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)
Marathon Oil Corp., solvency ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
An analysis of solvency ratios from 2017 to 2021 reveals a general trajectory toward deleveraging and improved solvency, characterized by a significant peak in debt levels in 2020 followed by a sharp contraction in 2021.
- Capital Structure and Leverage
- Debt to equity and debt to capital ratios remained relatively stable between 2017 and 2019, before increasing in 2020. A notable reduction occurred by 2021, with the debt to equity ratio reaching a five-year low of 0.38 and the debt to capital ratio falling to 0.27. This trend is further supported by the financial leverage ratio, which exhibited a consistent downward trend from 1.88 in 2017 to 1.59 in 2021, indicating a reduced reliance on debt to finance assets.
- Debt to Asset Relationship
- The debt to assets ratio showed a gradual increase from 0.25 in 2017 to a peak of 0.30 in 2020, before decreasing to 0.24 in 2021. The minimal difference between the standard debt ratios and those including operating lease liabilities suggests that lease obligations have a negligible impact on the overall solvency profile of the entity.
- Debt Servicing Capacity
- Interest coverage and fixed charge coverage ratios experienced extreme volatility. Negative values recorded in 2017 and 2020 indicate periods where operating income was insufficient to cover interest and fixed charges. Conversely, strong recoveries were observed in 2018 and 2021, with the interest coverage ratio rising to 4.91 and the fixed charge coverage ratio reaching 3.11 by the end of 2021, suggesting a substantial improvement in the ability to meet financial obligations.
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Debt Ratios
Coverage Ratios
Debt to Equity
Marathon Oil Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term finance lease liability | 6) | —) | —) | —) | —) | |
| Long-term debt due within one year | 36) | —) | —) | —) | —) | |
| Long-term debt, excluding due within one year | 3,978) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Long-term finance lease liability, excluding current portion | 24) | —) | —) | —) | —) | |
| Total debt | 4,044) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Stockholders’ equity | 10,686) | 10,561) | 12,153) | 12,128) | 11,708) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.38 | 0.51 | 0.45 | 0.45 | 0.47 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Chevron Corp. | 0.23 | — | — | — | — | |
| ConocoPhillips | 0.44 | — | — | — | — | |
| Exxon Mobil Corp. | 0.28 | — | — | — | — | |
| Debt to Equity, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.28 | — | — | — | — | |
| Debt to Equity, Industry | ||||||
| Energy | 0.31 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= 4,044 ÷ 10,686 = 0.38
2 Click competitor name to see calculations.
An analysis of the solvency profile between 2017 and 2021 reveals a general trajectory toward reduced financial leverage, characterized by a significant reduction in total obligations during the final year of the period. While the company maintained a relatively stable capital structure for the first three years, a notable shift in the debt-to-equity dynamic occurred between 2020 and 2021.
- Total Debt Trends
- Total debt remained nearly stagnant from 2017 to 2019, fluctuating minimally around the 5.5 billion USD mark. A modest decline was observed in 2020, followed by a substantial reduction in 2021, where total debt decreased to 4,044 million USD. This represents a significant deleveraging effort in the final year of the analyzed period.
- Stockholders’ Equity Fluctuations
- Equity showed steady growth from 2017 through 2019, peaking at 12,153 million USD. A contraction occurred in 2020, with equity dropping to 10,561 million USD, before experiencing a slight recovery to 10,686 million USD by the end of 2021.
- Debt to Equity Ratio Analysis
- The debt to equity ratio remained stable at 0.45 to 0.47 between 2017 and 2019. In 2020, the ratio reached a period peak of 0.51, driven primarily by the contraction in stockholders' equity rather than an increase in debt. However, by December 31, 2021, the ratio declined to 0.38, the lowest level in the five-year period, resulting from the concurrent reduction in total debt and the stabilization of equity.
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Debt to Equity (including Operating Lease Liability)
Marathon Oil Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term finance lease liability | 6) | —) | —) | —) | —) | |
| Long-term debt due within one year | 36) | —) | —) | —) | —) | |
| Long-term debt, excluding due within one year | 3,978) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Long-term finance lease liability, excluding current portion | 24) | —) | —) | —) | —) | |
| Total debt | 4,044) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Current portion of long-term operating lease liability (located in Other current liabilities) | 40) | 70) | 101) | —) | —) | |
| Long-term operating lease liability, excluding current portion (located in Deferred credits and other liabilities) | 23) | 67) | 107) | —) | —) | |
| Total debt (including operating lease liability) | 4,107) | 5,541) | 5,709) | 5,499) | 5,494) | |
| Stockholders’ equity | 10,686) | 10,561) | 12,153) | 12,128) | 11,708) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.38 | 0.52 | 0.47 | 0.45 | 0.47 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Chevron Corp. | 0.25 | — | — | — | — | |
| ConocoPhillips | 0.45 | — | — | — | — | |
| Exxon Mobil Corp. | 0.31 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.31 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Energy | 0.34 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity
= 4,107 ÷ 10,686 = 0.38
2 Click competitor name to see calculations.
The company's solvency position between 2017 and 2021 is characterized by a period of relative stability followed by a significant improvement in the leverage profile during the final year of the analyzed period.
- Total Debt Trends
- Total debt, including operating lease liabilities, remained largely consistent from 2017 through 2020, with values fluctuating within a narrow range between US$ 5,494 million and US$ 5,709 million. A substantial reduction occurred in 2021, where total debt decreased to US$ 4,107 million, indicating a meaningful reduction in total liabilities.
- Stockholders' Equity Fluctuations
- Equity levels grew steadily from 2017 to 2019, reaching a peak of US$ 12,153 million. A contraction was observed in 2020, with equity falling to US$ 10,561 million, followed by a slight recovery to US$ 10,686 million at the end of 2021.
- Debt to Equity Ratio Analysis
- The debt to equity ratio exhibited stability between 2017 and 2019, oscillating between 0.45 and 0.47. A peak was reached in 2020 at 0.52, resulting from the decline in stockholders' equity. However, by 2021, the ratio dropped to 0.38, the lowest level in the five-year period, reflecting a strengthened solvency position driven primarily by the reduction in total debt.
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Debt to Capital
Marathon Oil Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term finance lease liability | 6) | —) | —) | —) | —) | |
| Long-term debt due within one year | 36) | —) | —) | —) | —) | |
| Long-term debt, excluding due within one year | 3,978) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Long-term finance lease liability, excluding current portion | 24) | —) | —) | —) | —) | |
| Total debt | 4,044) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Stockholders’ equity | 10,686) | 10,561) | 12,153) | 12,128) | 11,708) | |
| Total capital | 14,730) | 15,965) | 17,654) | 17,627) | 17,202) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.27 | 0.34 | 0.31 | 0.31 | 0.32 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Chevron Corp. | 0.18 | — | — | — | — | |
| ConocoPhillips | 0.31 | — | — | — | — | |
| Exxon Mobil Corp. | 0.22 | — | — | — | — | |
| Debt to Capital, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.22 | — | — | — | — | |
| Debt to Capital, Industry | ||||||
| Energy | 0.24 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to capital = Total debt ÷ Total capital
= 4,044 ÷ 14,730 = 0.27
2 Click competitor name to see calculations.
Between 2017 and 2021, the company's capital structure transitioned from a period of relative stability to a significant reduction in leverage. While debt and capital levels remained consistent for the first three years of the period, a notable contraction in both metrics occurred toward the end of the timeframe, resulting in an improved solvency profile by 2021.
- Total Debt Trends
- Total debt remained nearly stagnant from 2017 through 2019, fluctuating minimally around the 5.5 billion US$ mark. A slight decrease was observed in 2020, followed by a substantial reduction in 2021, where total debt fell to 4,044 million US$. This represents a significant deleveraging effort in the final year of the analyzed period.
- Total Capital Movements
- Total capital experienced marginal growth between 2017 and 2019, peaking at 17,654 million US$. This trend reversed in 2020 and 2021, with capital declining to 15,965 million US$ and 14,730 million US$, respectively. The overall decrease in total capital reflects a shrinking balance sheet size during the latter two years.
- Debt to Capital Ratio Interpretation
- The debt to capital ratio remained stable between 0.31 and 0.32 from 2017 to 2019. In 2020, the ratio increased to 0.34, as the decrease in total capital outpaced the reduction in total debt. However, by December 31, 2021, the ratio declined to 0.27, the lowest level in the five-year period. This shift indicates a reduction in the proportion of debt used to fund the company's capital structure, thereby enhancing long-term solvency.
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Debt to Capital (including Operating Lease Liability)
Marathon Oil Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term finance lease liability | 6) | —) | —) | —) | —) | |
| Long-term debt due within one year | 36) | —) | —) | —) | —) | |
| Long-term debt, excluding due within one year | 3,978) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Long-term finance lease liability, excluding current portion | 24) | —) | —) | —) | —) | |
| Total debt | 4,044) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Current portion of long-term operating lease liability (located in Other current liabilities) | 40) | 70) | 101) | —) | —) | |
| Long-term operating lease liability, excluding current portion (located in Deferred credits and other liabilities) | 23) | 67) | 107) | —) | —) | |
| Total debt (including operating lease liability) | 4,107) | 5,541) | 5,709) | 5,499) | 5,494) | |
| Stockholders’ equity | 10,686) | 10,561) | 12,153) | 12,128) | 11,708) | |
| Total capital (including operating lease liability) | 14,793) | 16,102) | 17,862) | 17,627) | 17,202) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.28 | 0.34 | 0.32 | 0.31 | 0.32 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Chevron Corp. | 0.20 | — | — | — | — | |
| ConocoPhillips | 0.31 | — | — | — | — | |
| Exxon Mobil Corp. | 0.24 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.23 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Energy | 0.25 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 4,107 ÷ 14,793 = 0.28
2 Click competitor name to see calculations.
The solvency profile between 2017 and 2021 exhibits a period of relative stability followed by a significant deleveraging event in the final year of the period.
- Total Debt Evolution
- Total debt, including operating lease liabilities, remained consistent between 2017 and 2020, fluctuating within a narrow range between US$ 5,494 million and US$ 5,709 million. A substantial reduction occurred in 2021, with debt levels falling to US$ 4,107 million, representing a decrease of approximately 26% from the 2020 levels.
- Total Capital Trends
- Total capital experienced a gradual increase from 2017 to 2019, peaking at US$ 17,862 million. Following this peak, a consistent downward trend was observed, with capital decreasing to US$ 16,102 million in 2020 and further to US$ 14,793 million by the end of 2021.
- Debt to Capital Ratio Analysis
- The debt to capital ratio remained largely stagnant for the majority of the analyzed period, oscillating between 0.31 and 0.34 from 2017 through 2020. However, 2021 marked a notable improvement in the solvency ratio, which declined to 0.28. This shift indicates that the reduction in total debt outpaced the contraction of the total capital base, resulting in a reduced reliance on debt relative to the overall capital structure.
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Debt to Assets
Marathon Oil Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term finance lease liability | 6) | —) | —) | —) | —) | |
| Long-term debt due within one year | 36) | —) | —) | —) | —) | |
| Long-term debt, excluding due within one year | 3,978) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Long-term finance lease liability, excluding current portion | 24) | —) | —) | —) | —) | |
| Total debt | 4,044) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Total assets | 16,994) | 17,956) | 20,245) | 21,321) | 22,012) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.24 | 0.30 | 0.27 | 0.26 | 0.25 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Chevron Corp. | 0.13 | — | — | — | — | |
| ConocoPhillips | 0.22 | — | — | — | — | |
| Exxon Mobil Corp. | 0.14 | — | — | — | — | |
| Debt to Assets, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.15 | — | — | — | — | |
| Debt to Assets, Industry | ||||||
| Energy | 0.16 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to assets = Total debt ÷ Total assets
= 4,044 ÷ 16,994 = 0.24
2 Click competitor name to see calculations.
The solvency profile from 2017 to 2021 is characterized by a persistent contraction of the asset base and a strategic reduction in leverage during the final year of the period. While the debt-to-assets ratio trended upward for the majority of the period, a significant correction occurred in 2021, resulting in a strengthened solvency position.
- Asset Base Contraction
- A consistent downward trend in total assets is observed, with values declining from US$ 22,012 million in 2017 to US$ 16,994 million in 2021. This steady erosion of the asset base exerted upward pressure on the solvency ratio between 2017 and 2020, as the value of assets diminished while total debt remained relatively constant.
- Debt Dynamics
- Total debt remained stable between 2017 and 2020, fluctuating minimally around the US$ 5.4 to 5.5 billion range. A notable shift occurred in 2021, when total debt decreased significantly to US$ 4,044 million. This reduction represents a substantial deleveraging effort that offset the continuing decline in total assets.
- Debt to Assets Ratio Analysis
- The debt-to-assets ratio rose incrementally from 0.25 in 2017 to a peak of 0.30 in 2020. This increase indicates that a larger proportion of assets were financed by debt during this timeframe, primarily driven by asset depreciation or divestment rather than new borrowing. However, in 2021, the ratio fell to 0.24, the lowest level recorded in the period, reflecting an improvement in the company's financial leverage and overall solvency.
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Debt to Assets (including Operating Lease Liability)
Marathon Oil Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current portion of long-term finance lease liability | 6) | —) | —) | —) | —) | |
| Long-term debt due within one year | 36) | —) | —) | —) | —) | |
| Long-term debt, excluding due within one year | 3,978) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Long-term finance lease liability, excluding current portion | 24) | —) | —) | —) | —) | |
| Total debt | 4,044) | 5,404) | 5,501) | 5,499) | 5,494) | |
| Current portion of long-term operating lease liability (located in Other current liabilities) | 40) | 70) | 101) | —) | —) | |
| Long-term operating lease liability, excluding current portion (located in Deferred credits and other liabilities) | 23) | 67) | 107) | —) | —) | |
| Total debt (including operating lease liability) | 4,107) | 5,541) | 5,709) | 5,499) | 5,494) | |
| Total assets | 16,994) | 17,956) | 20,245) | 21,321) | 22,012) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.24 | 0.31 | 0.28 | 0.26 | 0.25 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Chevron Corp. | 0.15 | — | — | — | — | |
| ConocoPhillips | 0.23 | — | — | — | — | |
| Exxon Mobil Corp. | 0.16 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.16 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Energy | 0.17 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 4,107 ÷ 16,994 = 0.24
2 Click competitor name to see calculations.
The solvency profile from 2017 to 2021 exhibits a two-phase trend characterized by an initial increase in leverage relative to assets, followed by a significant reduction in the final year. While total assets declined consistently throughout the five-year period, the debt to assets ratio was primarily driven by the interaction between stable debt levels and a shrinking asset base until a sharp deleveraging event occurred in 2021.
- Asset Base Contraction
- A consistent downward trend in total assets is observed, decreasing from 22,012 million US dollars in 2017 to 16,994 million US dollars in 2021. This represents a steady erosion of the asset base over the analyzed period.
- Debt Evolution and Leverage Ratio
- Between 2017 and 2020, total debt remained relatively stable, fluctuating between 5,494 million and 5,709 million US dollars. However, because total assets were declining during this time, the debt to assets ratio rose progressively from 0.25 to a peak of 0.31 in 2020, indicating an increase in financial leverage.
- 2021 Solvency Improvement
- A significant shift occurred in 2021, where total debt was reduced to 4,107 million US dollars. Despite the continued decline in total assets, the magnitude of the debt reduction was sufficient to lower the debt to assets ratio to 0.24, the lowest level recorded in the five-year sequence.
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Financial Leverage
Marathon Oil Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 16,994) | 17,956) | 20,245) | 21,321) | 22,012) | |
| Stockholders’ equity | 10,686) | 10,561) | 12,153) | 12,128) | 11,708) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 1.59 | 1.70 | 1.67 | 1.76 | 1.88 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Chevron Corp. | 1.72 | — | — | — | — | |
| ConocoPhillips | 2.00 | — | — | — | — | |
| Exxon Mobil Corp. | 2.01 | — | — | — | — | |
| Financial Leverage, Sector | ||||||
| Oil, Gas & Consumable Fuels | 1.90 | — | — | — | — | |
| Financial Leverage, Industry | ||||||
| Energy | 1.93 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= 16,994 ÷ 10,686 = 1.59
2 Click competitor name to see calculations.
A comprehensive evaluation of the company's solvency position between 2017 and 2021 reveals a consistent reduction in the total asset base and a general decrease in financial leverage. The contraction in assets is mirrored by a fluctuating but overall lower equity position, resulting in a capital structure that is less reliant on debt relative to equity by the end of the analyzed period.
- Total Asset Trend
- Total assets exhibited a continuous downward trajectory, declining from US$ 22,012 million in 2017 to US$ 16,994 million in 2021. This represents a cumulative reduction of approximately 23%, indicating a significant contraction in the size of the balance sheet over the five-year interval.
- Stockholders' Equity Performance
- Equity levels showed moderate growth from 2017 to 2019, peaking at US$ 12,153 million. A notable decrease occurred in 2020, where equity fell to US$ 10,561 million, followed by a marginal recovery to US$ 10,686 million by the end of 2021.
- Financial Leverage Analysis
- The financial leverage ratio decreased from 1.88 in 2017 to 1.59 in 2021. While a slight increase was observed in 2020, rising to 1.70 from 1.67, the overall trend indicates a reduction in financial risk. The decline in this ratio suggests that the company has decreased its reliance on borrowed funds to finance its assets, effectively lowering its financial gearing and improving its long-term solvency profile.
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Interest Coverage
Marathon Oil Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) | 946) | (1,451) | 480) | 1,096) | (5,723) | |
| Less: Loss from discontinued operations | —) | —) | —) | —) | (4,893) | |
| Add: Income tax expense | 58) | (14) | (88) | 331) | 376) | |
| Add: Interest expense | 257) | 279) | 280) | 280) | 377) | |
| Earnings before interest and tax (EBIT) | 1,261) | (1,186) | 672) | 1,707) | (77) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 4.91 | -4.25 | 2.40 | 6.10 | -0.20 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Chevron Corp. | 31.39 | — | — | — | — | |
| ConocoPhillips | 15.38 | — | — | — | — | |
| Exxon Mobil Corp. | 33.98 | — | — | — | — | |
| Interest Coverage, Sector | ||||||
| Oil, Gas & Consumable Fuels | 26.79 | — | — | — | — | |
| Interest Coverage, Industry | ||||||
| Energy | 23.05 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Interest coverage = EBIT ÷ Interest expense
= 1,261 ÷ 257 = 4.91
2 Click competitor name to see calculations.
The solvency profile of the organization between 2017 and 2021 is characterized by significant volatility in operating profitability, which has directly impacted its capacity to service interest obligations.
- Earnings Before Interest and Tax (EBIT)
- Operating performance exhibited extreme fluctuations over the five-year period. Negative EBIT was recorded in 2017 and 2020, with the latter representing a substantial operating loss of 1,186 million US$. Conversely, strong recoveries were observed in 2018 and 2021, with EBIT reaching 1,707 million US$ and 1,261 million US$, respectively.
- Interest Expense
- Interest costs remained relatively stable compared to the volatility of earnings. A gradual downward trend is observed, decreasing from 377 million US$ in 2017 to 257 million US$ in 2021, suggesting a reduction in the overall debt burden or a decrease in the weighted average cost of borrowing.
- Interest Coverage Ratio
- The interest coverage ratio mirrored the instability of EBIT, oscillating between negative and positive values. The ratio peaked in 2018 at 6.10, indicating a strong ability to cover interest payments. However, the ratio fell to -4.25 in 2020, signaling an inability to meet interest obligations from operating profits during that period. A recovery to 4.91 in 2021 demonstrates a return to a sustainable solvency position.
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Fixed Charge Coverage
Marathon Oil Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) | 946) | (1,451) | 480) | 1,096) | (5,723) | |
| Less: Loss from discontinued operations | —) | —) | —) | —) | (4,893) | |
| Add: Income tax expense | 58) | (14) | (88) | 331) | 376) | |
| Add: Interest expense | 257) | 279) | 280) | 280) | 377) | |
| Earnings before interest and tax (EBIT) | 1,261) | (1,186) | 672) | 1,707) | (77) | |
| Add: Operating lease costs | 218) | 268) | 512) | 99) | 87) | |
| Earnings before fixed charges and tax | 1,479) | (918) | 1,184) | 1,806) | 10) | |
| Interest expense | 257) | 279) | 280) | 280) | 377) | |
| Operating lease costs | 218) | 268) | 512) | 99) | 87) | |
| Fixed charges | 475) | 547) | 792) | 379) | 464) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 3.11 | -1.68 | 1.49 | 4.77 | 0.02 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Chevron Corp. | 8.43 | — | — | — | — | |
| ConocoPhillips | 11.94 | — | — | — | — | |
| Exxon Mobil Corp. | 13.55 | — | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Oil, Gas & Consumable Fuels | 10.99 | — | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Energy | 9.19 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 1,479 ÷ 475 = 3.11
2 Click competitor name to see calculations.
The solvency profile between 2017 and 2021 is characterized by extreme volatility in the ability to service fixed obligations, driven primarily by significant fluctuations in operational earnings.
- Fixed Charge Coverage Ratio
- The coverage ratio experienced severe oscillations over the five-year period. After starting at a critically low level of 0.02 in 2017, the ratio peaked at 4.77 in 2018, indicating a strong capacity to meet fixed charges. This was followed by a sharp decline to 1.49 in 2019 and a collapse to -1.68 in 2020, signaling an inability to cover fixed costs from earnings. A recovery was observed in 2021, with the ratio returning to a healthy level of 3.11.
- Earnings before Fixed Charges and Tax
- Earnings demonstrated high variance, moving from 10 million US$ in 2017 to a peak of 1,806 million US$ in 2018. A downward trend followed, with earnings dropping to 1,184 million US$ in 2019 and falling into a deficit of negative 918 million US$ in 2020. A substantial rebound occurred in 2021, as earnings rose to 1,479 million US$, restoring the primary source of funding for fixed obligations.
- Fixed Charges
- Fixed charges showed less volatility than earnings but still experienced notable shifts. After decreasing from 464 million US$ in 2017 to 379 million US$ in 2018, charges increased significantly to 792 million US$ in 2019. Following this peak, charges trended downward to 547 million US$ in 2020 and further to 475 million US$ in 2021.
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