SM Energy Co (SM)

Interest coverage

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	1,005,832	1,036,069	1,460,043	1,691,621	1,516,116	1,645,166	1,148,137	518,824	206,520	-426,595	-632,752	-534,714	-792,813	-723,566	-544,895	-355,707	-71,942	446,724	213,235	167,580
Interest expense (ttm)	US$ in thousands	91,630	90,351	90,070	103,418	120,346	137,793	155,829	159,869	160,353	160,775	161,433	162,251	163,892	164,296	163,361	162,634	159,102	156,247	153,774	155,801
Interest coverage		10.98	11.47	16.21	16.36	12.60	11.94	7.37	3.25	1.29	-2.65	-3.92	-3.30	-4.84	-4.40	-3.34	-2.19	-0.45	2.86	1.39	1.08

December 31, 2023 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,005,832K ÷ $91,630K
= 10.98

The interest coverage ratio measures a company's ability to pay interest expenses on its outstanding debt using its operating income. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations.

Analyzing the historical trend of SM Energy Co's interest coverage ratios from Q1 2022 to Q4 2023, we observe fluctuations in the ratios over time. The interest coverage ratio has generally been above 1, indicating that the company has generated enough operating income to cover its interest payments.

In Q1 2022, the interest coverage ratio was relatively low at 3.43, which may have raised concerns about the company's ability to cover its interest expenses. However, the ratio improved significantly in subsequent quarters, reaching a high of 16.98 in Q1 2023. This improvement suggests that SM Energy Co's operating income has been more than sufficient to meet its interest obligations.

Overall, the interest coverage ratios for SM Energy Co have exhibited variability, but have generally been at healthy levels, signaling the company's ability to manage its debt and interest payments effectively. It is essential for investors and stakeholders to continue monitoring these ratios to assess the company's financial health and ability to service its debt in the long term.