Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

Our income tax provision (benefit) is as follows:

	Successor				Predecessor
	Year Ended Dec. 31, 2021		Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020		Year Ended Dec. 31, 2019
In thousands
Current income tax expense (benefit)
Federal	$	—	$	—	$	(6,407)	$	2,645
State	403		30		(853)		1,236
Total current income tax expense (benefit)	403		30		(7,260)		3,881
Deferred income tax expense (benefit)
Federal	—		—		(319,011)		89,950
State	364		(2,556)		(89,858)		10,521
Total deferred income tax expense (benefit)	364		(2,556)		(408,869)		100,471
Total income tax expense (benefit)	$	767	$	(2,526)	$	(416,129)	$	104,352

At December 31, 2021, we had federal net operating loss carryforwards (“NOLs”) and business credit carryforwards (before provision for valuation allowance) totaling $10.3 million and $18.1 million, respectively. Our federal NOLs may be carried forward indefinitely and our credit carryforwards begin to expire in 2041. NOL, enhanced oil recovery credit and research and development credit carryforwards generated prior to January 1, 2021 were fully reduced in accordance with the attribute reduction and ordering rules of Section 108 of the Internal Revenue Code of 1986 pertaining to discharge of indebtedness. At December 31, 2021, we had $0.6 million of alternative minimum tax credits, which under the Tax Cut and Jobs Act passed in 2017 will be fully refundable by 2022, and are recorded as a receivable on the balance sheet, and state NOLs and tax credits totaling $54.9 million (before provision for valuation allowance) related to all our state operations, which continue as carryforwards for the Successor. Our state NOLs expire in various years, starting in 2025.

Deferred income taxes reflect the available tax carryforwards and the temporary differences based on tax laws and statutory rates in effect at the December 31, 2021 and 2020 balance sheet dates.  As of December 31, 2021, we had $74.1 million of net state deferred tax assets associated with operations in Louisiana, Mississippi, Montana, North Dakota and Alabama, which were

fully offset with valuation allowances. The valuation allowances will remain until the realization of future deferred tax benefits are more likely than not to become utilized. The changes in our valuation allowance are detailed below:

	Successor				Predecessor
	Year Ended Dec. 31, 2021		Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020		Year Ended Dec. 31, 2019
In thousands
Beginning balance	$	129,408	$	129,840	$	77,215	$	51,093
Charges	29,345		2,269		77,138		26,122
Deductions	(33,291)		(2,701)		(24,513)		—
Ending balance	$	125,462	$	129,408	$	129,840	$	77,215

As of December 31, 2021, we had no unrecognized tax benefits recorded related to an uncertain tax position.

Significant components of our deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows:

	Successor
In thousands	December 31, 2021		December 31, 2020
Deferred tax assets
Loss and tax credit carryforwards – state	$	54,943	$	55,979
Derivative contracts	30,892		13,090
Accrued liabilities and other reserves	19,567		15,632
Business credit carryforwards	18,066		—
Loss carryforwards – federal	10,310		—
Lease liabilities	4,523		6,354
Property and equipment	2,613		59,207
Other	4,206		4,092
Valuation allowances	(125,462)		(129,408)
Total deferred tax assets	19,658		24,946
Deferred tax liabilities
CO2 and other contracts	(17,208)		(20,030)
Operating lease right-of-use assets	(4,088)		(6,190)
Total deferred tax liabilities	(21,296)		(26,220)
Total net deferred tax liability	$	(1,638)	$	(1,274)

Our reconciliation of income tax expense computed by applying the U.S. federal statutory rate and the reported effective tax rate on income from continuing operations is as follows:

	Successor				Predecessor
	Year Ended Dec. 31, 2021		Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020		Year Ended Dec. 31, 2019
In thousands
Income tax provision calculated using the federal statutory income tax rate	$	11,921	$	(11,169)	$	(388,228)	$	67,475
State income taxes, net of federal income tax benefit	450		(2,532)		(86,937)		7,435
Tax shortfall (windfall) on stock-based compensation deduction	(267)		—		(1,502)		1,912
Nondeductible compensation	5,057		—		—		—
Change in valuation allowance	(2,928)		9,653		19,344		26,122
Enhanced oil recovery credits generated	(14,272)		—		—		—
Tax attributes reduction – net of CODI exclusion	—		—		31,667		—
Other	806		1,522		9,527		1,408
Total income tax expense (benefit)	$	767	$	(2,526)	$	(416,129)	$	104,352

We file consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state jurisdictions.  The statutes of limitation for our income tax returns for tax years ending prior to 2018 have lapsed and therefore are not subject to examination by respective taxing authorities. We have not paid any significant interest or penalties associated with our income taxes.