Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes Disclosure [Abstract]

INCOME TAXES

10. INCOME TAXES:

The consolidated income tax provision is comprised of the following:
		Year Ended December 31,
		2011		2010		2009
Current	$	6,464	$	4,763	$	8,830
Current tax benefit on equity compensation		6,212		17,522		14,213
Total current tax		12,676		22,285		23,043
Deferred		244,994		236,330		(268,179)
Total income tax provision (benefit)	$	257,670	$	258,615	$	(245,136)

The income tax provision (benefit) for continuing operations differs from the amount that would be computed by applying the U.S. federal income tax rate of 35% to pretax income as a result of the following:

		Year Ended December 31,
		2011		2010		2009
Income tax provision (benefit) computed at the U.S. statutory rate	$	248,805	$	253,076	$	(243,666)
State income tax provision (benefit) net of federal benefit		6,329		3,608		(698)
Canadian net operating loss valuation allowance		-		(677)		-
Tax effect of rate change		4,228		1,939		-
Other, net		(1,692)		669		(772)
	$	257,670	$	258,615	$	(245,136)
The tax effects of temporary differences that give rise to significant components of the Company's deferred tax assets and liabilities for continuing operations are as follows:
				Year Ended December 31,
				2011		2010
Deferred tax assets - current:
Derivative instruments, net			$	-	$	255
Incentive compensation/other, net				9,329		4,627
Net deferred tax assets - current			$	9,329	$	4,882
Deferred tax liabilities - current:
Derivative instruments, net			$	82,709	$	47,567
Net deferred tax liabilities - current			$	82,709	$	47,567
Net deferred tax liability - current			$	73,380	$	42,685
Deferred tax assets - non-current:
U.S. federal tax credit carryforwards				13,280		13,714
Capital loss carryforwards				1,929		-
Derivative instruments, net				-		1,161
Incentive compensation/other, net				13,030		14,745
				28,239		29,620
Valuation allowance - Foreign Tax Credit (FTC)				(1,692)		(1,692)
Valuation allowance (Capital loss carryforwards)				(1,929)		-
Net deferred tax assets - non-current			$	24,618	$	27,928
Deferred tax liabilities - non-current:
Property and equipment				659,040		448,298
Other				587		341
Net non-current tax liabilities			$	659,627	$	448,639
Net non-current tax liability			$	635,009	$	420,711

In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Among other items, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and available tax planning strategies.

The Company did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations as a result of implementing the standard related to accounting for uncertain tax positions. The amount of unrecognized tax benefits did not change as of December 31, 2011.

It is expected that the amount of unrecognized tax benefits may change in the next twelve months; however Ultra does not expect the change to have a significant impact on the results of operations or the financial position of the Company. The Company currently has no unrecognized tax benefits that if recognized would affect the effective tax rate.

Estimated interest and penalties related to potential underpayment on any unrecognized tax benefits are classified as a component of tax expense in the Consolidated Statement of Operations. The Company has not recorded any interest or penalties associated with unrecognized tax benefits.

The Company files a consolidated federal income tax return in the United States federal jurisdiction and various combined, consolidated, unitary, and separate filings in several states, and international jurisdictions. With certain exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2008.

As of December 31, 2011, the Company had approximately $11.6 million of U.S. federal alternative minimum tax (AMT) credits available to offset regular U.S. federal income taxes. These AMT credits do not expire and can be carried forward indefinitely. In addition, as of December 31, 2011, the Company has $1.7 million of foreign tax credit carryforwards, none of which expire prior to 2017. However, with the 2007 sale of Sino American Energy, the Company no longer has foreign source income for which to utilize its foreign tax credit carryforwards. Therefore, a valuation allowance has been placed on the remaining foreign tax credit carryforwards.

The Company had an unutilized capital loss carryforward of approximately $5.4 million as of December 31, 2011. The majority of this carryforward expires in 2013. Due to the unpredictability of future capital gains that would allow for the utilization of this carryforward, a valuation allowance has be placed on the full amount of the carryforward.

The Company had Canadian net operating loss carryforwards of approximately $2.7 million as of December 31, 2009. The unexpired portion of the Canadian net operating loss carryforward was fully utilized in 2010, and thus the valuation allowance at December 31, 2009 has been removed and no deferred tax asset related to the Canadian net operating loss exists as of December 31, 2010.

The undistributed earnings of the Company's U.S. subsidiaries are considered to be indefinitely invested outside of Canada. Accordingly, no provision for Canadian income taxes and/or withholding taxes has been provided thereon.

The Company periodically uses derivative instruments designated as cash flow hedges for tax purposes as a method of managing its exposure to commodity price fluctuations. To the extent these hedges are effective, changes in the fair value of these derivative instruments are recorded in Other Comprehensive Income, net of income tax. To the extent these hedges are ineffective, they are marked to market with gains and losses recorded in the statement of operations. At December 31, 2011 and 2010, the Company also recorded a total deferred tax liability of $82.7 million and $46.2 million, respectively, attributable to the unrealized gains and losses recorded in the statement of operations.