Diamondback Energy Inc. (NASDAQ:FANG)

The analysis of the debt data over the five-year period reveals several significant trends and notable shifts in the company's debt structure and levels.

Current maturities of long-term debt

No reported amounts were recorded from the end of 2017 through 2019 and 2020, indicating the absence or non-disclosure of short-term portions of long-term debt during these years. However, in 2021 and 2022, values appeared amounting to 191 million US dollars and then sharply decreased to 45 million US dollars respectively. This suggests that the company either began reporting this liability or had restructured debt that introduced short-term repayment obligations, which then significantly declined in the most recent period.

Long-term debt, excluding current maturities

This component of debt shows a sharp and consistent increase year over year. Starting at 1,477 million US dollars in 2017, long-term debt more than tripled to 4,464 million by 2018. It then continued to increase, albeit at a slower pace, reaching 5,371 million in 2019, 5,624 million in 2020, and peaking at 6,642 million in 2021. This upward trend indicates an increasing reliance on long-term borrowings or possible debt refinancing strategies focused on extending maturity schedules.

Total debt (carrying amount)

Mirroring the long-term debt pattern, total debt rose significantly from 1,477 million US dollars in 2017 to 4,464 million in 2018. Following this, total debt increased further to 5,371 million in 2019, then to 5,815 million in 2020, and further up to 6,687 million in 2021. The increment each year reflects an overall growing debt burden, primarily driven by increases in long-term liabilities. The presence of current maturities as of 2021 also contributes to the total debt figure.

Overall, the data indicates a pronounced escalation in total indebtedness over the period, with the company significantly increasing its long-term debt commitments, particularly between 2017 and 2018. The emergence and subsequent reduction of current maturities toward the end of the period may indicate refinancing efforts or changes in debt maturity profiles. This growing debt level could impact the company's financial leverage and liquidity positions, necessitating careful management of debt servicing and repayment obligations moving forward.

The annual interest costs incurred reveal several notable trends over the five-year period ending in 2021. The components analyzed include interest expense less capitalized interest, capitalized interest, and the total interest expense.

Interest Expense, Less Capitalized Interest

This measure shows a consistent upward trend from 39 million USD in 2017 to a peak of 195 million USD in 2020, before a slight decline to 189 million USD in 2021. The increase between 2017 and 2020 is substantial, indicating rising interest costs not offset by capitalization during this period. The minor reduction in 2021 suggests some stabilization or possible efforts to control or reduce non-capitalized interest expenses.

Capitalized Interest

Capitalized interest also increases over the period but with more variability. It nearly triples from 22 million USD in 2017 to 66 million USD in 2019, dips slightly to 55 million USD in 2020, and then sharply rises to 88 million USD in 2021. The fluctuation reflects changes in capital expenditure patterns or capitalizable project costs, with a notable rebound in 2021.

Total Interest Expense

The total interest expense, combining both capitalized and non-capitalized components, exhibits a steady and significant rise from 61 million USD in 2017 to 277 million USD in 2021. The growth is particularly pronounced between 2018 and 2019, as well as continuing upward into 2021, indicating increased borrowing or higher interest rates affecting the company's debt service costs.

Overall, the data reflect growing financial costs related to debt over the analyzed period, with increasing interest expenses both capitalized and expensed. The partial stabilization of interest expense less capitalized interest in 2021 contrasts with a rise in capitalized interest, suggesting shifts in the company's investment and financing strategy during that year.

Over the analyzed period from 2017 to 2021, the company's interest coverage ratios display significant fluctuations, indicating varying levels of financial stability and ability to meet interest obligations.

Interest coverage ratio (without capitalized interest)

From 2017 to 2018, this ratio improved from 13.89 to 15.38, suggesting enhanced earnings relative to interest expenses. However, there was a sharp decline in 2019 to 3.14, followed by a severe negative ratio of -28.62 in 2020, indicating earnings were insufficient to cover interest costs, potentially due to operational or market challenges during that year. In 2021, the ratio rebounded strongly to 16.38, reflecting a substantial recovery in earnings capacity relative to interest obligations.

Adjusted interest coverage ratio (with capitalized interest)

A similar trend is observed with the adjusted ratio, which accounts for capitalized interest. It showed improvement from 8.83 in 2017 to 10.8 in 2018, followed by a decline to 2.26 in 2019 and a negative value of -22.32 in 2020. The recovery in 2021 to 11.18 suggests an improved ability to cover interest expenses when factoring in capitalized interest, aligning with the pattern seen in the raw interest coverage ratio.

Overall, the financial data reveals a period of financial stress in 2020, likely driven by decreased earnings or increased interest burdens, followed by a strong recovery in 2021. The adjustments for capitalized interest slightly reduce the coverage ratios but follow the same directional movements, indicating that capitalized interest has a material impact on the company's reported interest coverage. The volatility highlighted by these ratios underscores the importance of closely monitoring earnings and interest expenses to maintain financial health.