Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The components of the income tax expense (benefit) for each of the periods presented below are as follows:

	Years Ended December 31,
	2024		2023		2022
Current
Federal	$	(1)	$	264	$	37
State	(3)		6		10
Current Income Taxes	(4)		270		47
Deferred
Federal	(178)		381		(1,112)
State	55		47		(220)
Deferred Income Taxes	(123)		428		(1,332)
Total	$	(127)	$	698	$	(1,285)

The income tax expense (benefit) reported in our consolidated statement of operations is different from the federal income tax expense (benefit) computed using the federal statutory rate for the following reasons:

	Years Ended December 31,
	2024				2023				2022
Income tax expense (benefit) at the federal statutory rate of 21%	$	(177)	21.0	%	$	655	21.0	%	$	767	21.0	%
State income taxes (net of federal income tax benefit)	(5)		0.6	%	76		2.5	%	45		1.2	%
Deferred remeasurement due to state rate changes	47		(5.6)	%	(20)		(0.6)	%	30		0.8	%
Change in valuation allowance due to acquisitions	14		(1.7)	%	—		—	%	19		0.5	%
Change in valuation allowance excluding impact of acquisitions	(18)		2.1	%	(33)		(1.1)	%	(2,147)		(58.8)	%
Research and development tax credits	(31)		3.7	%	(3)		(0.1)	%	(19)		(0.5)	%
Transaction costs	22		(2.6)	%	—		—	%	2		0.1	%
Compensation costs related to acquired company	11		(1.2)	%	—		—	%	—		—	%
Other	10		(1.2)	%	23		0.7	%	18		0.5	%
Total	$	(127)	15.1	%	$	698	22.4	%	$	(1,285)	(35.2)	%

In 2024, the Company’s overall effective tax rate decreased compared to 2023 due to the revaluation of state deferred taxes as a result of Louisiana’s recent enactment of a tax rate decrease and as a result of permanent differences for transaction and compensation costs associated with the Southwestern Merger. The Company’s effective tax rate in 2023 increased from 2022 due to the release of the valuation allowance in 2022 which resulted in that year being a net benefit.

Deferred income taxes are provided to reflect temporary differences in the tax basis of assets and liabilities and their reported amounts in the financial statements. The tax-effected temporary differences, net operating loss (“NOL”) carryforwards and excess business interest expense carryforwards that comprise our deferred income taxes are as follows:

	December 31, 2024		December 31, 2023
Deferred tax liabilities:
Property, plant and equipment	$	(1,730)	$	(295)
Derivative instruments	—		(166)
Right of use lease asset	(36)		(25)
Other	(3)		(4)
Deferred tax liabilities	(1,769)		(490)
Deferred tax assets:
Net operating loss carryforwards	1,258		848
Carrying value of debt	4		25
Excess business interest expense carryforward	777		646
Capital loss carryforwards	103		78
Tax credit carryforwards	53		15
Contract liabilities	261		—
Asset retirement obligations	123		65
Investments	—		1
Future lease payments	36		25
Accrued liabilities	39		15
Derivative instruments	13		—
Other	24		17
Deferred tax assets	2,691		1,735
Valuation allowance	(343)		(312)
Deferred tax assets after valuation allowance	2,348		1,423
Net deferred tax asset	$	579	$	933
Reflected in the accompanying balance sheets as:
Deferred income tax assets	$	589	$	933
Deferred income tax liabilities	(10)		—
Total	$	579	$	933

As of December 31, 2024 and 2023, we had deferred tax assets of $2.691 billion and $1.735 billion, respectively, upon which we had a valuation allowance of $343 million and $312 million, respectively. The net change in the valuation allowance of $31 million is primarily due to the additional valuation allowance recorded related to the acquisition of Southwestern tax attributes partially offset by the expiration of a capital loss carryforward and state net operating loss carryforwards. Of this $31 million net change in the valuation allowance, $35 million is reflected in components of stockholders’ equity which is partially offset by $4 million reflected as a component of income tax benefit in the consolidated statements of operations.

We maintain a partial valuation allowance of $343 million against a portion of our federal and state deferred tax assets such as NOLs, credit carryovers, and capital losses, which may expire before we are able to utilize them due to the application of the limitations under Section 382 and the ordering in which such attributes may be applied.

Our ability to utilize NOL carryforwards, disallowed business interest carryforwards, tax credits and possibly other tax attributes to reduce future taxable income and federal income tax is subject to various limitations under Section 382 of the Code. The utilization of such attributes may be subject to an annual limitation under Section 382 of the Code should transactions involving our equity result in a cumulative shift of more than 50% in the beneficial ownership of our stock during any three-year testing period (an “Ownership Change”).

The Company experienced an Ownership Change in 2021 (“First Ownership Change”). The amount of the annual limitation due to the First Ownership Change is $54 million. This limitation applies to our NOL carryforwards, disallowed business interest carryforwards and general business tax credits that existed at the time of the First Ownership Change until such attributes expire or are fully utilized. As a result of the Southwestern Merger on October 1, 2024, the Company experienced another Ownership Change (“Second Ownership Change”). The base amount of the annual limitation due to the Second Ownership Change has been estimated to be $380 million. This limitation applies to our NOL carryforwards, disallowed business interest carryforwards and general business credits generated subsequent to the First Ownership Change until such attributes expire or are fully utilized. We believe that we are in a net unrealized built-in gain position at the time of the Second Ownership Change, which may result in increases to the annual limitation amount for a 5-year period. Some states impose similar limitations on tax attribute utilization upon experiencing an Ownership Change.

On October 1, 2024, we completed the Southwestern Merger. For federal income tax purposes, the transaction qualified as a tax-free merger under Section 368 of the Code and, as a result, we acquired carryover tax basis in Southwestern’s assets and liabilities. We recorded a $479 million net deferred tax liability determined through business combination accounting. Additionally, we acquired NOL and interest expense carryforwards which were previously subject to base annual Section 382 limitations of $2 million and $48 million. The acquired NOL and interest expense carryforwards that were not previously subject to a base annual Section 382 limitation are now subject to a base annual Section 382 limitation of approximately $269 million as a result of the merger. The base annual limitation is estimated to be increased over the first five years for recognized built-in gains.

The Marcellus Acquisition during 2022 was treated as a taxable asset acquisition with no tax carryovers acquired.

As of December 31, 2024, and after taking into account each of the foregoing matters, the federal NOLs are as follows:

Net operating losses, by year of expiration:
2031	$	5
2032	8
2033	2
2034	2
2035	50
2036	618
2037	832
Indefinitely lived	3,640
Total federal net operating losses	$	5,157

We had state NOL carryforwards of approximately $4.296 billion. Several states adopt the federal NOL carryforward period such that our more recent state NOLs do not expire. The state NOL carryforwards are subject to apportioned amounts of the federal Section 382 limitations.

As of December 31, 2024 and 2023, we have an income tax receivable of $32 million and $33 million included in other current assets within our consolidated balance sheets, respectively.

On August 16, 2022, the President of the United States signed into law the Inflation Reduction Act of 2022 (“IRA”) which, among other things, includes provisions for a 15% corporate alternative minimum tax on book income for companies whose average book income exceeds $1 billion for any three consecutive years preceding the tax year. We believe that we are an applicable corporation beginning in 2024 for purposes of this alternative tax. We estimate no tax due to this as a result of the book loss.

Accounting guidance for recognizing and measuring uncertain tax positions requires a more likely than not threshold condition be met on a tax position, based solely on the technical merits of being sustained, before any benefit of the tax position can be recognized in the financial statements. Guidance is also provided regarding recognition, classification and disclosure of uncertain tax positions. As of December 31, 2024 and 2023, the amount of unrecognized tax benefits related to NOL carryforwards, tax credit carryforwards, and tax liabilities associated with uncertain tax positions was $80 million and $68 million, respectively. As of December 31, 2024, $24 million is related to

state tax receivables not expected to be recovered, $14 million is related to a liability for tax credits taken, $9 million is related to tax credit carryforwards, and the remainder is related to NOL carryforwards. As of December 31, 2023, $24 million is related to state tax receivables not expected to be recovered, $10 million is related to a liability for tax credits taken, and the remainder is related to NOL carryforwards. If recognized, $47 million of the uncertain tax positions identified would have an effect on the effective tax rate. As of December 31, 2024, we had $1 million accrued for interest related to these uncertain tax positions. As of December 31, 2023, we had no amounts accrued for interest related to these uncertain tax positions. We recognize interest related to uncertain tax positions as a component of interest expense. Penalties, if any, related to uncertain tax positions would be recorded in other expenses.

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

	Years Ended December 31,
	2024		2023		2022
Unrecognized tax benefits at beginning of period	$	68	$	69	$	74
Additions based on tax positions related to the current year	3		3		2
Additions to tax positions of prior years	1		3		2
Additions to tax positions related to acquisitions	9		—		—
Settlements	—		(5)		—
Expiration of the applicable statute of limitations	—		—		—
Reductions to tax positions of prior years	(1)		(2)		(9)
Unrecognized tax benefits at end of period	$	80	$	68	$	69

Our federal and state income tax returns are subject to examination by federal and state tax authorities. Our tax years 2021 through 2024 remain open for all purposes of examination by the IRS as well as the Southwestern 2021 through 2023 returns, the Southwestern short period return for January 1, 2024 through October 1, 2024, and the Vine short period return for January 1, 2021 through November 1, 2021. However, certain earlier tax years remain open for adjustment to the extent of their NOL carryforwards available for future utilization.

In addition, tax years 2021 through 2024 as well as certain earlier years remain open for examination by state tax authorities. We do not anticipate that the outcome of any federal or state audit will have a significant impact on our financial position or results of operations.