Devon Energy Corporation (DVN)
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 | 4,972,000 | 8,134,000 | 3,277,000 | -2,957,000 | -115,000 |
| Interest expense | US$ in thousands | 384,000 | 381,000 | 399,000 | 270,000 | 270,000 |
| Interest coverage | 12.95 | 21.35 | 8.21 | -10.95 | -0.43 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $4,972,000K ÷ $384,000K
= 12.95
The interest coverage ratio for Devon Energy Corp. has exhibited fluctuations over the past five years. In 2022 and 2023, the company's interest coverage was quite healthy at 25.63 and 15.64 respectively, indicating that Devon Energy had more than enough earnings to cover its interest expenses. This suggests a strong ability to meet its interest obligations from operating income.
However, in 2021, the interest coverage ratio decreased to 9.87, which, although still above 1, indicates a slight decline in Devon Energy's ability to cover its interest payments from its earnings. This could be a point of concern as a lower interest coverage ratio may signify that the company's financial health is not as robust as in the previous years.
In 2020 and 2019, Devon Energy faced challenges with negative and extremely low interest coverage ratios of -0.49 and 0.71, respectively. A negative interest coverage ratio indicates that the company's operating income was insufficient to cover its interest expenses, posing a risk of financial distress.
Overall, while Devon Energy's interest coverage ratio has shown some volatility, the recent years have demonstrated an improvement in its ability to handle interest payments. Adequate interest coverage is crucial for a company's financial stability and ability to service its debt obligations.
Peer comparison
Dec 31, 2023