Hess Corporation (HES)
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 | 2,593,000 | 3,688,000 | 1,640,000 | -2,636,000 | 433,000 |
| Interest expense | US$ in thousands | 478,000 | 493,000 | 481,000 | 468,000 | 380,000 |
| Interest coverage | 5.42 | 7.48 | 3.41 | -5.63 | 1.14 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $2,593,000K ÷ $478,000K
= 5.42
Hess Corporation's interest coverage ratio has shown some variability over the past five years. In 2023 and 2022, the company had interest coverage ratios of 6.06 and 7.80 respectively, indicating that Hess Corporation generated operating income more than enough to cover its interest expenses during those years. This suggests strong financial health and a lower risk of default on debt obligations.
In contrast, in 2020, the interest coverage ratio was negative at -0.84, indicating that the company's operating income was insufficient to cover its interest expenses during that period. A negative interest coverage ratio is a cause for concern as it suggests potential financial distress and an inability to meet debt obligations solely through operating income.
However, in 2021 and 2019, the interest coverage ratios were 4.17 and 1.54 respectively. While these ratios indicate that the company's operating income exceeded interest expenses, the coverage was lower compared to 2022 and 2023. It is important for investors and creditors to monitor Hess Corporation's interest coverage ratio over time to assess the company's ability to meet debt obligations and manage financial risks effectively.
Peer comparison
Dec 31, 2023