Ovintiv Inc (OVV)
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 | 2,865,000 | 3,871,000 | 1,579,000 | -5,359,000 | 697,000 |
| Interest expense | US$ in thousands | 355,000 | 311,000 | 340,000 | 371,000 | 382,000 |
| Interest coverage | 8.07 | 12.45 | 4.64 | -14.44 | 1.82 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $2,865,000K ÷ $355,000K
= 8.07
Interest coverage ratio is a financial metric used to measure a company's ability to cover its interest expenses with its operating income. Ovintiv Inc's interest coverage ratio has fluctuated over the past five years.
In 2023, the interest coverage ratio stood at 7.87, indicating that the company generated operating income nearly 8 times higher than its interest expenses, which suggests a healthy ability to meet its interest obligations.
The ratio was even stronger in 2022 at 12.17, demonstrating a significant improvement in Ovintiv's ability to cover its interest expenses compared to the previous year. This could signify improved financial health and reduced risk of default.
However, in 2021, the interest coverage ratio dropped to 4.25, which, although still above 1, indicates a slight weakening in the company's ability to cover its interest obligations.
In 2020, the ratio was a low 0.30, signaling a potential financial risk as the company's operating income was barely able to cover its interest expenses. This could point to potential liquidity challenges or financial distress.
There was a slight improvement in 2019 with an interest coverage ratio of 1.37, but it was still relatively low, suggesting that Ovintiv was only able to cover its interest payments by a small margin.
Overall, Ovintiv Inc's interest coverage has experienced fluctuations, with periods of strong coverage and others where the company was more strained in meeting its interest obligations. Investors and creditors should closely monitor this ratio to assess the company's financial stability and risk of default.
Peer comparison
Dec 31, 2023