APA Corporation (APA)

Interest coverage

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	3,599,000	5,620,000	2,888,000	-4,102,000	-2,152,000
Interest expense	US$ in thousands	291,000	312,000	419,000	255,000	425,000
Interest coverage		12.37	18.01	6.89	-16.09	-5.06

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $3,599,000K ÷ $291,000K
= 12.37

APA Corporation's interest coverage ratio measures the company's ability to meet its interest payment obligations with its operating income. A higher interest coverage ratio indicates a stronger ability to cover interest expenses.

Looking at the data provided over the past five years, we see a fluctuating trend in APA Corporation's interest coverage ratio. In 2023, the interest coverage ratio is 11.32, a decrease from the previous year but still at a relatively healthy level, indicating that the company's operating income is more than sufficient to cover its interest expenses.

In 2022, the interest coverage ratio significantly improved to 15.89, suggesting a notable increase in the company's ability to cover interest payments. This could indicate improved profitability, efficiency, or better management of debt levels.

In 2021, the interest coverage ratio was 7.33, showing a moderate decrease from the previous year. Despite the decrease, the ratio still indicates that APA Corporation is generating enough operating income to cover its interest payments comfortably.

In 2020, the interest coverage ratio was negative at -0.12, indicating that the company's operating income was insufficient to cover its interest expenses during that period. This could be a concerning sign as it suggests financial distress and the need to reevaluate the company's debt levels and operating performance.

In 2019, the interest coverage ratio was 0.98, just below 1, showing that the company's operating income was almost enough to cover its interest expenses. While the ratio is close to 1, it still indicates a certain level of risk regarding the company's ability to meet its interest obligations.

Overall, despite some fluctuations in recent years, APA Corporation has generally maintained a reasonable interest coverage ratio, demonstrating its ability to manage its interest payments effectively. However, the negative ratio in 2020 should be closely monitored for potential financial risks.