Diamondback Energy Inc (FANG)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 4,832,000 | 4,501,000 | 4,872,000 | 4,532,000 | 4,417,000 | 4,502,000 | 4,859,000 | 5,885,000 | 5,994,000 | 5,949,000 | 5,209,000 | 3,793,000 | 3,037,000 | 1,332,000 | -948,000 | -4,454,000 | -5,075,000 | -5,227,000 | -3,343,000 | 210,000 |
| Interest expense (ttm) | US$ in thousands | 295,000 | 145,000 | 164,000 | 171,000 | 171,000 | 171,000 | 177,000 | 165,000 | 159,000 | 151,000 | 165,000 | 183,000 | 199,000 | 220,000 | 216,000 | 205,000 | 197,000 | 186,000 | 171,000 | 174,000 |
| Interest coverage | 16.38 | 31.04 | 29.71 | 26.50 | 25.83 | 26.33 | 27.45 | 35.67 | 37.70 | 39.40 | 31.57 | 20.73 | 15.26 | 6.05 | -4.39 | -21.73 | -25.76 | -28.10 | -19.55 | 1.21 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $4,832,000K ÷ $295,000K
= 16.38
Based on the provided data, Diamondback Energy Inc's interest coverage ratio has shown significant fluctuation over the periods reported. The interest coverage ratio is a measure of a company's ability to meet its interest obligations on outstanding debt, with higher values generally indicating a stronger ability to do so.
In March 2020, the interest coverage ratio was 1.21, suggesting that the company's earnings were just sufficient to cover its interest expenses. However, in the following quarters, the interest coverage ratio dropped significantly into negative territory, indicating that the company's earnings were insufficient to cover its interest payments, raising concerns about its financial health and ability to service its debt obligations.
Subsequently, there was a notable improvement in the interest coverage ratio starting from the third quarter of 2021, where it turned positive and began to increase steadily through 2022 and 2023. This positive trend indicates that Diamondback Energy Inc's earnings were more than adequate to cover its interest expenses, reflecting a better financial position and debt-servicing ability.
By the end of December 2024, the interest coverage ratio stood at 16.38, suggesting a strong improvement compared to the negative values seen in the earlier periods. This increase in the interest coverage ratio signifies that the company's profitability and cash flow were more than sufficient to cover its interest payments, indicating a healthier financial position and lower risk of default on its debt obligations.
Overall, the trend in Diamondback Energy Inc's interest coverage ratio indicates a volatile period in the company's ability to service its debt in the past, followed by a significant improvement and a more stable financial position in the later periods. It is important for investors and stakeholders to monitor this ratio to assess the company's ability to meet its interest obligations and manage its debt effectively.
Peer comparison
Dec 31, 2024