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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | Note 4 – Income Taxes The provision for income taxes consists of the following:
|  | For the Years Ended December 31,
|  | 2015 |  | 2014 |  | 2013
|  | (in thousands)
Current portion of income tax expense |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  | 1,571 |  |  | 868 |  |  | 2,121 |
Deferred portion of income tax expense (benefit) |  | (276,722 | ) |  | 397,780 |  |  | 105,555 |
Total income tax expense (benefit) |  | $ | (275,151 | ) |  | $ | 398,648 |  |  | $ | 107,676 |
Effective tax rate |  | 38.1 | % |  | 37.4 | % |  | 38.6 | %
The components of the net deferred income tax liabilities are as follows:
|  | As of December 31,
|  | 2015 |  | 2014
|  | (in thousands)
Deferred tax liabilities: |  |  |  |
Oil and gas properties |  | $ | 854,029 |  |  | $ | 1,029,424 |
Derivative asset |  | 179,543 |  |  | 220,437 |
Other |  | 1,233 |  |  | 4,475 |
Total deferred tax liabilities |  | 1,034,805 |  |  | 1,254,336 |
Deferred tax assets: |  |  |  |  |  |
Federal and state tax net operating loss carryovers |  | 244,942 |  |  | 184,447 |
Stock compensation |  | 14,529 |  |  | 16,763 |
Other liabilities |  | 27,449 |  |  | 25,715 |
Total deferred tax assets |  | 286,920 |  |  | 226,925 |
Valuation allowance |  | (10,394 | ) |  | (7,246 | )
Net deferred tax assets |  | 276,526 |  |  | 219,679 |
Total net deferred tax liabilities (1) |  | $ | 758,279 |  |  | $ | 1,034,657 |
Current federal income tax refundable |  | $ | 5,378 |  |  | $ | 4,734 |
Current state income tax refundable |  | $ | 65 |  |  | $ | — |
Current state income tax payable |  | $ | — |  |  | $ | 25 |
____________________________________________
(1) | All deferred tax liabilities and assets as of December 31, 2015, are classified as noncurrent on the accompanying balance sheets upon the Company’s adoption of ASU 2015-17 on a prospective basis. Prior year amounts have not been restated. Please refer to the caption Recently Issued Accounting Standards in Note 1 - Summary of Significant Accounting Policies for additional discussion.
At December 31, 2015, the Company estimated its federal net operating loss carryforward at $796.7 million, which includes unrecognized excess income tax benefits associated with stock awards of $126.7 million. The federal net operating loss carryforward begins to expire in 2031. The Company has estimated state net operating loss carryforwards of $338.9 million that expire between 2016 and 2036 and it has federal R&D credit carryforwards of $7.2 million that expire between 2028 and 2033. The Company’s valuation allowance relates to charitable contribution carryforwards, state net operating loss carryforwards, and state tax credits, which the Company anticipates will expire before they can be utilized. The change in the valuation allowance from 2014 to 2015 primarily reflects an allocable change to the Company’s mix of state apportioned losses and the anticipated utilization of state cumulative net operating losses. Federal income tax expense differs from the amount that would be provided by applying the statutory United States federal income tax rate to income before income taxes primarily due to the effect of state income taxes, changes in valuation allowances, R&D credits, and other permanent differences, as follows:
| For the Years Ended December 31,
| 2015 |  | 2014 |  | 2013
| (in thousands)
Federal statutory tax expense (benefit) | $ | (253,001 | ) |  | $ | 372,644 |  |  | $ | 97,514 |
Increase (decrease) in tax resulting from: |  |  |  |  |
State tax expense (benefit) (net of federal benefit) | (21,583 | ) |  | 21,350 |  |  | 9,400 |
Change in valuation allowance | 3,148 |  |  | 2,245 |  |  | (314 | )
Research and development credit | (1,971 | ) |  | — |  |  | — |
Other | (1,744 | ) |  | 2,409 |  |  | 1,076 |
Income tax expense (benefit) | $ | (275,151 | ) |  | $ | 398,648 |  |  | $ | 107,676 |
Acquisitions, divestitures, drilling activity, and basis differentials impacting the prices received for oil, gas, and NGLs affect apportionment of taxable income to the states where the Company owns oil and gas properties. As its apportionment factors change, the Company’s blended state income tax rate changes. This change, when applied to the Company’s total temporary differences, impacts the total state income tax expense (benefit) reported in the current year. Items affecting state apportionment factors are evaluated at the beginning of each year, after completion of the prior year income tax return, and when significant acquisition, divestiture, or changes in drilling activity or estimated state revenue occurs during the year. The Company and its subsidiaries file federal income tax returns and various state income tax returns. With certain exceptions, the Company is no longer subject to United States federal or state income tax examinations by these tax authorities for years before 2007. During the first quarter of 2015, as a result of its R&D credit settlement with the IRS Appeals Office in late 2014, the Company recorded an additional $2.0 million net R&D credit from a claim filed on an amended return. At December 31, 2015, the Company’s 2007 - 2011 IRS examination was still ongoing, but a final agreement was reached in January 2016. There are no material adjustments to previously recorded amounts. During the quarter ended September 30, 2015, the IRS initiated an audit of the SM-Mitsui Tax Partnership for the 2013 tax year. The Company has a significant investment in the underlying assets of the tax partnership and this audit was still in progress at December 31, 2015. The Company complies with authoritative accounting guidance regarding uncertain tax provisions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. Interest expense in the accompanying statements of operations includes a negligible amount associated with income taxes. At December 31, 2015, the Company estimates the range of reasonably possible change in 2016 to the recorded unrecognized tax benefits presented in the table below could be from zero to $1.8 million. The total amount recorded for unrecognized tax benefits is presented below:
| For the Years Ended December 31,
| 2015 |  | 2014 |  | 2013
| (in thousands)
Beginning balance | $ | 1,582 |  |  | $ | 2,358 |  |  | $ | 2,278 |
Additions for tax positions of prior years | 1,200 |  |  | 140 |  |  | 80 |
Settlements | — |  |  | (916 | ) |  | — |
Ending balance | $ | 2,782 |  |  | $ | 1,582 |  |  | $ | 2,358 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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