Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

Our income tax provision (benefit) is as follows:

	Successor						Predecessor
	Year Ended Dec. 31, 2022		Year Ended Dec. 31, 2021		Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands
Current income tax expense (benefit)
Federal	$	3,055	$	—	$	—	$	(6,407)
State	2,308		403		30		(853)
Total current income tax expense (benefit)	5,363		403		30		(7,260)
Deferred income tax expense (benefit)
Federal	63,814		—		—		(319,011)
State	5,667		364		(2,556)		(89,858)
Total deferred income tax expense (benefit)	69,481		364		(2,556)		(408,869)
Total income tax expense (benefit)	$	74,844	$	767	$	(2,526)	$	(416,129)

At December 31, 2022, we had general business credit carryforwards totaling $10.5 million that begin to expire in 2041. In connection with our restructuring in 2020, net operating loss carryforwards (“NOLs”), and tax credit carryforwards for enhanced oil recovery and research and development generated prior to January 1, 2021 were fully reduced in accordance with the attribute reduction and ordering rules of Section 108 of the Internal Revenue Code of 1986 pertaining to discharge of indebtedness. At December 31, 2022, we had $0.6 million of alternative minimum tax credits, which under the Tax Cut and Jobs Act passed in 2017 are fully refundable and are recorded as a receivable on the balance sheet, and state NOLs and tax credits totaling $48.2 million (before provision for valuation allowance) related to our state operations. Our state NOLs expire in various years, starting in 2025.

Deferred income taxes reflect the available tax carryforwards and the temporary differences based on tax laws and statutory rates in effect at the December 31, 2022 and 2021 balance sheet dates.  Based on all available evidence, both positive and negative, we reached a determination as of March 31, 2022, that there was sufficient positive evidence, primarily related to a substantial increase in worldwide oil prices and taxable income generated from future reversals of existing taxable temporary differences, to conclude that our federal and certain state deferred tax assets are more likely than not to be realized. Based on this determination, in 2022 we reversed the valuation allowance on our federal and certain state deferred tax assets by $51.4 million and $14.8 million, respectively. The reversal of state valuation allowance relates to certain state deferred tax assets for Mississippi, Montana and North Dakota. As of December 31, 2022, we had $59.2 million of net state deferred tax assets associated with operations in Louisiana, Alabama, as well as certain Mississippi tax credits, which were fully offset with valuation allowances. The valuation allowances will remain until the realization of future deferred tax benefits are more likely than not to become utilized. The changes in our valuation allowance are detailed below:

	Successor						Predecessor
	Year Ended Dec. 31, 2022		Year Ended Dec. 31, 2021		Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands
Beginning balance	$	125,462	$	129,408	$	129,840	$	77,215
Charges	790		29,345		2,269		77,138
Deductions	(67,019)		(33,291)		(2,701)		(24,513)
Ending balance	$	59,233	$	125,462	$	129,408	$	129,840

Significant components of our deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows:

In thousands	December 31, 2022		December 31, 2021
Deferred tax assets
Loss and tax credit carryforwards – state	$	48,172	$	54,943
Derivative contracts	—		30,892
Accrued liabilities and other reserves	19,155		19,567
Business credit carryforwards	10,487		18,066
Loss carryforwards – federal	—		10,310
Lease liabilities	1,998		4,523
Property and equipment	—		2,613
Other	5,974		4,206
Valuation allowances	(59,233)		(125,462)
Total deferred tax assets	26,553		19,658
Deferred tax liabilities
Property and equipment	(78,055)		—
CO2 and other contracts	(15,304)		(17,208)
Operating lease right-of-use assets	(2,770)		(4,088)
Derivative contracts	(1,544)		—
Total deferred tax liabilities	(97,673)		(21,296)
Total net deferred tax liability	$	(71,120)	$	(1,638)

Our reconciliation of income tax expense computed by applying the U.S. federal statutory rate and the reported effective tax rate on income from continuing operations is as follows:

	Successor						Predecessor
	Year Ended Dec. 31, 2022		Year Ended Dec. 31, 2021		Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020
In thousands
Income tax provision calculated using the federal statutory income tax rate	$	116,551	$	11,921	$	(11,169)	$	(388,228)
State income taxes	20,642		1,468		8,509		(120,340)
Tax windfall on stock-based compensation deduction	(158)		(267)		—		(1,380)
Nondeductible compensation	2,303		5,057		—		—
Change in valuation allowance	(66,229)		(3,946)		(432)		52,625
EOR and other	(1,530)		(14,272)		—		—
Tax attributes reduction – net of cancellation of indebtedness income exclusion	—		—		—		31,667
Other	3,265		806		566		9,527
Total income tax expense (benefit)	$	74,844	$	767	$	(2,526)	$	(416,129)

We file consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state jurisdictions.  The statutes of limitation for our income tax returns for tax years ending prior to 2019 have lapsed and therefore are not subject to examination by respective taxing authorities. We have not paid any significant interest or penalties associated with our income taxes.