INCOME TAXES

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

As a result of the full-cost ceiling impairments recorded in 2020, the Company recognized a valuation allowance against its net deferred tax assets for the three and nine months ended September 30, 2020. Due to a variety of factors, including the Company’s significant net income during the nine months ended September 30, 2021, the Company’s federal valuation allowance was reversed as of September 30, 2021 as the deferred tax assets were determined to be more likely than not to be utilized. As a portion of the Company’s state net operating loss carryforwards are not expected to be utilized, a valuation allowance will continue to be recognized until the state deferred tax assets are more likely than not to be utilized.

The Company recorded an income tax benefit of $6.7 million and an income tax provision of $1.5 million for the three and nine months ended September 30, 2021, respectively. The Company’s income tax position for the three and nine months ended September 30, 2021 differed from amounts computed by applying the U.S. federal statutory rate to the pre-tax income due primarily to the impact of reversing the Company’s federal valuation allowance as of September 30, 2021, as well as permanent differences between book and tax income and state taxes, primarily in New Mexico.

NOTE 5 — INCOME TAXES — ContinuedThe Company’s total income tax position for the three and nine months ended September 30, 2020 differed from amounts computed by applying the U.S. federal statutory tax rates to pre-tax income due primarily to the impact of the valuation allowance, as well as permanent differences between book and tax income and state taxes, primarily in New Mexico.