Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before income taxes were:

	Year Ended December 31,
(In millions)		2021		2020		2019
United States		$	637	$	(1,319)	$	43
Foreign		367		(146)		349
Total		$	1,004	$	(1,465)	$	392

Income tax provisions (benefits) were:

	Year Ended December 31,
	2021						2020						2019
(In millions)	Current		Deferred		Total		Current		Deferred		Total		Current		Deferred		Total
Federal	$	—	$	—	$	—	$	(5)	$	—	$	(5)	$	(116)	$	(3)	$	(119)
State and local	4		1		5		(2)		(8)		(10)		4		3		7
Foreign	81		(28)		53		15		(14)		1		58		(34)		24
Total	$	85	$	(27)	$	58	$	8	$	(22)	$	(14)	$	(54)	$	(34)	$	(88)

    A reconciliation of the federal statutory income tax rate applied to income (loss) before income taxes to the provision (benefit) for income taxes follows:

	Year Ended December 31,
(In millions)	2021			2020			2019
Total pre-tax income (loss)	$	1,004		$	(1,465)		$	392
Total income tax provision (benefit)	$	58		$	(14)		$	(88)
Effective income tax rate	6		%	1		%	(22)		%
Income taxes at the statutory tax rate	$	211		$	(308)		$	83
Effects of foreign operations	(13)			23			(29)
Adjustments to valuation allowances	(166)			239			(28)
State income taxes, net of federal benefit	23			6			11
Tax law change	(2)			—			—
Other federal tax effects	5			26			(125)
Income tax provision (benefit)	$	58		$	(14)		$	(88)

The effective income tax rate is influenced by a variety of factors including the geographic and functional sources of income and the relative magnitude of these sources of income. The difference between the total provision and the sum of the amounts allocated to segments is reported in the “Not Allocated to Segments” column of the tables in Note 5.

Effects of foreign operations – The effects of foreign operations decreased our tax provision in 2021 largely due to the income mix within E.G. between equity method investees and subsidiaries which can reduce the effective tax rate below the U.S. statutory tax rate. The effects of foreign operations increased our tax provision in 2020 largely due to book losses in foreign jurisdictions with no corresponding tax benefits. The effects of foreign operations decreased our tax provision in 2019 due to tax benefits related to our U.K. operations and pre-tax income in jurisdictions with effective tax rates lower than the U.S.

Adjustments to valuation allowances – Since December 31, 2016, we have maintained a full valuation allowance on our net federal deferred tax assets. In all years, the most significant driver for the change in valuation allowance was due to current year activity in the U.S. We intend to continue a full valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the allowance. However, if current commodity prices are sustained and absent any additional objective negative evidence, we expect it is reasonably possible that sufficient positive evidence will exist within the next 12 months to adjust our current valuation allowance position. Exact timing and amount of the adjustment to the valuation allowance is unknown as this time.

Other federal tax effects – In 2020, the increase to other federal tax effects is largely related to non-deductible goodwill impairment. The 2019 decrease in other federal tax effects is primarily related to the settlement of the 2010-2011 U.S. Federal Tax Audit (“IRS Audit”) in the first quarter of 2019. The release of the accrued tax positions resulted in a $126 million tax benefit, primarily related to AMT credits.

    Deferred tax assets and liabilities resulted from the following:

	Year Ended December 31,
(In millions)	2021		2020
Deferred tax assets:
Employee benefits	$	66	$	77
Operating loss carryforwards	1,541		1,966
Foreign tax credits	611		611
Other(a)	52		67
Subtotal	2,270		2,721
Valuation allowance	(780)		(948)
Total deferred tax assets	1,490		1,773
Deferred tax liabilities:
Property, plant and equipment(a)	1,544		1,879
Accrued revenue	—		20
Other(a)	82		37
Total deferred tax liabilities	1,626		1,936
Net deferred tax liabilities	$	136	$	163
Net deferred tax assets	$	—	$	—

(a)2020 balances were reclassified to conform to current period’s presentation. The total Net deferred tax liabilities balance was not impacted by the change in presentation.

Operating loss carryforwards – At December 31, 2021, we have a gross deferred tax asset related to our operating loss carryforwards of $1.5 billion, before valuation allowance. U.S. operating loss carryforwards relating to tax years beginning prior to January 1, 2018, include $1.4 billion ($295 million deferred tax asset) that expire in 2036 - 2037. U.S. operating loss carryforwards for tax years beginning after December 31, 2017, include $5.3 billion ($1.1 billion deferred tax asset) which can be carried forward indefinitely. Foreign operating loss carryforwards include $26 million that expire in 2022 - 2027. State operating loss carryforwards of $3.3 billion ($125 million deferred tax asset) expire in 2022 through 2040.

Foreign tax credits – At December 31, 2021, we reflect foreign tax credits of $611 million, which will expire in years 2022 through 2026.

Valuation allowances – At December 31, 2021, we reflect a valuation allowance in our consolidated balance sheet of $780 million against our net deferred tax assets in various jurisdictions in which we operate. The decrease in valuation allowance primarily relates to current year activity in the U.S.

Property, plant and equipment – At December 31, 2021, we reflected a deferred tax liability of $1.5 billion. The decrease primarily relates to current year activity in the U.S.

    Net deferred tax assets and liabilities were classified in the consolidated balance sheets as follows:

	December 31,
(In millions)	2021		2020
Assets:
Other noncurrent assets	$	—	$	—
Liabilities:
Noncurrent deferred tax liabilities	136		163
Net deferred tax liabilities	$	136	$	163
Net deferred tax assets	$	—	$	—

    We are routinely undergoing examinations in the jurisdictions in which we operate. As of December 31, 2021, our income tax returns remain subject to examination in the following major tax jurisdictions for the tax years indicated:

United States(a)	2010 - 2020
Equatorial Guinea	2007 - 2020

(a)Includes federal and state jurisdictions.

The following table summarizes the activity in unrecognized tax benefits:

(In millions)	2021		2020		2019
Beginning balance	$	8	$	13	$	263
Additions for tax positions of prior years	2		—		13
Reductions for tax positions of prior years	—		(5)		(152)
Settlements	—		—		(111)
Ending balance	$	10	$	8	$	13

If the unrecognized tax benefits as of December 31, 2021 were recognized, $10 million would affect our effective income tax rate. As of December 31, 2021, we do not expect uncertain tax positions to significantly change within the next twelve months. During the first quarter of 2019, we withdrew our appeal related to the Brae area decommissioning costs in the U.K., thus the uncertain tax positions previously established are now considered effectively settled with no tax provision or benefit impact. Also, in the first quarter of 2019, we settled the 2010-2011 IRS Audit, resulting in a tax benefit of $126 million.

Interest and penalties are recorded as part of the tax provision and were immaterial for 2021, a $2 million tax benefit in 2020 and a $6 million tax provision in 2019. As of December 31, 2021 and 2020, we had no significant accrued interest or penalties related to income taxes. For December 31, 2019, $3 million of interest and penalties were accrued related to income taxes.

In the third quarter of 2020, we received an $89 million cash refund related to alternative minimum tax credits and interest. This refund was accelerated as a result of the enactment of the Coronavirus Aid, Relief, and Economic Security Act, commonly referred to as the CARES Act, in the first quarter of 2020.