Chesapeake Energy 1996 Annual Report Download - page 58

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Year Ended June 30,
($ in thousands)
Current
Deferred
Total
through June 30, 1998.
Due to the nature of the oil and gas business, the com-
pany and its subsidiaries are exposed to possible environ-
mental risks. The company has implemented various
policies and procedures to avoid environmental contami-
nation and risks from environmental contamination. The
company is not aware of any potential environmental
issues or claims.
5. INCOME TAXES
As discussed in Note 1, the company has adopted SFAS
109. The components of the income tax provision for
each of the periods are as follows:
1996 1995 1994
$$- $-
12,854 6,299 1,250
$12,854 $ 6,299 $ 1,250
The effective income tax rate differed from the com-
puted "expected" federal income tax rate on earnings
before income taxes for the following reasons:
Deferred income taxes are provided to reflect tempo-
rary differences in the basis of net assets for income tax
and financial reporting purposes. The tax effected tem-
porary differences and tax loss carryforwards which com-
prise deferred taxes are as follows:
At June 30, 1996, the company had regular tax net
operating loss carryforwards of approximately $140 mil-
lion and alternative minimum tax net operating loss
carryforwards of approximately $15 million. These loss
carryforward amounts will expire during the years 2007
through 2011. The company also had a percentage deple-
tion carryforward of approximately $2.3 million at June
30, 1996, which is available to offset future federal in-
come taxes payable and has no expiration date.
In accordance with certain provisions of the Tax Re-
form Act of 1986, a change of greater than 50% of the
beneficial ownership of the company within a three-year
period (an "Ownership Change") would place an annual
limitation on the company's ability to utilize its existing
tax carryforwards. Under regulations issued by the Inter-
nal Revenue Service, the company does not believe that
an Ownership Change has occurred as ofJune 30, 1996.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended June 30, 1996 1995 1994
($ in thousands)
Deferred tax liabilities:
Acquisition, exploration
and development costs
and related depreciation,
depletion and
amortization $(63,725) $(31,220) $(15,872)
Deferred tax assets:
Net operating loss
carryforwards 50,776 23,414 12,879
Percentage depletion
carryforward 764 526 780
51,540 23,940 13,659
Total Deferred
Income Taxes $(12,185) $ (7,280) $ ( 2,213)
Year Ended June 30, 1996 1995 1994
($ in thousands)
Computed "expected"
income tax provision $12,673 $ 6,286 $1,753
Tax percentage depletion (238) (144) (780)
Other 419 157 277
$12,854 $ 6,299 $1,250
CHESAPEAKE EN5R Y CORPORATION