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Income Taxes | 12 Months Ended
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Dec. 31, 2018
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,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Current portion of income tax expense (benefit) |  |  |  |  |
Federal | $ | — |  |  | $ | 5,698 |  |  | $ | 2,932 |
State | 1,662 |  |  | 3,398 |  |  | 1,539 |
Deferred portion of income tax expense (benefit) | 141,708 |  |  | (192,066 | ) |  | (448,643 | )
Total income tax expense (benefit) | $ | 143,370 |  |  | $ | (182,970 | ) |  | $ | (444,172 | )
Effective tax rate | 22.0 | % |  | 53.2 | % |  | 37.0 | %
The components of the net deferred tax liabilities are as follows:
| As of December 31,
| 2018 |  | 2017
| (in thousands)
Deferred tax liabilities |  |  |
Oil and gas properties | $ | 218,094 |  |  | $ | 142,467 |
Derivative assets | 35,247 |  |  | — |
Other | 4,812 |  |  | 3,412 |
Total deferred tax liabilities | 258,153 |  |  | 145,879 |
Deferred tax assets |  |  |  |  |
Derivative liabilities | — |  |  | 29,463 |
Credit carryover | 22,554 |  |  | 22,537 |
Pension | 6,427 |  |  | 7,986 |
Federal and state tax net operating loss carryovers | 4,217 |  |  | 3,867 |
Stock compensation | 3,263 |  |  | 3,545 |
Other liabilities | 1,497 |  |  | 1,470 |
Total deferred tax assets | 37,958 |  |  | 68,868 |
Valuation allowance | (3,083 | ) |  | (2,978 | )
Net deferred tax assets | 34,875 |  |  | 65,890 |
Total net deferred tax liabilities | $ | 223,278 |  |  | $ | 79,989 |
Current federal income tax refundable | $ | 59 |  |  | $ | 37 |
Current state income tax payable | $ | 1,331 |  |  | $ | 3,009 |
The enactment of the 2017 Tax Act on December 22, 2017 reduced the Company’s federal tax rate for 2018 and future years from 35 percent to 21 percent. With the conclusion of the one-year measurement period and considering subsequent guidance, the Company believes it has properly analyzed the tax accounting impacts of the 2017 Tax Act, including the $1.0 million limitation on the compensation of certain covered individuals, which impacts the Company’s tax rate. There are no new estimates or finalized income tax items associated with the 2017 Tax Act included in income tax (expense) benefit for the year ended December 31, 2018. As of December 31, 2018, the Company estimated its federal net operating loss (“NOL”) carryforward at $2.3 million, which reflects the planning strategies to utilize NOLs for the 2017 and 2016 tax years. In 2017, the Company re-evaluated various factors affecting deferred tax assets related to net operating losses and tax credits and determined utilization would be appropriate. The change in the current quarter portion of income tax (expense) benefit between periods reflects the effect of this determination. The Company expects to receive the 2018 federal current portion of income tax expense as a credit against tax in a future period. See the credit discussion below. After the adoption of ASU 2016-09 in 2017, the Company no longer records a deferred tax amount for unrecognized excess income tax benefits associated with employee share-based payment awards. A cumulative effect adjustment was recorded to the beginning deferred income tax balance and retained earnings as of January 1, 2017. Please refer to Note 1 – Summary of Significant Accounting Policies above for additional information regarding the adoption of ASU 2016-09. The Company has federal research and development (“R&D”) and AMT credit carryforwards of $7.4 million and $15.6 million, respectively. The federal R&D credit carryforwards expire between 2028 and 2034. The Company’s AMT credit carryforwards do not expire and are expected to be fully refunded by 2022. State NOL carryforwards were $79.7 million and state tax credits were $212,000 as of December 31, 2018. Federal and state NOLs and state credits expire between 2019 and 2038. The Company’s current valuation allowance relates to state NOL carryforwards and state tax credits, which are expected to expire before they can be utilized. The change in the valuation allowance from 2017 to 2018 primarily relates to an allocable change to the Company’s mix of state apportioned losses and anticipated utilization of state cumulative NOLs. Federal income tax expense (benefit) 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, excess tax benefits and deficiencies from share-based payment awards, changes in valuation allowances, R&D credits, and accumulated impacts of other smaller permanent differences, and is reported as follows:
| For the Years Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Federal statutory tax expense (benefit) | $ | 136,873 |  |  | $ | (120,335 | ) |  | $ | (420,671 | )
Increase (decrease) in tax resulting from: |  |  |  |  |
Federal tax reform changes - 2017 Tax Act | — |  |  | (63,675 | ) |  | — |
State tax expense (benefit) (net of federal benefit) | 2,771 |  |  | (3,286 | ) |  | (17,549 | )
Change in valuation allowance | 105 |  |  | (2,727 | ) |  | (5,059 | )
Employee share-based compensation | 2,508 |  |  | 8,190 |  |  | — |
Other | 1,113 |  |  | (1,137 | ) |  | (893 | )
Income tax expense (benefit) | $ | 143,370 |  |  | $ | (182,970 | ) |  | $ | (444,172 | )
Acquisitions, divestitures, drilling activity, and basis differentials, which impact the prices received for oil, gas, and NGLs, impact the apportionment of taxable income to the states where the Company owns oil and gas properties. As these factors change, the Company’s 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 upon completion of the prior year income tax return, after significant acquisitions and divestitures, if there are significant changes in drilling activity, or if estimated state revenue changes occur during the year. As a result of the 2018 divestitures, the Company’s state apportionment rate reflects its significant Texas presence. The Company and its subsidiaries file federal income tax returns and various state income tax returns. The Company is generally no longer subject to United States federal or state income tax examinations by tax authorities for years before 2015. During the third quarter of 2018, the IRS finalized its examination of the net operating loss (“NOL”) claims back to tax years 2003 through 2005 with no changes to claimed amounts. The Company received $5.9 million and $5.5 million of cash refunds in 2018 and 2017, respectively, for NOL carryback claims. During 2016, the Company’s 2007 - 2011 IRS examination was finalized, with no material adjustments to previously recorded amounts. 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. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2019. The total amount recorded for unrecognized tax benefits is presented below:
| For the Years Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Beginning balance | $ | 446 |  |  | $ | 446 |  |  | $ | 2,782 |
Additions for tax positions of prior years | — |  |  | — |  |  | 9 |
Settlements | — |  |  | — |  |  | (2,345 | )
Ending balance | $ | 446 |  |  | $ | 446 |  |  | $ | 446 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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