Vital Energy Inc. (VTLE)

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	661,560	445,330	763,481	961,417	762,135	862,477	667,670	257,112	262,038	-125,038	-507,955	-925,398	-773,110	-864,978	-903,881	-187,427	-283,500	112,505	435,692	292,670
Interest expense (ttm)	US$ in thousands	149,819	128,258	119,920	121,198	125,121	127,414	126,853	119,916	113,385	108,361	104,783	105,985	105,009	93,914	82,277	70,970	61,547	61,620	61,274	59,933
Interest coverage		4.42	3.47	6.37	7.93	6.09	6.77	5.26	2.14	2.31	-1.15	-4.85	-8.73	-7.36	-9.21	-10.99	-2.64	-4.61	1.83	7.11	4.88

December 31, 2023 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $661,560K ÷ $149,819K
= 4.42

Interest coverage ratio measures the 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 the interest coverage ratio for Vital Energy Inc. over the past years, we observe fluctuations in the company's ability to cover its interest expenses. From March 2019 to June 2022, the interest coverage ratio ranged between -10.99 and 7.11, showing volatility in the company's ability to cover its interest costs.

Notably, the interest coverage ratio improved significantly from negative values in early 2021 to positive values in recent periods, reaching a peak of 7.93 in March 2023. This indicates that Vital Energy has enhanced its ability to cover interest expenses from its operating earnings.

However, it is essential to note that the interest coverage ratio dropped to 2.14 in March 2022, which may suggest a slight decline in the company's capacity to meet its interest payments compared to the prior period. Subsequently, the ratio recovered to 4.42 in December 2023, reflecting a moderate improvement in interest coverage.

Overall, Vital Energy Inc.'s interest coverage ratio has displayed variability over the years, with fluctuations reflecting changes in earnings and interest expenses. It is imperative for the company to maintain a healthy interest coverage ratio to demonstrate financial stability and ensure sufficient cash flow to meet its debt obligations.