Marathon Oil Corporation (MRO)

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	2,248,000	3,951,000	1,308,000	-1,180,000	636,000
Interest expense	US$ in thousands	343,000	227,000	257,000	279,000	280,000
Interest coverage		6.55	17.41	5.09	-4.23	2.27

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $2,248,000K ÷ $343,000K
= 6.55

The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher ratio indicates a company is more capable of servicing its debt. Based on the data provided for Marathon Oil Corporation over the past five years, we observe varying levels of interest coverage.

In 2023, the interest coverage ratio stands at 6.51, reflecting the company's ability to cover its interest payments by its earnings before interest and taxes. This indicates a moderate level of financial health and suggests a satisfactory ability to meet interest obligations.

The significant increase in interest coverage to 18.68 in 2022 indicates a substantial improvement in Marathon Oil's ability to cover its interest expenses. This could be attributed to increased earnings or reduced interest expenses, which enhanced the company's financial position during that year.

In 2021, the interest coverage ratio was 5.36, indicating a slight decline from the previous year. While the ratio is still above 1 (implying the company can cover its interest payments), it suggests a decrease in the company's ability to service its debt compared to the prior year.

The negative interest coverage ratio of -3.91 in 2020 is a concerning sign as it indicates that Marathon Oil's earnings were insufficient to cover its interest expenses during that period. A negative ratio suggests financial distress and raises questions about the company's ability to meet its debt obligations.

The interest coverage ratio of 2.15 in 2019 shows an ability to cover interest payments by earnings but at a lower level compared to the more recent years. This suggests that Marathon Oil had a moderate capacity to service its debt that year.

In summary, Marathon Oil's interest coverage ratio has shown fluctuations over the past five years. While the company demonstrated strong interest coverage in certain years, there were periods of weaker performance, particularly in 2020. It is crucial for investors and stakeholders to monitor this ratio closely to assess the company's financial health and debt servicing capabilities.