INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of components of income tax expense (benefit)

The table below sets forth the provision for income taxes attributable to continuing operations for the periods presented.



	Year Ended December 31,
	2012			2011			2010
	(In Thousands)
Current:
Federal	$	(34,733	)	$	(201	)	$	(16,393	)
Foreign	—			28,921			—
State	(805		)	1,421			2,492
	(35,538		)	30,141			(13,901		)
Deferred:
Federal	202,552			56,482			121,111
State	6,423			2,512			2,560
	208,975			58,994			123,671
Total income tax	$	173,437		$	89,135		$	109,770

Schedule of income before income tax, domestic and foreign

Earnings (loss) from continuing operations before income taxes consists of the following for the periods presented:



	Year Ended December 31,
	2012			2011			2010
	(In Thousands)
United States Federal	$	(1,013,801	)	$	188,421		$	301,349
Foreign	(101,693		)	(1,026		)	(1,917		)
	$	(1,115,494	)	$	187,395		$	299,432

Reconciliation of income tax computed by applying statutory federal income tax rate

A reconciliation of reported income tax attributable to continuing operations to the amount of income tax that would result from applying the United States federal statutory income tax rate to pretax earnings from continuing operations is as follows:



	Year Ended December 31,
	2012			2011			2010
	(In Thousands)
Federal income tax at 35% of earnings before income taxes and discontinued operations	$	(390,423	)	$	65,947		$	105,472
State income taxes, net of federal income tax benefits	(11,211		)	2,214			3,526
Change in valuation allowance	575,570			—			—
Canadian dividend tax, net of U.S. tax benefit	—			18,460			—
Effect of federal, state, and foreign tax on permanent differences	3,026			4,025			4,030
Other	(3,525		)	(1,511		)	(3,258		)
Total income tax	$	173,437		$	89,135		$	109,770

Schedule of deferred tax assets and liabilities

The components of net deferred tax assets and liabilities at December 31, 2012 and 2011 are as follows:



	December 31,
	2012			2011
	(In Thousands)
Deferred tax assets:
Property and equipment⁽¹⁾	$	353,352		$	101,299
Accrual for postretirement benefits	3,134			11,545
Stock-based compensation accruals	10,748			7,921
Net operating loss carryforwards	157,103			60,965
Alternative minimum tax credit carryforward	49,409			54,776
Other	32,278			8,418
Total gross deferred tax assets	606,024			244,924
Less valuation allowance	(575,570		)	—
Net deferred tax assets	30,454			244,924
Deferred tax liabilities:
Unrealized gains on derivative contracts, net	(17,429		)	(25,713		)
Amortization of deferred gain on rig sales	(10,472		)	(8,267		)
Other	(2,553		)	—
Total gross deferred tax liabilities	(30,454		)	(33,980		)
Net deferred tax assets	$	—		$	210,944

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(1)	Includes deferred tax assets of $28.3 million related to Italy and South Africa as of December 31, 2012.

The net deferred tax assets and liabilities are reflected in the Consolidated Balance Sheets as follows:



	December 31,
	2012			2011
	(In Thousands)
Current deferred tax liabilities	$	(14,681	)	$	(20,172	)
Non-current deferred tax assets	14,681			231,116
Net deferred tax assets	$	—		$	210,944

Summary of income tax contingencies

The table below sets forth the reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits. The Company records interest accrued related to unrecognized tax benefits in interest expense and penalties in other expense, to the extent they apply. The Company does not expect a material amount of unrecognized tax benefits to reverse in the next twelve months.



	Year Ended December 31,
	2012			2011			2010
	(In Thousands)
Gross unrecognized tax benefits at beginning of period	$	2,829		$	3,345		$	2,665
Increases as a result of tax positions taken during a prior period	—			—			1,078
Decreases as a result of tax positions taken during a prior period	(1,970		)	(516		)	(398		)
Gross unrecognized tax benefits at end of period	$	859		$	2,829		$	3,345

Income tax receivables

The table below sets forth income tax receivables as of the dates indicated.



	December 31,
	2012		2011
	(In Thousands)
Current income tax receivable⁽¹⁾	$	—	$	16,481
Non-current income tax receivable⁽²⁾	20,651		—
	$	20,651	$	16,481

____________________________________________


(1)	Included in “Other current assets” in the Consolidated Balance Sheets.


(2)	Included in “Other assets” in the Consolidated Balance Sheets.

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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