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)
Apache Corp., solvency ratios
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
The solvency profile of the entity demonstrates a period of relative stability between 2011 and 2014, followed by a severe deterioration in financial health during 2015. While leverage remained controlled for the first four years of the period, the final year shows a precipitous increase in debt relative to equity and assets, coinciding with a collapse in the ability to service fixed obligations.
- Capital Structure and Leverage
- From 2011 to 2014, the debt to equity ratio fluctuated within a narrow range of 0.25 to 0.43. However, 2015 witnessed a substantial escalation to 3.42, indicating a fundamental shift in the capital structure toward heavy debt reliance. This trend is mirrored in the debt to capital and debt to assets ratios, which rose to 0.77 and 0.47 respectively in 2015, after remaining consistently low in previous years. Financial leverage followed a similar trajectory, remaining under 2.20 until 2014 and then surging to 7.34 by the end of 2015.
- Debt Service Capacity
- A critical decline in coverage ratios is observed starting in 2012. The interest coverage ratio fell from a robust 48.61 in 2011 to 22.40 in 2013, before turning negative in 2014 (-20.37) and collapsing further to -107.98 in 2015. This indicates that earnings became insufficient to cover interest expenses. Similarly, the fixed charge coverage ratio declined from 35.59 in 2011 to -88.32 in 2015, confirming a systemic inability to meet fixed financial commitments during the latter part of the analyzed period.
The convergence of rapidly increasing leverage and deeply negative coverage ratios by 2015 suggests a significant liquidity crisis and a high level of insolvency risk. The transition from a low-leverage, high-coverage position in 2011 to a high-leverage, negative-coverage position in 2015 indicates a severe erosion of the financial cushion.
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Debt Ratios
Coverage Ratios
Debt to Equity
Apache Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current debt | 1) | —) | 53) | 990) | 431) | |
| Long-term debt, excluding current maturities | 8,777) | 11,245) | 9,672) | 11,355) | 6,785) | |
| Total debt | 8,778) | 11,245) | 9,725) | 12,345) | 7,216) | |
| Total Apache shareholders’ equity | 2,566) | 25,937) | 33,396) | 31,331) | 28,993) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 3.42 | 0.43 | 0.29 | 0.39 | 0.25 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Debt to equity = Total debt ÷ Total Apache shareholders’ equity
= 8,778 ÷ 2,566 = 3.42
2 Click competitor name to see calculations.
Between 2011 and 2015, the company's solvency profile underwent a transition from a conservative leverage position to a high-risk state. From 2011 to 2013, a strong equity base supported the company's debt obligations, maintaining low solvency ratios. However, a critical inflection point occurred in 2015, where a precipitous decline in shareholders' equity fundamentally altered the capital structure and significantly increased financial risk.
- Total Debt Trends
- Total debt exhibited volatility throughout the period. An initial increase was observed in 2012, with debt rising to 12,345 million US$. This was followed by a reduction in 2013 and a subsequent increase in 2014 to 11,245 million US$. By December 31, 2015, total debt decreased to 8,778 million US$, indicating a reduction in absolute borrowing levels despite the worsening solvency ratio.
- Shareholders' Equity Trends
- Shareholders' equity showed steady growth from 28,993 million US$ in 2011 to a peak of 33,396 million US$ in 2013. A downward trend emerged in 2014, with equity falling to 25,937 million US$. This decline accelerated sharply in 2015, resulting in a collapse to 2,566 million US$, which represents a severe erosion of the company's net asset value.
- Debt to Equity Ratio Analysis
- The debt to equity ratio remained stable and low between 2011 and 2014, fluctuating within a range of 0.25 to 0.43. This indicates a period where equity was the primary source of financing. In 2015, the ratio surged to 3.42. This dramatic increase was driven by the collapse of shareholders' equity rather than an increase in debt, signaling a sharp rise in financial leverage and a weakened capacity to cover obligations through equity.
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Debt to Capital
Apache Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current debt | 1) | —) | 53) | 990) | 431) | |
| Long-term debt, excluding current maturities | 8,777) | 11,245) | 9,672) | 11,355) | 6,785) | |
| Total debt | 8,778) | 11,245) | 9,725) | 12,345) | 7,216) | |
| Total Apache shareholders’ equity | 2,566) | 25,937) | 33,396) | 31,331) | 28,993) | |
| Total capital | 11,344) | 37,182) | 43,121) | 43,676) | 36,209) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.77 | 0.30 | 0.23 | 0.28 | 0.20 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Debt to capital = Total debt ÷ Total capital
= 8,778 ÷ 11,344 = 0.77
2 Click competitor name to see calculations.
Between 2011 and 2015, the solvency profile exhibited significant volatility, culminating in a sharp increase in financial leverage during the final year of the period. While the debt-to-capital ratio remained relatively stable and low from 2011 through 2014, a substantial contraction in the capital base in 2015 fundamentally altered the solvency position.
- Total Debt Trends
- Total debt experienced fluctuations throughout the five-year period, peaking in 2012 at 12,345 million US$. Following this peak, debt levels fluctuated between 9,725 million US$ and 11,245 million US$, before declining to 8,778 million US$ by the end of 2015.
- Total Capital Dynamics
- Total capital grew from 36,209 million US$ in 2011 to a peak of 43,676 million US$ in 2012. The capital base remained above 37,000 million US$ through 2014, but experienced a severe reduction in 2015, falling to 11,344 million US$. This represents a significant erosion of the total capital structure.
- Debt to Capital Ratio Analysis
- The debt to capital ratio ranged from 0.20 to 0.30 between 2011 and 2014, suggesting a moderate reliance on debt. However, in 2015, the ratio surged to 0.77. This spike was not driven by an increase in borrowing—as total debt actually decreased from the previous year—but was instead the result of the precipitous decline in total capital, which drastically increased the proportion of debt relative to the total capital base.
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Debt to Assets
Apache Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current debt | 1) | —) | 53) | 990) | 431) | |
| Long-term debt, excluding current maturities | 8,777) | 11,245) | 9,672) | 11,355) | 6,785) | |
| Total debt | 8,778) | 11,245) | 9,725) | 12,345) | 7,216) | |
| Total assets | 18,842) | 55,952) | 61,637) | 60,737) | 52,051) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.47 | 0.20 | 0.16 | 0.20 | 0.14 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Debt to assets = Total debt ÷ Total assets
= 8,778 ÷ 18,842 = 0.47
2 Click competitor name to see calculations.
The solvency profile from 2011 to 2015 exhibits a period of relative stability followed by a significant increase in leverage during the final year of the period. While total debt experienced several fluctuations, the debt-to-assets ratio remained low until 2015, when a sharp contraction in the asset base substantially altered the solvency position.
- Total Debt Trends
- Total debt demonstrated volatility throughout the five-year period. After an initial increase from 7,216 million US$ in 2011 to 12,345 million US$ in 2012, debt levels fluctuated between 8,778 million US$ and 11,245 million US$. Despite these variations, total debt in 2015 remained lower than the peak levels observed in 2012 and 2014.
- Total Asset Variations
- Total assets showed a general upward trend between 2011 and 2013, peaking at 61,637 million US$. A moderate decline occurred in 2014, followed by a precipitous drop to 18,842 million US$ by December 31, 2015. This represents a severe reduction in the asset base, decreasing by approximately 66% between 2014 and 2015.
- Debt to Assets Ratio Analysis
- The debt-to-assets ratio remained constrained between 0.14 and 0.20 from 2011 through 2014, indicating a consistent solvency posture. However, in 2015, the ratio escalated to 0.47. This spike was not driven by an increase in borrowing, as total debt actually decreased from 11,245 million US$ to 8,778 million US$ during that interval, but was instead the direct result of the substantial contraction in total assets.
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Financial Leverage
Apache Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 18,842) | 55,952) | 61,637) | 60,737) | 52,051) | |
| Total Apache shareholders’ equity | 2,566) | 25,937) | 33,396) | 31,331) | 28,993) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 7.34 | 2.16 | 1.85 | 1.94 | 1.80 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Financial leverage = Total assets ÷ Total Apache shareholders’ equity
= 18,842 ÷ 2,566 = 7.34
2 Click competitor name to see calculations.
Between 2011 and 2015, the financial structure exhibited a period of relative stability followed by a severe contraction in the final year. The balance sheet experienced significant volatility, particularly regarding the relationship between total assets and shareholders' equity.
- Asset and Equity Dynamics
- Total assets grew from 52,051 million USD in 2011 to a peak of 61,637 million USD in 2013, before declining sharply to 18,842 million USD by 2015. A similar trajectory is observed in shareholders' equity, which increased steadily until 2013, reaching 33,396 million USD, but then plummeted to 2,566 million USD in 2015, representing a substantial erosion of the equity base.
- Financial Leverage Progression
- The financial leverage ratio remained relatively stable between 2011 and 2013, fluctuating within a narrow range of 1.80 to 1.94. A moderate increase to 2.16 was recorded in 2014, which served as a precursor to a dramatic spike to 7.34 in 2015. This escalation indicates a fundamental shift in the capital structure, characterized by an increased reliance on debt to finance assets relative to the available equity.
The sharp increase in the leverage ratio in 2015 is directly correlated with the precipitous drop in shareholders' equity. The transition from a ratio of 2.16 to 7.34 suggests a significant increase in solvency risk and a diminished financial cushion for creditors.
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Interest Coverage
Apache Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to Apache shareholders | (23,119) | (5,403) | 2,232) | 2,001) | 4,584) | |
| Add: Net income attributable to noncontrolling interest | (409) | 343) | 56) | —) | —) | |
| Less: Net loss from discontinued operations, net of tax | (771) | (517) | —) | —) | —) | |
| Add: Income tax expense | (5,469) | 1,637) | 1,928) | 2,876) | 3,509) | |
| Add: Interest expense, net of capitalized interest | 259) | 136) | 197) | 175) | 170) | |
| Earnings before interest and tax (EBIT) | (27,967) | (2,770) | 4,413) | 5,052) | 8,263) | |
| Solvency Ratio | ||||||
| Interest coverage1 | -107.98 | -20.37 | 22.40 | 28.87 | 48.61 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Interest coverage = EBIT ÷ Interest expense
= -27,967 ÷ 259 = -107.98
2 Click competitor name to see calculations.
A significant deterioration in solvency is evident over the five-year period ending December 31, 2015. The capacity to service interest obligations from operating profits shifted from a position of extreme strength to a critical deficit, characterized by a transition from high positive coverage to substantial operating losses.
- Earnings Before Interest and Tax (EBIT)
- A consistent and accelerating decline in EBIT is observed. From a peak of US$ 8,263 million in 2011, earnings contracted through 2013 before falling into negative territory in 2014 at US$ -2,770 million. This downward trajectory culminated in a severe loss of US$ -27,967 million by the end of 2015.
- Interest Expense
- Net interest expenses remained relatively stable between 2011 and 2014, fluctuating within a range of US$ 136 million to US$ 197 million. However, a notable increase occurred in 2015, where expenses rose to US$ 259 million, increasing the financial burden during a period of severe operating losses.
- Interest Coverage Ratio
- The interest coverage ratio reflects a rapid erosion of the financial cushion. The ratio decreased from 48.61 in 2011 to 22.40 in 2013, indicating a narrowing margin of safety. The ratio turned negative in 2014 (-20.37) and plummeted to -107.98 in 2015, signaling that operating earnings were no longer sufficient to cover interest payments.
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Fixed Charge Coverage
Apache Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to Apache shareholders | (23,119) | (5,403) | 2,232) | 2,001) | 4,584) | |
| Add: Net income attributable to noncontrolling interest | (409) | 343) | 56) | —) | —) | |
| Less: Net loss from discontinued operations, net of tax | (771) | (517) | —) | —) | —) | |
| Add: Income tax expense | (5,469) | 1,637) | 1,928) | 2,876) | 3,509) | |
| Add: Interest expense, net of capitalized interest | 259) | 136) | 197) | 175) | 170) | |
| Earnings before interest and tax (EBIT) | (27,967) | (2,770) | 4,413) | 5,052) | 8,263) | |
| Add: Net rental expense | 57) | 58) | 81) | 76) | 64) | |
| Earnings before fixed charges and tax | (27,910) | (2,712) | 4,494) | 5,128) | 8,327) | |
| Interest expense, net of capitalized interest | 259) | 136) | 197) | 175) | 170) | |
| Net rental expense | 57) | 58) | 81) | 76) | 64) | |
| Fixed charges | 316) | 194) | 278) | 251) | 234) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | -88.32 | -13.98 | 16.17 | 20.43 | 35.59 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= -27,910 ÷ 316 = -88.32
2 Click competitor name to see calculations.
A severe deterioration in the capacity to meet fixed obligations is observed over the five-year period ending December 31, 2015. This trend is primarily driven by a precipitous decline in earnings, which transitioned from substantial surpluses to significant losses, undermining the solvency profile of the entity.
- Earnings before fixed charges and tax
- A consistent downward trajectory is evident, beginning with a peak of US$ 8,327 million in 2011 and decreasing to US$ 4,494 million by 2013. A critical inflection point occurred in 2014, as earnings transitioned to a deficit of US$ 2,712 million, followed by a catastrophic decline to US$ 27,910 million in losses by December 31, 2015.
- Fixed charges
- Fixed obligations remained relatively stable throughout the period compared to the volatility of earnings, ranging from a low of US$ 194 million in 2014 to a high of US$ 316 million in 2015. The increase in charges during 2015 coincided with the period of maximum earnings loss, further compounding the financial strain.
- Fixed charge coverage ratio
- The coverage ratio experienced a sharp and continuous collapse, falling from a robust 35.59 in 2011 to 16.17 in 2013. The ratio entered negative territory in 2014 at -13.98 and deteriorated further to -88.32 by 2015. This progression indicates that the entity moved from a position of high solvency to a state where earnings were entirely insufficient to cover fixed financial commitments.
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