Ovintiv Inc (OVV)

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	1,763,000	2,865,000	3,871,000	1,579,000	-5,359,000
Interest expense	US$ in thousands	412,000	355,000	311,000	340,000	371,000
Interest coverage		4.28	8.07	12.45	4.64	-14.44

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,763,000K ÷ $412,000K
= 4.28

Interest coverage is a key financial ratio that measures a company's ability to meet its interest payment obligations on its debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expenses. A higher ratio indicates a stronger ability to cover interest payments.

Looking at the data provided for Ovintiv Inc, the interest coverage ratio has fluctuated over the years. In December 2020, the interest coverage ratio was negative at -14.44, indicating that the company's EBIT was not sufficient to cover its interest expenses, raising concerns about its financial health.

However, there was a significant improvement in the interest coverage ratio in the following years. By December 2021, the ratio had increased to 4.64, showing that the company's EBIT was now able to cover its interest expenses about 4.64 times. This improvement suggests a better ability to service its debt obligations.

The trend continued in the subsequent years with the interest coverage ratio further improving to 12.45 in December 2022, 8.07 in December 2023, and 4.28 in December 2024. These increasing ratios indicate a strengthening financial position for Ovintiv Inc, as the company's earnings are increasingly covering its interest expenses.

Overall, the improving trend in Ovintiv Inc's interest coverage ratio from negative to positive values suggests a positive direction in the company's ability to meet its interest obligations, indicating a potentially healthier financial position.