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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Details of income tax provisions and deferred income taxes from continuing operations are provided in the following tables. The components of income tax benefits and expense were as follows (in thousands):
| Successor |  |  | Predecessor
| Year Ended December 31, 2022 |  | Period from May 18, 2021 through December 31, 2021 |  |  | Period from January 1, 2021 through May 17, 2021 |  | Year Ended December 31, 2020
Current: |  |  |  |  |  |  |  |
State | $ | — |  |  | $ | (39) |  |  |  | $ | (7,968) |  |  | $ | — |
Federal | — |  |  | — |  |  |  | — |  |  | (273) |
Deferred: |  |  |  |  |  |  |  |
State | — |  |  | — |  |  |  | — |  |  | 7,563 |
Federal | — |  |  | — |  |  |  | — |  |  | — |
Total income tax (benefit) expense provision | $ | — |  |  | $ | (39) |  |  |  | $ | (7,968) |  |  | $ | 7,290 |
A reconciliation of the statutory federal income tax amount to the recorded expense follows (in thousands):
| Successor |  |  | Predecessor
| Year Ended December 31, 2022 |  | Period from May 18, 2021 through December 31, 2021 |  |  | Period from January 1, 2021 through May 17, 2021 |  | Year Ended December 31, 2020
Income (loss) before federal income taxes | $ | 494,701 |  |  | $ | (112,868) |  |  |  | $ | 243,026 |  |  | $ | (1,617,843) |
Expected income tax at statutory rate | 103,887 |  |  | (23,702) |  |  |  | 51,036 |  |  | (339,747) |
State income taxes | 2,227 |  |  | (3,177) |  |  |  | (12,484) |  |  | (14,696) |
Bankruptcy adjustments | — |  |  | 44,748 |  |  |  | (111,285) |  |  | — |
Remeasurement of state deferred tax asset | 13,869 |  |  | (7,966) |  |  |  | — |  |  | — |
Return to provision | (17,075) |  |  | — |  |  |  | — |  |  | — |
Other differences | 1,117 |  |  | 2,841 |  |  |  | 445 |  |  | 10,800 |
Change in valuation allowance due to current year activity | (104,025) |  |  | (12,783) |  |  |  | 64,320 |  |  | 350,933 |
Income tax (benefit) expense recorded | $ | — |  |  | $ | (39) |  |  |  | $ | (7,968) |  |  | $ | 7,290 |
For the year ended December 31, 2022, the Company's effective tax rate was 0%. For the Prior Predecessor Period, the Company had an effective tax rate of (3.3)% and an income tax benefit of $8.0 million. For the Prior Successor Period, the Company had an effective tax rate of 0.03% and tax benefit of $39 thousand. The higher effective income tax rate for the year ended December 31, 2022, is due the Company recording a benefit in 2021 related to an Oklahoma refund claim associated with an examination of historical returns. The effective tax rate differs from the statutory tax rate due the Company's valuation allowance position. The tax effects of temporary differences and net operating loss carryforwards, which give rise to deferred tax assets and liabilities at December 31, 2022, and 2021 are estimated as follows (in thousands):
| Successor |  |  |
| December 31, 2022 |  | December 31, 2021 |  |  |  |  |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforward and tax credits | $ | 346,455 |  |  | $ | 298,127 |  |  |  |  |  |
Oil and gas property basis difference | 269,206 |  |  | 432,959 |  |  |  |  |  |
Investment in pass through entities | 66,502 |  |  | 58,751 |  |  |  |  |  |
Stock-based compensation expense | 1,484 |  |  | — |  |  |  |  |  |
Change in fair value of derivative instruments | 73,198 |  |  | 86,296 |  |  |  |  |  |
Other assets | 52,107 |  |  | 31,298 |  |  |  |  |  |
Total deferred tax assets | 808,952 |  |  | 907,431 |  |  |  |  |  |
Valuation allowance for deferred tax assets | (803,332) |  |  | (907,358) |  |  |  |  |  |
Deferred tax assets, net of valuation allowance | 5,620 |  |  | 73 |  |  |  |  |  |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Right of use asset | 5,615 |  |  | — |  |  |  |  |  |
Other | 5 |  |  | 73 |  |  |  |  |  |
Total deferred tax liabilities | 5,620 |  |  | 73 |  |  |  |  |  |
Net deferred tax asset | $ | — |  |  | $ | — |  |  |  |  |  |
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2022, a valuation allowance of $803.3 million has been recorded. The amount of the Deferred Tax Asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. As discussed in Note 2, elements of the Plan provided that the Company’s indebtedness related to Predecessor Senior Notes and certain general unsecured claims were exchanged for Common Stock in settlement of those claims. Absent an exception, a debtor recognizes CODI upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The IRC provides that a debtor in a Chapter 11 bankruptcy case may exclude CODI from taxable income, but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. As a result of the market value of equity upon emergence from Chapter 11 bankruptcy proceedings, the estimated amount of CODI and historical interest expense haircut is approximately $655 million, which will reduce the value of the Company’s net operating losses. The actual reduction in tax attributes does not occur until the first day of the Company’s tax year subsequent to the date of emergence, or January 1, 2022. The reduction of net operating losses is expected to be fully offset by a corresponding decrease in valuation allowance. As of December 31, 2021, the Company had an estimated federal net operating loss carryforward of approximately $1.4 billion after giving effect to the estimated reduction in tax attributes as discussed above. Emergence from Chapter 11 bankruptcy proceedings resulted in a change in ownership for purposes of IRC Section 382. The Company is applying rules under IRC Section 382(l)(5) that allows the Company to mitigate the limitations imposed under the regulations with respect to the Company’s remaining tax attributes. The Company’s deferred tax assets and liabilities, prior to the valuation allowance, have been computed on such basis. Additionally, under IRC Section 382(l)(5), an ownership change subsequent to the Company’s emergence could severely limit or effectively eliminate its ability to realize the value of its tax attributes. The Company has an available federal tax net operating loss carryforward estimated at approximately $1.6 billion as of December 31, 2022. These federal net operating loss carryforwards of approximately $349 million generated in tax years prior to 2018 will begin to expire in 2036. As a result of the Tax Cuts and Jobs Act, the 2018 through 2022 federal NOL carryforwards of $1.3 billion have no expiration. The Company also has state net operating loss carryovers of approximately $317 million that began to expire in 2022. As of December 31, 2022, we had no liability for uncertain tax positions. On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Based on the Company's current analysis of the provisions, the Company does not believe this legislation will have a material impact on its consolidated financial statements.

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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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