Vital Energy Inc. (VTLE)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.31 | 0.41 | 0.56 | 0.82 | 0.52 |
| Debt-to-capital ratio | 0.37 | 0.50 | 0.74 | 1.02 | 0.58 |
| Debt-to-equity ratio | 0.58 | 1.00 | 2.78 | — | 1.39 |
| Financial leverage ratio | 1.85 | 2.45 | 4.97 | — | 2.69 |
Solvency ratios provide insight into a company's ability to meet its long-term financial obligations. Vital Energy Inc.'s solvency ratios have shown notable fluctuations over the past five years. The debt-to-assets ratio has decreased steadily from 0.82 in 2020 to 0.31 in 2023, indicating a more conservative approach to debt management and higher asset coverage for liabilities.
Similarly, the debt-to-capital ratio has shown a decreasing trend from 1.02 in 2020 to 0.37 in 2023, reflecting a lower proportion of debt in the company's capital structure. The debt-to-equity ratio peaked at 2.78 in 2021 and has since decreased to 0.58 in 2023, suggesting a reduced reliance on debt financing and a stronger equity position.
The financial leverage ratio has also exhibited variability, with a significant increase from 2.69 in 2019 to 4.97 in 2021 before declining to 1.85 in 2023. This implies that the company's level of financial leverage has fluctuated over the years, potentially impacting its risk profile and cost of capital.
Overall, Vital Energy Inc. has made progress in reducing its debt levels relative to assets and capital, improving its solvency position over the years. However, the fluctuating financial leverage indicates a need for continued monitoring and strategic financial management to ensure long-term financial stability and sustainability.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 4.42 | 6.09 | 2.31 | -7.36 | -4.61 |
The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher ratio indicates that the company is more capable of covering its interest expenses.
Analyzing the trend in Vital Energy Inc.'s interest coverage ratio over the past five years, we can observe fluctuations in the company's ability to cover its interest payments.
In 2023, the interest coverage ratio improved to 4.42, reflecting a stronger ability to cover interest expenses compared to the previous year. This could indicate improved profitability or more stable interest expenses relative to operating income.
In 2022, the interest coverage ratio was relatively high at 6.09, indicating a strong ability to cover interest payments with operating income.
In 2021, the interest coverage ratio decreased to 2.31 from the previous year, suggesting a decline in the company's ability to cover interest expenses from its operating income.
However, in 2020 and 2019, the interest coverage ratios were negative (-7.36 and -4.61, respectively), indicating that the company's operating income was insufficient to cover its interest expenses during those years. This implies financial distress and raises concerns about the company's financial sustainability.
Overall, Vital Energy Inc.'s interest coverage ratio has varied significantly over the past five years, with improvements in some years but deteriorations in others. It is essential for the company to maintain a healthy interest coverage ratio to ensure it can meet its interest obligations and sustain its financial health.