Hess Corp. (NYSE:HES)

Current Ratio Analysis

The current ratio exhibits notable fluctuations across the observed periods. Initially, it declines steadily from 1.69 in the first quarter of 2019 to a low of 1.26 by the end of that year. Subsequently, a marked increase occurs in early 2020, peaking at 2.2 in the third quarter. This rise suggests an improvement in short-term liquidity during that period. However, following this peak, the ratio experiences a gradual decline throughout 2021, stabilizing around the mid-1.4s. In 2022, the ratio again trends upwards, reaching approximately 1.78 by the third quarter, before slightly tapering off towards the end of 2022 and into 2023, declining to around 1.31 by the third quarter of 2023. Overall, the current ratio indicates periods of both strengthening and weakening liquidity over time, with the highest liquidity occurring in mid-2020.

Quick Ratio Analysis

The quick ratio mirrors the broader patterns observed in the current ratio though with generally lower values, reflecting the exclusion of inventory from liquid assets. From 1.5 in the first quarter of 2019, the quick ratio declines to about 1.08 by the end of 2019, indicating a reduction in liquid assets relative to current liabilities. Thereafter, the ratio improves through the first three quarters of 2020, peaking at 1.6 in the final quarter, consistent with enhanced liquidity. A downward trend is observed again in 2021, with the ratio hovering between 1.28 and 1.36 in the latter half, then rising modestly during 2022, attaining a recent high of 1.63. In 2023, a decline is evident again, dropping to 1.16 by the third quarter. This suggests periods of fluctuating liquid asset coverage, with liquidity peaking in late 2020 and mid-2022.

Cash Ratio Analysis

The cash ratio demonstrates more pronounced volatility, reflecting the company's cash and cash equivalents in relation to current liabilities. Beginning at 1.01 in early 2019, the ratio declines steadily to 0.62 by the close of 2019, indicating reduced cash reserves relative to liabilities. A rebound occurs in early 2020, with figures rising above 1.0 midyear and peaking at 1.07 in the final quarter, signaling relatively strong cash reserves during this period. The ratio then fluctuates near the 0.9 to 1.1 range through 2021, with a notable dip to 0.59 in early 2022. Recovery is evident afterward, reaching 1.04 by the end of 2022. Nonetheless, a downward movement resumes in 2023, falling to 0.67 in the third quarter, suggesting a reduction in cash liquidity. This reduction in the cash ratio towards the latest periods may indicate tightening cash management or increased current liabilities.

Overall Liquidity Observations

Across all three liquidity metrics, the data reveal a cyclical pattern of contraction and expansion in liquidity over the examined time frame. The most significant improvements occur in mid to late 2020, coinciding with broader global economic disruptions, potentially reflecting strategic liquidity management during uncertain conditions. Subsequent periods show a general trend towards declining liquidity ratios, especially notable in the current and cash ratios during 2023. This pattern may reflect changing operational needs, investment activities, or shifts in working capital requirements. It is important to monitor these ratios closely in future periods to assess ongoing liquidity risk and financial flexibility.

Current Assets

Current assets exhibited fluctuations over the reported periods, generally ranging between approximately $3.1 billion and $4.3 billion. Notably, current assets increased sharply from the end of 2019 into the first quarter of 2020, peaking around $4.3 billion at the end of 2021. After this peak, the values demonstrated some decline but mostly remained above $3.7 billion through 2023, indicating a relatively stable liquidity base with some volatility.

Current Liabilities

Current liabilities showed a declining trend from early 2019 through mid-2020, dropping from over $2.5 billion to levels near $1.4 billion. However, starting in late 2020, current liabilities reversed course and steadily increased, reaching a peak close to $3 billion by the third quarter of 2023. This upward trajectory suggests growing short-term obligations over recent quarters.

Current Ratio

The current ratio displayed notable variability throughout the periods, with values ranging from a low of approximately 1.26 at the end of 2019 to a high above 2.2 in the third quarter of 2020. Initially declining during 2019, the current ratio surged in the first half of 2020, reflecting improved liquidity relative to liabilities. Since early 2021, the ratio generally trended downward, decreasing steadily toward 1.31 by the third quarter of 2023. This declining ratio indicates a compression of liquidity buffer relative to short-term liabilities, potentially signalling increased pressure on the company's short-term financial health.

The analysis of the financial data reveals several notable trends in key liquidity metrics over the observed periods.

Total quick assets

Total quick assets showed a general downward trend from early 2019 through late 2020, reaching a low in September 2020. Starting in 2021, a recovery phase is observable, with quick assets rising steadily through late 2021 and into mid-2022. Subsequently, a slight decline occurred near the end of 2022 and into early 2023, followed by some variability but no clear upward or downward momentum toward the latest quarter.

Current liabilities

Current liabilities exhibited moderate fluctuations over the entire timeframe. Initially, liabilities decreased notably from early 2019 through mid-2020, reaching a trough around September 2020. However, from late 2020 onward, liabilities increased, peaking substantially around the end of 2021. Following that peak, a general decline was observed over 2022, but current liabilities trended upward again in 2023, ending at a higher level than the preceding quarters of the same year.

Quick ratio

The quick ratio, which measures short-term liquidity by comparing quick assets to current liabilities, experienced notable variation. Early 2019 featured relatively strong liquidity, but the ratio decreased steadily through 2019, reflecting a deteriorating short-term liquidity position. This ratio improved significantly during 2020 and peaked in early 2021, indicating strengthened liquidity. Afterward, the quick ratio declined gradually through 2021 and 2022 with brief improvements, ultimately falling considerably by the most recent quarter. This indicates that although the company managed to bolster quick assets relative to liabilities during the early pandemic period, liquidity strength weakened in the latest periods.

In summary, the company’s liquidity position demonstrated sensitivity to broader market conditions, with a period of liquidity contraction through 2019, recovery and strengthening during 2020 and early 2021, followed by renewed pressure on liquidity ratios in recent quarters. The fluctuating current liabilities contributed notably to these dynamics, alongside variations in quick assets. The overall trend points to a cautious liquidity environment in the latest periods requiring close monitoring and potential strategic adjustments.

The financial data reveals notable fluctuations in liquidity and short-term obligations over the analyzed periods. Examination of total cash assets indicates substantial variability, with an initial decline from early 2019 through the end of that year, followed by uneven recovery phases. Notably, cash assets decreased markedly in the second half of 2019, hitting a low point in late 2020 before rebounding through 2021. Subsequent periods show alternating increases and decreases, with particularly elevated levels at the end of 2021 and mid-2022, before another decline approaching late 2023.

Current liabilities follow a somewhat different pattern, with a pronounced downward trend through the first half of 2020, reaching relatively low levels in mid-2020. Afterward, liabilities increased markedly, peaking toward the end of 2021. The period 2022 through 2023 shows fluctuations around relatively high values, with liabilities maintaining elevated levels compared to earlier years and reaching a peak near the third quarter of 2023.

The cash ratio, reflecting the relative capacity to cover current liabilities with cash assets, mirrors these movements to some extent but also underscores shifts in short-term financial stability. The ratio dropped from near or above 1.0 in early 2019 to approximately 0.6 by the end of 2019, indicating a weakening liquidity position at that time. In 2020, the ratio recovered to around or above 1.0 in certain quarters, suggesting improved cash coverage of liabilities. During 2021, the ratio mostly hovered below 1.0, signaling less robust liquidity despite the increase in cash assets, due to rising current liabilities. A substantial drop to about 0.59 occurred in early 2022, followed by a partial rebound through the rest of that year and into early 2023. The latest data shows the ratio decreasing again to under 0.7, reflecting tighter liquidity conditions.

Total Cash Assets

Demonstrated significant volatility, with declines through late 2019, recovery into 2021, and further oscillations thereafter.

Current Liabilities

Displayed a general downward trend early on, but increased sharply from late 2020 through 2021, remaining elevated in subsequent quarters.

Cash Ratio

Varied in accordance with cash and liabilities, with periods of strong coverage above 1.0 interrupted by phases of reduced liquidity, reaching lows around 0.6 and 0.67.

Overall, the data suggests episodic pressures on liquidity, especially highlighted by the cash ratio falling below 1.0 during multiple quarters, indicating that cash assets were insufficient to cover current liabilities on several occasions. Despite periods of recovery, recent trends toward decreased cash ratios and elevated liabilities point toward caution regarding short-term financial flexibility.