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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 13 – Income Taxes

 

The current and deferred income tax provision for the years ended December 31, 2022 and 2021 were comprised for the following:

 

   2022   2021 
         
Current  $208,898   $— 
Deferred   —    — 
Income tax provision (benefit)  $208,898   $— 

   

At December 31, 2022, the Company had net operating loss carryforwards of approximately $18.6 million for federal income tax purposes available to offset future taxable income, as limited by the applicable provisions, which expire at various dates beginning in 2022 for the federal net operating loss carryforwards. In accordance with Section 382 of the Internal Revenue Code, the usage of the Company's net operating loss carryforwards may be limited in the event of a change in ownership. A full Section 382 analysis has not been prepared and NOLs could be subject to limitation under Section 382.

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis of assets and liabilities. The Company’s net tax position as of December 31, 2022 and 2021 is as follows:

 

   2022   2021 
         
Deferred tax assets:          
Loss carry-forwards  $4,789,586   $5,341,256 
Oil and gas Properties   —    1,239,723 
Right of use assets   7,341    8,036 
Stock option grants   1,369,105    796,188 
Asset retirement obligation   6,616,407    — 
Derivatives   —    27,210 
Other   436,477    — 
       Total deferred tax assets   13,218,916    7,412,413 
           
Deferred tax liabilities:          
Oil and gas Properties   (5,552,159)   — 
Other property and equipment   (171,650)   (459,745)
Derivatives   (31,369)   — 
Other   (69,688)   — 
       Total deferred tax liabilities   (5,824,866)   (459,745)
           
Net deferred tax asset (liability) before valuation allowance   7,394,050    6,952,668 
           
Valuation allowance   (7,394,050)   (6,952,668)
Net deferred taxes  $—   $— 

 

Reconciliations of the tax provision computed at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2022 and 2021 are as follows:

 

  2022   2021
  $   %   $   %
               
Provision (benefit) at statutory rate       1,531,536   21.0%       (3,909,142)   21.0%
State taxes (net of federal impact)          350,632   4.9%          (893,518)   4.8%
Nondeductible expenses            21,052   0.3%         3,503,996   -18.8%
Return to Accrual     (2,135,704)   -29.3%   —    
Valuation Allowance          441,382   6.1%         1,298,664   -7.0%
Income tax provision           208,898   3%   —   0%

  

Utilization of the Company’s loss carryforwards is dependent on realizing taxable income. The Company recorded valuation allowances of $7.4 million and $7.0 million as of December 31, 2022 and 2021, respectively, due to the uncertainty related to its ability to utilize some of its deferred income tax assets, primarily consisting of net operating loss carryforwards prior to expiration or limitation under Section 382 as discussed above.

 

The Company has evaluated all tax positions for which the statute of limitations remains open and believes that the material positions taken would likely than not would be sustained by examination. Therefore, at December 31, 2022, the Company has not established any reserves for, nor recorded any unrecognized benefits related to uncertain tax positions.