Anadarko Petroleum Corp. (NYSE:APC)

Leverage Ratios

The debt to equity ratio showed a gradual increase from 0.64 in 2012 to 1.25 by the end of 2016, indicating a rising reliance on debt relative to shareholders' equity. The most notable jump occurred between 2014 and 2015, where the ratio increased from 0.77 to 1.23.

Similarly, the debt to capital ratio increased from 0.39 in 2012 to 0.56 in 2016, following a consistent upward trend that reflects a larger proportion of capital structure being financed by debt over time.

Debt to assets ratio remained relatively stable at around 0.24 during 2012 to 2014 but rose significantly to 0.34 in 2015 and maintained this level in 2016, suggesting increased leverage on total asset financing in later years.

Financial leverage, calculated as total assets divided by total equity, expanded from 2.55 in 2012 up to 3.73 in 2016, highlighting an increased use of debt as a financing mechanism relative to equity.

Coverage Ratios

Interest coverage ratio, which measures the ability to meet interest expenses, declined steeply over the period. It dropped from a comfortable 5.8 times coverage in 2012 to near breakeven in 2014 at 1.07, then sharply fell into negative territory in 2015 and 2016 (-10.74 and -3.3 respectively), indicating difficulty or inability to cover interest expenses with operating earnings during the latter years.

Fixed charge coverage ratio followed a pattern similar to interest coverage, decreasing from 5.06 in 2012 to negative values by 2015 and 2016 (-9.74 and -2.98). This decline suggests worsening capacity to cover fixed financial charges, such as lease payments and debt service obligations.

Summary of Trends and Implications

The financial data reveal a trend of increasing leverage through rising debt levels relative to equity and assets between 2012 and 2016. While moderate leverage can enhance returns, the rising ratios signal a shift toward greater financial risk.

Concurrently, the coverage ratios’ significant declines, deteriorating from healthy coverage to negative figures, suggest the company may have faced operational challenges affecting its earnings before interest and fixed charges. This weakening ability to meet debt-related obligations raises concerns about financial stability and credit risk during the final years analyzed.

Overall, the company’s risk profile increased as it became more leveraged and less capable of generating sufficient earnings to service its debts and fixed charges. These trends would warrant close monitoring and potentially corrective financial strategies to mitigate default risk and ensure sustainable operations.

Total debt

Total debt increased steadily from 13,269 million USD in 2012 to a peak of 15,751 million USD in 2015, before experiencing a slight decline to 15,323 million USD in 2016. This indicates a general trend of rising leverage through increased borrowing over the five-year period, with a minor reduction in the last recorded year.

Stockholders’ equity

Stockholders’ equity showed fluctuations characterized by an initial increase from 20,629 million USD in 2012 to 21,857 million USD in 2013, followed by a consistent decline to 12,212 million USD by 2016. This downward trend suggests a deterioration in net assets attributable to shareholders during the latter part of the period.

Debt to equity ratio

The debt to equity ratio reflects increasing financial leverage, beginning at 0.64 in 2012 and remaining relatively stable through 2013. It then rose substantially to 0.77 in 2014 and escalated further to 1.23 in 2015, reaching 1.25 in 2016. This upward trajectory illustrates a growing reliance on debt financing as equity declined, indicating elevated financial risk.

Summary

Over the observed period, there is a clear pattern of rising total debt coupled with declining stockholders' equity, resulting in an increasing debt to equity ratio. The data suggests a shift towards greater financial leverage and potential vulnerability due to reduced equity cushions. The modest reduction in total debt in the final year does not offset the overall increased leverage trend driven largely by declining equity levels.

The analysis of the financial data reveals several key trends in the company's debt and capital structure over the five-year period from 2012 to 2016.

Total Debt

Total debt exhibited a general increasing trend from 2012 through 2015, rising from approximately $13.3 billion in 2012 to $15.8 billion in 2015. In 2016, total debt slightly decreased to about $15.3 billion, reflecting a modest reduction after four consecutive years of growth.

Total Capital

Total capital initially increased from around $33.9 billion in 2012 to $35.4 billion in 2013 but then began a downward trajectory, declining to approximately $27.5 billion by 2016. The most significant decrease occurred between 2014 and 2015, when total capital contracted from about $34.8 billion to $28.6 billion, continuing to decline modestly into 2016.

Debt to Capital Ratio

The debt to capital ratio, a measure of financial leverage, showed a decreasing trend in the early years, dropping from 0.39 in 2012 to 0.38 in 2013. However, from 2014 onwards, this ratio increased markedly, moving from 0.43 in 2014 to 0.56 in 2016. This upward trend indicates a significant increase in the proportion of capital financed through debt over the latter part of the period.

Overall, the data suggests that while total debt experienced growth followed by a slight decrease in the final year, total capital saw a sustained decrease after 2013. Consequently, the company's financial structure became more leveraged, with a growing reliance on debt financing relative to total capital, particularly from 2014 to 2016. This shift may reflect changes in financing strategy, market conditions, or operational factors influencing capital management decisions during the period analyzed.

Total Debt

The total debt of the company showed a consistent upward trend from 2012 through 2015, increasing from $13,269 million to $15,751 million. However, in 2016, there was a slight decrease to $15,323 million, indicating a modest reduction in debt levels after several years of growth.

Total Assets

Total assets increased steadily from 2012 to 2014, moving from $52,589 million to $61,689 million. This upward trend reversed substantially in 2015, dropping sharply to $46,414 million, with a further slight decrease to $45,564 million in 2016. This significant decline in total assets over the last two reported years suggests asset divestitures, impairments, or other factors negatively impacting asset holdings.

Debt to Assets Ratio

The debt to assets ratio remained relatively stable at 0.24-0.25 during 2012 to 2014, reflecting a consistent capital structure during this period. From 2015 onward, the ratio increased notably to 0.34 and remained at that elevated level in 2016. This change corresponds with the decline in total assets and the continued high level of total debt, indicating a higher leverage position and potentially increased financial risk.

Total Assets

The total assets displayed an overall declining trend over the five-year period. Starting from 52,589 million USD in 2012, assets increased moderately to 61,689 million USD in 2014, representing the peak year within the period. However, from 2014 onward, a significant decrease occurred, falling to 46,414 million USD in 2015 and continuing slightly to 45,564 million USD in 2016. This reflects a reduction of approximately 26% from the peak value in 2014 to 2016, indicating possible asset divestitures or write-downs during the latter years.

Stockholders’ Equity

Stockholders' equity showed a relatively stable pattern between 2012 and 2013, increasing from 20,629 million USD to 21,857 million USD. Thereafter, equity declined sharply over the following years, dropping to 19,725 million USD in 2014, then more notably to 12,819 million USD in 2015, and marginally down to 12,212 million USD in 2016. Overall, equity contracted by approximately 44% from 2013 to 2016, which may suggest losses, dividend payouts exceeding earnings, or other equity reductions impacting the company's net worth.

Financial Leverage

The financial leverage ratio rose steadily across the entire timeframe, beginning at 2.55 in 2012 and maintaining the same level in 2013. From 2014 onwards, there was a notable increase to 3.13, followed by further growth to 3.62 in 2015 and 3.73 in 2016. This upward trend suggests a rising proportion of debt relative to equity, likely reflecting increased borrowing or diminishing equity base. The leverage increase alongside declining equity raises concerns about heightened financial risk and reduced buffer against obligations.

Earnings before interest and tax (EBIT)

From 2012 to 2016, EBIT shows a notable downward trajectory. Initially, EBIT was strong at 4,307 million US dollars in 2012, followed by a significant reduction to 2,792 million in 2013. The decline accelerated in 2014, with EBIT dropping to 826 million. In the subsequent years, the company experienced substantial negative EBIT values, reaching -8,864 million in 2015 and -2,939 million in 2016. This trend reflects deteriorating operational profitability, with considerable losses incurred in the last two years.

Interest Expense

Interest expense exhibits a gradual increase over the five-year period. Starting at 742 million US dollars in 2012, it slightly decreased in 2013 to 686 million but then rose steadily to 772 million in 2014. In 2015 and 2016, it further increased to 825 million and 890 million, respectively. This rise indicates growing debt servicing costs or higher borrowings over time.

Interest Coverage Ratio

The interest coverage ratio reveals a marked deterioration in the company’s ability to meet interest obligations through operating earnings. It declined sharply from a healthy 5.8 times in 2012 to 4.07 in 2013 and further dropped to near unity at 1.07 in 2014. Subsequently, the ratio turned negative, registering -10.74 in 2015 and -3.3 in 2016. Negative values signify that EBIT was insufficient to cover interest expenses, reflecting financial distress and increased risk of default.

Earnings Before Fixed Charges and Tax

The earnings before fixed charges and tax showed a significant downward trend over the five-year period. Starting at 4,443 million US dollars in 2012, earnings declined steadily to 2,911 million in 2013 and further plummeted to 911 million in 2014. The trend reversed drastically in 2015 and 2016, where earnings turned negative, reaching -8,787 million and -2,866 million respectively. This indicates a substantial deterioration in earnings performance, particularly in the last two years of the period analyzed.

Fixed Charges

Fixed charges remained relatively stable throughout the five years, fluctuating slightly but generally staying within the range of 800 to 960 million US dollars. The values were 878 million in 2012, decreased marginally to 805 million in 2013, and then showed a gradual increase to 857 million in 2014, 902 million in 2015, and 963 million in 2016. This consistency contrasts with the volatility observed in earnings.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio experienced a marked decline over the period. It started at a strong level of 5.06 in 2012, indicating the company was comfortably covering its fixed charges. The ratio dropped considerably to 3.62 in 2013 and further declined to just over 1.0 in 2014, indicating diminished coverage capacity. In 2015 and 2016, the ratio turned negative (-9.74 and -2.98 respectively), reflecting that earnings before fixed charges were insufficient to meet fixed financial obligations, highlighting severe financial stress.

Overall Insights

The financial data reveals an overall weakening financial position from 2012 through 2016. Earnings before fixed charges and tax weakened progressively until turning negative in the last two years, while fixed charges remained generally stable, thereby increasing the burden relative to earnings. The declining and ultimately negative fixed charge coverage ratio underscores deteriorating ability to service fixed costs, raising concerns about financial stability during this period.