NOTE E—INCOME TAXES

The Company and its subsidiaries file a consolidated federal income tax return.

The Company's effective income tax rate differed from the federal statutory rate as follows:

	2015			2014
	(in thousands)
Income Taxes at Federal Statutory Rate	$	(210,781	)	$	8,167
Change in Valuation Allowance		251,045			(10,647	)
Nondeductible Expenses		(3,240	)		869
State Income Taxes Net of Federal Benefit		(37,197	)		1,441
Other		(6,290	)		153

		17			(17	)

	2015			2014
	(in thousands)
Deferred Tax Assets Relating To:
Net Operating Loss Carryforward		130,816			94,321
Oil and Gas Properties and Tangible Equipment		228,324			6,256
Stock Option Expense		4,207			3,322
Unrealized Loss on Derivatives		—			4,381
Other		719			327

		364,066			108,607
Less Valuation Allowance		359,510			108,466

Total Deferred Tax Asset		4,556			141

Deferred Tax Liabilities Relating To:
Unrealized Loss on Derivatives		(4,432	)		—
Net Unrealized Gain on Investments		(124	)		(141	)

Total Deferred Tax Liability		(4,556	)		(141	)

Net Deferred Tax Asset (Liability)		—			—

A valuation allowance for deferred tax assets is required when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of this deferred tax asset depends on the Company's ability to generate sufficient taxable income in the future. Management believes it is more-likely-than-not that the net deferred tax asset will not be realized by future operating results. The valuation allowance increased (decreased) by approximately $251 million and ($11 million) for the years ended December 31, 2015 and 2014, respectively.

At December 31, 2015, the Company had net operating loss carryforwards for federal income tax purposes of approximately $327 million, which will expire in years 2019 through 2035.

Tax years beginning in 2012 are subject to examination by taxing authorities, although net operating loss and credit carryforwards from all years are subject to examination and adjustments for at least three years following the year in which the attributes are used.

The Company routinely assesses potential uncertain tax positions and, if required, establishes accruals for such amounts. Only tax positions that meet the more-likely-than-not recognition threshold are recorded.