INCOME TAXES

The Company’s estimated annual effective income tax rates are used to allocate expected annual income tax expense to interim periods. The rates are the ratio of estimated annual income tax expense to estimated annual income before income taxes by taxing jurisdiction, except for discrete items, which are significant, unusual or infrequent items for which income taxes are computed and recorded in the interim period in which the specific transaction occurs. The estimated annual effective income tax rates are applied to the year-to-date income before income taxes by taxing jurisdiction to determine the income tax expense allocated to the interim period. The Company updates its estimated annual effective income tax rate at the end of each quarterly period considering the geographic mix of income based on the tax jurisdictions in which the Company operates. Actual results that are different from the assumptions used in estimating the annual effective income tax rate will impact future income tax expense. Income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate income tax rate of 35% to income before income taxes as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Income tax expense at the statutory rate	$	15,160		$	3,971		$	19,864		$	4,599
State income taxes, net of U.S. federal income tax benefit	865			127			1,087			1,702
U.K. income tax benefit	(1,320		)	(175		)	(2,536		)	(175		)
Capital loss associated with investment in Pinnacle Gas Resources, Inc. for which no income tax benefit was recognized in prior periods	—			—			—			(1,135		)
Other, net	105			(321		)	413			(329		)
Income tax expense	$	14,810		$	3,602		$	18,828		$	4,662

As of June 30, 2012, the Company had U.S. and U.K. income tax loss carryforwards of approximately $150.9 million and $105.1 million, respectively. The U.S. loss carryforwards expire between 2019 and 2032 if not utilized in earlier periods. The U.K. loss carryforwards are not subject to expiration as long as the Company maintains an activity trading status in the U.K. The realization of the deferred tax assets related to the loss carryforwards is dependent on the Company’s ability to generate sufficient future taxable income, which the Company expects to be able to generate within the applicable carryforward periods. Accordingly, the Company believes that it is more likely than not that its net deferred tax assets will be fully realized.

At June 30, 2012, the Company had no material uncertain tax positions and the tax years since 1999 in the U.S. remain open to review by federal and various state tax jurisdictions. In the U.K., the tax years since 2010 remain open to review by Her Majesty's Revenue and Customs.