Hess Corp. (NYSE:HES)

The data reveals several notable trends in the debt structure over the five-year period.

Current portion of long-term debt

The current portion of long-term debt exhibited considerable volatility. Starting at $67 million in 2018, it fell sharply to $10 million in 2020 but surged dramatically to $517 million in 2021 before dropping back to $3 million in 2022. Such fluctuations suggest irregular refinancing activities or significant repayments within the short-term horizon.

Current portion of finance lease obligations

This component showed a steady, gradual increase over time, from $17 million in 2019 to $21 million by the end of 2022, indicating an incremental rise in short-term lease liabilities.

Long-term debt, excluding current portion

A generally upward trajectory is observed in long-term debt excluding the current portion. The outstanding balance grew from $6,605 million in 2018 to $8,278 million by 2022, peaking slightly in 2020. This progression reflects an expansion in the company’s longer-term borrowing over the years, albeit with minor fluctuations.

Long-term finance lease obligations

Long-term finance lease obligations declined consistently from $238 million in 2019 to $179 million in 2022. This decrease suggests gradual repayments or lease expirations impacting the long-term lease liability balance.

Total debt and finance lease obligations (carrying amount)

The aggregate carrying amount of total debt and finance lease obligations increased from $6,672 million in 2018 to a peak of $8,677 million in 2021, followed by a slight decrease to $8,481 million in 2022. This indicates overall growth in indebtedness over the analyzed period, with a possible plateau or beginning of reduction in the most recent year.

In summary, the company’s total debt profile over the five years shows rising long-term liabilities accompanied by fluctuating short-term debt components, particularly in the current portion of long-term debt. Meanwhile, lease obligations present an opposing trend, with long-term leases declining and current lease obligations creeping up moderately. These dynamics may reflect ongoing shifts in the company’s financing strategy, balancing between different debt maturities and types of obligations.

Interest Expense

Interest expense exhibited a slight decline from 399 million USD in 2018 to 380 million USD in 2019, followed by a notable increase in subsequent years. It rose to 468 million USD in 2020, then increased further to 481 million USD in 2021 and reached 493 million USD in 2022. This indicates a general upward trend in interest expense over the five-year period, especially from 2019 onward.

Capitalized Interest

Capitalized interest showed variability during the observed period. It increased from 20 million USD in 2018 to 38 million USD in 2019, then no data is available for 2020 and 2021. By 2022, it decreased substantially to 10 million USD. The missing data in 2020 and 2021 makes it difficult to clearly observe the intermediate trend, but the available points suggest fluctuations with a decrease by the end of the period.

Interest Costs Incurred

The total interest costs incurred rose from 419 million USD in 2018 to 418 million USD in 2019, remaining relatively stable between these years. However, starting in 2020, there was a consistent upward trajectory to 468 million USD, 481 million USD in 2021, and reaching 503 million USD in 2022. This trend closely parallels the behavior of interest expense, reflecting overall growth in total interest costs incurred.

Overall Analysis

The data reveals that while interest expense experienced a slight decline early on, it generally increased throughout the later years, impacting the overall interest costs incurred, which also demonstrated a clear upward trend. Capitalized interest amounts were more volatile with some missing information but showed a peak in 2019 followed by a decline in 2022, suggesting changes in the company's approach to capitalizing interest over time. The increasing interest expenses and total interest costs incurred may reflect higher borrowing levels, rising interest rates, or changes in the debt structure during the period analyzed.

The interest coverage ratio (without capitalized interest) displayed notable fluctuations over the analyzed periods. Beginning at 1.55 in 2018, it experienced a modest increase to 1.58 in 2019, indicating a slight improvement in the company's ability to meet interest obligations from operating earnings. However, in 2020, the ratio sharply declined to -5.09, signifying a substantial deterioration in interest coverage, likely due to operating losses or significantly reduced earnings before interest expenses.

Following this downturn, the ratio showed a strong recovery in subsequent years, rising to 4.1 in 2021 and further improving to 8.19 by the end of 2022. This upward trend suggests a considerable enhancement in the company's financial performance and its capacity to cover interest expenses comfortably.

The adjusted interest coverage ratio, which accounts for capitalized interest, mirrored the same overall pattern. Starting at 1.48 in 2018, it slightly decreased to 1.44 in 2019, remained at -5.09 in 2020 indicating severe stress, then rebounded robustly to 4.1 in 2021 and 8.03 in 2022. The minimal differences between the adjusted and unadjusted ratios suggest that capitalized interest did not significantly impact the interest coverage throughout these years.

Overall, the data reveals that the company faced substantial financial challenges in 2020, adversely affecting its ability to service interest costs. However, the subsequent recovery in 2021 and 2022 indicates improved operational results or financial management, enhancing solvency and reducing credit risk.