Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Anadarko Petroleum Corp., solvency ratios
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The solvency profile of the organization exhibits a progressive deterioration from 2012 through 2016, characterized by an increasing reliance on borrowed capital and a critical decline in the capacity to service financial obligations.
- Capital Structure and Leverage
- An upward trend is observed across all leverage metrics, indicating a significant increase in financial risk. The debt-to-equity ratio remained relatively stable between 2012 and 2013 but rose sharply thereafter, increasing from 0.62 in 2013 to 1.25 by 2016. This shift is mirrored in the debt-to-capital ratio, which climbed from 0.38 to 0.56, and the debt-to-assets ratio, which increased from 0.24 to 0.34. Furthermore, the financial leverage ratio expanded from 2.55 in 2012 to 3.73 in 2016, confirming a more aggressive and risk-prone capital structure over the five-year period.
- Debt Service Coverage
- A severe collapse in the ability to cover fixed costs and interest expenses is evident. The interest coverage ratio declined steadily from 5.80 in 2012 to 1.07 in 2014, before entering negative territory with a value of -10.74 in 2015 and -3.30 in 2016. A nearly identical pattern is observed in the fixed charge coverage ratio, which dropped from 5.06 in 2012 to -2.98 in 2016. The transition to negative ratios in the final two years of the period indicates that operating earnings were insufficient to meet mandatory financial obligations, signifying substantial solvency distress.
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Debt to Equity
Anadarko Petroleum Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 42) | 33) | —) | 500) | —) | |
| Long-term debt, excluding current portion | 15,281) | 15,718) | 15,092) | 13,065) | 13,269) | |
| Total debt | 15,323) | 15,751) | 15,092) | 13,565) | 13,269) | |
| Stockholders’ equity | 12,212) | 12,819) | 19,725) | 21,857) | 20,629) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 1.25 | 1.23 | 0.77 | 0.62 | 0.64 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= 15,323 ÷ 12,212 = 1.25
2 Click competitor name to see calculations.
The solvency profile exhibits a marked deterioration between 2012 and 2016. While total debt levels experienced a moderate increase over the period, a substantial erosion of stockholders' equity resulted in a significant escalation of the debt-to-equity ratio. The company transitioned from a capital structure dominated by equity to one where debt exceeds equity by the end of the observed period.
- Total Debt
- Debt levels rose steadily from 13,269 million US$ in 2012 to a peak of 15,751 million US$ in 2015. A slight contraction occurred in 2016, with total debt decreasing to 15,323 million US$, though the final figure remains approximately 15.5% higher than the 2012 baseline.
- Stockholders' Equity
- Equity showed initial growth, peaking at 21,857 million US$ in 2013. Subsequently, a severe downward trend emerged, with equity falling to 19,725 million US$ in 2014 and dropping sharply to 12,819 million US$ in 2015. By December 31, 2016, equity reached a period low of 12,212 million US$, representing a cumulative decline of nearly 44% from its 2013 peak.
- Debt to Equity Ratio
- The ratio remained relatively stable and low between 2012 and 2013, fluctuating between 0.64 and 0.62. A reversal occurred in 2014 as the ratio climbed to 0.77, followed by a sharp spike to 1.23 in 2015 and 1.25 in 2016. This progression indicates a substantial increase in financial leverage, with the company's debt obligations surpassing its equity base starting in 2015.
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Debt to Capital
Anadarko Petroleum Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 42) | 33) | —) | 500) | —) | |
| Long-term debt, excluding current portion | 15,281) | 15,718) | 15,092) | 13,065) | 13,269) | |
| Total debt | 15,323) | 15,751) | 15,092) | 13,565) | 13,269) | |
| Stockholders’ equity | 12,212) | 12,819) | 19,725) | 21,857) | 20,629) | |
| Total capital | 27,535) | 28,570) | 34,817) | 35,422) | 33,898) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.56 | 0.55 | 0.43 | 0.38 | 0.39 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Debt to capital = Total debt ÷ Total capital
= 15,323 ÷ 27,535 = 0.56
2 Click competitor name to see calculations.
The solvency profile from 2012 to 2016 is characterized by a consistent increase in the debt to capital ratio, indicating a strategic or circumstantial shift toward a more leveraged capital structure over the five-year period.
- Total Debt Trends
- Total debt exhibited a general upward trajectory for the majority of the analyzed period, rising from 13,269 million USD in 2012 to a peak of 15,751 million USD in 2015. While a slight decrease to 15,323 million USD was observed in 2016, the overall debt load remained elevated compared to the levels maintained between 2012 and 2013.
- Total Capital Trends
- Total capital experienced a period of growth initially, peaking at 35,422 million USD in 2013. Subsequently, a downward trend emerged, with capital decreasing to 34,817 million USD in 2014 and dropping more sharply to 28,570 million USD in 2015 and 27,535 million USD by the end of 2016.
- Debt to Capital Ratio Analysis
- The debt to capital ratio remained relatively stable during the first two years, recording 0.39 in 2012 and 0.38 in 2013. A significant increase began in 2014, with the ratio rising to 0.43, followed by a sharp acceleration to 0.55 in 2015 and 0.56 in 2016. This upward movement is the result of a compounding effect: total debt increased while total capital decreased, causing debt to represent a substantially larger portion of the total capital structure by the end of the period.
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Debt to Assets
Anadarko Petroleum Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 42) | 33) | —) | 500) | —) | |
| Long-term debt, excluding current portion | 15,281) | 15,718) | 15,092) | 13,065) | 13,269) | |
| Total debt | 15,323) | 15,751) | 15,092) | 13,565) | 13,269) | |
| Total assets | 45,564) | 46,414) | 61,689) | 55,781) | 52,589) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.34 | 0.34 | 0.24 | 0.24 | 0.25 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Debt to assets = Total debt ÷ Total assets
= 15,323 ÷ 45,564 = 0.34
2 Click competitor name to see calculations.
Between 2012 and 2016, the solvency profile of the organization shifted from a period of stable leverage to a period of increased financial risk. While total debt grew modestly over the five-year period, a significant contraction in total assets starting in 2015 led to a deterioration of the debt-to-assets ratio.
- Total Debt Trends
- Total debt exhibited a steady upward trajectory from December 31, 2012, through December 31, 2015, increasing from 13,269 million US$ to a peak of 15,751 million US$. A slight reduction was observed by the end of 2016, with debt levels falling to 15,323 million US$.
- Total Assets Analysis
- Asset levels grew consistently from 2012 to 2014, reaching a maximum of 61,689 million US$. However, a substantial decrease occurred in 2015, where total assets fell to 46,414 million US$, followed by a further decline to 45,564 million US$ in 2016. This represents a significant reduction in the asset base over a two-year period.
- Debt to Assets Ratio Interpretation
- The debt-to-assets ratio remained stable between 0.24 and 0.25 from 2012 to 2014, indicating a consistent relationship between leverage and asset growth. In 2015, the ratio rose sharply to 0.34 and remained at this level through 2016. This increase was primarily driven by the sharp decline in total assets rather than an exponential increase in debt, suggesting that a smaller proportion of the company's assets were available to cover its total obligations by the end of the period.
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Financial Leverage
Anadarko Petroleum Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 45,564) | 46,414) | 61,689) | 55,781) | 52,589) | |
| Stockholders’ equity | 12,212) | 12,819) | 19,725) | 21,857) | 20,629) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 3.73 | 3.62 | 3.13 | 2.55 | 2.55 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= 45,564 ÷ 12,212 = 3.73
2 Click competitor name to see calculations.
The financial solvency profile from 2012 to 2016 is characterized by a progressive increase in financial leverage, coinciding with a significant contraction in both the asset base and stockholders' equity during the latter half of the period.
- Asset Base Trends
- Total assets experienced initial growth, rising from 52,589 million USD in 2012 to a peak of 61,689 million USD in 2014. This growth was followed by a sharp decline in 2015, where assets dropped to 46,414 million USD, with a further slight decrease to 45,564 million USD by the end of 2016.
- Equity Position
- Stockholders' equity peaked in 2013 at 21,857 million USD before initiating a downward trend. A moderate decline was observed in 2014, followed by a substantial reduction in 2015 to 12,819 million USD. The equity base continued to erode, reaching 12,212 million USD by December 31, 2016.
- Financial Leverage Analysis
- The financial leverage ratio remained constant at 2.55 between 2012 and 2013, but thereafter exhibited a consistent upward trajectory. The ratio increased to 3.13 in 2014, 3.62 in 2015, and peaked at 3.73 in 2016. This trend indicates a growing reliance on debt relative to equity to sustain the asset base, resulting in a higher risk profile regarding long-term solvency.
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Interest Coverage
Anadarko Petroleum Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to common stockholders | (3,071) | (6,692) | (1,750) | 801) | 2,391) | |
| Add: Net income attributable to noncontrolling interest | 263) | (120) | 187) | 140) | 54) | |
| Add: Income tax expense | (1,021) | (2,877) | 1,617) | 1,165) | 1,120) | |
| Add: Interest expense | 890) | 825) | 772) | 686) | 742) | |
| Earnings before interest and tax (EBIT) | (2,939) | (8,864) | 826) | 2,792) | 4,307) | |
| Solvency Ratio | ||||||
| Interest coverage1 | -3.30 | -10.74 | 1.07 | 4.07 | 5.80 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Interest coverage = EBIT ÷ Interest expense
= -2,939 ÷ 890 = -3.30
2 Click competitor name to see calculations.
The financial data reveals a severe degradation in solvency and debt-servicing capacity between 2012 and 2016. A persistent decline in operating profitability, coupled with rising interest obligations, led to a critical failure to cover interest expenses from earnings.
- Earnings Before Interest and Tax (EBIT)
- A substantial erosion of profitability is observed, with EBIT falling from US$ 4,307 million in 2012 to US$ 826 million in 2014, before collapsing into a significant deficit of US$ 8,864 million in 2015. Although 2016 showed a reduction in losses to US$ 2,939 million, the operating result remained negative.
- Interest Expense
- Debt servicing costs remained relatively stable but trended upward after 2013, increasing from US$ 686 million to US$ 890 million by 2016. This gradual increase in fixed financial costs occurred simultaneously with the collapse of operating income, compounding the financial strain on the organization.
- Interest Coverage Ratio
- The ratio exhibits a sharp downward trajectory, moving from a robust 5.80 in 2012 to 1.07 in 2014, indicating that earnings barely covered interest payments by the third year. The ratio turned negative in 2015 (-10.74) and remained negative in 2016 (-3.30), signifying an inability to meet interest obligations from operating profits during the final two years of the period.
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Fixed Charge Coverage
Anadarko Petroleum Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to common stockholders | (3,071) | (6,692) | (1,750) | 801) | 2,391) | |
| Add: Net income attributable to noncontrolling interest | 263) | (120) | 187) | 140) | 54) | |
| Add: Income tax expense | (1,021) | (2,877) | 1,617) | 1,165) | 1,120) | |
| Add: Interest expense | 890) | 825) | 772) | 686) | 742) | |
| Earnings before interest and tax (EBIT) | (2,939) | (8,864) | 826) | 2,792) | 4,307) | |
| Add: Rent expense, net of sublease income and amounts capitalized | 73) | 77) | 85) | 119) | 136) | |
| Earnings before fixed charges and tax | (2,866) | (8,787) | 911) | 2,911) | 4,443) | |
| Interest expense | 890) | 825) | 772) | 686) | 742) | |
| Rent expense, net of sublease income and amounts capitalized | 73) | 77) | 85) | 119) | 136) | |
| Fixed charges | 963) | 902) | 857) | 805) | 878) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | -2.98 | -9.74 | 1.06 | 3.62 | 5.06 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= -2,866 ÷ 963 = -2.98
2 Click competitor name to see calculations.
An analysis of solvency metrics from 2012 to 2016 reveals a severe deterioration in the capacity to service fixed obligations. The primary driver of this trend is a drastic contraction in earnings, which transitioned from strong profitability to substantial losses, while fixed charges remained relatively constant or increased slightly.
- Earnings Before Fixed Charges and Tax
- A precipitous decline in earnings is observed, falling from 4,443 million US dollars in 2012 to 911 million US dollars in 2014. This downward trend culminated in a significant deficit of 8,787 million US dollars in 2015, with a partial recovery to negative 2,866 million US dollars in 2016.
- Fixed Charge Obligations
- Fixed charges exhibited relative stability with a slight upward trajectory over the analyzed period. After a minor decrease to 805 million US dollars in 2013, these charges rose steadily each year, reaching 963 million US dollars by 2016.
- Fixed Charge Coverage Ratio
- The coverage ratio demonstrates a critical collapse in solvency. The ratio moved from a strong position of 5.06 in 2012 to 1.06 in 2014, indicating that earnings were barely sufficient to meet fixed obligations. In 2015 and 2016, the ratio became negative, reaching -9.74 and -2.98 respectively, confirming that earnings were insufficient to cover the fixed charges during those fiscal years.
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