Murphy Oil Corporation (MUR)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 379,517 | 1,033,440 | 1,598,920 | 262,564 | -1,381,140 |
| Interest expense | US$ in thousands | 105,926 | 112,373 | 150,759 | 238,544 | 186,726 |
| Interest coverage | 3.58 | 9.20 | 10.61 | 1.10 | -7.40 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $379,517K ÷ $105,926K
= 3.58
Interest coverage ratio is a key financial metric used to evaluate a company's ability to meet its interest obligations on outstanding debt. A higher interest coverage ratio indicates a company is more capable of servicing its debt.
In the case of Murphy Oil Corporation, the interest coverage ratio has shown significant fluctuations over the past five years. In December 31, 2020, the interest coverage ratio was -7.40, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expense, raising concerns about its ability to meet its debt obligations.
By December 31, 2021, the interest coverage ratio improved to 1.10, though still below the ideal ratio of 2 or above, suggesting a precarious financial position.
However, in the subsequent years, the interest coverage ratio demonstrated a positive trend, reaching 10.61 by December 31, 2022 and 9.20 by December 31, 2023. This significant improvement indicates that Murphy Oil Corporation's earnings have strengthened sufficiently to comfortably cover its interest expenses.
In December 31, 2024, the interest coverage ratio experienced a slight decline to 3.58, which, while lower than the previous year, remains at a healthy level, indicating that the company is still able to meet its interest obligations comfortably.
Overall, the trajectory of Murphy Oil Corporation's interest coverage ratio reflects both periods of financial strain and subsequent recovery, highlighting the importance of monitoring this ratio to assess the company's financial health and its ability to service its debt obligations effectively.
Peer comparison
Dec 31, 2024