INCOME TAXES:

An analysis of our deferred taxes follows:



	As of December 31,
	2016			2015
Tax effect of temporary differences:
Net operating loss carryforwards	$	201,557		$	31,624
Oil and gas properties	85,772			76,766
Asset retirement obligations	85,312			79,618
Stock compensation	3,294			5,199
Hedges	—			(13,598		)
Accrued incentive compensation	954			1,234
Debt issuance costs	7,480			—
Other	441			(722		)
Total deferred tax assets (liabilities)	384,810			180,121
Valuation allowance	(384,810		)	(180,121		)
Net deferred tax assets (liabilities)	$	—		$	—

We estimate that we had ($5,674), ($44,096) and $159 of current federal income tax expense (benefit) for the years ended December 31, 2016, 2015 and 2014, respectively. For the years ended December 31, 2016, 2015 and 2014, we recorded deferred income tax expense (benefits) of $13,080, ($272,311) and ($102,177), respectively. The deferred income tax benefits were a result of our losses before income taxes attributable primarily to ceiling test write-downs of our oil and gas properties (see Note 17 – Supplemental Information on Oil and Natural Gas Operations – Unaudited). We had current income tax receivables of $26,086 and $46,174 at December 31, 2016 and 2015, respectively, both of which related to expected tax refunds from the carryback of net operating losses to previous tax years.

For tax reporting purposes, net operating loss carryforwards totaled approximately $599,144 at December 31, 2016. If not utilized, the majority of such carryforwards would expire in 2035 and would fully expire in 2036. In addition, we had approximately $1,050 in statutory depletion deductions available for tax reporting purposes that may be carried forward indefinitely. Recognition of a deferred tax asset associated with these and other carryforwards is dependent upon our evaluation that it is more likely than not that the asset will ultimately be realized. As a result of the significant declines in commodity prices and the resulting ceiling test write-downs and net losses incurred, we determined during 2015 that it was more likely than not that a portion of our deferred tax assets will not be realized in the future. Accordingly, we established a valuation allowance against a portion of our deferred tax assets. As of December 31, 2016, our valuation allowance totaled $384,810. Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.

A reconciliation between the statutory federal income tax rate and our effective income tax rate as a percentage of income before income taxes follows:



	Year Ended December 31,
	2016	2015	2014
Income tax expense computed at the statutory federal income tax rate	35.0%	35.0%	35.0%
State taxes	0.2	0.6	1.0
Change in valuation allowance	(35.0)	(12.8)	—
IRC Sec. 162(m) limitation	(0.3)	(0.1)	(0.5)
Tax deficits on stock compensation	(0.7)	(0.1)	(0.2)
Reorganization fees	(0.3)	—	—
Other	(0.2)	(0.1)	(0.3)
Effective income tax rate	(1.3)%	22.5%	35.0%

Income taxes allocated to accumulated other comprehensive income related to oil and gas hedges amounted to ($13,080), ($35,737) and $49,601 for the years ended December 31, 2016, 2015 and 2014, respectively.

As of December 31, 2016, we had unrecognized tax benefits of $491. If recognized, all of our unrecognized tax benefits would impact our effective tax rate. A reconciliation of the total amounts of unrecognized tax benefits follows:



Total unrecognized tax benefits as of December 31, 2015	$	491
Increases (decreases) in unrecognized tax benefits as a result of:
Tax positions taken during a prior period	—
Tax positions taken during the current period	—
Settlements with taxing authorities	—
Lapse of applicable statute of limitations	—
Total unrecognized tax benefits as of December 31, 2016	$	491

Our unrecognized tax benefits pertain to a proposed state income tax audit adjustment. We believe that our unrecognized tax benefits may be reduced to zero within the next 12 months upon completion and ultimate settlement of the examination.

It is our policy to classify interest and penalties associated with underpayment of income taxes as interest expense and general and administrative expenses, respectively. We recognized $46 of interest expense and no penalties related to uncertain tax positions for the year ended December 31, 2016. We recognized $131 of interest expense and no penalties related to uncertain tax positions for the year ended December 31, 2015. No such amounts were recognized for the year ended December 31, 2014. The liabilities for unrecognized tax benefits and accrued interest payable are components of other current liabilities on our balance sheet.

The tax years 2013 through 2016 remain subject to examination by major tax jurisdictions.