Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax bases of assets and liabilities. The Company’s net deferred tax position as of December 31, 2022 and 2021 is as follows (in thousands).

	December 31,
	2022		2021
Deferred tax assets
Net operating loss carryforwards	$	12,874	$	129,651
Unrealized loss on derivatives	—		3,729
Percentage depletion carryover	8		1,770
Compensation	14,184		9,838
Lease liabilities	12,585		4,866
Other	1,926		9,410
Total deferred tax assets	41,577		159,264
Valuation allowance on deferred tax assets	(11,322)		(10,599)
Total deferred tax assets, net of valuation allowance	30,255		148,665
Deferred tax liabilities
Unrealized gain on derivatives	(995)		—
Property and equipment	(368,283)		(179,153)
Less than wholly-owned subsidiaries	(63,388)		(39,900)
Lease right of use assets	(12,585)		(4,866)
Other	(13,355)		(2,684)
Total deferred tax liabilities	(458,606)		(226,603)
Net deferred tax liabilities	$	(428,351)	$	(77,938)

At December 31, 2020, the Company’s deferred tax assets exceeded its deferred tax liabilities due to the deferred tax assets generated by impairment charges recorded in 2020. As a result, the Company established a valuation allowance against most of the deferred tax assets beginning in the third quarter of 2020. Due to a variety of factors, including the Company’s significant net income in 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 before expiration, a valuation allowance will continue to be recognized until the state deferred tax assets are more likely than not to be utilized.

The current income tax provision and the deferred income tax provision for the years ended December 31, 2022, 2021 and 2020 were comprised of the following (in thousands). 

	Year Ended December 31,
	2022		2021		2020
Current income tax provision
Federal income tax	$	31,335	$	—	$	—
State income tax	23,542		—		—
Net current income tax provision	$	54,877	$	—	$	—
Deferred income tax provision (benefit)
Federal income tax	$	302,486	$	44,883	$	(25,675)
State income tax	41,994		29,827		(19,924)
Net deferred income tax provision (benefit)	$	344,480	$	74,710	$	(45,599)

Reconciliations of the tax expense (benefit) computed at the statutory federal rate to the Company’s total income tax provision (benefit) for the years ended December 31, 2022, 2021 and 2020 is as follows (in thousands). 

	Year Ended December 31,
	2022		2021		2020
Federal tax expense (benefit) at statutory rate(1)	$	353,992	$	150,223	$	(125,823)
State income tax expense (benefit)	59,870		26,646		(20,607)
Permanent differences	(15,227)		(2,078)		(3,114)
Change in federal valuation allowance	—		(103,262)		103,262
Change in state valuation allowance	722		3,181		683
Total income tax provision (benefit)	$	399,357	$	74,710	$	(45,599)

__________________    

(1)The statutory federal tax rate was 21% for the years ended December 31, 2022, 2021 and 2020.

The Company files a United States federal income tax return and several state tax returns, a number of which remain open for examination. The earliest tax year open for examination for the federal, the State of New Mexico and the State of Louisiana tax returns is 2019. The earliest tax year open for examination for the State of Texas tax return is 2018.

The Company has evaluated all tax positions for which the statute of limitations remains open and believes that the material positions taken would more likely than not be sustained by examination. Therefore, at December 31, 2022, the Company had not established any reserves for, nor recorded any unrecognized benefits related to, uncertain tax positions.