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
Halliburton Co., solvency ratios
Based on: 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), 10-K (reporting date: 2014-12-31).
The solvency profile between 2014 and 2018 reflects a period of significant financial stress followed by a gradual recovery. A marked increase in leverage and a sharp decline in debt-servicing capacity are evident from 2014 through 2016, with a stabilization and moderate improvement occurring in 2017 and 2018.
- Leverage and Capital Structure
- A substantial increase in the reliance on debt is observed from 2014 to 2016. The debt to equity ratio rose from 0.48 to a peak of 1.32, while the debt to assets ratio nearly doubled from 0.24 to 0.46 over the same period. Financial leverage followed a similar upward trajectory, climbing from 1.98 in 2014 to a peak of 3.01 in 2017. By 2018, these metrics began to moderate, with the debt to equity ratio declining to 1.10 and financial leverage easing to 2.73, suggesting a strategic shift toward deleveraging.
- Debt Servicing and Coverage
- The most critical volatility is found in the coverage ratios, which indicate severe operational distress during the mid-period. Interest coverage plummeted from a robust 12.90 in 2014 to a negative 9.92 in 2016, signifying that earnings were insufficient to cover interest expenses. Fixed charge coverage mirrored this collapse, dropping from 4.38 in 2014 to -4.93 in 2016. However, a recovery phase is evident starting in 2017, with interest coverage returning to 4.03 and fixed charge coverage reaching 2.42 by the end of 2018.
- Overall Solvency Trend
- The synchronization of rising debt ratios and falling coverage ratios between 2014 and 2016 points to a period of heightened financial risk. The subsequent reversal of these trends in 2017 and 2018 indicates an improvement in the company's ability to meet its long-term obligations and a gradual restoration of financial stability.
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Debt to Equity
Halliburton Co., debt to equity calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current maturities of long-term debt | 36) | 512) | 170) | 659) | 14) | |
| Long-term debt, excluding current maturities | 10,421) | 10,430) | 12,214) | 14,687) | 7,840) | |
| Total debt | 10,457) | 10,942) | 12,384) | 15,346) | 7,854) | |
| Company shareholders’ equity | 9,522) | 8,322) | 9,409) | 15,462) | 16,267) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 1.10 | 1.31 | 1.32 | 0.99 | 0.48 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to equity = Total debt ÷ Company shareholders’ equity
= 10,457 ÷ 9,522 = 1.10
2 Click competitor name to see calculations.
Between 2014 and 2018, a significant shift in the capital structure is observed, characterized by a transition from a low-leverage position to a more aggressive solvency profile. The overall trend reflects an initial period of rapid debt accumulation and equity erosion, followed by a gradual phase of deleveraging and equity stabilization.
- Total Debt Dynamics
- A sharp increase in total debt is evident between 2014 and 2015, where obligations rose from 7,854 million to 15,346 million. Following this peak, a consistent downward trend occurred from 2016 through 2018, with total debt reducing to 10,457 million by the end of the period.
- Shareholders' Equity Evolution
- Company shareholders' equity experienced a sustained decline from 16,267 million in 2014 to a low of 8,322 million in 2017. A moderate recovery is noted in 2018, with equity increasing to 9,522 million, suggesting a marginal improvement in the company's net asset position.
- Debt to Equity Ratio Analysis
- The debt to equity ratio demonstrates a steep ascent from 0.48 in 2014 to a peak of 1.32 in 2016, indicating a pivot where debt surpassed equity as the primary source of financing. While the ratio remained elevated at 1.31 in 2017, it declined to 1.10 by 2018, reflecting a gradual improvement in the company's solvency position toward the end of the analyzed timeframe.
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Debt to Capital
Halliburton Co., debt to capital calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current maturities of long-term debt | 36) | 512) | 170) | 659) | 14) | |
| Long-term debt, excluding current maturities | 10,421) | 10,430) | 12,214) | 14,687) | 7,840) | |
| Total debt | 10,457) | 10,942) | 12,384) | 15,346) | 7,854) | |
| Company shareholders’ equity | 9,522) | 8,322) | 9,409) | 15,462) | 16,267) | |
| Total capital | 19,979) | 19,264) | 21,793) | 30,808) | 24,121) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.52 | 0.57 | 0.57 | 0.50 | 0.33 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to capital = Total debt ÷ Total capital
= 10,457 ÷ 19,979 = 0.52
2 Click competitor name to see calculations.
The solvency profile from 2014 to 2018 is characterized by a sharp increase in leverage during the initial period, followed by a gradual deleveraging phase. The Debt to Capital ratio experienced a significant upward trajectory, peaking in 2016 and 2017 before showing signs of moderation by the end of 2018.
- Total Debt Trends
- A substantial increase in total debt is observed between 2014 and 2015, where the balance rose from 7,854 million US$ to 15,346 million US$. Following this peak, a consistent downward trend occurred over the next three years, with total debt declining to 10,457 million US$ by December 31, 2018.
- Total Capital Fluctuations
- Total capital peaked in 2015 at 30,808 million US$, coinciding with the peak in total debt. Subsequently, a contraction in the capital base was noted, reaching a low of 19,264 million US$ in 2017, before a slight recovery to 19,979 million US$ in 2018.
- Debt to Capital Ratio Analysis
- The Debt to Capital ratio rose from 0.33 in 2014 to 0.50 in 2015, indicating a shift toward a more debt-heavy capital structure. This ratio continued to climb, stabilizing at 0.57 throughout 2016 and 2017. By 2018, the ratio decreased to 0.52, suggesting a reduction in the proportion of debt relative to total capital, although the leverage level remained considerably higher than the 2014 baseline.
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Debt to Assets
Halliburton Co., debt to assets calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current maturities of long-term debt | 36) | 512) | 170) | 659) | 14) | |
| Long-term debt, excluding current maturities | 10,421) | 10,430) | 12,214) | 14,687) | 7,840) | |
| Total debt | 10,457) | 10,942) | 12,384) | 15,346) | 7,854) | |
| Total assets | 25,982) | 25,085) | 27,000) | 36,942) | 32,240) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.40 | 0.44 | 0.46 | 0.42 | 0.24 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to assets = Total debt ÷ Total assets
= 10,457 ÷ 25,982 = 0.40
2 Click competitor name to see calculations.
The solvency profile experienced significant volatility between 2014 and 2018, characterized by an initial surge in leverage followed by a period of gradual deleveraging. The debt-to-assets ratio rose sharply in the early part of the period before beginning a modest descent toward the end of the five-year window.
- Debt to Assets Ratio Trends
- The ratio increased from 0.24 in 2014 to a peak of 0.46 in 2016, indicating a substantial increase in the proportion of assets financed through debt. Following this peak, the ratio trended downward to 0.44 in 2017 and 0.40 in 2018, reflecting a gradual improvement in the solvency position.
- Analysis of Total Debt
- A dramatic increase in total debt was observed between 2014 and 2015, where liabilities grew from 7,854 million to 15,346 million. From 2016 onward, a consistent downward trend emerged, with total debt reducing annually to reach 10,457 million by December 31, 2018.
- Total Asset Movements
- Total assets peaked in 2015 at 36,942 million but underwent a significant contraction starting in 2016, dropping to 27,000 million. This decline continued into 2017, reaching a low of 25,085 million, before a slight recovery to 25,982 million was recorded in 2018.
- Interrelation of Debt and Assets
- The peak debt-to-assets ratio in 2016 was driven by a convergence of factors: while total debt had begun to decline from its 2015 high, the total asset base contracted more aggressively during the same period. The subsequent improvement in the ratio through 2018 is attributed to the continued reduction of total debt alongside a stabilizing asset base.
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Financial Leverage
Halliburton Co., financial leverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 25,982) | 25,085) | 27,000) | 36,942) | 32,240) | |
| Company shareholders’ equity | 9,522) | 8,322) | 9,409) | 15,462) | 16,267) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.73 | 3.01 | 2.87 | 2.39 | 1.98 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Financial leverage = Total assets ÷ Company shareholders’ equity
= 25,982 ÷ 9,522 = 2.73
2 Click competitor name to see calculations.
An analysis of the solvency profile between 2014 and 2018 reveals a period of increasing financial risk followed by a slight stabilization. The company experienced a notable expansion in its leverage ratio, peaking in 2017 before showing a marginal improvement in 2018.
- Total Assets
- Asset values peaked in 2015 at 36,942 million US$, followed by a significant contraction over the next two years, reaching a low of 25,085 million US$ in 2017. A slight recovery was observed in 2018, with assets increasing to 25,982 million US$.
- Company Shareholders' Equity
- A consistent downward trend in equity is observed from 2014 through 2017, falling from 16,267 million US$ to 8,322 million US$. This represents a substantial erosion of the equity base over the four-year period. A partial recovery occurred in 2018, with equity rising to 9,522 million US$.
- Financial Leverage Ratio
- The financial leverage ratio exhibited a steady climb from 1.98 in 2014 to a peak of 3.01 in 2017. This upward trajectory indicates that the company relied increasingly on debt relative to equity to finance its assets. In 2018, the ratio decreased to 2.73, suggesting a slight reduction in financial gearing and a move toward a more conservative capital structure.
The divergence between the decline in shareholders' equity and the fluctuations in total assets served as the primary driver for the increased leverage ratio. The most acute pressure on solvency occurred between 2016 and 2017, where the rapid decrease in equity outpaced the reduction in assets, resulting in the highest leverage levels of the period.
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Interest Coverage
Halliburton Co., interest coverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to company | 1,656) | (463) | (5,763) | (671) | 3,500) | |
| Add: Net income attributable to noncontrolling interest | 1) | (5) | (6) | 4) | 1) | |
| Less: Income (loss) from discontinued operations, net | —) | (19) | (2) | (5) | 64) | |
| Add: Income tax expense | 157) | 1,131) | (1,858) | (274) | 1,275) | |
| Add: Interest expense | 598) | 705) | 698) | 463) | 396) | |
| Earnings before interest and tax (EBIT) | 2,412) | 1,387) | (6,927) | (473) | 5,108) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 4.03 | 1.97 | -9.92 | -1.02 | 12.90 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Interest coverage = EBIT ÷ Interest expense
= 2,412 ÷ 598 = 4.03
2 Click competitor name to see calculations.
The interest coverage ratio exhibits extreme volatility between 2014 and 2018, transitioning from a position of strong solvency to a critical deficit before returning to positive territory. This trajectory reflects a period of significant operational distress followed by a phased recovery in earnings capacity.
- Earnings Before Interest and Tax (EBIT)
- A severe contraction in EBIT is observed starting in 2015, with earnings dropping from 5,108 million US dollars in 2014 to a deficit of 473 million US dollars in 2015. This decline accelerated in 2016, reaching a low of negative 6,927 million US dollars. A recovery trend emerged in 2017 and 2018, with EBIT returning to positive values of 1,387 million and 2,412 million US dollars, respectively.
- Interest Expense
- Interest obligations followed an upward trend for the majority of the period. Expenses rose from 396 million US dollars in 2014 to a peak of 705 million US dollars in 2017. A slight reduction occurred in 2018, with expenses decreasing to 598 million US dollars, suggesting a stabilization or reduction in debt servicing costs.
- Interest Coverage Ratio
- The ratio demonstrates a dramatic collapse from a robust 12.90 in 2014 to -1.02 in 2015 and a critical -9.92 in 2016, indicating that operating earnings were insufficient to cover interest payments during these years. Solvency began to stabilize in 2017 with a ratio of 1.97, and further improved to 4.03 by 2018, signaling a restored ability to meet fixed financial obligations from operational profits.
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Fixed Charge Coverage
Halliburton Co., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to company | 1,656) | (463) | (5,763) | (671) | 3,500) | |
| Add: Net income attributable to noncontrolling interest | 1) | (5) | (6) | 4) | 1) | |
| Less: Income (loss) from discontinued operations, net | —) | (19) | (2) | (5) | 64) | |
| Add: Income tax expense | 157) | 1,131) | (1,858) | (274) | 1,275) | |
| Add: Interest expense | 598) | 705) | 698) | 463) | 396) | |
| Earnings before interest and tax (EBIT) | 2,412) | 1,387) | (6,927) | (473) | 5,108) | |
| Add: Rentals on operating leases, net of sublease rentals | 680) | 574) | 587) | 875) | 1,000) | |
| Earnings before fixed charges and tax | 3,092) | 1,961) | (6,340) | 402) | 6,108) | |
| Interest expense | 598) | 705) | 698) | 463) | 396) | |
| Rentals on operating leases, net of sublease rentals | 680) | 574) | 587) | 875) | 1,000) | |
| Fixed charges | 1,278) | 1,279) | 1,285) | 1,338) | 1,396) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 2.42 | 1.53 | -4.93 | 0.30 | 4.38 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| SLB N.V. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,092 ÷ 1,278 = 2.42
2 Click competitor name to see calculations.
The solvency profile between 2014 and 2018 is characterized by extreme volatility in earnings, leading to a severe temporary impairment of the company's ability to meet fixed obligations, followed by a steady recovery.
- Fixed Charge Coverage Ratio
- A precipitous decline is observed from 2014 to 2016, with the ratio falling from 4.38 to -4.93. This indicates a transition from a robust solvency position to a period where earnings were insufficient to cover fixed charges. A recovery trend emerged thereafter, with the ratio climbing to 1.53 in 2017 and reaching 2.42 by the end of 2018, signaling a return to a sustainable coverage level.
- Earnings Before Fixed Charges and Tax
- Earnings exhibited significant instability, plummeting from US$ 6,108 million in 2014 to a substantial loss of US$ 6,340 million in 2016. This volatility was the primary catalyst for the deterioration of the coverage ratio. Positive momentum was regained in 2017 and 2018, with earnings recovering to US$ 1,961 million and US$ 3,092 million, respectively.
- Fixed Charge Obligations
- Fixed charges remained remarkably stable throughout the analyzed period, showing a slight downward trend from US$ 1,396 million in 2014 to US$ 1,278 million in 2018. The consistency of these charges confirms that the fluctuations in the solvency ratio were driven by operational earnings performance rather than changes in the company's fixed cost structure or debt obligations.
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