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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s income tax benefit from continuing operations consists of the following (in thousands):
| Successor |  |  | Predecessor
| Year Ended December 31, |  | Period from November 20, 2020 through December 31, 2020 |  |  | Period from January 1, 2020 through November 19, 2020
| 2022 |  | 2021 |  |  |
Current: |  |  |  |  |  |  |  |
Federal | $ | 7,127 |  |  | $ | — |  |  | $ | — |  |  |  | $ | (36) |
State | 883 |  |  | 4 |  |  | — |  |  |  | — |
Total current tax expense (benefit) | 8,010 |  |  | 4 |  |  | — |  |  |  | (36) |
Deferred: |  |  |  |  |  |  |  |
Federal | (46,767) |  |  | (977) |  |  | (2,918) |  |  |  | (221,277) |
State | (8,127) |  |  | — |  |  | (529) |  |  |  | (41,649) |
Total deferred tax benefit | (54,894) |  |  | (977) |  |  | (3,447) |  |  |  | (262,926) |
Total income tax benefit | $ | (46,884) |  |  | $ | (973) |  |  | $ | (3,447) |  |  |  | $ | (262,962) |
The reconciliation of income taxes from continuing operations calculated at the U.S. federal tax statutory rate to the Company’s effective tax rate is set forth below:
| Successor |  |  | Predecessor
| Year Ended December 31, |  | Period from November 20, 2020 through December 31, 2020 |  |  | Period from January 1, 2020 through November 19, 2020
| 2022 |  | 2021 |  |  |
| (%) |  | (In thousands) |  | (%) |  | (In thousands) |  | (%) |  | (In thousands) |  |  | (%) |  | (In thousands)
U.S. federal tax statutory rate | 21.0 | % |  | $ | 291,068 |  |  | 21.0 | % |  | $ | 39,477 |  |  | 21.0 | % |  | $ | (14,817) |  |  |  | 21.0 | % |  | $ | (867,051) |
State income taxes, net of federal income tax benefit | 2.6 | % |  | 36,156 |  |  | 3.0 | % |  | 5,679 |  |  | 2.6 | % |  | (1,817) |  |  |  | 2.4 | % |  | (98,946) |
Non-deductible executive compensation | 0.7 | % |  | 9,204 |  |  | 1.3 | % |  | 2,510 |  |  | — | % |  | — |  |  |  | — | % |  | 1,372 |
Transaction costs | 0.3 | % |  | 3,855 |  |  | — | % |  | — |  |  | — | % |  | — |  |  |  | — | % |  | — |
Change in valuation allowance | (27.2) | % |  | (377,233) |  |  | (71.7) | % |  | (134,713) |  |  | (18.3) | % |  | 12,941 |  |  |  | (14.7) | % |  | 606,642 |
Equity-based compensation windfall (shortfall) | (0.4) | % |  | (5,723) |  |  | — | % |  | — |  |  | — | % |  | — |  |  |  | (0.2) | % |  | 8,687 |
Discharge of debt and nondeductible professional fees | — | % |  | — |  |  | 46.3 | % |  | 87,070 |  |  | (0.3) | % |  | 232 |  |  |  | (2.1) | % |  | 85,149 |
Other | (0.4) | % |  | (4,211) |  |  | (0.4) | % |  | (996) |  |  | — | % |  | 14 |  |  |  | — | % |  | 1,185 |
Annual effective tax benefit | (3.4) | % |  | $ | (46,884) |  |  | (0.5) | % |  | $ | (973) |  |  | 5.0 | % |  | $ | (3,447) |  |  |  | 6.4 | % |  | $ | (262,962) |
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows:
| December 31,
| 2022 |  | 2021
| (In thousands)
Deferred tax assets |  |  |
Net operating loss carryforward | $ | 316,085 |  |  | $ | 51,942 |
Oil and natural gas properties | — |  |  | 237,051 |
Derivative instruments | 72,761 |  |  | 91,213 |
Bonus and equity-based compensation | 9,806 |  |  | 6,718 |
Investment in partnerships | — |  |  | 12,924 |
Other deferred tax assets | 7,863 |  |  | 14,843 |
Total deferred tax assets | 406,515 |  |  | 414,691 |
Less: Valuation allowance | (9,617) |  |  | (399,770) |
Total deferred tax assets, net | $ | 396,898 |  |  | $ | 14,921 |
Deferred tax liabilities |  |  |
Oil and natural gas properties | $ | 117,995 |  |  | $ | — |
Investment in partnerships | 69,867 |  |  | — |
Other deferred tax liabilities | 8,810 |  |  | 14,928 |
Total deferred tax liabilities | $ | 196,672 |  |  | $ | 14,928 |
Total deferred tax assets (liabilities), net | $ | 200,226 |  |  | $ | (7) |
The Company’s effective tax rate for the year ended December 31, 2022 (Successor) was (3.4)% of pre-tax income from continuing operations, as compared to an effective tax rate of (0.5)% of pre-tax income from continuing operations for the year ended December 31, 2021 (Successor). The effective tax rates from continuing operations for the year ended December 31, 2022 (Successor) and 2021 (Successor) were lower than the statutory federal rate of 21% primarily as a result of the Company’s valuation allowance, the substantial majority of which was released as of December 31, 2022. This benefit was partially offset by the impacts of state income taxes. As a result of the Merger, which qualified as a tax-free reorganization for U.S. federal income tax purposes, the Company recognized a net deferred tax asset of $228.6 million in its purchase price allocation as of the acquisition date to reflect the difference between the tax basis and the fair value of Whiting’s assets acquired and liabilities assumed. The net deferred tax asset includes the tax effected benefit of federal net operating loss (“NOL”) carryforwards of $1.1 billion that were acquired in the Merger and are subject to various limitations under Section 382 of the Internal Revenue Code of 1986 (the “Code”), as discussed further below. As of December 31, 2022, the Company had gross U.S. federal NOL carryforwards of $1.1 billion, of which approximately $1.0 billion will not expire and $105.3 million will expire from 2023 to 2037, and gross state NOL carryforwards of $2.2 billion. The gross state NOL carryforwards expire between 2023 and 2041. Both the Company and Whiting experienced an “ownership change” as defined by the Code in the past, including as a result of the Merger. Accordingly, under Section 382 of the Code, the Company’s NOL carryforwards and other tax attributes (collectively, “Tax Benefits”) are subject to various limitations going forward. However, the limitations applicable under Section 382 of the Code resulting from the Merger are not expected to have a material impact on the realizability of the Company’s deferred tax assets. The Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership that it cannot predict or control that could result in further limitations being placed on its ability to utilize its Tax Benefits. Determining the limitations under Section 382 of the Code is technical and highly complex, and upon future analysis the Company may determine that its ability to utilize its Tax Benefits may be limited to a greater extent than currently anticipated. Tax Benefits are recorded as an asset to the extent that management assesses the utilization of such Tax Benefits to be more likely than not, and when the future utilization of some portion of the Tax Benefits is determined not to be more likely than not, then a valuation allowance is provided to reduce the Tax Benefits from such assets. The Company initially recorded a valuation allowance against substantially all of its net deferred tax assets as of March 31, 2020. As of each reporting date, the Company assesses the available positive and negative evidence, including future reversals of temporary differences, tax-planning strategies and future taxable income, to estimate whether sufficient future taxable income will be generated to realize its deferred tax assets. A significant piece of objective positive evidence that the Company has evaluated is the cumulative income earned during the periods since the Company and Whiting each emerged from voluntary restructuring under Chapter 11 of the Bankruptcy Code in 2020. This source of objective positive evidence combined with the indefinite lives for many of the Company’s deferred tax assets and projections of future taxable income led the Company to determine that there is sufficient positive evidence to conclude that it is more likely than not that the Company will realize the majority of its net deferred tax assets and release a substantial majority of the valuation allowance previously recorded for the year. The Company’s estimated valuation allowance as of December 31, 2022 was $9.6 million, which relates to state NOL carryforwards acquired in the Merger. The Company’s estimated valuation allowance as of December 31, 2021 was $399.8 million and was released during the year ended December 31, 2022 (Successor), including $377.2 million that was attributable to continuing operations and $22.6 million that was attributable to discontinued operations. Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company had no unrecognized tax benefits as of December 31, 2022 and 2021. With respect to income taxes, the Company’s policy is to account for interest charges as interest expense and any penalties as tax expense in its Consolidated Statements of Operations. The Company files a U.S. federal income tax return and income tax returns in the various states where it operates. As the Company has NOL carryforwards from previous tax years, of which the earliest relate to the 2012 tax year, the Internal Revenue Service (“IRS”) may examine the Company’s loss years back to the 2012 tax year. The Company has filed a non-automatic method change with the IRS to change the method of accounting for losses on undeveloped oil and gas leases that have expired for an entity acquired as part of the Merger. Should this method change be approved by the IRS, additional tax deductions may be available with respect to the Company’s 2022 tax year.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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