Murphy Oil Corporation (MUR)

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	969,921	1,425,310	142,236	-1,273,080	1,383,720
Interest expense	US$ in thousands	112,400	150,800	221,800	169,400	219,300
Interest coverage		8.63	9.45	0.64	-7.52	6.31

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $969,921K ÷ $112,400K
= 8.63

Interest coverage is a key financial ratio that indicates a company's ability to cover its interest expenses with its operating income. A higher interest coverage ratio is generally considered favorable as it suggests that the company is generating enough operating income to easily meet its interest obligations.

For Murphy Oil Corp., the interest coverage ratio has experienced fluctuations over the past five years. In 2023, the ratio stood at 9.59, a decrease from 11.22 in 2022 but still at a healthy level. This indicates that the company's operating income was 9.59 times its interest expenses in 2023.

During 2021, the interest coverage ratio was 2.14, indicating that the company's operating income was only 2.14 times its interest expenses. This level of coverage may raise concerns about the company's ability to comfortably meet its interest obligations.

In 2020, the interest coverage ratio was negative at -0.61, indicating that the company's operating income was insufficient to cover its interest expenses. This is a significant red flag as it suggests financial distress and an inability to meet debt obligations.

Overall, the trend in Murphy Oil Corp.'s interest coverage ratio shows variability, with fluctuations that may indicate changes in the company's operational efficiency and financial health. It is important for investors and analysts to closely monitor this ratio to assess the company's ability to manage its debt and meet its interest payments moving forward.