Provision for Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Provision for Taxes

NOTE 9—PROVISION FOR TAXES

The Company’s income tax (benefit) provision is as follows:

	2014			2013
Current:	$	—		$	—
Deferred:
Change in depreciation, depletion and amortization	$	1,437,000		$	2,895,000
Change in unrealized gain (loss) on derivative		2,841,000			232,000
Change in other items		(17,000	)		128,000
Change in NOL		(4,160,000	)		(11,783,000	)
Change in accruals		(1,020,000	)		—
Change in valuation allowance		919,000			8,528,000
Total	$	—		$	—

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates to pretax income from continuing operations for the years ended December 31, 2014 and 2013 primarily due to the generation of NOL carryforwards, expense related to stock options, intangible drilling costs, availability of AMT credit carryforwards, unrealized gain (loss) on derivative contracts and the valuation allowance.

At December 31, 2014, Trans Energy had net operating loss carryforwards of approximately $63.6 million that may be offset against future taxable income from 2015 through 2033. No tax benefit has been reported in the December 31, 2014 and 2013 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

Net deferred tax assets and liabilities consist of the following components as of December 31, 2014 and 2013:

	2014			2013
Deferred tax assets:
NOL carryover	$	21,625,000		$	17,465,000
AMT credit		606,000			606,000
Accruals		1,020,000			—
Unrealized loss on derivative contract		—			43,000
Other		31,000			14,000
Total deferred tax assets		23,282,000			18,128,000
Deferred tax liabilities:
Depreciation, depletion and amortization		(4,884,000	)		(3,447,000	)
Unrealized gain on derivative contract		(2,798,000	)		—
Total deferred tax liabilities		(7,682,000	)		(3,447,000	)
Valuation allowance		(15,600,000	)		(14,681,000	)
Net deferred taxes	$	—		$	—