Income Taxes |
9 Months Ended |
|---|---|
Sep. 30, 2025 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES |
8. INCOME TAXES We record income taxes for interim periods based on an estimated annual effective tax rate. The estimated annual effective rate is recomputed on a quarterly basis and may fluctuate due to changes in forecasted annual operating income, positive or negative changes to the valuation allowance for net deferred tax assets and changes to actual or forecasted permanent book to tax differences. Our effective tax rate for the nine months ended September 30, 2025 was 6.7%, compared with 19.0% in the same period in 2024. For the nine months ended September 30, 2025, our income tax provision included a discrete benefit of approximately $12 million from a reduction in Flotek's valuation allowance. Excluding this discrete item, the difference between our effective tax rate and the federal statutory rate related to a permanent book-tax difference in the accounting for a sale-leaseback transaction with Flotek and changes in the valuation allowance on our net deferred tax assets. For the nine months ended September 30, 2024, our income tax provision included a discrete benefit of $25.6 million related to the release of a portion of the valuation allowance on our net deferred tax assets. This discrete item was caused by the assumption of a $25.6 million deferred tax liability in our acquisition of AST, which made it more likely than not that we would be able to utilize a corresponding amount of our deferred tax assets. Excluding this discrete item, the difference between our effective tax rate and the federal statutory rate related to changes in the valuation allowance on our net deferred tax assets. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA contains, among other provisions, certain changes to U.S. federal income tax laws related to 100% bonus depreciation and the calculation of interest expense deductions, which will reduce our taxable income in 2025 and future years. The accounting for changes in tax rates and tax law are required to be recognized in the period in which the legislation is enacted. The effects of this tax law change have been incorporated into these unaudited condensed consolidated financial statements. Flotek has historically maintained a valuation allowance on substantially all of its deferred tax assets. At each reporting date, Flotek considers all available positive and negative evidence to evaluate whether its deferred tax assets are more likely than not to be realized. A significant piece of positive evidence that Flotek considers is whether it has incurred cumulative income (generally defined as income before income taxes) in recent years. Flotek noted that for the three years ended September 30, 2025, it recorded cumulative income before income taxes of approximately $30 million. As a result of this positive evidence, Flotek concluded that a valuation allowance was no longer required for a portion of its deferred tax assets at September 30, 2025, because it is more likely than not that the deferred tax assets will be realized. Because Flotek is not part of our consolidated group for income tax purposes, we present Flotek's net deferred tax assets separate from the Company's net deferred tax liabilities. |