Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Tax Disclosure

NOTE 13 - INCOME TAXES

We compute our quarterly tax provision using the effective tax rate method by applying the anticipated annual effective rate to our year-to-date income or loss, except for discrete items. Income tax on discrete items is computed and recorded in the period in which the specific transaction occurs.

We consider whether a portion, or all, of the deferred tax assets (“DTAs”) will be realized based on a more likely than not standard of judgment. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2020, we had a full valuation allowance totaling $165.6 million against our DTAs resulting from prior year cumulative financial losses, oil and gas impairments, and significant net operating losses for U.S. federal and state income tax. At each reporting period, management considers the scheduled reversal of deferred tax liabilities, available taxes in carryback periods, tax planning strategies and projected future taxable income in making this assessment. As of September 30, 2021, there was no change in our assessment of the realizability of our DTAs. Future events or new evidence which may lead us to conclude that it is more likely than not that our net DTAs will be realized include, but are not limited to, cumulative historical pre-tax earnings, sustained or continued improvements in oil prices, and taxable events that could result from one or more transactions.

As long as we conclude that we will continue to provide for a valuation allowance against our net DTA, we will likely not have any income tax expense or benefit other than for state income taxes. The effective income tax rates for the three and nine months ended September 30, 2021 were 0.1 percent and 0.2 percent provision on income, respectively, and 0.6 percent provision on loss and 0.5 percent benefit on loss for the three and nine months ended September 30, 2020, respectively.

As of September 30, 2021, there is no liability for unrecognized income tax benefits. As of the date of this report, we are current with our income tax filings in all applicable state jurisdictions and are not currently under any state income tax examinations. The IRS has accepted our 2019 federal income tax return with no tax adjustments. We continue to voluntarily participate in the IRS CAP program for the review of our 2020 and 2021 tax years. Participation in the IRS CAP Program has enabled us to have minimal uncertain tax benefits associated with our federal tax return filings.