XML 26 R16.htm IDEA: XBRL DOCUMENT v3.23.3
Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

Note 8 — Income Taxes

The Company is a corporation that is subject to U.S. federal, state and foreign income taxes.

For the three months ended September 30, 2023, the Company recognized an income tax benefit of $15.9 million for an effective tax rate of 88.3%. The Company’s effective tax rate of 88.3% is different than the U.S. federal statutory income tax rate of 21% primarily due to the change of its valuation allowance on its federal deferred tax assets. For the three months ended September 30, 2022, the Company recognized an income tax expense of $0.1 million for an effective tax rate of 0.0%. The Company’s effective tax rate of 0.0% is different than the U.S. federal statutory income tax rate of 21% primarily due to recording a valuation allowance for its deferred tax assets.

For the nine months ended September 30, 2023, the Company recognized an income tax benefit of $55.5 million for an effective tax rate of -120.9%. The Company’s effective tax rate of -120.9% is different than the U.S. federal statutory income tax rate of 21% primarily due to a non-cash benefit discrete item of $54.9 million related to the partial release of its valuation allowance on its federal deferred tax assets not subject to separate return limitations offset by the impact of other permanent differences. The release of the valuation allowance is a result of the deferred tax liabilities acquired with the EnVen Acquisition. For the nine months ended September 30, 2022, the Company recognized an income tax expense of $2.3 million for an effective tax rate of 0.6%. The Company’s effective tax rate of 0.6% is lower than the U.S. federal statutory income tax rate of 21% primarily due to recording a valuation allowance for its deferred tax assets.

The Company evaluates and updates the estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Consequently, based upon the mix and timing of the Company’s actual earnings compared to annual projections, the effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. The quarterly income tax provision is generally comprised of tax expense on income or benefit on loss at the most recent estimated annual effective tax rate. The tax effect of discrete items is recognized in the period in which they occur at the applicable statutory rate.

Deferred income tax assets and liabilities are recorded related to net operating losses and temporary differences between the book and tax basis of assets and liabilities expected to produce deductions and income in the future. The deferred tax asset estimates are subject to revision, either up or down, in future periods based on new facts or circumstances. The Company reduces deferred tax assets by a valuation allowance when, based on estimates, it is more likely than not that a portion of those assets will not be realized in a future period. In evaluating the Company’s valuation allowance, the Company considers cumulative losses, the reversal of existing temporary differences, the existence of taxable income in carryback years, tax optimization planning and future taxable income for each of its taxable jurisdictions. The Company assesses the realizability of its deferred tax assets quarterly; changes to the Company’s assessment of its valuation allowance in future periods could materially impact its results of operations. The Company maintains a partial valuation allowance against certain federal deferred tax assets in which it is more likely than not such assets will not be realized in a future period. The Company also maintains a partial valuation allowance against its federal net deferred tax assets subject to separate return limitations, its state net deferred tax assets and its foreign net deferred tax assets. A deferred tax liability of $96.6 million and $2.1 million is included in “Other long-term liabilities” on the Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, respectively.

EnVen Acquisition

On February 13, 2023, the Company completed the EnVen Acquisition, which is further discussed in Note 2 — Acquisitions and Divestitures. The Company recognized a net deferred tax liability of $150.5 million in its purchase price allocation as of the acquisition date to reflect differences between tax basis and the fair value of EnVen’s assets acquired and liabilities assumed. The deferred tax balance is based on preliminary calculations and on information available to management at the time such estimates were made. Further analysis will be made upon filing EnVen’s tax returns that will result in a change to the net deferred tax impact recorded.