APA Corporation (APA)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	1,908,000	3,210,000	6,056,000	2,309,000	-4,406,000
Interest expense	US$ in thousands	373,000	331,000	322,000	418,000	434,000
Interest coverage		5.12	9.70	18.81	5.52	-10.15

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,908,000K ÷ $373,000K
= 5.12

APA Corporation's interest coverage ratio has shown significant fluctuations over the five-year period from December 31, 2020, to December 31, 2024.

- On December 31, 2020, the interest coverage ratio was notably concerning at -10.15, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses, which could be a red flag for solvency risk.
- However, the situation improved markedly by December 31, 2022, with the interest coverage ratio surging to 18.81. This substantial increase suggests that APA Corporation's ability to meet its interest obligations improved significantly, potentially reflecting enhanced profitability or reduced interest expenses.
- By December 31, 2024, the interest coverage ratio declined to 5.12, indicating a reduced capacity to cover interest payments compared to the previous year. While still positive, the downward trend may warrant further investigation into the company's financial health and ability to service its debt.

Overall, APA Corporation's interest coverage has shown volatility over the years, with improvements and setbacks in its ability to cover interest expenses. Investors and stakeholders should monitor this ratio closely to assess the company's financial stability and debt servicing capabilities.