Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

v3.25.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 14 — INCOME TAXES
For the years ended December 31, 2025, 2024, and 2023, components of our provision (benefit) for income taxes are as follows.
Provision for (Benefit from) Income Taxes: 2025 2024 2023
Federal deferred tax $ (7,654,389) $ 19,096,010  $ (901,522)
State current tax
 374,982  401,197  72,213 
State deferred tax (173,339) 943,747  954,551 
Provision for (Benefit from) Income Taxes $ (7,452,746) $ 20,440,954  $ 125,242 
The Company’s overall effective tax rates are calculated as Benefit from (Provision for) Income Taxes divided by Income (Loss) Before Benefit from (Provision for) Income Taxes. The effective tax rates for the years ended December 31, 2025, 2024, and 2023 were as follows.
For the years ended December 31,
2025 2024 2023
Effective tax rate (1)
17.7  % 23.3  % 0.1  %
(1) The effective tax rates for the years ended December 31, 2025 and 2024 differ from the U.S. federal statutory rate of 21% primarily due to share-based and executive compensation and state income taxes. The effective tax rate for the year ended December 31, 2023 was impacted by the release of valuation allowance on the Company's federal net deferred tax asset. A tax benefit of $24.2 million was recorded in the year ended December 31, 2023.
The following is a reconciliation of the difference between the effective income tax rate and the U.S. federal statutory rate, for the year ended December 31, 2025.
Rate Reconciliation: 2025
Amount
Percent
Pre-tax book income (loss) $ (42,183,945)
Tax provision (benefit) computed at the U.S. federal statutory rate (8,858,628) 21.0  %
State and local income tax, net of federal income tax effect (1)
174,193  (0.4)
Nontaxable or nondeductible items:
Share-based compensation and executive compensation disallowance 1,209,928  (2.9)
Meals and entertainment 20,147  0.0 
Other 1,614  0.0 
Provision for (Benefit from) Income Taxes $ (7,452,746) 17.7  %
(1) State taxes in Texas made up the majority (greater than 50%) of the tax effect in this category.
As previously disclosed for the years ended December 31, 2024, and 2023, prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and the U.S. federal statutory rate.
Rate Reconciliation:
 2024 2023
Pre-tax book income (loss) (2)
$ 87,911,268  $ 104,917,670 
Tax at federal statutory rate 18,461,366  22,032,711 
Excess tax benefit from stock option exercises and restricted stock vesting 104,344  478,304 
Adjust prior estimates to tax return 69,654  (474,617)
States taxes, net of federal benefit 1,008,096  1,122,782 
Valuation allowance —  (24,182,975)
Non-deductible expenses and other 797,494  1,149,037 
Provision for (Benefit from) Income Taxes $ 20,440,954  $ 125,242 
(2) Amount in the year ended December 31, 2023 represented pre-tax book income, net of income taxes paid.
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, 2025 and 2024.
2025 2024
Deferred Tax Assets
Net operating loss (NOL) carryforward $ 72,880,353  $ 68,516,720 
Share-based compensation 910,213  1,097,273 
Asset retirement obligation 6,627,813  5,755,174 
§163(j) business interest expense carryforward 19,675,692  18,838,600 
Other 1,488,392  1,672,268 
Gross Deferred Tax Assets $ 101,582,463  $ 95,880,035 
Less: valuation allowance —  — 
Net Deferred Tax Assets $ 101,582,463  $ 95,880,035 
Deferred Tax Liabilities
Property and equipment $ (115,663,637) $ (123,318,803)
Fair value of derivative instruments (6,107,910) (392,761)
Other (575,035) (760,273)
Net Deferred Tax Liabilities $ (122,346,582) $ (124,471,837)
Net Deferred Tax Liability $ (20,764,119) $ (28,591,802)
The following table summarizes income taxes paid (net of refunds received) for the year ended December 31, 2025. All jurisdictions in which income taxes paid (net of refunds received) were equal to or greater than five percent of total income taxes paid (net of refunds received) are included below (if the noted jurisdiction did not meet the five percent threshold for a particular year, the amount for that year is not included below).
Income taxes paid (net of refunds received) 2025
Federal income taxes $ — 
State and local income taxes:
Texas $ 337,787 
Other 9,700 
Total state and local income taxes, net of refunds $ 347,487 
Total income taxes paid, net of refunds received $ 347,487 
As of December 31, 2025, the Company had net operating loss carryforwards for federal income tax reporting purposes of approximately $96.9 million which, if unused, will begin to expire in 2033 and fully expire in 2037 and an additional $248.2 million that can be carried forward indefinitely.
Section 382 of the Internal Revenue Code of 1986, as amended, 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, 2025, we carried a valuation allowance against our federal and state deferred tax assets of $0. 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. As of June 30, 2023, the Company was no longer in a cumulative loss position. As a result, future forecasted pre-tax book income was considered as positive evidence in assessing the valuation allowance. Based on the change in judgment on the realizability of the related federal deferred tax assets in future years, the Company released $24.2 million of valuation allowance as a benefit during the year ended December 31, 2023. This, coupled with the income tax provision for the year ended December 31, 2025 resulted in an ending federal net deferred tax liability of $16,977,823. Additionally, the Company reported a net state deferred tax liability at December 31, 2025 of $3,786,296 attributable to certain state deferred tax liabilities mainly associated with property and equipment.