Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For the years ended December 31, 2022, 2021, and 2020, components of our provision for (benefit from) income taxes are as follows:
Provision for Income Taxes 2022 2021 2020
Federal deferred tax $ 6,437,680  $ —  $ (6,001,176)
State deferred tax 1,971,044  90,342  — 
Provision for (Benefit From) Income Taxes $ 8,408,724  $ 90,342  $ (6,001,176)
The following is a reconciliation of income taxes computed using the U.S. federal statutory rate to the provision for (benefit from) income taxes:
Rate Reconciliation 2022 2021 2020
Pre-tax book income (loss) $ 147,043,749  $ 3,413,234  $ (259,413,004)
Tax at federal statutory rate $ 30,879,187  $ 716,779  $ (54,476,731)
Excess tax benefit from stock option exercises and restricted stock vesting (312,268) (175,187) (1,109,379)
Adjust prior estimates to tax return 214,740  2,938,948  (1,930,994)
States taxes, net of federal benefit 1,443,145  430,654  (964,393)
Valuation allowance (24,151,242) (3,827,194) 52,161,412 
Non-deductible expenses and other 335,162  6,342  318,909 
Provision for (Benefit From) Income Taxes $ 8,408,724  $ 90,342  $ (6,001,176)
The Company's deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. The net deferred taxes consisted of the following as of December 31, 2022 and 2021:
12/31/2022
Total		 12/31/2021
Total
Deferred Tax Assets
Net operating loss (NOL) carryforward 70,564,004  60,155,112 
Equity compensation 1,554,680  691,076 
Asset retirement obligation 6,635,099  3,348,875 
Fair market value of derivatives 2,827,202  6,403,745 
§163(j) business interest expense carryforward 4,917,358  — 
Others 1,173,441  61,077 
Gross Deferred Tax Assets 87,671,784  70,659,885 
Less: valuation allowance (24,182,975) (48,334,217)
Net Deferred Tax Assets 63,488,809  22,325,668 
Deferred Tax Liabilities
Property and equipment (71,402,820) (22,415,959)
Other (585,005) — 
Net Deferred Liabilities (71,987,825) (22,415,959)
Net Deferred Tax Liabilities (8,499,016) (90,292)
As of December 31, 2022, the Company had net operating loss carryforwards for federal income tax reporting purposes of approximately $109.3 million which, if unused, will begin to expire in 2027 and fully expire in 2037 and an additional $225.1 million that can be carried forward indefinitely. The shares issued for the Stronghold Acquisition (further discussed in Note 5 - "ACQUISITIONS & DIVESTITURES) resulted in the Company having an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended. Section 382 limits the availability of certain tax attributes, including net operating losses and disallowed interest carryforwards, to offset future taxable income of the Company. In evaluating its need for a valuation allowance against its deferred tax assets, the Company has estimated the amount of tax attributes related to the pre-ownership change period to be available under Section 382 in periods in which it expects deferred tax liabilities to be realized based on currently available information. Based on its current analysis, the Company does not anticipate any material tax attributes to expire unused as result of the Section 382 ownership change; however, the ultimate timing in the amount of tax attributes available in future periods may be different than the Company's current estimate and will be determined in each year as new information becomes available. Changes in expectation in the timing of the availability of the Company's tax attributes could result in adjustments to the valuation allowance in future years as it updates its analysis based on new information.
As of December 31, 2022, we carried a valuation allowance against our federal and state deferred tax assets of $24,182,975. We have considered both the positive and negative evidence in determining whether it was more likely than not that some portion or all of our deferred tax assets will be realized. The amount of deferred tax assets considered realizable could, however, be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence is no longer present and additional weight is given to subjective positive evidence, including projections for growth. During 2022, the Company determined that certain existing deferred tax assets will not be offset by existing deferred tax liabilities as a result of the 80% limitation on the utilization of net operating losses incurred after 2017. This results in an ending federal net deferred tax liability after valuation allowance of $6,437,680. Additionally, the Company reported a net state deferred tax liability at December 31, 2022 of $2,061,336 attributable to certain state deferred tax liabilities mainly associated with property and equipment.