Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 9— Income Taxes

At March 31, 2022, the Company had a deferred tax asset of $46.5 million net of valuation allowance. Additionally, the Company also had deferred tax liabilities of $8.2 million inclusive of a valuation allowance of $3.0 million.

During the current period, the Company recognized net deferred tax benefits of $3.8 million out of the total available tax benefits of $22.7 million related to tax losses available in Guyana. These tax losses have no expiration date.

In deriving the $3.8 million in Guyana net tax benefits being recognized, the Company relied on sources of income attributable to the projected taxable income for the period covered by the Company’s relevant existing drilling contracts. Given the mobile nature of the Company’s assets, we are not able to reasonably forecast the jurisdictions in which taxable income from future drilling contracts may arise. Further, we do not believe taxable temporary differences will reverse within the period covered by the Company’s relevant existing drilling contracts to warrant an additional source of income for recognizing the Company’s deferred tax assets. We also have limited objective positive evidence in historical periods for Guyana. Accordingly, in determining the amount of deferred tax assets to recognize related to the Company’s Guyana operations, we did not consider projected book income beyond the conclusion of existing drilling contracts. As new drilling contracts are executed or as current contracts are extended, we will reassess the amount of deferred tax assets in Guyana that are realizable. Finally, once we have established sufficient objective positive evidence in Guyana for historical periods, we may consider reliance on forecasted taxable income from future drilling contracts.

At March 31, 2022, the reserves for uncertain tax positions totaled $76.6 million (net of related tax benefits of $0.1 million). At December 31, 2021, the reserves for uncertain tax positions totaled $75.0 million (net of related tax benefits of $0.3 million).

It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may fluctuate in the next 12 months primarily due to the completion of open audits or the expiration of statutes of limitation.

During the three months ended March 31, 2022, our tax provision included net tax benefits of $3.8 million related to a release of valuation allowance for Guyana deferred tax benefits, $0.9 million related to an adjustment to Swiss deferred tax benefits, and $1.3 million related primarily to deferred tax adjustments. Such tax benefits were partially offset by tax expenses of $0.8 million related to various recurring items.

During the period from February 6 through March 31, 2021, our tax provision included tax benefits of $10.1 million related to US and non-US reserve releases. Such tax benefits were partially offset by tax expenses of $3.1 million related to various recurring items.

During the period from January 1 through February 5, 2021, our income tax provision included a tax benefit of $1.7 million related to non-US reserve release and tax expense of $2.5 million related to fresh start and reorganization adjustments, and other recurring tax expenses of approximately $2.6 million.