INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Deferred tax assets and liabilities are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years related to cumulative temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying balance sheets. The tax effect of the net change in the cumulative temporary differences during each period in the deferred tax assets and liabilities determines the periodic provision for deferred taxes.

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current tax expense (benefit)
Federal	$	(25,537)	$	51,246	$	—
State	(4,460)		16,950		—
Total current tax expense (benefit)	(29,997)		68,196		—
Deferred tax expense
Federal	238,426		289,578		62,212
State	6,737		47,924		10,646
Total deferred tax expense	245,163		337,502		72,858
Total income tax expense	$	215,166	$	405,698	$	72,858

Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to the net deferred tax liability and asset result from the following components (in thousands):

	As of December 31,
	2023		2022
Deferred tax liabilities:
Oil and gas properties	$	1,200,521	$	868,612
Right-of-use assets	22,654		5,915
Total deferred tax liabilities	1,223,175		874,527
Deferred tax assets:
Federal and state tax net operating loss carryforward	504,922		432,096
Interest expense carryforward	33,564		—
Asset retirement obligations	79,718		71,092
Commodity derivative contracts	7,251		37,293
Inventory	213		13,783
Stock-based compensation	7,327		5,974
Lease liability	22,866		6,067
Transaction costs	6,078		1,461
Other long-term assets	21,859		12,547
Total deferred tax assets	683,798		580,313
Less: Valuation allowance	25,404		25,404
Total deferred tax assets after valuation allowance	658,394		554,909
Deferred income tax liabilities, net	$	(564,781)	$	(319,618)

We had $2.1 billion and $1.8 billion of net operating loss carryovers for federal income tax purposes as of December 31, 2023 and 2022, respectively. Due to change of ownership provisions of Section 382 of the Internal Revenue Code, utilization of net operating loss carryovers and other tax attributes are limited. Federal net operating loss carryforwards incurred prior to January 1, 2018 of $569.2 million will begin to expire in 2035. Federal net operating loss carryforwards incurred after December 31, 2017 of $1.5 billion have no expiration and can only be used to offset 80% of taxable income when utilized.

We assess the recoverability of our deferred tax assets each period by considering whether it is more-likely-than-not that all or a portion of the deferred tax assets will be realized. In making such determination, we consider all available evidence (both positive and negative), including future reversals of temporary differences, tax-planning strategies, projected future taxable income, and results of operations. As a result of merger activity in 2021, we recorded a valuation allowance of $25.4 million, which continued to be recorded as of December 31, 2023 and 2022, against certain acquired net operating losses and other tax attributes due to the limitation on realizability caused by the change of ownership provisions of Section 382 of the Internal Revenue Code. We will continue to monitor facts and circumstances in the reassessment of the likelihood that the deferred tax assets will be realized.

Recorded income tax expense or benefit differs from the amount that would be provided by applying the statutory United States federal income tax rate of 21% to income before income taxes due to state income taxes and other changes outlined as follows (in thousands):

	Year Ended December 31,
	2023		2022		2021
Federal statutory tax expense	$	210,458	$	347,293	$	52,824
Increase (decrease) in tax resulting from:
State tax expense, net of federal benefit	26,081		58,658		10,646
State tax rate change	(23,002)		—		—
Return to provision	(1,866)		19,975		27
Compensation of covered individuals	5,689		6,138		1,793
Stock-based compensation	(2,996)		(3,343)		(1,559)
Transaction costs	—		—		9,043
Bargain purchase gain	—		(2,852)		—
Tax credits	—		(1,405)		—
Change in valuation allowance	—		(19,302)		—
Other	802		536		84
Total income tax expense	$	215,166	$	405,698	$	72,858

Acquisitions, including the Hibernia Acquisition and the Tap Rock Acquisition, divestitures, drilling activity, and the prices received for crude oil, natural gas, and NGL, impact the apportionment of taxable income to the states where we own crude oil and natural gas properties. As these factors change, our state income tax rate changes. This change, when applied to our total temporary differences, impacts the total state income tax (expense) benefit reported in the current year.

We had no unrecognized tax benefits as of December 31, 2023, 2022, and 2021. As of December 31, 2023, the Company is subject to U.S. federal and state income tax examination for the years ended December 31, 2022, 2021, and 2020. Tax returns for years prior to 2020 may remain open with respect to net operating loss carryforwards that are utilized in a later year, as tax attributes from prior years can be adjusted during an audit of a later year.

In 2022, the Inflation Reduction Act (“IRA”) was signed into law. Among other provisions, the IRA imposes a 15% corporate alternative minimum tax (“Corporate AMT”) for tax years beginning after December 31, 2022, imposes a 1% excise tax on corporate stock repurchases after December 31, 2022, and provides tax incentives to promote various energy efficient initiatives. We are evaluating the potential impact of the Corporate AMT on our current income tax expense and income taxes payable; however, we currently do not believe this will materially affect our income taxes paid for the 2023 tax year.