Table of Contents Index to Financial Statements A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. To assess that likelihood, the Company uses estimates and judgment regarding future taxable income, and considers the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include current financial position, results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as current and forecasted business economics of the oil and gas industry. For the years ended December 31, 2018 and 2017, the Company maintained a full valuation allowance against its deferred tax assets based on its conclusion, considering all available evidence (both positive and negative), that it was more likely than not that the deferred tax assets would not be realized. A significant item of objective negative evidence considered was the cumulative pre-tax loss incurred over the three-year period ended December 31, 2018, primarily due to non-cash impairments of proved natural gas and oil properties recognized in 2015 and 2016. As of the first quarter of 2019, the Company had sustained a three-year cumulative level of profitability. Based on this factor and other positive evidence including forecasted taxable income, the Company concluded that it was more likely than not that the deferred tax assets would be realized and determined that $522 million of the valuation allowance would be released during 2019. Accordingly, a tax benefit of $522 million was recorded. As of December 31, 2019, the Company expects to retain a valuation allowance of $87 million related to net operating losses in jurisdictions in which it no longer operates. The Company is continually evaluating deferred tax asset realizability, and if pricing changes occur that would significantly affect the forecast, the Company will reconsider the need for a valuation allowance at such time. A reconciliation of the changes to the valuation allowance is as follows: A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows: A tax position must meet certain thresholds for any of the benefit of the uncertain tax position to be recognized in the financial statements. As of December 31, 2019, there were no unrecognized tax positions identified that would have a material effect on the effective tax rate. All positions booked as of December 31, 2018 were released in 2019 due to audit completion and statute expirations. The Internal Revenue Service closed the 2014 audit of the Company’s federal return in 2019 with no change and is currently auditing the Company’s 2016 and 2017 tax periods. The income tax years 2016 to 2019 remain open to examination by the major taxing jurisdictions to which the Company is subject. (in millions) Valuation allowance as of December 31, 2018 $ 609  Release of valuation allowance in 2019 (522) Valuation allowance as of December 31, 2019 $ 87  (in millions) 2019 2018 Unrecognized tax benefits at beginning of year $ 7  $ 12  Additions based on tax positions related to the current year —  —  Additions to tax positions of prior years —  —  Reductions to tax positions of prior years (7) (5) Unrecognized tax benefits at end of year $ —  $ 7  108