Magnolia Oil & Gas Corp (MGY)

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	534,485	1,073,790	602,594	-1,925,670	127,502
Interest expense	US$ in thousands	4,256	5,854	4,290	3,628	3,541
Interest coverage		125.58	183.43	140.46	-530.78	36.01

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $534,485K ÷ $4,256K
= 125.58

The interest coverage ratio for Magnolia Oil & Gas Corp has displayed varying trends over the past five years, indicating fluctuations in the company's ability to meet its interest obligations.

In 2019, the interest coverage ratio was 36.01, suggesting that the company had sufficient operating income to cover its interest expenses. This ratio improved significantly to 183.43 in 2022, indicating a stronger ability to pay off interest obligations.

However, in 2020, the interest coverage ratio turned negative at -530.78, which may raise concerns about the company's financial health and its ability to cover interest costs with its operating income. This could be attributed to a significant decline in operating income relative to interest expenses during that period.

Subsequently, there was a significant improvement in 2021, with the interest coverage ratio increasing to 140.46. This implies that the company's operating income was more than sufficient to cover its interest expenses during that year.

By the end of 2023, the interest coverage ratio stood at 125.58, reflecting a slight decline compared to the previous year but still indicating a relatively strong ability to meet interest payments from operating income.

Overall, while there have been fluctuations in Magnolia Oil & Gas Corp's interest coverage ratio over the years, the recent ratios suggest that the company has generally been able to comfortably cover its interest expenses with its operating income. However, it would be important to further investigate the factors behind the negative interest coverage ratio in 2020 to assess any potential risks to the company's financial stability.