Income Taxes

12 Months Ended

Dec. 31, 2022

The provision for income tax was as follows:


Expense (recovery)	2022		2021		2020
Current corporate income tax – North America	$	2,789	$	1,841	$	(245)
Current corporate income tax – North Sea	69		7		(4)
Current corporate income tax – Offshore Africa	74		21		17
Current PRT (1) – North Sea	(42)		(34)		(31)
Other taxes	16		13		6
Current income tax	2,906		1,848		(257)
Deferred corporate income tax	302		399		(181)
Deferred PRT (1) – North Sea	(441)		—		—
Deferred income tax	(139)		399		(181)
Income tax	$	2,767	$	2,247	$	(438)

(1)Petroleum Revenue Tax.

In connection with the Company's de-booking of its crude oil reserves and acceleration of the abandonment at the Ninian field in the North Sea (note 7), as at December 31, 2022, the Company recognized deferred tax recoveries comprised of a deferred corporate income tax recovery of $528 million and a deferred PRT recovery of $441 million.

The provision for income tax is different from the amount computed by applying the combined statutory Canadian federal and provincial income tax rates to earnings before taxes. The reasons for the difference are as follows:


	2022		2021		2020
Canadian statutory income tax rate	23.2%		23.2%		24.1%
Income tax provision at statutory rate	$	3,180	$	2,298	$	(211)
Effect on income taxes of:
UK PRT and other taxes	(467)		(21)		(25)
Impact of UK PRT and other taxes on corporate income tax	190		11		11
Foreign and domestic tax rate differentials	(203)		(11)		(52)
Non-taxable portion of capital gains	65		(26)		(10)
Stock options exercised for common shares	159		98		(25)

Non-taxable gain on corporate acquisitions	—		(110)		(52)
Revisions arising from prior year tax filings	(186)		16		(62)
Change in unrecognized capital loss carryforward asset	65		(26)		(10)
Other	(36)		18		(2)
Income tax	$	2,767	$	2,247	$	(438)

The following table summarizes the temporary differences that give rise to the net deferred income tax liability:


	2022		2021
Deferred income tax liabilities
Property, plant and equipment and exploration and evaluation assets	$	11,985	$	12,254
Lease assets	336		349


Investments	56		35
Investment in North West Redwater Partnership	903		850
Unrealized risk management activities	—		12
Unrealized foreign exchange gain on long-term debt	—		14
Taxable PRT for corporate income tax	176		—
Other	25		78
	13,481		13,592
Deferred income tax assets
Asset retirement obligations	(1,822)		(1,719)
Lease liabilities	(354)		(363)
Share-based compensation	(33)		(22)
Loss carryforwards	(652)		(1,268)
Unrealized foreign exchange loss on long-term debt	(67)		—
Deferred PRT	(439)		—


	(3,367)		(3,372)
Net deferred income tax liability	$	10,114	$	10,220

Movements in deferred tax assets and liabilities recognized in net earnings during the year were as follows:


	2022		2021		2020
Property, plant and equipment and exploration and evaluation assets	$	(334)	$	184	$	(158)
Lease assets	(15)		(30)		(11)
Unrealized foreign exchange on long-term debt	(81)		34		29
Unrealized risk management activities	(12)		19		(8)
Asset retirement obligations	(74)		(213)		(13)
Lease liabilities	11		25		6
Share-based compensation	(11)		(10)		4
Loss carryforwards	618		202		(182)
Investments	21		21		(22)
Investment in North West Redwater Partnership	53		83		174
Deferred PRT	(441)		—		—
Taxable PRT for corporate income tax	176		—		—
Other	(50)		84		—
	$	(139)	$	399	$	(181)

The following table summarizes the movements of the net deferred income tax liability during the year:


	2022		2021		2020
Balance – beginning of year	$	10,220	$	10,144	$	10,539
Deferred income tax (recovery) expense	(139)		399		(181)
Deferred income tax expense included in other comprehensive income (loss)	—		1		—
Foreign exchange adjustments	33		(2)		(3)
Business combinations (note 7)	—		(322)		(211)
Balance – end of year	$	10,114	$	10,220	$	10,144

Current income taxes recognized in each operating segment will vary depending upon available income tax deductions related to the nature, timing and amount of capital expenditures incurred in any particular year.

The Company files income tax returns in the various jurisdictions in which it operates. These tax returns are subject to periodic examinations in the normal course by the applicable tax authorities. The tax returns as prepared may include filing positions that could be subject to differing interpretations of applicable tax laws and regulations, which may take several years to resolve. The Company does not believe the ultimate resolution of these matters will have a material impact upon the Company’s reported results of operations, financial position or liquidity.

Deferred income tax assets are recognized for temporary differences to the extent that the realization of the related tax benefit through future taxable profits is probable. Deferred PRT assets will be recovered from the UK Government, directly or through other third parties, as related abandonment expenditures are made. The Company has not recognized deferred income tax assets with respect to taxable capital loss carryforwards in excess of $1,000 million in North America, which can be carried forward indefinitely and only applied against future taxable capital gains. In addition, the Company has not recognized deferred income tax assets related to North American tax pools of approximately $1,000 million, which can only be claimed against income from certain oil and gas properties.

Deferred income tax liabilities have not been recognized on the unremitted net earnings of wholly controlled subsidiaries. The Company is able to control the timing and amount of distributions and no taxes are payable on distributions from these subsidiaries provided that the distributions remain within certain limits.