Income Taxes

6 Months Ended

Jun. 30, 2025

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The table below presents a comparison of the Current Period and Prior Period’s income tax expense (benefit) and actual year-to-date effective tax rates.

	Six Months Ended June 30,
	2025				2024
Income (loss) before income taxes	$	909			$	(262)
Current tax expense	56		6.2	%	—		—	%
Deferred tax expense (benefit)	134		14.7	%	(61)		23.3	%
Income tax expense (benefit)	$	190	20.9	%	$	(61)	23.3	%

An estimated annual effective tax rate (“EAETR”) is used in recording our interim year-to-date income tax provision. The EAETR is determined based on analysis of year-to-date and projected financial results of our operations. Our EAETR during the Current Period was 21.2%, compared to 22.4% in the Prior Period. The actual year-to-date effective tax rate and EAETR can differ as a result of certain discrete items, which are recorded in the period. Common examples of such items include, but are not limited to, certain equity-based compensation, true-ups resulting from differences between tax returns filed and estimated accruals, and tax effects of enacted laws.

As a result of projecting federal and state income taxes, a portion of our EAETR represents the estimated provision for current taxes. Due to the book income in the Current Period, a current tax expense of $56 million was recorded. There was no current tax expense recorded in the Prior Period.

As of December 31, 2024, we were in a net deferred tax asset position and anticipate being in a net deferred tax asset position as of December 31, 2025. Based on all available positive and negative evidence, including projections of future taxable income, we believe it is more likely than not that some of our deferred tax assets will not be realized. As such, a partial valuation allowance was recorded against our net deferred tax asset position for federal and state purposes as of June 30, 2025 and December 31, 2024.

On August 16, 2022, the previous Presidential Administration signed into law the Inflation Reduction Act of 2022, which includes provisions for a 15% corporate alternative minimum tax (“CAMT”) on book income for companies whose average book income exceeds $1 billion for any three consecutive years preceding the tax year. Based upon our book income in the past three years, we believe we are subject to the CAMT. The CAMT will result in incremental taxes to the extent that 15% of our adjusted book earnings exceeds our regular federal tax liability. We currently project that we will pay the CAMT in 2025.

Subsequent to June 30, 2025, on July 4, 2025, the current Presidential Administration signed into law the One Big Beautiful Bill Act. This bill restores 100% bonus depreciation for property acquired and placed into service after January 19, 2025, restores the immediate expensing of research expenditures, and provides for parity between the treatment of intangible drilling costs and depreciation for purposes of the CAMT. As this legislation was enacted after June 30, 2025, its effects are not reflected in the Company’s provision for income taxes as of that date. The Company is currently evaluating the impact of the new legislation, which is expected to have a significant benefit on its financial position, results of operations and cash flows in future reporting periods.