v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
Note 4 - Income Taxes
The provision for income taxes consisted of the following:
For the Three Months Ended
June 30,		For the Six Months Ended
June 30,
2026202520262025
(in millions)
Current portion of income tax (expense) benefit:
Federal$(4)$(7)$(9)$(28)
State2 (1)(3)(3)
Deferred portion of income tax expense(316)(43)(231)(69)
Income tax expense$(318)$(51)$(243)$(101)
Effective tax rate22.9 %20.1 %24.8 %20.8 %
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Note: Prior year amounts may not calculate due to rounding.
Income tax expense or benefit differs from the amount that would be calculated by applying the statutory United States federal income tax rate to income or loss before income taxes. These differences can relate to the effect of federal and state tax credits, state income taxes, excess tax benefits and deficiencies from stock-based compensation awards, tax deduction limitations on compensation of covered individuals, and the cumulative effect of other smaller permanent differences. The quarterly effective tax rate and the resulting income tax expense or benefit can also be affected by the proportional effects of forecast net income or loss and the correlative effect on the valuation allowance for each of the periods presented in the table above. Income tax expense or benefit can also reflect a period change from the remeasurement of deferred tax assets and liabilities resulting from a statutorily enacted tax rate change or a change in the composition of income and activities among multiple state tax jurisdictions due to a corporate reorganization. Due to the Merger and resulting increase in activity in the state of Colorado, we recorded a remeasurement tax expense during the first quarter of 2026, related to SM Energy’s historical net deferred tax balances.
As a result of the Merger, it was determined that an ownership change occurred under Sections 382 and 383 of the Internal Revenue Code (“IRC”), changing the timing of when we can utilize certain tax attributes. We have assessed the recoverability of our deferred tax assets by considering whether it is more likely than not that all or a portion of the combined Company’s deferred tax assets will be realized. In making such a determination, we considered both the positive and negative evidence, including our recent history of profitability, and concluded that no additional valuation allowance is currently required. We will continue to assess the realizability of our acquired tax attributes considering any potential impacts under IRC 382, as permitted under ASC 805.
We comply with authoritative accounting guidance regarding uncertain tax positions. The entire amount of unrecognized tax benefit we have reported would affect our effective tax rate if recognized. We do not expect a significant change to our recorded unrecognized tax benefits in 2026.
We are no longer subject to United States federal or state income tax examinations by tax authorities for tax years prior to 2022. However, tax years in which net operating losses or tax credit carryforwards were generated remain subject to examination until such losses or credits are fully utilized or expire.