| Schedule of Deferred Tax Assets and Liabilities |
The following table presents Callon’s deferred tax assets and liabilities with respect to its carryforwards and other temporary differences:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2017 |
|
2016 |
Deferred tax asset (a)
|
|
|
|
|
Federal net operating loss carryforward (b)
|
|
$ |
97,437 |
|
|
$ |
135,711 |
|
Statutory depletion carryforward |
|
5,381 |
|
|
8,843 |
|
Alternative minimum tax credit carryforward (c)
|
|
52 |
|
|
104 |
|
Asset retirement obligations |
|
572 |
|
|
1,181 |
|
Derivatives |
|
6,186 |
|
|
6,456 |
|
Unvested RSU equity awards |
|
1,749 |
|
|
2,092 |
|
Other |
|
2,401 |
|
|
4,376 |
|
Deferred tax asset before valuation allowance |
|
113,778 |
|
|
158,763 |
|
Deferred tax liability (a)
|
|
|
|
|
Oil and natural gas properties |
|
54,264 |
|
|
18,661 |
|
Total deferred tax liability |
|
54,264 |
|
|
18,661 |
|
Net deferred tax asset before valuation allowance |
|
59,514 |
|
|
140,102 |
|
Less: Valuation allowance |
|
(60,919 |
) |
|
(140,192 |
) |
Net deferred tax liability |
|
$ |
(1,405 |
) |
|
$ |
(90 |
) |
|
|
(a) |
Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future period when those temporary differences are expected to be recovered or settled. The 2017 Tax Reform lowered the U.S. federal corporate tax rate from 35% to 21%, which caused the Company to remeasure its deferred income tax assets and liabilities at the new rate. As of December 31, 2017 and 2016, the Company’s tax rate applied was 21% and 35%, respectively. As a result of the change in the applied tax rate on our deferred tax assets and liabilities, the Company recorded a $40,611 reduction in our net deferred tax assets with a corresponding reduction in our valuation allowance.
|
|
|
(b) |
As of December 31, 2016, the Company’s $135,711 deferred tax asset related to NOL carryforwards was net of $9,288 of unrealized excess tax benefits related to stock based compensation.
|
|
|
(c) |
The 2017 Tax Reform repealed the Alternative Minimum Tax (“AMT”) effective for years beginning after December 31, 2017. The result had an immaterial impact in income. |
|
| Summary of Operating Loss Carryforwards |
If not utilized, the Company’s existing federal NOL carryforwards, unaffected by the 2017 Tax Reform, will expire as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Expiring |
|
|
Total |
|
2018-2023 |
|
2024-2026 |
|
2027-2029 |
|
2030-2032 |
|
2033-2037 |
Federal NOL carryforwards |
|
$ |
463,985 |
|
|
$ |
111,431 |
|
|
$ |
14,408 |
|
|
$ |
41,379 |
|
|
$ |
42,158 |
|
|
$ |
254,609 |
|
|
| Schedule of Effective Income Tax Rate Reconciliation |
The following table presents a reconciliation of the reported amount of income tax expense to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
Components of income tax rate reconciliation |
|
2017 |
|
2016 |
|
2015 |
Income tax expense computed at the statutory federal income tax rate |
|
35 |
% |
|
35 |
% |
|
35 |
% |
State taxes net of federal benefit |
|
1 |
% |
|
— |
% |
|
1 |
% |
Section 162(m) |
|
— |
% |
|
(1 |
)% |
|
(1 |
)% |
Valuation allowance |
|
(35 |
)% |
|
(34 |
)% |
|
(54 |
)% |
Effective income tax rate |
|
1 |
% |
|
— |
% |
|
(19 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
Components of income tax expense |
|
2017 |
|
2016 |
|
2015 |
Current federal income tax benefit |
|
$ |
(48 |
) |
|
$ |
(104 |
) |
|
$ |
— |
|
Deferred federal income tax benefit |
|
(45 |
) |
|
— |
|
|
(69,087 |
) |
Deferred state income tax (benefit) expense |
|
1,366 |
|
|
90 |
|
|
(1,282 |
) |
Valuation allowance |
|
— |
|
|
— |
|
|
108,843 |
|
Total income tax (benefit) expense |
|
$ |
1,273 |
|
|
$ |
(14 |
) |
|
$ |
38,474 |
|
|