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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Deferred tax assets and liabilities are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years related to cumulative temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying balance sheets. The tax effect of the net change in the cumulative temporary differences during each period in the deferred tax assets and liabilities determines the periodic provision for deferred taxes. The provision for income taxes consists of the following (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Current tax expense (benefit) |  |  |  |  |
Federal | $ | 51,246 |  |  | $ | — |  |  | $ | (27) |
State | 16,950 |  |  | — |  |  | — |
Total current tax expense (benefit) | 68,196 |  |  | — |  |  | (27) |
Deferred tax expense (benefit) |  |  |  |  |
Federal | 289,578 |  |  | 62,212 |  |  | (53,784) |
State | 47,924 |  |  | 10,646 |  |  | (6,736) |
Total deferred tax expense (benefit) | 337,502 |  |  | 72,858 |  |  | (60,520) |
Total income tax expense (benefit) | $ | 405,698 |  |  | $ | 72,858 |  |  | $ | (60,547) |
Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to the net deferred tax liability and asset result from the following components (in thousands):
|  | As of December 31,
|  | 2022 |  | 2021
Deferred tax liabilities: |  |  |  |
Oil and gas properties |  | $ | 868,612 |  |  | $ | 608,829 |
Right-of-use assets |  | 5,915 |  |  | 8,292 |
Total deferred tax liabilities |  | 874,527 |  |  | 617,121 |
Deferred tax assets: |  |  |  |
Federal and state tax net operating loss carryforward |  | 432,096 |  |  | 482,216 |
Asset retirement obligations |  | 71,092 |  |  | 51,515 |
Commodity derivative contracts |  | 37,293 |  |  | 86,958 |
Inventory |  | 13,783 |  |  | 10,108 |
Stock-based compensation |  | 5,974 |  |  | 7,622 |
Lease liability |  | 6,067 |  |  | 8,187 |
Property taxes |  | — |  |  | 19,458 |
Transaction costs |  | 1,461 |  |  | — |
Other long-term assets |  | 12,547 |  |  | 21,474 |
Total deferred tax assets |  | 580,313 |  |  | 687,538 |
Less: Valuation allowance |  | 25,404 |  |  | 48,133 |
Total deferred tax assets after valuation allowance |  | 554,909 |  |  | 639,405 |
Total non-current net deferred tax asset (liability) |  | $ | (319,618) |  |  | $ | 22,284 |
The following table outlines the Federal net operating loss (“NOL”) carryforwards acquired and deferred tax assets and liabilities recorded as a result of the mergers that closed in 2021 (in millions):
| HighPoint Merger |  | Extraction Merger |  | Crestone Peak Merger
Federal NOL carryforwards (1) | $ | 219.0 |  |  | $ | 479.9 |  |  | $ | 555.7 |
Deferred tax asset (liability) | $ | 110.5 |  |  | $ | 49.2 |  |  | $ | (125.1) |
Valuation allowance | (48.1) |  |  | — |  |  | — |
Net deferred tax asset (liability) | $ | 62.4 |  |  | $ | 49.2 |  |  | $ | (125.1) |
___________________________ (1)The net operating loss carryforwards acquired in the HighPoint, Extraction, and Crestone Peak mergers will be subject to an annual limitation under Section 382 of the Code of approximately $5.6 million, $7.0 million, and $16.8 million, respectively. The Company had $1.8 billion and $2.0 billion of net operating loss carryovers for federal income tax purposes as of December 31, 2022 and 2021, respectively. Due to change of ownership provisions of Section 382 of the Code, utilization of net operating loss carryovers and other tax attributes are limited. Federal net operating loss carryforwards incurred prior to January 1, 2018 of $569.2 million will begin to expire in 2035. Federal net operating loss carryforwards incurred after December 31, 2017 of $1.2 billion have no expiration and can only be used to offset 80% of taxable income when utilized. The Company assesses the recoverability of its deferred tax assets each period by considering whether it is more-likely-than-not that all or a portion of the deferred tax assets will be realized. In making such determination, the Company considers all available (both positive and negative) evidence, including future reversals of temporary differences, tax-planning strategies, projected future taxable income, and results of operations. As a result of the HighPoint Merger, the Company had a valuation allowance of $25.4 million and $48.1 million as of December 31, 2022 and 2021, respectively, against certain acquired net operating losses and other tax attributes due to the limitation on realizability caused by the change of ownership provisions of Section 382 of the Code. The Company will continue to monitor facts and circumstances in the reassessment of the likelihood that the deferred tax assets will be realized. Recorded income tax expense or benefit differs from the amount that would be provided by applying the statutory United States federal income tax rate of 21% to income before income taxes. These differences primarily relate to the effect of state income taxes, excess tax benefits and deficiencies on stock-based compensation awards, tax limitations on compensation of covered individuals, changes in valuation allowances, and other permanent differences, as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Federal statutory tax expense | $ | 347,293 |  |  | $ | 52,824 |  |  | $ | 9,026 |
Increase (decrease) in tax resulting from: |  |  |  |  |
State tax expense, net of federal benefit | 58,658 |  |  | 10,646 |  |  | 1,694 |
State tax rate change | — |  |  | — |  |  | 124 |
Return to provision | 19,975 |  |  | 27 |  |  | 292 |
Compensation of covered individuals | 6,138 |  |  | 1,793 |  |  | 144 |
Stock-based compensation | (3,343) |  |  | (1,559) |  |  | 690 |
Transaction costs | — |  |  | 9,043 |  |  | — |
Bargain purchase gain | (2,852) |  |  | — |  |  | — |
Tax credits | (1,405) |  |  | — |  |  | — |
Change in valuation allowance | (19,302) |  |  | — |  |  | (72,553) |
Other | 536 |  |  | 84 |  |  | 36 |
Total income tax expense (benefit) | $ | 405,698 |  |  | $ | 72,858 |  |  | $ | (60,547) |
The Company had no unrecognized tax benefits as of December 31, 2022, 2021, and 2020. The tax returns for 2021, 2020, and 2019 are still subject to audit by the Internal Revenue Service. On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law. Among other provisions, the IRA imposes a 15% corporate alternative minimum tax (“Corporate AMT”) for tax years beginning after December 31, 2022, imposes a 1% excise tax on corporate stock repurchases after December 31, 2022, and provides tax incentives to promote various energy efficient initiatives. The Company is evaluating the potential impact of the Corporate AMT on our current income tax expense and income taxes payable; however, we currently do not believe this will materially affect our income taxes paid for the 2023 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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