INCOME TAXES

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company recorded a current income tax provision of $9.0 million for each of the three and nine months ended September 30, 2023 and a deferred income tax provision of $5.6 million and $119.6 million for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2022, the Company recorded a current income tax provision of $0.3 million and $51.9 million, respectively, and a deferred income tax provision of $113.7 million and $266.5 million, respectively.

The Company’s effective income tax rates of 5% and 18% for the three and nine months ended September 30, 2023, respectively, differed from the U.S. federal statutory rate due primarily to recognizing research and experimental expenditure tax credits of $65.1 million in the third quarter of 2023, which were partially offset by permanent differences between book and taxable income and state taxes, primarily in New Mexico. The Company’s effective income tax rate of 25% for both the three and nine months ended September 30, 2022 differed from the U.S. federal statutory rate due primarily to permanent differences between book and taxable income and state taxes, primarily in New Mexico.

The Company recognizes tax benefits from an uncertain tax position on the basis of a two-step process in which (i) the Company determines whether it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based upon the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

As of September 30, 2023, the Company had unrecognized tax benefits (“UTB”) of $28.0 million as a result of research and experimental expenditures related to horizontal drilling and completion innovations. There were no UTBs as of December 31, 2022. Although the Company believes it has adequately reserved for its uncertain tax positions in respect of such research and experimental expenditures, no assurance can be given that the final tax outcome of these matters will not be different. The timing as to when the Company will substantially resolve the uncertainties associated with the UTBs is unknown as