Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.6.0.2
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Taxes [Abstract]  
Income Taxes



Note 11 - Income Taxes



The following table presents Callon’s deferred tax assets and liabilities with respect to its carryforwards and other temporary differences:



 

 

 

 

 

 



 

As of December 31,



 

2016

 

2015

Deferred tax asset

 

 

 

 

 

 

   Federal net operating loss carryforward (a)

 

$

135,711 

 

$

107,935 

   Statutory depletion carryforward

 

 

8,843 

 

 

8,843 

   Alternative minimum tax credit carryforward

 

 

104 

 

 

208 

   Asset retirement obligations

 

 

1,181 

 

 

630 

   Derivatives

 

 

6,456 

 

 

   Unvested RSU equity awards

 

 

2,092 

 

 

1,418 

   Other

 

 

4,376 

 

 

6,823 

      Deferred tax asset before valuation allowance

 

 

158,763 

 

 

125,857 

Deferred tax liability

 

 

 

 

 

 

   Oil and natural gas properties

 

 

18,661 

 

 

6,488 

   Derivatives

 

 

 

 

6,984 

   Other

 

 

 

 

3,542 

      Total deferred tax liability

 

 

18,661 

 

 

17,014 

Net deferred tax asset before valuation allowance

 

 

140,102 

 

 

108,843 

   Less: Valuation allowance

 

 

(140,192)

 

 

(108,843)

Net deferred tax liability

 

$

(90)

 

$



(a)

The Company’s $135,711 deferred tax asset related to NOL carryforwards is net of $9,288 of unrealized excess tax benefits related to stock based compensation.



If not utilized, the Company’s federal operating loss (“NOL”) carryforwards will expire as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Year Expiring



 

Total

 

2017-2022

 

2023-2025

 

2026-2028

 

2029-2031

 

2032-2036

Federal NOL carryforwards

 

$

387,745 

 

$

56,979 

 

$

65,878 

 

$

32,714 

 

$

53,806 

 

$

178,368 



As a result of the write-down of oil and natural gas properties discussed in Notes 2 and 13, the Company has incurred a cumulative three year loss. Because of the impact the cumulative loss has on the determination of the recoverability of deferred tax assets through future earnings, the Company assessed the ability to realize its deferred tax assets based on the future reversals of existing deferred tax liabilities. Accordingly, the Company established a valuation allowance for a portion of the deferred tax asset. The valuation allowance was $140,192 as of December 31, 2016.



The Company had no significant unrecognized tax benefits at December 31, 2016. Accordingly, the Company does not have any interest or penalties related to uncertain tax positions. However, if interest or penalties were to be incurred related to uncertain tax positions, such amounts would be recognized in income tax expense. Tax periods for years 2003 through 2016 remain open to examination by the federal and state taxing jurisdictions to which the Company is subject.



The Company provides for income taxes at a statutory rate of 35% adjusted for permanent differences expected to be realized, which primarily relate to non-deductible executive compensation expenses and state income taxes. 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

 

2016

 

2015

 

2014

   Income tax expense computed at the statutory federal income tax rate

 

 

35% 

 

 

35% 

 

 

35% 

   Percentage depletion carryforward

 

 

—%

 

 

—%

 

 

—%

   State taxes net of federal benefit

 

 

—%

 

 

1% 

 

 

1% 

   Restricted stock and stock options

 

 

—%

 

 

—%

 

 

—%

   Section 162(m)

 

 

(1)%

 

 

(1)%

 

 

2% 

   Valuation allowance

 

 

(34)%

 

 

(54)%

 

 

—%

Effective income tax rate

 

 

—%

 

 

(19)%

 

 

38% 





 

 

 

 

 

 

 

 

 



 

For the Year Ended December 31,

Components of income tax expense

 

2016

 

2015

 

2014

   Current federal income tax benefit

 

$

(104)

 

$

 

$

   Current state income tax expense

 

 

 

 

 

 

   Deferred federal income tax (benefit) expense

 

 

 

 

(69,087)

 

 

22,373 

   Deferred state income tax (benefit) expense

 

 

90 

 

 

(1,282)

 

 

761 

   Valuation allowance

 

 

 

 

108,843 

 

 

Total income tax expense

 

$

(14)

 

$

38,474 

 

$

23,134