Viper Energy Ut (VNOM)

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	577,783	596,200	700	292,163	-17,947
Interest expense	US$ in thousands	73,848	48,907	40,409	34,044	33,000
Interest coverage		7.82	12.19	0.02	8.58	-0.54

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $577,783K ÷ $73,848K
= 7.82

The interest coverage ratio measures a company's ability to meet its interest obligations with its earnings before interest and taxes (EBIT). A higher interest coverage ratio indicates that the company is more capable of servicing its debt.

Analyzing Viper Energy Ut's interest coverage ratios from 2020 to 2024, we observe a significant improvement in its ability to cover interest expenses.

- In December 31, 2020, the interest coverage ratio was negative at -0.54, suggesting that the company's EBIT was insufficient to cover its interest expenses.
- By December 31, 2021, the interest coverage ratio improved substantially to 8.58, indicating a healthier position where the company's earnings are more than sufficient to cover its interest payments.
- However, in December 31, 2022, the interest coverage ratio dropped to a very low level of 0.02, which raises concerns about the company's ability to cover its interest payments with its EBIT.
- The situation improved dramatically by December 31, 2023, with an interest coverage ratio of 12.19, reflecting a strong ability to meet interest obligations.
- By the end of December 31, 2024, the interest coverage ratio remained positive at 7.82, affirming the company's continued ability to comfortably cover its interest expenses.

Overall, the trend in the interest coverage ratios of Viper Energy Ut shows fluctuations, but generally, the company has been able to enhance its capacity to meet interest payments over the years, with notable improvements in 2021 and 2023. It is essential for investors and stakeholders to monitor this ratio to ensure the company maintains a healthy financial position.