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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Taxes [Abstract] |
Income Taxes | 8. INCOME TAXESVAALCO and its domestic subsidiaries file a consolidated U.S. income tax return. Certain foreign subsidiaries also file tax returns in their respective local jurisdictions.Income taxes attributable to continuing operations for the years ended December 31, 2021, 2020, and 2019 are attributable to foreign taxes payable in Gabon as well as income taxes in the U.S. Provision for income taxes related to income (loss) from continuing operations consists of the following: Year Ended December 31, 2021 2020 2019U.S. Federal: (in thousands)Current $ — $ (337) $ (337)Deferred (34,548) 11,814 3,916Foreign: Current 20,282 3,859 9,747Deferred (7,890) 12,345 10,564Total $ (22,156) $ 27,681 $ 23,890As of December 31, 2021 and 2020 the Company had deferred tax assets of $86.9 million and $126.3 million, respectively. The deferred tax assets are primarily attributable to Gabon and U.S. federal income taxes related to basis differences in fixed assets, foreign tax credit carryforwards, as well as U.S. and foreign net operating loss carryforwards. In assessing the realizability of the deferred tax assets, the Company considers all available positive and negative evidence and makes a determination whether it is more likely than not that some or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future income in periods in which the deferred tax assets can be utilized. Numerous judgments and assumptions are inherent in this assessment, including the determination of future taxable income, future operating conditions (particularly as related to prevailing crude oil prices).As of December 31, 2021, due to the increase in future taxable income, the Company determined that it is more likely than not that it would be able to fully utilize its Gabon deferred tax assets and partially utilize its U.S deferred tax assets. Correspondingly, this resulted in a full valuation allowance release of the Gabon deferred tax asset and a partial valuation allowance release of the U.S deferred tax asset. As of December 31, 2020, the Company determined that it is more likely than not that it would not be able to utilize its deferred tax assets. On the basis of these evaluations, a valuation allowance of $46.9 million and $126.3 million were recorded as of December 31, 2021 and 2020, respectively. Valuation allowances reduce the deferred tax assets to the amount that is more likely than not to be realized. Taxes paid in Gabon with respect to earnings from the Etame Marin block are determined under the provisions of the Etame PSC. In accordance with the Etame PSC, the Etame Consortium maintains a “Cost Account,” which accumulates capital costs and operating expenses that are deductible against revenues, net of royalties, in determining taxable profits. For each calendar year, the Etame Consortium is entitled to receive a percentage of the production (“Cost Recovery Percentage”) remaining after deducting royalties so long as there are amounts remaining in the Cost Account. Prior to the PSC Extension, the Cost Recovery Percentage was 70%. As a result of the PSC Extension, the Cost Recovery Percentage has been increased to 80% for the period from September 17, 2018 through September 16, 2028. See Note 9 for further discussion of the PSC Extension. After September 16, 2028, the Cost Recovery Percentage returns to 70%. The difference between revenues, net of royalties, and the costs recovered for the period is “Profit Oil.” As payment of corporate income taxes, the Etame Consortium pays the government an allocation of the remaining Profit Oil production from the contract area ranging from 50% to 60%. The percentage of Profit Oil paid to the government as tax is a function of production rates. When the Cost Account is less than the entitled recovery percentage (either 70% or 80%, depending on the period), Profit Oil as a percentage of revenues increases and Gabon taxes paid increase as a percentage of revenues. We also record as income tax expense the increase or decrease in the value of the government’s allocation of Profit Oil which results due to change in value from the time the allocation is originally produced to the time the allocation is actually lifted. The primary differences between the financial statement and tax bases of assets and liabilities resulted in deferred tax assets associated with continuing operations at December 31, 2021 and 2020 are as follows: As of December 31,(in thousands) 2021 2020Deferred tax assets: Basis difference in fixed assets $ 20,133 $ 27,995Foreign tax credit carryforward 20,084 34,144Alternative minimum tax credit carryover — —U.S. federal net operating losses 25,182 32,579Foreign net operating losses 8,693 24,602Asset retirement obligations 8,546 3,640Operating leases 1,750 1,472Basis difference in accrued liabilities 402 368Basis difference in receivables 454 331Other 1,683 1,121Total deferred tax assets 86,927 126,252Valuation allowance (46,949) (126,252)Net deferred tax assets $ 39,978 $ — Foreign tax credits will expire between the years 2021 and 2025. Foreign net operating losses (“NOLs”) are not subject to expiry dates. The NOLs for the Gabon subsidiaries are included in the respective subsidiaries’ cost oil accounts, which will be offset against future taxable revenues. All of the Company’s U.S. federal NOLs that were incurred prior to 2018 will expire between 2035 and 2037. U.S. federal NOLs incurred after 2017 do not expire. The ability to utilize NOLs and other tax attributes could be subject to a limitation if the Company were to undergo an ownership change as defined in Section 382 of the Tax Code. The Company does not anticipate utilization of the foreign tax credits prior to expiration and has recorded a full valuation allowance on these deferred tax assets.The Company recognizes the financial statement benefit of a tax position only after determining that they are more likely than not to sustain the position following an audit. The Company believes that its income tax positions and deductions will be sustained on audit, and therefore no reserves for uncertain tax positions have been established. Accordingly, no interest or penalties have been accrued as of December 31, 2021 and 2020. The Company’s policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.Income (loss) from continuing operations before income taxes is attributable as follows: Year Ended December 31,(in thousands) 2021 2020 2019U.S. $ (38,867) $ (2,908) $ (13,330)Foreign 98,645 (17,494) 34,372 $ 59,778 $ (20,402) $ 21,042The reconciliation of income tax expense (benefit) attributable to income (loss) from continuing operations to income tax on income (loss) from continuing operations at the U.S. statutory rate is as follows: Year Ended December 31,(in thousands) 2021 2020 2019Tax provision computed at U.S. statutory rate $ 12,553 $ (4,284) $ 4,386Foreign taxes not offset in U.S. by foreign tax credits 35,306 (9,801) 16,015Recognition of foreign deferred tax assets, net of U.S. impact — — —Unrealizable foreign deferred tax assets — — —Permanent differences (703) 97 180Foreign tax credit expirations 14,060 — 9,616Increase/(decrease) in valuation allowance (83,372) 41,635 (6,307)Other — 34 —Total income tax expense (benefit) $ (22,156) $ 27,681 $ 23,890 For the years ended December 31, 2021, 2020, and 2019, the Company is subject to foreign and U.S. federal taxes only, with no allocations made to state and local taxes. The following table summarizes the tax years that remain subject to examination by major tax jurisdictions. Jurisdiction YearsU.S. 2012-2021Gabon 2017-2021

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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