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
Diamondback Energy Inc., 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).
The solvency profile exhibits a period of increasing leverage between 2017 and 2020, followed by a partial correction in 2021. There is a consistent correlation across all leverage-based metrics, indicating a systemic increase in the reliance on debt financing during the first four years of the period analyzed.
- Debt Leverage Ratios
- A steady upward trajectory is observed in debt to equity, debt to capital, and debt to assets ratios from 2017 through 2020. Debt to equity increased from 0.28 to a peak of 0.66, while debt to assets rose from 0.19 to 0.33 over the same timeframe. These trends indicate an expansion of the debt load relative to both the equity base and total asset value. In 2021, a reversal occurred, with the debt to equity ratio decreasing to 0.55 and debt to assets falling to 0.29, suggesting a strategic effort toward deleveraging.
- Financial Leverage
- Financial leverage followed a similar growth pattern, rising consistently from 1.48 in 2017 to a peak of 2.00 in 2020. This progression reflects a heightened use of borrowed funds to acquire assets. The subsequent decline to 1.89 in 2021 aligns with the general reduction in solvency ratios observed across the board for that year.
- Interest Coverage and Debt Servicing
- The interest coverage ratio demonstrates significant volatility. After maintaining strong levels in 2017 and 2018, the ratio experienced a sharp decline to 3.14 in 2019 and plummeted to -28.62 in 2020. This negative value indicates that operating earnings were insufficient to cover interest expenses during that period. However, a robust recovery is noted in 2021, with the ratio rebounding to 16.38, the highest level in the five-year sequence, signifying a substantial restoration of the capacity to service debt.
In summary, the period was characterized by a gradual increase in financial risk and leverage that culminated in 2020, coinciding with a critical temporary inability to cover interest payments. The 2021 results indicate a shift toward improved solvency and a strong recovery in operational profitability relative to debt obligations.
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Debt to Equity
Diamondback Energy Inc., 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 maturities of long-term debt | 45) | 191) | —) | —) | —) | |
| Long-term debt, excluding current maturities | 6,642) | 5,624) | 5,371) | 4,464) | 1,477) | |
| Total debt | 6,687) | 5,815) | 5,371) | 4,464) | 1,477) | |
| Total Diamondback Energy, Inc. stockholders’ equity | 12,088) | 8,794) | 13,249) | 13,699) | 5,255) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.55 | 0.66 | 0.41 | 0.33 | 0.28 | |
| 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 ÷ Total Diamondback Energy, Inc. stockholders’ equity
= 6,687 ÷ 12,088 = 0.55
2 Click competitor name to see calculations.
The solvency profile between 2017 and 2021 is characterized by a consistent expansion of total debt and significant volatility in stockholders' equity, resulting in an overall increase in financial leverage over the period.
- Total Debt Accumulation
- A continuous upward trend in total debt is observed, increasing from US$ 1,477 million in 2017 to US$ 6,687 million in 2021. The most pronounced growth occurred between 2017 and 2018, where debt levels more than tripled, followed by steady annual increases through 2021.
- Stockholders' Equity Volatility
- Equity levels demonstrated substantial fluctuation. Following a peak of US$ 13,699 million in 2018, equity experienced a gradual decline in 2019 and a sharp contraction to US$ 8,794 million in 2020. A recovery was noted by the end of 2021, with equity rising to US$ 12,088 million.
- Debt to Equity Ratio Progression
- The debt to equity ratio increased steadily from 0.28 in 2017 to a peak of 0.66 in 2020. This peak was the result of the compounding effect of rising total debt and the simultaneous decrease in equity during 2020. By December 31, 2021, the ratio moderated to 0.55, reflecting an improvement in the solvency position relative to the 2020 peak, although leverage remained substantially higher than the 2017 baseline.
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Debt to Capital
Diamondback Energy Inc., 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 maturities of long-term debt | 45) | 191) | —) | —) | —) | |
| Long-term debt, excluding current maturities | 6,642) | 5,624) | 5,371) | 4,464) | 1,477) | |
| Total debt | 6,687) | 5,815) | 5,371) | 4,464) | 1,477) | |
| Total Diamondback Energy, Inc. stockholders’ equity | 12,088) | 8,794) | 13,249) | 13,699) | 5,255) | |
| Total capital | 18,775) | 14,609) | 18,620) | 18,164) | 6,732) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.36 | 0.40 | 0.29 | 0.25 | 0.22 | |
| 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
= 6,687 ÷ 18,775 = 0.36
2 Click competitor name to see calculations.
A consistent increase in total debt is observed between 2017 and 2021, reflecting a progressive shift in the financing structure. While total capital experienced significant volatility, the overall solvency profile transitioned from a conservative position to a more leveraged state over the five-year period.
- Total Debt Trajectory
- Total debt exhibited a continuous upward trend, rising from 1,477 million US dollars in 2017 to 6,687 million US dollars by the end of 2021. This steady increase indicates a sustained reliance on debt financing to support operations or growth.
- Total Capital Volatility
- Total capital saw a substantial surge between 2017 and 2018, increasing from 6,732 million US dollars to 18,164 million US dollars. Following a period of relative stability in 2019, a notable contraction occurred in 2020, with capital falling to 14,609 million US dollars before recovering to 18,775 million US dollars in 2021.
- Debt to Capital Ratio Dynamics
- The debt to capital ratio increased steadily from 0.22 in 2017 to a peak of 0.40 in 2020. This peak was driven by the convergence of rising total debt and a reduction in total capital. A reversal of this trend occurred in 2021, as the ratio declined to 0.36, indicating that the growth in total capital exceeded the growth in total debt during that period.
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Debt to Assets
Diamondback Energy Inc., 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 maturities of long-term debt | 45) | 191) | —) | —) | —) | |
| Long-term debt, excluding current maturities | 6,642) | 5,624) | 5,371) | 4,464) | 1,477) | |
| Total debt | 6,687) | 5,815) | 5,371) | 4,464) | 1,477) | |
| Total assets | 22,898) | 17,619) | 23,531) | 21,596) | 7,771) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.29 | 0.33 | 0.23 | 0.21 | 0.19 | |
| 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
= 6,687 ÷ 22,898 = 0.29
2 Click competitor name to see calculations.
A consistent upward trajectory in total debt is observed between 2017 and 2021, while total assets experienced significant volatility during the same period. These dynamics have directly influenced the solvency profile of the organization, specifically the debt to assets ratio, which peaked in 2020 before showing a slight moderation in 2021.
- Total Debt Trends
- Total debt grew continuously over the five-year period, rising from US$ 1,477 million in 2017 to US$ 6,687 million in 2021. The most substantial increase occurred between 2017 and 2018, where debt levels more than tripled, indicating a period of aggressive financing or acquisition activity.
- Total Asset Fluctuations
- Total assets exhibited an irregular pattern, increasing sharply from US$ 7,771 million in 2017 to a peak of US$ 23,531 million in 2019. A notable contraction occurred in 2020, with assets falling to US$ 17,619 million, before recovering to US$ 22,898 million by the end of 2021.
- Debt to Assets Ratio Analysis
- The debt to assets ratio trended upward from 0.19 in 2017 to 0.23 in 2019. A significant spike to 0.33 was recorded in 2020, driven by the simultaneous increase in total debt and the sharp decline in total assets. This peak represents the highest level of leverage relative to assets within the observed timeframe. By 2021, the ratio decreased to 0.29, as the growth in total assets began to offset the continued rise in total debt.
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Financial Leverage
Diamondback Energy Inc., 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 | 22,898) | 17,619) | 23,531) | 21,596) | 7,771) | |
| Total Diamondback Energy, Inc. stockholders’ equity | 12,088) | 8,794) | 13,249) | 13,699) | 5,255) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 1.89 | 2.00 | 1.78 | 1.58 | 1.48 | |
| 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 ÷ Total Diamondback Energy, Inc. stockholders’ equity
= 22,898 ÷ 12,088 = 1.89
2 Click competitor name to see calculations.
An analysis of the balance sheet structure between 2017 and 2021 reveals significant fluctuations in both total assets and stockholders' equity. Total assets grew substantially from US$ 7,771 million in 2017 to a peak of US$ 23,531 million in 2019, followed by a contraction to US$ 17,619 million in 2020 and a subsequent recovery to US$ 22,898 million by 2021. Stockholders' equity mirrored this volatility, reaching US$ 13,699 million in 2018 before experiencing a notable decline to US$ 8,794 million in 2020.
- Financial Leverage Trend
- A progressive increase in financial leverage is observed from 2017 to 2020, with the ratio rising steadily from 1.48 to 2.00. This trajectory signifies an increasing reliance on debt to finance assets, with the peak in 2020 representing the highest level of financial risk relative to equity within the analyzed period.
- Solvency Adjustment in 2021
- A reversal of the upward leverage trend occurred in 2021, as the ratio decreased to 1.89. This indicates a moderate deleveraging process and a slight improvement in the solvency profile, occurring in tandem with the recovery of stockholders' equity to US$ 12,088 million.
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Interest Coverage
Diamondback Energy Inc., 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) attributable to Diamondback Energy, Inc. | 2,182) | (4,517) | 240) | 846) | 482) | |
| Add: Net income attributable to noncontrolling interest | 94) | (155) | 75) | 99) | 34) | |
| Add: Income tax expense | 631) | (1,104) | 47) | 168) | (20) | |
| Add: Interest expense, less capitalized interest | 189) | 195) | 169) | 77) | 39) | |
| Earnings before interest and tax (EBIT) | 3,096) | (5,581) | 531) | 1,191) | 536) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 16.38 | -28.62 | 3.14 | 15.38 | 13.89 | |
| 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
= 3,096 ÷ 189 = 16.38
2 Click competitor name to see calculations.
The period between 2017 and 2021 was characterized by significant volatility in operating profitability and a steady increase in debt servicing obligations, leading to extreme fluctuations in the company's ability to cover interest expenses.
- Earnings Before Interest and Tax (EBIT) Trends
- Operational earnings experienced severe instability, rising from 536 million USD in 2017 to 1,191 million USD in 2018, before declining to 531 million USD in 2019. A critical downturn occurred in 2020, with EBIT falling to a deficit of 5,581 million USD. However, a robust recovery was recorded in 2021, with earnings reaching a period high of 3,096 million USD.
- Interest Expense Trajectory
- Interest expenses, net of capitalized interest, showed a consistent upward trend for the majority of the period. Costs increased from 39 million USD in 2017 to 195 million USD by 2020, representing a nearly fivefold increase in annual interest obligations. This cost remained relatively stable into 2021, ending at 189 million USD.
- Interest Coverage Ratio Analysis
- The interest coverage ratio mirrored the volatility of EBIT while being pressured by rising interest costs. The ratio peaked early in 2018 at 15.38 before dropping sharply to 3.14 in 2019. In 2020, the ratio became deeply negative at -28.62, indicating that operating losses were substantial enough to preclude the coverage of interest payments from current earnings. By 2021, the ratio rebounded strongly to 16.38, signaling a restoration of solvency margins and an improved capacity to service debt.
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