Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before income taxes were:

	Year Ended December 31,
(In millions)		2022		2021		2020
United States		$	3,037	$	637	$	(1,319)
Foreign		742		367		(146)
Total		$	3,779	$	1,004	$	(1,465)

Income tax provisions (benefits) were:

	Year Ended December 31,
	2022						2021						2020
(In millions)	Current		Deferred		Total		Current		Deferred		Total		Current		Deferred		Total
Federal	$	—	$	(46)	$	(46)	$	—	$	—	$	—	$	(5)	$	—	$	(5)
State and local	12		52		64		4		1		5		(2)		(8)		(10)
Foreign	172		(23)		149		81		(28)		53		15		(14)		1
Total	$	184	$	(17)	$	167	$	85	$	(27)	$	58	$	8	$	(22)	$	(14)

    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)	2022			2021			2020
Total pre-tax income (loss)	$	3,779		$	1,004		$	(1,465)
Total income tax provision (benefit)	$	167		$	58		$	(14)
Effective income tax rate	4		%	6		%	1		%
Income taxes at the statutory tax rate	$	793		$	211		$	(308)
Adjustments to valuation allowances	(691)			(166)			239
Effects of foreign operations	2			(13)			23
State income taxes, net of federal benefit	62			23			6
Tax law change	—			(2)			—
Other federal tax effects	1			5			26
Income tax provision (benefit)	$	167		$	58		$	(14)

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 6.

Adjustments to valuation allowances – From December 31, 2016 until the first quarter of 2022, we maintained a full valuation allowance on our net federal deferred tax assets. In the first quarter of 2022, as a result of significant increases in commodity prices, corresponding increases in projections of our future taxable income, and the absence of objective negative evidence such as a cumulative loss in recent years, we determined we had sufficient positive evidence to release a majority of the federal valuation allowance, which resulted in a non-cash deferred tax benefit of $685 million. We retained a partial valuation allowance on certain U.S. deferred tax assets primarily as a result of volatility in commodity prices impacting assessed likelihood of future realizability. We continue to reassess whether the balance of the valuation allowance is appropriate on a quarterly basis and, given the totality of the facts and circumstances, will adjust the valuation allowance in future periods if the evidence supports it.

Effects of foreign operations – The effects of foreign operations increased and decreased our tax provision in 2022 and 2021, respectively, largely due to the income mix within E.G. The income mix between equity method investees and subsidiaries within E.G. can cause the effective tax rate in E.G. to differ from 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.

Other federal tax effects – In 2020, the increase to other federal tax effects is largely related to non-deductible goodwill impairment.

    Deferred tax assets and liabilities resulted from the following:

	Year Ended December 31,
(In millions)	2022		2021
Deferred tax assets:
Employee benefits	$	56	$	66
Operating loss carryforwards	1,189		1,541
Foreign tax credits	602		611
Other	65		52
Subtotal	1,912		2,270
Valuation allowance	(89)		(780)
Total deferred tax assets	1,823		1,490
Deferred tax liabilities:
Property, plant and equipment	1,850		1,544
Other	100		82
Total deferred tax liabilities	1,950		1,626
Net deferred tax liabilities	$	127	$	136

Operating loss carryforwards – At December 31, 2022, we have a gross deferred tax asset related to our operating loss carryforwards of $1.2 billion. U.S. operating loss carryforwards consist of $5.2 billion ($1.1 billion deferred tax asset) which can be carried forward indefinitely. Foreign operating loss carryforwards include $1 million that begin to expire in 2023. State operating loss carryforwards include $2.4 billion ($120 million deferred tax asset) that begin to expire in 2023.

Foreign tax credits – At December 31, 2022, we reflect foreign tax credits of $602 million, which will expire in years 2023 through 2026.

Valuation allowances – At December 31, 2022, we reflect a partial valuation allowance in our consolidated balance sheet of $89 million against our net deferred tax assets in various jurisdictions in which we operate. The decrease in valuation allowance is primarily due to the $685 million valuation allowance release on a portion of our federal and state net deferred tax assets in the first quarter of 2022.

Property, plant and equipment – At December 31, 2022, we reflected a deferred tax liability of $1.9 billion. The increase 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)	2022		2021
Assets:
Other noncurrent assets	$	40	$	—
Liabilities:
Noncurrent deferred tax liabilities	167		136
Net deferred tax liabilities	$	127	$	136

    We are routinely undergoing examinations in the jurisdictions in which we operate. As of December 31, 2022, our income tax returns remain subject to examination in the following major tax jurisdictions for the tax years indicated:

United States(a)	2016 - 2021
Equatorial Guinea	2007 - 2021

(a)Includes federal and state jurisdictions.

The following table summarizes the activity in unrecognized tax benefits:

(In millions)	2022		2021		2020
Beginning balance	$	10	$	8	$	13
Additions for tax positions of prior years	1		2		—
Reductions for tax positions of prior years	—		—		(5)
Settlements	(11)		—		—
Ending balance	$	—	$	10	$	8

Interest and penalties are recorded as part of the tax provision and were immaterial for the years ended December 31, 2022, 2021 and 2020. As of December 31, 2022, 2021 and 2020, we had no significant accrued interest or penalties related to income taxes.

On August 16, 2022, the President signed the IRA into law. The IRA enacted various income tax provisions including a 15% corporate book minimum tax and created and extended certain tax-related energy incentives. The tax provisions of the IRA which may apply to us are generally effective in 2023 or later and therefore tax impacts to us in 2022 were immaterial. The U.S. Treasury is expected to publish further guidance and regulations that will be relevant to scoping considerations and the calculation of minimum income tax liabilities. As we receive further guidance, we will continue to evaluate and assess the impact the IRA may have to our cash flows and financial results in future periods.