Devon Energy Corp. (NYSE:DVN)

The financial data reveals several notable trends in the company's leverage and coverage ratios over the analyzed five-year period.

Debt Ratios

The debt to equity ratio exhibits a significant increase from 0.65 in 2018 to a peak of 1.58 in 2020, indicating a higher reliance on debt financing relative to equity during that year. This ratio then declines markedly to 0.6 by 2022, suggesting a reduction in leverage and possibly an improvement in capitalization strategy. The debt to equity ratio including operating lease liabilities follows the same pattern, indicating that operating leases did not meaningfully alter the overall debt structure during the period.

Similarly, the debt to capital ratio rises from 0.39 in 2018 to 0.61 in 2020 before dropping back down to 0.37 in 2022. This points to an increased proportion of debt within the capital structure in 2020, followed by a deleveraging trend. Including operating lease liabilities results in marginally higher ratios but does not change the underlying trend.

The debt to assets ratio follows this same pattern, increasing to 0.46 in 2020 and subsequently decreasing to 0.28 in 2022. The consistency across all debt-related ratios underscores 2020 as a year of heightened leverage, with a subsequent focus on reducing debt levels in recent years.

Financial Leverage

Financial leverage peaks in 2020 at 3.44, reflecting increased use of debt financing relative to equity. From this peak, the ratio reverts closer to earlier levels, falling to 2.12 by 2022. This pattern aligns with the observed movements in debt ratios, confirming a strategic shift toward lowering financial risk post-2020.

Interest and Fixed Charge Coverage Ratios

Interest coverage experiences a pronounced decline in 2019, dropping from 4.09 in 2018 to 0.58, and further plunging to a negative value in 2020 (-10.93). This severe contraction signals significant challenges in meeting interest obligations during that troubled year. The recovery is notable in 2021 and continues strongly in 2022, where the ratio surges to 22.01, indicating a substantial improvement in the company's ability to cover interest expenses from earnings.

Fixed charge coverage mirrors the trend in interest coverage, declining to negative levels in 2020 before rebounding to 20.83 in 2022. This recovery confirms improved operational performance and suggests enhanced financial stability with greater capacity to meet fixed financial obligations over time.

Overall, the data indicates that the company underwent a period of increased leverage and financial stress around 2020, as evidenced by elevated debt ratios and significantly reduced coverage ratios. Since then, the company appears to have taken measures to reduce leverage and strengthen its financial position, resulting in improved coverage ratios and lower debt-related metrics by 2022.

The analysis of the financial data over the five-year period reveals several key trends related to debt, equity, and leverage ratios.

Total Debt

The total debt exhibited a fluctuating pattern. It initially decreased from 5947 million USD in 2018 to 4541 million USD in 2019, remaining relatively stable through 2020 at 4550 million USD. However, debt increased substantially to 6737 million USD in 2021 before slightly declining to 6697 million USD in 2022. This suggests an initial effort to reduce liabilities followed by increased borrowing or financing in the subsequent years.

Stockholders’ Equity

Equity attributable to shareholders showed significant volatility. Equity decreased sharply from 9186 million USD in 2018 to 5802 million USD in 2019, and further dropped to 2885 million USD in 2020. Nevertheless, a strong recovery was observed in 2021, reaching 9262 million USD, with continued growth to 11167 million USD by the end of 2022. This indicates phases of capitalization decline followed by substantial reinvestment or retained earnings in the last two years.

Debt to Equity Ratio

The debt to equity ratio aligns with the movements seen in debt and equity. The ratio rose from 0.65 in 2018 to a peak of 1.58 in 2020, reflecting increased leverage largely due to the sharp equity decline and stable debt level. Following this peak, the ratio improved significantly, dropping to 0.73 in 2021 and further to 0.6 in 2022, consistent with the recovery in equity and moderate debt levels. This indicates a deleveraging phase and improved financial stability towards the end of the period.

Overall, the data portrays a challenging period around 2019-2020 with heightened leverage and reduced equity, followed by a clear trend of financial strengthening and deleveraging in 2021 and 2022.

The financial data reveals several notable trends concerning the company's leverage and equity over the five-year period from 2018 to 2022.

Total debt (including operating lease liability)

The total debt exhibited a declining trend from 2018 to 2020, decreasing from approximately $5.9 billion to $4.55 billion. This reduction suggests a period of deleveraging or debt repayment during these years. However, in 2021, total debt increased significantly to around $6.76 billion, followed by a slight reduction to $6.72 billion in 2022. The increase in debt in 2021 may indicate strategic borrowing or increased capital expenditures during that year.

Stockholders’ equity attributable to Devon

Stockholders' equity showed a sharp decline from 2018 through 2020, dropping from approximately $9.19 billion to $2.89 billion. This substantial decrease in equity may be attributed to losses, write-downs, or dividends exceeding net income. Following this decline, equity rebounded strongly in 2021 and 2022, reaching about $9.26 billion and $11.17 billion respectively. The growth in equity during these final two years indicates improved profitability, capital infusion, or retained earnings accumulation.

Debt to equity ratio (including operating lease liability)

The debt to equity ratio increased notably from 0.65 in 2018 to a peak of 1.58 in 2020, reflecting higher leverage during the period when equity was decreasing and debt remained relatively stable. Subsequently, the ratio declined to 0.73 in 2021 and further to 0.60 in 2022, correlating with the recovery in equity and stabilization of debt levels. This reduction in leverage suggests an improvement in the company’s capital structure and potentially lower financial risk.

In summary, the company experienced a period of increased financial stress culminating in 2020, characterized by reduced equity and higher leverage. However, the subsequent years demonstrated a recovery phase, with strengthening equity positions and reduced leverage ratios, indicating improved financial health and stability by the end of 2022.

Total debt

The total debt exhibits a fluctuating trend over the five-year period. It declined significantly from 5,947 million USD in 2018 to 4,541 million USD in 2019, remaining relatively stable in 2020 at 4,550 million USD. However, there was a notable rise in 2021, reaching 6,737 million USD, followed by a slight decrease to 6,697 million USD in 2022. This indicates that after a period of debt reduction and stabilization, the company increased its borrowing notably in 2021, maintaining a high debt level into 2022.

Total capital

Total capital experienced considerable volatility during the period. Starting at 15,133 million USD in 2018, it decreased sharply to 10,343 million USD in 2019 and continued to decline to its lowest point at 7,435 million USD in 2020. Subsequently, total capital rebounded strongly, climbing to 15,999 million USD in 2021 and further increasing to 17,864 million USD in 2022. This pattern suggests a contraction of the company’s capital base up to 2020, followed by substantial capital growth in the subsequent two years.

Debt to capital ratio

The debt to capital ratio shows notable variation aligned with the changes in total debt and total capital. It increased from 0.39 in 2018 to 0.44 in 2019, peaked at 0.61 in 2020, indicating a higher proportion of debt within the capital structure during that year. Subsequently, the ratio declined significantly to 0.42 in 2021 and further to 0.37 in 2022, reflecting a decrease in leverage. This shift suggests that despite the increase in total debt in the last two years, the growth in total capital outpaced debt, leading to a lower relative debt burden.

The financial data reveals notable fluctuations in the company's capital structure and debt levels over the five-year period ending in 2022.

Total Debt (including operating lease liability)

The total debt decreased from 5,947 million US dollars in 2018 to 4,553 million US dollars in 2020, indicating a reduction in debt obligations during this period. However, a significant increase occurred in 2021, raising total debt to 6,760 million US dollars, followed by a slight decline to 6,718 million US dollars in 2022. This pattern suggests initial debt repayment or deleveraging efforts, succeeded by renewed borrowing or increased liabilities starting in 2021.

Total Capital (including operating lease liability)

Total capital showed a notable decline from 15,133 million US dollars in 2018 to its lowest point of 7,438 million US dollars in 2020, reflecting a contraction in the overall financing base. A sharp recovery was observed in 2021, with total capital more than doubling to 16,022 million US dollars, and continued growth to 17,885 million US dollars in 2022. This rebound may indicate capital infusions, asset growth, or a combination thereof, enhancing the company's capital base significantly in the latter years.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio reveals a fluctuating leverage position. Starting at 0.39 in 2018, it increased steadily to 0.61 in 2020, suggesting a rising proportion of debt relative to total capital during a period when total capital was shrinking. Subsequently, the ratio decreased to 0.42 in 2021 and further to 0.38 in 2022, indicating a reduction in relative debt levels amid the substantial increase in total capital. This trend reflects a shift towards a more balanced or strengthened capital structure in recent years.

The analysis of the financial data reveals distinct fluctuations in total debt, total assets, and the debt-to-assets ratio over the five-year period.

Total Debt

The total debt experienced a decline from 2018 to 2019, dropping from 5,947 million US dollars to 4,541 million US dollars. It then remained relatively stable into 2020 at 4,550 million US dollars. However, there was a notable increase in total debt in 2021 to 6,737 million US dollars, which slightly decreased to 6,697 million US dollars in 2022. The increase between 2020 and 2021 indicates a significant rise in borrowing or liabilities.

Total Assets

Total assets showed a downward trend from 19,566 million US dollars in 2018 to 9,912 million US dollars in 2020, representing a substantial reduction over this period. Following 2020, total assets sharply increased to 21,025 million US dollars in 2021 and continued to grow to 23,721 million US dollars in 2022. This rebound and continued growth suggest asset acquisition or valuation improvements post-2020.

Debt to Assets Ratio

The debt-to-assets ratio rose from 0.30 in 2018 to a peak of 0.46 in 2020, reflecting a higher proportion of debt relative to assets during this year. Subsequently, this ratio declined to 0.32 in 2021 and further decreased to 0.28 in 2022. The reduction in this ratio post-2020 corresponds with the increase in assets and the slight decline in total debt, indicating a strengthening balance sheet and lower leverage risk.

In summary, the company underwent a period of contraction in assets accompanied by stable debt levels up to 2020, resulting in increased leverage. From 2021 onwards, assets recovered significantly, and despite an increased absolute debt level, the proportional debt burden decreased, reflecting an improved financial position and potentially enhanced capacity to manage debt obligations.

Total debt (including operating lease liability)

The total debt showed a decline from 5947 million US dollars in 2018 to 4555 million in 2019, remaining almost stable in 2020 at 4553 million. However, there was a notable increase in 2021, reaching 6760 million, before slightly decreasing to 6718 million in 2022. This indicates a general reduction in debt during 2019 and 2020, followed by a substantial rise in the subsequent years.

Total assets

Total assets demonstrated a decreasing trend from 2018 at 19566 million US dollars to 9912 million in 2020. After this low point, there was a significant recovery and growth in total assets, reaching 21025 million in 2021 and further increasing to 23721 million in 2022. This reflects an overall recovery and expansion of asset base after an initial decline.

Debt to assets (including operating lease liability)

The debt to assets ratio increased from 0.30 in 2018 to a peak of 0.46 in 2020, indicating a rising proportion of debt relative to assets. This was followed by a decline to 0.32 in 2021 and a further decrease to 0.28 in 2022, pointing to an improvement in the leverage position relative to the asset base over the last two years.

Overall analysis

The financial data reveals that the company experienced a reduction in both total debt and total assets from 2018 through 2020, with a simultaneous increase in leverage as reflected by the debt to assets ratio peaking in 2020. Starting in 2021, both total assets and total debt increased substantially, but the assets grew at a higher rate, leading to an improved debt to assets ratio by 2022. This pattern suggests a period of contraction and deleveraging followed by recovery and improved financial stability.

The financial data shows a fluctuating trend in total assets over the five-year period. After a significant decline from 19,566 million US dollars in 2018 to 9,912 million US dollars in 2020, total assets experienced a substantial recovery, rising to 21,025 million US dollars in 2021 and further increasing to 23,721 million US dollars in 2022. This indicates a renewed expansion or asset accumulation in the latter years following a period of contraction.

Stockholders’ equity attributable to Devon follows a similar trend. It decreased sharply from 9,186 million US dollars in 2018 to 2,885 million US dollars in 2020, reflecting a notable erosion of equity, possibly due to losses or other equity-reducing activities. However, equity rebuilt significantly in 2021, reaching 9,262 million US dollars, and continued to grow to 11,167 million US dollars in 2022. This recovery suggests improved financial health and owner’s claim on the company's assets in recent years.

Financial leverage, calculated as a ratio, indicates the degree to which the company is utilizing debt relative to equity. The leverage ratio increased from 2.13 in 2018 to a peak of 3.44 in 2020, signaling higher reliance on debt during the period of declining assets and equity. This heightened leverage might reflect increased borrowing during challenging times. By 2021, the leverage ratio declined sharply to 2.27 and further to 2.12 in 2022, near the initial level of 2018. The reduction in leverage coincides with the rebound in assets and equity, indicating a strengthening balance sheet and lower financial risk exposure through reduced debt reliance.

In summary, the company underwent a period of financial contraction and increased leverage up to 2020, followed by a significant asset and equity recovery and deleveraging from 2021 onward. These patterns may reflect strategic adjustments, improved operational performance, or changes in market conditions contributing to restored financial stability in the most recent years.

The financial data indicates significant variations in the company's earnings before interest and tax (EBIT) over the five-year period. Initially, EBIT dropped sharply from a positive $1,218 million in 2018 to a considerably negative value of $-2,831 million in 2020, demonstrating a period of substantial operational challenges. This was followed by a strong recovery in 2021, with EBIT rising dramatically to $3,286 million, and further improvement in 2022 reaching $8,145 million, which suggests effective operational or market improvements during the latter years.

Interest expenses based on debt outstanding displayed a relatively stable trend, ranging from $259 million to $388 million across the years. The lowest interest expense was recorded in 2020 at $259 million, and the highest in 2021 at $388 million, showing only modest fluctuations that do not correspond directly with the extremes observed in EBIT, implying stable or slightly varying debt levels or interest rates over the period.

The interest coverage ratio, a key indicator of the company's ability to meet interest obligations from its earnings, reflected the volatility of EBIT. It started at a healthy 4.09 times in 2018 but dropped precipitously to 0.58 in 2019 and further to a negative ratio of -10.93 in 2020, indicating inability to cover interest expenses from earnings during that year. However, this ratio improved significantly in 2021 to 8.47 and peaked at 22.01 in 2022, pointing to a marked strengthening in earnings relative to interest obligations and thus an enhanced capacity to service debt.

Overall, the data reveals a period of financial stress culminating in 2020, followed by a robust recovery in operational profitability and financial health through 2021 and 2022. Despite consistent interest expenses, the company's earnings and interest coverage ratios improved markedly, supporting a more favorable outlook for debt servicing and operational sustainability in the most recent years reported.

Earnings before fixed charges and tax

There is significant fluctuation in earnings before fixed charges and tax over the five-year period. Starting at 1,229 million US dollars in 2018, the value sharply declined to 191 million in 2019 and further dropped to a negative 2,821 million in 2020, indicating a substantial loss. A strong recovery is observed in 2021, with earnings improving considerably to 3,311 million, followed by further growth to 8,167 million in 2022.

Fixed charges

Fixed charges remain relatively stable throughout the period, ranging from 269 million to 413 million US dollars. The lowest fixed charges were recorded in 2020 at 269 million, and the highest in 2021 at 413 million. The overall variation is moderate, with no clear increasing or decreasing trend.

Fixed charge coverage ratio

The fixed charge coverage ratio reflects the ability to cover fixed charges from earnings before fixed charges and tax. This ratio exhibits considerable volatility. In 2018, the ratio was at a healthy 3.98, but it dropped significantly to 0.64 in 2019, indicating weakening coverage. The ratio turned negative in 2020 (-10.49), reflecting the loss situation and inability to cover fixed charges from earnings. Substantial improvement occurred in 2021, with the ratio rising to 8.02, and an even higher ratio of 20.83 in 2022, indicating strong capacity to meet fixed obligations during this later period.

Summary of trends

The data reveals a period of financial difficulty in 2019 and especially in 2020, characterized by a steep decline in earnings before fixed charges and tax and poor fixed charge coverage. This was followed by a notable recovery beginning in 2021, with both earnings and fixed charge coverage reaching levels significantly above those in 2018. Fixed charges have remained relatively steady, indicating consistent obligations throughout the period. Overall, the financial strength related to earnings capacity and ability to cover fixed expenses improved markedly in the most recent years.