Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Diamondback Energy Inc., liquidity ratios
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.01 | 0.49 | 0.69 | 0.91 | 0.62 | |
| Quick ratio | 0.93 | 0.36 | 0.59 | 0.59 | 0.60 | |
| Cash ratio | 0.47 | 0.09 | 0.10 | 0.21 | 0.19 |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The overall liquidity profile exhibits significant volatility over the analyzed five-year period, characterized by a general deterioration in the short-term solvency position that culminated in 2020, followed by a sharp recovery in 2021.
- Current Ratio
- The current ratio fluctuated between 0.49 and 1.01. After an initial increase in 2018, the ratio trended downward to a period low of 0.49 in 2020, indicating a period of constrained liquidity. A substantial correction occurred by the end of 2021, with the ratio rising to 1.01, marking the first instance in the period where current assets were sufficient to cover current liabilities.
- Quick Ratio
- The quick ratio remained relatively stable around 0.59 to 0.60 from 2017 through 2019 before experiencing a sharp contraction to 0.36 in 2020. The subsequent increase to 0.93 in 2021 mirrors the recovery seen in the current ratio, reflecting a strengthened capacity to meet immediate obligations without reliance on inventory.
- Cash Ratio
- The cash ratio demonstrates the most pronounced volatility, particularly between 2018 and 2021. Following a steady decline from 0.21 in 2018 to a low of 0.09 in 2020, the ratio surged to 0.47 in 2021. This significant increase suggests a strategic accumulation of cash or a reduction in current liabilities, drastically improving the most conservative measure of liquidity.
A comparison of the three metrics reveals that the proximity between the current and quick ratios remained narrow throughout the period, suggesting that inventory does not represent a dominant portion of current assets. The synchronized trough in 2020 across all ratios indicates a systemic liquidity challenge during that fiscal year, while the synchronized peak in 2021 signifies a comprehensive restoration of the short-term financial position.
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Current Ratio
Diamondback Energy Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 1,446) | 602) | 869) | 925) | 359) | |
| Current liabilities | 1,438) | 1,236) | 1,263) | 1,020) | 577) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.01 | 0.49 | 0.69 | 0.91 | 0.62 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Chevron Corp. | 1.26 | — | — | — | — | |
| ConocoPhillips | 1.34 | — | — | — | — | |
| ExxonMobil Holdings Corp. | 1.04 | — | — | — | — | |
| Current Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | 1.14 | — | — | — | — | |
| Current Ratio, Industry | ||||||
| Energy | 1.15 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Current ratio = Current assets ÷ Current liabilities
= 1,446 ÷ 1,438 = 1.01
2 Click competitor name to see calculations.
The liquidity profile of the entity exhibited significant volatility between 2017 and 2021, characterized by fluctuating short-term asset levels and a general expansion of short-term obligations. While the liquidity position remained under pressure for the majority of the observed period, a notable recovery in the final year shifted the solvency posture.
- Current Assets Trend
- Short-term assets demonstrated high variability, increasing from 359 million USD in 2017 to 925 million USD in 2018. A subsequent decline was observed through 2020, where assets reached a period low of 602 million USD, before surging to a peak of 1,446 million USD by the end of 2021.
- Current Liabilities Trend
- A consistent upward trajectory is observed in current liabilities, which grew from 577 million USD in 2017 to 1,438 million USD in 2021. This steady increase indicates a continuous expansion of the entity's short-term financial obligations over the five-year duration.
- Current Ratio Dynamics
- The current ratio remained below the 1.0 threshold for four consecutive years, indicating that current assets were insufficient to cover current liabilities during that time. The ratio reached its lowest point in 2020 at 0.49. However, a significant reversal occurred in 2021, with the ratio rising to 1.01, marking the first instance in the analyzed period where the entity achieved a current asset position that exceeded its current liabilities.
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Quick Ratio
Diamondback Energy Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 654) | 104) | 123) | 215) | 112) | |
| Restricted cash | 18) | 4) | 5) | —) | —) | |
| Accounts receivable, joint interest and other, net | 72) | 56) | 186) | 96) | 73) | |
| Accounts receivable, oil and natural gas sales, net | 598) | 281) | 429) | 297) | 159) | |
| Total quick assets | 1,342) | 445) | 743) | 607) | 344) | |
| Current liabilities | 1,438) | 1,236) | 1,263) | 1,020) | 577) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 0.93 | 0.36 | 0.59 | 0.59 | 0.60 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Chevron Corp. | 0.90 | — | — | — | — | |
| ConocoPhillips | 1.10 | — | — | — | — | |
| ExxonMobil Holdings Corp. | 0.69 | — | — | — | — | |
| Quick Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.80 | — | — | — | — | |
| Quick Ratio, Industry | ||||||
| Energy | 0.80 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 1,342 ÷ 1,438 = 0.93
2 Click competitor name to see calculations.
The quick ratio exhibited a period of relative stability followed by significant volatility between 2017 and 2021. While the liquidity position remained consistent in the early years of the period, a notable contraction occurred in 2020, followed by a substantial recovery in 2021, bringing the ratio to its highest level within the observed five-year timeframe.
- Stability Phase (2017–2019)
- During this interval, the quick ratio remained nearly constant, fluctuating minimally between 0.59 and 0.60. This stability was maintained despite a steady upward trend in both total quick assets and current liabilities, suggesting that the growth in liquid assets was proportional to the increase in short-term obligations.
- Liquidity Contraction (2020)
- A significant decline in the quick ratio to 0.36 was observed in 2020, marking the lowest point of liquidity in the period. This deterioration was driven primarily by a sharp reduction in total quick assets, which fell to 445 million from 743 million in the previous year, while current liabilities remained elevated at 1,236 million.
- Recovery and Peak Liquidity (2021)
- The liquidity position improved markedly in 2021, with the quick ratio rising to 0.93. This recovery was fueled by a substantial increase in total quick assets, which reached 1,342 million. This surge in liquid assets nearly balanced the total current liabilities of 1,438 million, indicating a significantly strengthened ability to meet short-term obligations without relying on inventory sales.
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Cash Ratio
Diamondback Energy Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and cash equivalents | 654) | 104) | 123) | 215) | 112) | |
| Restricted cash | 18) | 4) | 5) | —) | —) | |
| Total cash assets | 672) | 108) | 128) | 215) | 112) | |
| Current liabilities | 1,438) | 1,236) | 1,263) | 1,020) | 577) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.47 | 0.09 | 0.10 | 0.21 | 0.19 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Chevron Corp. | 0.21 | — | — | — | — | |
| ConocoPhillips | 0.55 | — | — | — | — | |
| ExxonMobil Holdings Corp. | 0.12 | — | — | — | — | |
| Cash Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.20 | — | — | — | — | |
| Cash Ratio, Industry | ||||||
| Energy | 0.21 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 672 ÷ 1,438 = 0.47
2 Click competitor name to see calculations.
An analysis of the liquidity position between 2017 and 2021 reveals a period of volatility followed by a significant strengthening of immediate liquidity. While short-term obligations expanded steadily over the five-year period, the available cash reserves experienced substantial fluctuations, culminating in a sharp increase in the final year.
- Current Liabilities Trend
- A consistent upward trajectory in short-term obligations is observed. Current liabilities rose from 577 million US$ in 2017 to 1,438 million US$ by 2021. The most significant increase occurred between 2017 and 2018, where obligations nearly doubled, indicating a substantial expansion in the company's short-term financial commitments.
- Total Cash Assets Performance
- Cash holdings exhibited significant variance. After an initial increase in 2018 to 215 million US$, assets declined for two consecutive years, reaching a low of 108 million US$ in 2020. This downward trend was reversed sharply in 2021, with total cash assets surging to 672 million US$, representing more than a six-fold increase from the previous year.
- Cash Ratio Interpretation
- The cash ratio followed a U-shaped pattern. Starting at 0.19 in 2017, the ratio peaked slightly at 0.21 in 2018 before deteriorating to 0.10 in 2019 and 0.09 in 2020. This decline indicates a period of reduced capacity to cover current liabilities using only cash and cash equivalents. However, the ratio recovered aggressively in 2021 to 0.47, the highest level in the observed period, signifying a markedly improved immediate liquidity posture.
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