Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 108 Page 109 Page 110 Page 111 Page 112 Page 113 Page 114 Page 115 Page 116 Page 117 Page 118 Page 119 Page 120 Page 121 Page 122 Page 123 Page 124 Page 125 Page 126 Page 127 Page 128 Page 129 Page 130 Page 131 Page 132 Page 133 Page 134 Page 135 Page 136 Page 137 Page 138 Page 139 Page 140 Page 141 Page 142 Page 143 Page 144 Page 145 Page 146 Page 147 Page 148 Page 149 Page 150 Page 151 Page 152 Page 153 Page 154 Page 155 Page 156 Page 157 Page 158 Page 159 Page 160 Page 161 Page 162 Page 163 Page 164 Page 165 Page 166 Page 167 Page 168 Page 169 Page 170 Page 171 Page 172 Page 173 Page 174 Page 175 Page 176 Page 177 Page 178 Page 179 Page 180 Page 181 Page 182KOSMOS ENERGY LTD. Notes to Consolidated Financial Statements (Continued) 12. Income Taxes (Continued) temporary differences become deductible. The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows: December 31, 2016 2015 (In thousands) Deferred tax assets: Foreign capitalized operating expenses . . . . . . . . . . . . . . . $ 69,804 $ 101,823 Foreign net operating losses . . . . . . . . . . . . . . . . . . . . . . . 36,352 14,719 Equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,752 26,095 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,744 22,656 Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,652 165,293 Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87,517) (116,541) Total deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . 83,135 48,752 Deferred tax liabilities: Depletion, depreciation and amortization related to property and equipment . . . . . . . . . . . . . . . . . . . . . . . . (526,945) (425,183) Unrealized derivative gains . . . . . . . . . . . . . . . . . . . . . . . (584) (92,549) Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (527,529) (517,732) Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . $(444,394) $(468,980) The Company has recorded a full valuation allowance against the net deferred tax assets in countries where we only have exploration operations. The net decrease in the valuation allowance of $29.0 million is due to the write-off of previously capitalized foreign operating expenses and tax losses in Morocco related to the relinquishment of three licenses and the utilization of deferred tax assets to offset the tax impact of a payment from a joint license holder related to their withdrawal from three licenses, together totaling $58.2 million. The decrease in valuation allowance was partially offset by the tax effect of 2016 losses and foreign capitalized operating expenses of $29.2 million. The Company has entered into various petroleum contracts in Morocco. These petroleum contracts provide for a tax holiday, at a 0% tax rate, for a period of 10 years beginning on the date of first production, if any. The Company has foreign net operating loss carryforwards of $116.7 million. Of these losses, we expect $0.9 million, $13.4 million, $0.5 million, $0.5 million and $0.6 million to expire in 2019, 2020, 2021, 2022 and 2023, respectively, and $100.8 million do not expire. The Ghana tax loss of $53.3 million is expected to be fully utilized in 2017. The remaining $63.4 million in tax losses currently have offsetting valuation allowances. A subsidiary of the Company files a U.S. federal income tax return and a Texas margin tax return. In addition to the United States, the Company files income tax returns in the countries in which we operate. The Company is open to U.S. federal income tax examinations for tax years 2013 through 2016 and to Texas margin tax examinations for the tax years 2011 through 2016. In addition, the Company is open to income tax examinations for years 2011 through 2016 in its significant other foreign jurisdictions, primarily Ghana. As of December 31, 2016, the Company had no material uncertain tax positions. The Company’s policy is to recognize potential interest and penalties related to income tax matters in income tax expense. 140