v3.25.2
Income taxes
 6 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
The following table presents income tax benefit (expense) for the periods presented:
Three months ended June 30,Six months ended June 30,
(in thousands)2025202420252024
Current$(1,070)$(1,062)$(1,832)$(2,237)
Deferred(238,100)(9,347)(236,289)7,577 
Income tax benefit (expense)$(239,170)$(10,409)$(238,121)$5,340 
The Company estimates its annual effective tax rate (“AETR”) in recording its quarterly income tax provision for the various jurisdictions in which it operates. The tax effects of statutory rate changes, significant unusual or infrequently occurring items, and certain changes in the assessment of the realizability of deferred tax assets are excluded from the determination of its estimated AETR and are recognized as discrete items in the quarter in which they occur. The Company's AETR as of June 30, 2025 was 0%, which reflects the impact of providing a valuation allowance on the 2025 activity of the Company's federal net deferred tax asset. In addition, the Company recorded a discrete charge of $237.9 million related to the valuation allowance recorded on the December 31, 2024 federal net deferred tax asset. As such, the Company's effective tax rate for the three and six months ended June 30, 2025 is not meaningful. The effective tax rate for the three and six months ended June 30, 2024 was 22.09% and 15.36%, respectively. Current income tax expense is primarily attributable to Texas Franchise tax.
Management is required to assess the realizability of deferred tax assets for each reporting period. This assessment involves evaluating all available evidence, both positive and negative, to determine whether it is more-likely-than-not that the deferred tax assets will be realized. One of the most significant pieces of objective evidence is the existence of a cumulative pre-tax income or loss over the past three years. A three-year cumulative loss significantly constrains a company's ability to rely on projected future taxable income as a source of support for the realizability of deferred tax assets.
As a result of full cost ceiling impairments recorded during the current period, and the expectation of potential additional impairments in future periods, the Company now anticipates being in a cumulative three-year pre-tax loss position in the near term. This shift in outlook represents a significant negative indicator under applicable accounting guidance and therefore management can no longer determine that it is more-likely-than-not that the Company's deferred tax assets will be realized. Accordingly, as of June 30, 2025, the Company has recorded a valuation allowance against its federal net deferred tax asset. In addition, the Company continues to maintain a full valuation allowance against its Oklahoma state deferred tax assets as of June 30, 2025. The Company has not recorded a valuation allowance on its Texas net deferred tax asset of $3.4 million as of June 30, 2025.
As of December 31, 2024, the Company had federal net operating loss carryforwards totaling $897.0 million, of which $530.2 million will begin to expire in 2035 and $366.8 million will not expire but may be limited in future periods, and State of Oklahoma net operating loss carryforwards that do not expire totaling $459.3 million.
If the Company were to experience an "ownership change," as determined under Section 382 of the Internal Revenue Code, the Company's ability to offset taxable income, arising after the ownership change with net operating loss and interest expense carryforwards arising prior to the ownership change, could be significantly limited. Based on information available as of June 30, 2025, no such ownership change has occurred. As such, the tax attributes are available to offset taxable income; however, as of June 30, 2025 these deferred tax assets are fully offset with a valuation allowance.
On July 4, 2025, the One Big Beautiful Bill Act (the "OBBB Act") was signed into law. The OBBB Act is a significant piece of tax legislation that includes provisions which permanently restore an EBITDA-based section 163(j) calculation for tax years beginning after December 31, 2024; restore 100% bonus depreciation under section 168(k) for certain property acquired and placed in service after January 19, 2025; and allow for current expensing of R&D expenditures. ASC 740-10 requires the impact of changes to tax law to be recorded in the period of enactment, which will be reflected in our third quarter financial statements. The Company is assessing the impacts to its income tax expense as a result of the OBBB Act.