Income Taxes

9 Months Ended

Sep. 30, 2020

Note K – Income Taxes

The Company’s effective income tax rate is calculated as the amount of income tax expense (benefit) divided by income from continuing operations before income taxes. For the three-month and nine-month periods ended September 30, 2020 and 2019, the Company’s effective income tax rates were as follows:


	2020	2019
Three months ended September 30,	19.1%	10.6%
Nine months ended September 30,	18.6%	12.1%

The effective tax rate for the three-month period ended September 30, 2020 was below the U.S. statutory tax rate of 21% due to exploration expenses in certain foreign jurisdictions in which no income tax benefit is available, as well as no tax benefit available from the pre-tax loss of the noncontrolling interest in MP GOM.

The effective tax rate for the three-month period ended September 30, 2019 was below the U.S. statutory tax rate of 21% due to an income tax deduction for prior years Vietnam exploration spend which resulted in an income tax benefit of $15 million.

The effective tax rate for the nine-month period ended September 30, 2020 was below the U.S. statutory tax rate of 21% due to exploration expenses in certain foreign jurisdictions in which no income tax benefit is available, as well as no tax benefit available from the pre-tax loss of the noncontrolling interest in MP GOM. These items reduced the tax credit on a reported pre-tax net loss.

The effective tax rate for the nine-month period ended September 30, 2019 was below the statutory tax rate of 21% due to an income tax deduction for prior years Vietnam exploration spend which resulted in an income tax benefit of $15 million, a reduction of the Alberta provincial corporate income tax rate that reduced the future deferred tax liability by $13 million, and no tax applied to the pre-tax income of the noncontrolling interest in MP GOM.

The Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities. These audits often take multiple years to complete and settle. Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future years from resolution of outstanding unsettled matters. As of September 30, 2020, the earliest years remaining open for audit and/or settlement in our major taxing jurisdictions are as follows: United States – 2016; Canada – 2016; Malaysia – 2013; and United Kingdom – 2018. Following the divestment of Malaysia in the

third quarter of 2019, the Company has retained certain possible tax and other liabilities and rights to income tax receivables relating to Malaysia for the years prior to 2019. The Company believes current recorded liabilities are adequate.