Analysis of Debt
Total Debt (Carrying Amount)
EOG Resources Inc., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The total long-term debt and finance leases exhibited a peak in 2016 before entering a consistent period of deleveraging through 2019.
- Total Debt Trajectory
- Total obligations rose from 6.66 billion US dollars in 2015 to a peak of 6.99 billion US dollars in 2016. Subsequently, a steady downward trend was observed, with the total carrying amount declining to 6.39 billion in 2017, 6.08 billion in 2018, and reaching 5.18 billion by the end of 2019. This represents a total reduction of approximately 25.8% from the 2016 peak.
- Debt Maturity Profile Shift
- A significant change in the composition of debt is evident in the current portion of long-term debt. Between 2015 and 2016, current obligations remained nominal at approximately 6.58 million US dollars. However, a sharp escalation occurred starting in 2017, with current debt rising to 356.2 million, then to 913.1 million in 2018, and reaching 1.01 billion in 2019. This trajectory indicates a substantial shift in the maturity schedule, with a larger volume of debt becoming due within a twelve-month period.
- Non-Current Obligation Reduction
- Long-term debt excluding the current portion followed a consistent reductive path following 2016. From a high of 6.98 billion US dollars in 2016, the carrying amount decreased to 6.03 billion in 2017, 5.17 billion in 2018, and 4.16 billion in 2019. The contraction of non-current liabilities, combined with the increase in the current portion, suggests that the overall debt reduction is being driven by both the natural maturation of debt and active repayment strategies.
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Total Debt (Fair Value)
| Dec 31, 2019 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Commercial paper | —) |
| Senior notes | 5,452,000) |
| Finance leases | 57,900) |
| Total long-term debt and finance leases (fair value) | 5,509,900) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.06 |
Based on: 10-K (reporting date: 2019-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 3.62%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 4.40% | 500,000) | 22,000) | |
| 2.45% | 500,000) | 12,250) | |
| 4.10% | 750,000) | 30,750) | |
| 2.63% | 1,250,000) | 32,813) | |
| 3.15% | 500,000) | 15,750) | |
| 4.15% | 750,000) | 31,125) | |
| 6.65% | 140,000) | 9,310) | |
| 3.90% | 500,000) | 19,500) | |
| 5.10% | 250,000) | 12,750) | |
| 3.00% | 57,900) | 1,737) | |
| Total | 5,197,900) | 187,985) | |
| 3.62% | |||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 187,985 ÷ 5,197,900 = 3.62%
Interest Costs Incurred
EOG Resources Inc., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The interest cost profile from 2015 to 2019 demonstrates an initial increase followed by a sustained period of decline. Total interest costs reached a peak in 2016 before trending downward through 2019, indicating a reduction in the overall cost of borrowing or a decrease in the principal debt balance.
- Interest Expense, Incurred
- Total interest incurred rose from US$ 279.2 million in 2015 to a peak of US$ 313.3 million in 2016. Following this peak, the expenditure entered a consistent decline for three consecutive years, ending at US$ 223.4 million in 2019. This represents an overall decrease of approximately 28.7% from the 2016 high.
- Net Interest Expense
- Net interest expenses followed a trajectory similar to total incurred costs, peaking in 2016 at US$ 281.7 million. A significant contraction is observed between 2018 and 2019, where expenses dropped from US$ 245.1 million to US$ 185.1 million, signaling a marked improvement in the net cost of debt servicing toward the end of the period.
- Interest Expense, Capitalized
- Capitalized interest exhibited a divergent pattern compared to total incurred costs. After a steady decline from US$ 41.8 million in 2015 to a period low of US$ 24.5 million in 2018, there was a sharp increase to US$ 38.3 million in 2019. The increase in capitalization during a year when total incurred interest decreased suggests a strategic shift toward financing long-term capital assets.
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Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
2019 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Net interest expense
= 3,730,396 ÷ 185,129 = 20.15
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest expense, incurred
= 3,730,396 ÷ 223,421 = 16.70
A significant upward trajectory in debt servicing capacity is evident from 2015 through 2019. Both measured coverage ratios transitioned from deeply negative figures to strong positive values, indicating a substantial recovery in earnings relative to interest obligations over the five-year period.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- This ratio exhibited a sharp recovery, moving from -23.94 in 2015 to -4.07 in 2016, before crossing into positive territory at 3.10 in 2017. A rapid escalation occurred in 2018, reaching 16.64, and remained largely stable at 16.70 in 2019, suggesting a robust margin of safety for interest payments.
- Interest Coverage Ratio (without capitalized interest)
- A similar recovery pattern is observed for the non-capitalized ratio, which started at -28.16 in 2015 and improved to -4.53 in 2016. The ratio became positive in 2017 at 3.41, followed by a significant surge to 18.31 in 2018 and a peak of 20.15 in 2019.
- Comparative Solvency Trends
- The transition from negative coverage in 2015-2016 to high positive values by 2019 reflects a fundamental shift in the financial profile. The substantial increase in both ratios during 2018 indicates a period of rapid earnings growth or significant debt reduction, moving the entity from a state of interest deficit to a position of high solvency and minimal default risk.
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