)	$	(16,611	)
United Kingdom Net Operating Loss		62,477			17,329
United Kingdom Other		314			226
Total Net Noncurrent Deferred Income Tax Assets	$	4,941		$	944
Current Deferred Income Tax (Assets) Liabilities
Commodity Hedging Contracts	$	158,302		$	-
Deferred Compensation Plans		(28,346	)		-
Timing Differences Associated with Different Year-ends in Foreign Jurisdictions		6,251			41,027
Other		(218	)		676
Total Net Current Deferred Income Tax Liabilities	$	135,989		$	41,703
Noncurrent Deferred Income Tax (Assets) Liabilities
Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization	$	5,485,435		$	4,373,110
Non-Producing Leasehold Costs		(66,926	)		(78,846	)
Seismic Costs Capitalized for Tax		(111,862	)		(92,901	)
Equity Awards		(120,852	)		(99,447	)
Capitalized Interest		106,265			94,957
Net Operating Loss		(1,152,386	)		(498,893	)
Alternative Minimum Tax Credit Carryforward		(298,350	)		(214,873	)
Other		25,894			18,599
Total Net Noncurrent Deferred Income Tax Liabilities	$	3,867,219		$	3,501,706
Total Net Deferred Income Tax Liabilities	$	3,998,267		$	3,533,205

The components of Income Before Income Taxes for the years indicated below were as follows (in thousands):

	2011			2010			2009
United States	$	2,156,147		$	646,495		$	784,248
Foreign		(246,348	)		(238,519	)		87,763
Total	$	1,909,799		$	407,976		$	872,011

The principal components of EOG's Income Tax Provision for the years indicated below were as follows (in thousands):

	2011			2010			2009
Current:
Federal	$	94,244		$	17,154		$	95,194
State		1,083			(1,642	)		8,783
Foreign		224,049			155,565			47,015
Total		319,376			171,077			150,992
Deferred:
Federal		608,181			190,602			166,045
State		40,321			60,619			31,580
Foreign		(149,202	)		(174,976	)		(23,233	)
Total		499,300			76,245			174,392
Income Tax Provision	$	818,676		$	247,322		$	325,384

The differences between taxes computed at the United States federal statutory tax rate and EOG's effective rate were as follows:

		2011	2010	2009
Statutory Federal Income Tax Rate		35.00%	35.00%	35.00%
State Income Tax, Net of Federal Benefit		1.41	9.39	3.00
Income Tax Provision Related to Foreign Operations		0.88	(0.03)	(1.40)
Income Tax Provision Related to Trinidad Operations		3.37	6.26	0.60
Canadian Shallow Natural Gas Impairments		1.85	9.49	-
Other		0.36	0.51	0.11
	Effective Income Tax Rate	42.87%	60.62%	37.31%

The difference in the effective tax rate and the United States federal statutory rate of 35% is attributed principally to state and foreign income taxes.  The decrease in the state tax expense is attributable largely to the redetermination of the deferred state tax liability, which was reduced to reflect lower statutory state tax rates in North Dakota.  Foreign taxes had a smaller effect on EOG's worldwide tax rate due to smaller Canadian impairments, which are tax-effected at a statutory rate of 27%, and to higher domestic earnings.

The balance of unrecognized tax benefits at December 31, 2011 was $33 million, all of which, if recognized, would affect the effective tax rate.  EOG records interest and penalties related to unrecognized tax benefits to its income tax provision.  Currently, there are no amounts of interest or penalties recognized in the Consolidated Statements of Income and Comprehensive Income or in the Consolidated Balance Sheets.  EOG does not anticipate that the amount of the unrecognized tax benefits will significantly change during the next twelve months.  EOG and its subsidiaries file income tax returns in the United States and various state, local and foreign jurisdictions.  EOG is generally no longer subject to income tax examinations by tax authorities in the United States (federal), Canada, the United Kingdom, Trinidad and China for taxable years before 2005, 2007, 2010, 2004 and 2008, respectively.

EOG's foreign subsidiaries' undistributed earnings of approximately $2.3 billion at December 31, 2011 are considered to be indefinitely invested outside the United States and, accordingly, no United States federal or state income taxes have been provided thereon.  Upon distribution of those earnings, EOG may be subject to both foreign withholding taxes and United States income taxes, net of allowable foreign tax credits.  The amount of such additional taxes would be dependent on several factors, including the size and timing of the distribution, the particular foreign jurisdiction from which the distribution is made, and the availability of foreign tax credits.  As a result, the determination of the potential amount of unrecognized withholding and deferred income taxes is not practicable, though additional taxes resulting from a repatriation of foreign earnings could be significant.

In 2011, EOG generated a regular tax net operating loss (NOL) of $1.8 billion.  This NOL, along with the 2010 NOL of $1.4 billion, is expected to be carried forward and applied against regular taxable income in future periods.  To the extent not utilized, these NOL carryforwards will expire in 2030 and 2031, respectively.  Additionally, as of December 31, 2011, EOG had state income tax NOLs of approximately $700 million, which, if unused, expire between 2015 and 2031.  The Stock Compensation Topic of the ASC provides that when settlement of a stock award contributes to a NOL carryforward, neither the associated excess tax benefit nor the credit to additional paid in capital (APIC) should be recorded until the stock award deduction reduces income taxes payable.  Upon utilization of the NOLs in future periods, a benefit of $40 million will be reflected in APIC (including $23 million and $17 million related to 2011 and 2010, respectively).  In 2011, EOG paid alternative minimum tax (AMT) of $104 million.  The AMT paid in 2011, along with AMT of $194 million paid in prior years, will be carried forward indefinitely as a credit available to offset regular income taxes in future periods.

The ability of EOG to utilize both the regular tax NOL carryfowards and the AMT credit carryforwards to reduce regular federal taxable income and federal income taxes, respectively, may become subject to various limitations under the Internal Revenue Code.  Such limitations may arise if certain ownership changes (as defined for income tax purposes) were to occur.  As of December 31, 2011, we do not believe that an ownership change has occurred which would limit either carryforward.

During 2011, EOG's United Kingdom subsidiary incurred a tax NOL of approximately $71 million which, along with the 2010 NOL of $30 million, will be carried forward indefinitely.  In July 2011, the United Kingdom increased the statutory income tax rate applying to oil and gas activities from 50% to 62%, effective March 2011.  In December 2011, the United Kingdom increased from 6% to 10% a statutory deduction referred to as "Uplift," which is an upward adjustment to certain unused NOLs.  The increase in the Uplift percentage is effective January 1, 2012. These two changes did not have a material impact on EOG's 2011 earnings or cash flow.