Cobalt International Energy, Inc.
Notes to Consolidated Financial Statements (Continued)
F-31
16. Income Taxes (Continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. As a result of prospective application of Accounting
Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, the Company offset all
deferred tax liabilities and assets, as well as any related valuation allowance, and is presenting them as a single non-current amount as
of December 31, 2015. The Company has not retrospectively adjusted prior periods. The significant components of the Company’s
deferred tax assets and liabilities were as follows:
As of December 31,
2015
2014
($ in thousands)
Short-term deferred tax liabilities:
2.625% convertible senior notes due 2019(1) ...................... $
— $
18,479
3.125% convertible senior notes due 2024(1) ......................
—
11,855
Total short-term deferred tax liabilities .....................
—
30,334
Long-term deferred tax liabilities:
2.625% convertible senior notes due 2019 ........................... $ 85,339 $
85,471
3.125% convertible senior notes due 2024 ...........................
148,279
148,507
Oil and gas properties...........................................................
152,043
54,461
Total long-term deferred tax liabilities ......................
385,661
288,439
Long-term deferred tax assets:
Seismic and exploration costs...............................................
733,183
457,854
Stock based compensation....................................................
26,995
18,092
Domestic NOL carry forwards .............................................
568,050
415,608
Foreign NOL carry forwards ................................................
42,625
38,200
Other.....................................................................................
(88,837)
(43,021)
Valuation allowance .............................................................
(896,355) (567,960)
Total long-term deferred assets .................................
385,661
318,773
Net long-term deferred assets..........................................
—
30,334
Net deferred tax assets ............................................................... $
— $
—
(1) The recognition of the liability and equity components of the debt resulted in a taxable temporary basis
difference and recorded as an adjustment to additional paid-in capital.
The Company has established a full valuation allowance against the deferred tax assets where the Company has determined that
it is more likely than not that all of the deferred tax assets will not be realized. Because of the full valuation allowance, no income tax
expense or benefit is reflected on the consolidated statement of operations for years ended December 31, 2015, 2014 and 2013.
The NOL carryforward for federal and state income tax purposes of approximately $1.6 billion and $71.8 million as of
December 31, 2015 begins to expire in 2025 and 2024, respectively. The utilization of the NOL carryforwards is dependent upon
generating sufficient future taxable income in the appropriate jurisdictions within the carryforward period.
As of December 31, 2015, the Company had NOL carryforward for foreign income tax purposes of approximately $83.5 million
which began to expire in 2015. The Company has determined that it is more likely than not, that the foreign NOLs will not be fully
realized. Therefore, a full valuation allowance was established for these net deferred tax assets.
There were no unrecognized tax benefits or accrued interest or penalties associated with unrecognized tax benefits as of
December 31, 2015 and 2014.
