Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Jun. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Note 6 - Income Taxes
The domestic and foreign components of our (loss) income before income taxes are as follows for the fiscal years ended:
 
June 30,
 
2013
 
2012
 
(In thousands)
United States
$
(9,449
)
 
$
(6,646
)
Australia
(7,537
)
 
30,876

United Kingdom
(4,047
)
 
(3,698
)
(LOSS) INCOME BEFORE INCOME TAX
$
(21,033
)
 
$
20,532


The following reconciles the Company's effective tax rate to the federal statutory tax rate for the fiscal years ended:
 
June 30,
 
2013
 
2012
 
(In thousands)
Tax provision computed per federal statutory rate
$
(6,310
)
 
$
6,160

State taxes, net of federal benefit
(40
)
 
190

Foreign rate differential
(60
)
 
76

Non taxable Australian revenue
288

 
(8
)
Goodwill write off
—

 
756

Decreases related to lapse of applicable statute of limitations
685

 
1,571

Change in valuation allowance
7,897

 
9,352

Australian petroleum resource rent tax
(10,354
)
 
(5,951
)
Australian petroleum resource rent tax - income tax effect
3,106

 
1,785

Taxable dividends from subsidiaries, net of foreign tax credits
(709
)
 
(1,152
)
Foreign tax credit adjustment
787

 
649

Capital loss adjustment
309

 
(3,006
)
Additional basis related to the Santos SA
—

 
(18,118
)
Impact of rate change
140

 
457

Foreign currency translation differential
2,912

 
1,375

Other items
83

 
(87
)
Consolidated income tax benefit
$
(1,266
)
 
$
(5,951
)

The following summarizes components of our income tax provision for the fiscal years ended:
 
June 30,
 
2013
 
2012
 
(In thousands)
Current income tax:
 
 
 
United States
$
—

 
$
—

Australia
—

 
—

United Kingdom
—

 
—

Total current income tax provision
—

 
—

 
 
 
 
Deferred income tax:
 
 
 
United States
—

 
—

Australia
(1,266
)
 
(5,951
)
United Kingdom
—

 
—

Total deferred income benefit provision
(1,266
)
 
(5,951
)
Consolidated income benefit provision
$
(1,266
)
 
$
(5,951
)
 
 
 
 
Effective tax rate
6
%
 
(29
)%

The Company's effective tax rate was increased to positive 6% primarily due to the extension of the Australian Petroleum Resource Rent Tax ("PRRT") to onshore projects which increased the related deferred tax asset.
Significant components of the Company's deferred tax assets and liabilities can be summarized as follows for the fiscal years ended:
 
June 30,
 
2013
 
2012
 
(In thousands)
Deferred tax liabilities:
 
 
 
Land, buildings and equipment
$
(4,132
)
 
$
(2,767
)
Stepped up basis of oil and gas properties
—

 
(550
)
Australian petroleum resource rent tax - income tax effect
(2,165
)
 
(1,785
)
Other items
(237
)
 
(261
)
Total deferred tax liabilities
(6,534
)
 
(5,363
)
 
 
 
 
Deferred tax assets:
 
 
 
Asset retirement obligations
2,194

 
2,210

Net operating losses, capital losses, and foreign tax credit carry forwards
31,354

 
28,139

Australian petroleum resource rent tax
13,145

 
5,951

United Kingdom exploration costs and net operating losses
3,777

 
3,224

Stock option compensation
1,971

 
1,851

Interest
—

 
539

Australian capitalized legal costs
343

 
514

Other items
557

 
579

Total deferred tax asset
53,341

 
43,007

Valuation allowance
(39,590
)
 
(31,693
)
Net long term deferred tax asset
$
7,217

 
$
5,951


For the fiscal year ended June 30, 2013, the valuation allowance increased by $7.9 million, primarily due to additional book losses and a partial valuation allowance against the increase in the PRRT deferred tax assets.
The tax benefit recorded for fiscal year 2013 totals $1.3 million. In addition to corporate income tax, the income tax benefit includes the tax effect of the Company's obligation related to the Australian PRRT. The extension of PRRT to onshore projects was enacted during fiscal year 2012 and effective from July 1, 2012. As a consequence of the extension of the Australian PRRT regime to onshore petroleum products, a deferred tax benefit of $6.0 million was recorded during fiscal year 2012. On June 28, 2013, Australian Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013 received Royal Assent. This new legislation clarifies that the Company is able to access 100% of the costs incurred in relation to the Palm Valley field since July 1, 2002. As a result of this legislative change, the gross deferred tax assets have been updated to reflect the additional basis available in costs incurred since July 1, 2002. Primarily as a result of additional qualifying expenditures incurred in Australia during fiscal year 2013 which are expected to be realized in future periods, the net deferred tax asset balance increased to $7.2 million during fiscal year 2013.
The US gross deferred tax assets and liabilities at June 30, 2013 consist primarily of foreign tax credits, property, plant and equipment, and stock options. The Australian deferred tax assets and liabilities at June 30, 2013 consist primarily of acquisition and development costs, asset retirement obligations, net operating and capital loss carry forwards, and other assets which will result in tax deductions when paid. Australian net operating and capital losses carry forward indefinitely.
After reviewing all positive and negative evidence, a valuation allowance is still recorded against all the net deferred tax assets related to corporate income taxes in the US, Australia and the UK. A partial valuation allowance is recorded against the deferred tax assets that relate to the Australian PRRT. As a result the Company has a net deferred tax asset of $7.2 million as of June 30, 2013.
As of June 30, 2013, the Company remains subject to examination in the following major tax jurisdictions for the tax years indicated below:
Jurisdiction
 
Tax Years Subject
 to Examination:
US Federal
 
2011 - 2012
Colorado
 
2010 - 2012
Connecticut
 
2010
Maine
 
2010 - 2012
Montana
 
2011 - 2012
Australia
 
2009 - 2012
United Kingdom
 
2009 - 2012

At June 30, 2013, the Company had net operating loss and foreign tax credit carry forwards for US Federal and State Income Tax purposes, respectively, which are scheduled to expire periodically as follows:
 
State Net Operating Losses
 
Federal Foreign Tax Credit
 
(In thousands)
Expires:
 
 
 
2017
$
301

 
$
310

2018
3,219

 
—

2019
1,432

 
1,411

2020
1,191

 
144

2021
—

 
1,006

2022
—

 
3,030

2023 and thereafter
—

 
4,050

Total
$
6,143

 
$
9,951


There are no uncertain tax positions that would meet the more-likely-than-not recognition threshold for the fiscal years ended June 30, 2013, or 2012.