Vital Energy Inc. (VTLE)
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 | 661,560 | 762,135 | 262,038 | -773,110 | -283,500 |
| Interest expense | US$ in thousands | 149,819 | 125,121 | 113,385 | 105,009 | 61,547 |
| Interest coverage | 4.42 | 6.09 | 2.31 | -7.36 | -4.61 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $661,560K ÷ $149,819K
= 4.42
The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher ratio indicates a stronger ability to cover interest payments.
In the case of Vital Energy Inc., the interest coverage has fluctuated over the past five years. In 2023, the interest coverage ratio improved to 4.42 from 6.09 in 2022, indicating that the company's operating income was able to cover its interest expenses 4.42 times. This suggests a relatively healthy ability to meet interest payments.
However, the ratios for 2021 and prior years were lower, with negative ratios in 2020 and 2019. A negative interest coverage ratio implies that the company's operating income was insufficient to cover its interest expenses during those years. This indicates a higher financial risk and the potential difficulty in meeting interest obligations.
Overall, Vital Energy Inc. has shown improvements in its interest coverage in recent years, but attention should be paid to maintaining a sustainable level of coverage to ensure the company's financial health and ability to service its debt.
Peer comparison
Dec 31, 2023