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
Devon Energy Corp., solvency ratios
Based on: 10-K (reporting date: 2022-12-31), 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).
The solvency profile of the entity exhibited a period of significant financial stress peaking in 2020, followed by a rapid deleveraging process and a substantial improvement in debt serviceability through 2022.
- Leverage Ratios
- A pronounced increase in leverage is observed leading into 2020, where the debt-to-equity ratio peaked at 1.58, more than doubling the 2018 level of 0.65. Similarly, the debt-to-assets ratio reached a high of 0.46 and the debt-to-capital ratio reached 0.61 during the same period. Following this peak, a consistent downward trend occurred, with the debt-to-equity ratio falling to 0.60 and the debt-to-assets ratio declining to 0.28 by December 31, 2022, indicating a stronger solvency position than that held at the start of the analyzed period.
- Financial Leverage
- Financial leverage mirrored the trends of the debt ratios, rising from 2.13 in 2018 to a peak of 3.44 in 2020. This upward movement was reversed in subsequent years, returning to 2.12 by the end of 2022, suggesting a strategic reduction in the use of debt to finance assets.
- Coverage Ratios
- Interest and fixed charge coverage ratios demonstrated extreme volatility. A critical decline is evident from 2018 to 2020, with interest coverage dropping from 4.09 to -10.93 and fixed charge coverage dropping from 3.98 to -10.49, signaling that earnings were insufficient to cover fixed financial obligations during 2020. This was followed by a sharp recovery; interest coverage rose to 8.47 in 2021 and surged to 22.01 by 2022, reflecting a massive increase in the capacity to service debt.
- Impact of Operating Lease Liabilities
- The inclusion of operating lease liabilities had a negligible impact on the solvency metrics. The ratios for debt to equity, debt to capital, and debt to assets remained virtually identical whether or not lease liabilities were included, suggesting that these liabilities represent a minimal portion of the total capital structure.
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Debt to Equity
Devon Energy Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 251) | —) | —) | —) | 162) | |
| Current finance lease liabilities | 8) | 8) | 8) | 7) | —) | |
| Long-term debt | 6,189) | 6,482) | 4,298) | 4,294) | 5,785) | |
| Long-term finance lease liabilities | 249) | 247) | 244) | 240) | —) | |
| Total debt | 6,697) | 6,737) | 4,550) | 4,541) | 5,947) | |
| Stockholders’ equity attributable to Devon | 11,167) | 9,262) | 2,885) | 5,802) | 9,186) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.60 | 0.73 | 1.58 | 0.78 | 0.65 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Chevron Corp. | 0.15 | 0.23 | — | — | — | |
| ConocoPhillips | 0.35 | 0.44 | — | — | — | |
| Exxon Mobil Corp. | 0.21 | 0.28 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.20 | 0.28 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Energy | 0.22 | 0.31 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity attributable to Devon
= 6,697 ÷ 11,167 = 0.60
2 Click competitor name to see calculations.
The solvency profile between 2018 and 2022 is characterized by a period of significant leverage expansion peaking in 2020, followed by a robust recovery in equity and a subsequent improvement in the debt-to-equity ratio.
- Debt to Equity Ratio Trends
- The debt to equity ratio exhibited a sharp upward trajectory from 0.65 in 2018 to a peak of 1.58 by December 31, 2020. This peak indicates a period where total debt significantly exceeded stockholders' equity. Following this peak, a rapid deleveraging trend is observed, with the ratio falling to 0.73 in 2021 and ending at 0.60 in 2022, marking the lowest level of leverage within the five-year period.
- Equity Volatility
- Stockholders' equity attributable to the company experienced substantial volatility. A downward trend was observed from 2018 to 2020, with equity falling from US$ 9,186 million to a low of US$ 2,885 million. This contraction served as the primary catalyst for the increase in the debt to equity ratio. A significant reversal occurred thereafter, with equity increasing to US$ 9,262 million in 2021 and reaching US$ 11,167 million by the end of 2022.
- Total Debt Management
- Total debt decreased from US$ 5,947 million in 2018 to approximately US$ 4,541 million in 2019, remaining relatively stable through 2020. A notable increase occurred in 2021, where debt rose to US$ 6,737 million, before stabilizing slightly at US$ 6,697 million in 2022. While absolute debt levels remained higher in 2022 than in 2018, the concurrent growth in equity resulted in an overall improved solvency position.
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Debt to Equity (including Operating Lease Liability)
Devon Energy Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 251) | —) | —) | —) | 162) | |
| Current finance lease liabilities | 8) | 8) | 8) | 7) | —) | |
| Long-term debt | 6,189) | 6,482) | 4,298) | 4,294) | 5,785) | |
| Long-term finance lease liabilities | 249) | 247) | 244) | 240) | —) | |
| Total debt | 6,697) | 6,737) | 4,550) | 4,541) | 5,947) | |
| Current operating lease liabilities | 13) | 18) | 1) | 10) | —) | |
| Long-term operating lease liabilities | 8) | 5) | 2) | 4) | —) | |
| Total debt (including operating lease liability) | 6,718) | 6,760) | 4,553) | 4,555) | 5,947) | |
| Stockholders’ equity attributable to Devon | 11,167) | 9,262) | 2,885) | 5,802) | 9,186) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.60 | 0.73 | 1.58 | 0.79 | 0.65 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Chevron Corp. | 0.17 | 0.25 | — | — | — | |
| ConocoPhillips | 0.36 | 0.45 | — | — | — | |
| Exxon Mobil Corp. | 0.24 | 0.31 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.23 | 0.31 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Energy | 0.25 | 0.34 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity attributable to Devon
= 6,718 ÷ 11,167 = 0.60
2 Click competitor name to see calculations.
The solvency profile between 2018 and 2022 was characterized by a period of significant leverage expansion followed by a robust restoration of equity. The most notable volatility occurred in 2020, where the debt-to-equity ratio reached its peak before returning to a more conservative position by the end of the analysis period.
- Debt to Equity Ratio Evolution
- The debt to equity ratio exhibited a non-linear trend, rising from 0.65 in 2018 to 0.79 in 2019, and peaking at 1.58 in 2020. Following this peak, the ratio declined sharply to 0.73 in 2021 and further to 0.60 in 2022, indicating a strengthened solvency position relative to the initial 2018 level.
- Equity Volatility
- Stockholders' equity attributable to the company underwent a severe contraction from 2018 to 2020, dropping from US$ 9,186 million to US$ 2,885 million. This decline was the primary driver of the increased leverage in 2020. However, a substantial recovery occurred thereafter, with equity expanding to US$ 9,262 million in 2021 and reaching US$ 11,167 million by December 31, 2022.
- Debt Obligation Patterns
- Total debt, including operating lease liabilities, showed an initial decrease from US$ 5,947 million in 2018 to approximately US$ 4,553 million by 2020. A subsequent increase occurred in 2021, where debt rose to US$ 6,760 million, before stabilizing at US$ 6,718 million in 2022. Despite the increase in absolute debt levels since 2020, the concurrent growth in equity resulted in a net improvement in the solvency ratio.
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Debt to Capital
Devon Energy Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 251) | —) | —) | —) | 162) | |
| Current finance lease liabilities | 8) | 8) | 8) | 7) | —) | |
| Long-term debt | 6,189) | 6,482) | 4,298) | 4,294) | 5,785) | |
| Long-term finance lease liabilities | 249) | 247) | 244) | 240) | —) | |
| Total debt | 6,697) | 6,737) | 4,550) | 4,541) | 5,947) | |
| Stockholders’ equity attributable to Devon | 11,167) | 9,262) | 2,885) | 5,802) | 9,186) | |
| Total capital | 17,864) | 15,999) | 7,435) | 10,343) | 15,133) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.37 | 0.42 | 0.61 | 0.44 | 0.39 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Chevron Corp. | 0.13 | 0.18 | — | — | — | |
| ConocoPhillips | 0.26 | 0.31 | — | — | — | |
| Exxon Mobil Corp. | 0.17 | 0.22 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.17 | 0.22 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Energy | 0.18 | 0.24 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 6,697 ÷ 17,864 = 0.37
2 Click competitor name to see calculations.
The financial solvency profile of Devon Energy Corp. between 2018 and 2022 is characterized by significant volatility in capital structure and a fluctuating reliance on debt financing. While the debt-to-capital ratio experienced a notable peak in 2020, the period concluded with a strengthened solvency position, ending at a level lower than the 2018 baseline.
- Total Debt Trends
- Total debt exhibited a non-linear trajectory, decreasing from 5,947 million US$ in 2018 to a low of 4,541 million US$ in 2019. This level remained stable through 2020 before a sharp increase occurred in 2021, where debt reached 6,737 million US$. A slight contraction followed in 2022, with total debt settling at 6,697 million US$.
- Total Capital Fluctuations
- Total capital underwent substantial contractions and expansions. A downward trend was observed from 2018 to 2020, with capital falling from 15,133 million US$ to a period low of 7,435 million US$. However, a rapid recovery occurred in 2021 and 2022, with total capital expanding to 15,999 million US$ and 17,864 million US$, respectively.
- Debt to Capital Ratio Analysis
- The debt to capital ratio increased steadily from 0.39 in 2018 to a peak of 0.61 in 2020. This increase was primarily driven by the significant reduction in total capital rather than an increase in absolute debt levels. Subsequently, the ratio declined sharply to 0.42 in 2021 and further to 0.37 in 2022. This downward trend in the latter years reflects a capital base that grew at a much faster rate than the accumulation of debt, resulting in a more conservative solvency position by the end of the analyzed period.
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Debt to Capital (including Operating Lease Liability)
Devon Energy Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 251) | —) | —) | —) | 162) | |
| Current finance lease liabilities | 8) | 8) | 8) | 7) | —) | |
| Long-term debt | 6,189) | 6,482) | 4,298) | 4,294) | 5,785) | |
| Long-term finance lease liabilities | 249) | 247) | 244) | 240) | —) | |
| Total debt | 6,697) | 6,737) | 4,550) | 4,541) | 5,947) | |
| Current operating lease liabilities | 13) | 18) | 1) | 10) | —) | |
| Long-term operating lease liabilities | 8) | 5) | 2) | 4) | —) | |
| Total debt (including operating lease liability) | 6,718) | 6,760) | 4,553) | 4,555) | 5,947) | |
| Stockholders’ equity attributable to Devon | 11,167) | 9,262) | 2,885) | 5,802) | 9,186) | |
| Total capital (including operating lease liability) | 17,885) | 16,022) | 7,438) | 10,357) | 15,133) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.38 | 0.42 | 0.61 | 0.44 | 0.39 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Chevron Corp. | 0.15 | 0.20 | — | — | — | |
| ConocoPhillips | 0.26 | 0.31 | — | — | — | |
| Exxon Mobil Corp. | 0.19 | 0.24 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.19 | 0.23 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Energy | 0.20 | 0.25 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 6,718 ÷ 17,885 = 0.38
2 Click competitor name to see calculations.
An analysis of the solvency metrics from 2018 to 2022 reveals a period of volatility in the capital structure, characterized by a peak in relative leverage during 2020 followed by a strengthening of the solvency position by 2022.
- Total Debt Trends
- Total debt, inclusive of operating lease liabilities, decreased from 5,947 million in 2018 to 4,555 million in 2019 and remained virtually unchanged through 2020. A significant increase occurred in 2021, with debt rising to 6,760 million, before plateauing at 6,718 million in 2022.
- Total Capital Fluctuations
- The total capital base underwent a severe contraction between 2018 and 2020, declining from 15,133 million to a low of 7,438 million. This trend reversed sharply in 2021 and 2022, with the capital base expanding to 17,885 million by the end of the observed period.
- Debt to Capital Ratio Analysis
- The debt to capital ratio rose from 0.39 in 2018 to a peak of 0.61 in 2020. This spike was predominantly driven by the shrinking total capital base rather than an increase in nominal debt. Following 2020, the ratio experienced a consistent decline, falling to 0.42 in 2021 and reaching 0.38 in 2022, representing the lowest leverage level within the five-year timeframe.
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Debt to Assets
Devon Energy Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 251) | —) | —) | —) | 162) | |
| Current finance lease liabilities | 8) | 8) | 8) | 7) | —) | |
| Long-term debt | 6,189) | 6,482) | 4,298) | 4,294) | 5,785) | |
| Long-term finance lease liabilities | 249) | 247) | 244) | 240) | —) | |
| Total debt | 6,697) | 6,737) | 4,550) | 4,541) | 5,947) | |
| Total assets | 23,721) | 21,025) | 9,912) | 13,717) | 19,566) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.28 | 0.32 | 0.46 | 0.33 | 0.30 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Chevron Corp. | 0.09 | 0.13 | — | — | — | |
| ConocoPhillips | 0.18 | 0.22 | — | — | — | |
| Exxon Mobil Corp. | 0.11 | 0.14 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.11 | 0.15 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Energy | 0.12 | 0.16 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 6,697 ÷ 23,721 = 0.28
2 Click competitor name to see calculations.
The solvency profile of Devon Energy Corp. between 2018 and 2022 is characterized by a period of significant volatility followed by a marked improvement in the asset-to-debt relationship.
- Debt to Assets Ratio Trend
- A non-linear progression is observed in the debt to assets ratio, which began at 0.30 in 2018 and peaked at 0.46 in 2020 before declining to 0.28 by 2022. This trajectory indicates a temporary increase in leverage risk mid-period, followed by a strengthening of the balance sheet.
- Impact of Asset Contraction
- The rise in the ratio during 2019 and 2020 was primarily driven by a substantial contraction in total assets, which fell from US$ 19,566 million in 2018 to a low of US$ 9,912 million in 2020. Because total debt remained relatively stable during the 2019-2020 window, the reduction in the asset base led to a higher proportion of assets being financed by debt.
- Balance Sheet Expansion and Recovery
- From 2021 onward, a significant expansion in total assets occurred, reaching US$ 23,721 million by 2022. Although total debt increased from US$ 4,550 million in 2020 to US$ 6,697 million in 2022, the rate of asset growth far exceeded the increase in borrowing. Consequently, the debt to assets ratio decreased steadily, ending the analyzed period at its lowest level of 0.28.
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Debt to Assets (including Operating Lease Liability)
Devon Energy Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 251) | —) | —) | —) | 162) | |
| Current finance lease liabilities | 8) | 8) | 8) | 7) | —) | |
| Long-term debt | 6,189) | 6,482) | 4,298) | 4,294) | 5,785) | |
| Long-term finance lease liabilities | 249) | 247) | 244) | 240) | —) | |
| Total debt | 6,697) | 6,737) | 4,550) | 4,541) | 5,947) | |
| Current operating lease liabilities | 13) | 18) | 1) | 10) | —) | |
| Long-term operating lease liabilities | 8) | 5) | 2) | 4) | —) | |
| Total debt (including operating lease liability) | 6,718) | 6,760) | 4,553) | 4,555) | 5,947) | |
| Total assets | 23,721) | 21,025) | 9,912) | 13,717) | 19,566) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.28 | 0.32 | 0.46 | 0.33 | 0.30 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Chevron Corp. | 0.11 | 0.15 | — | — | — | |
| ConocoPhillips | 0.18 | 0.23 | — | — | — | |
| Exxon Mobil Corp. | 0.13 | 0.16 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Oil, Gas & Consumable Fuels | 0.13 | 0.16 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Energy | 0.14 | 0.17 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 6,718 ÷ 23,721 = 0.28
2 Click competitor name to see calculations.
An analysis of the solvency position from 2018 to 2022 reveals a period of significant volatility in asset valuation and leverage, culminating in a strengthened balance sheet by the end of the period.
- Asset Contraction and Leverage Increase (2018–2020)
- A pronounced downward trend in total assets was observed between 2018 and 2020, with values decreasing from US$ 19,566 million to US$ 9,912 million. Although total debt also decreased during this interval, falling from US$ 5,947 million to US$ 4,553 million, the reduction in assets was more severe. This imbalance resulted in a steady climb of the debt-to-assets ratio, which rose from 0.30 in 2018 to a peak of 0.46 in 2020, indicating a higher proportion of assets financed through debt.
- Asset Expansion and Ratio Compression (2021–2022)
- The period between 2021 and 2022 was characterized by a rapid expansion of the asset base, which grew to US$ 23,721 million. While total debt increased to US$ 6,718 million during this time, the growth in assets significantly outpaced the accumulation of new debt. This led to a sharp correction in the solvency ratio, which dropped to 0.32 in 2021 and further declined to 0.28 by December 31, 2022.
- Overall Solvency Trend
- The long-term trend indicates that despite a temporary spike in relative leverage in 2020, the company ended the five-year period in a more favorable solvency position. The final debt-to-assets ratio of 0.28 represents the lowest level of leverage recorded in the analyzed timeframe, suggesting an improved ability to cover total liabilities with existing assets.
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Financial Leverage
Devon Energy Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 23,721) | 21,025) | 9,912) | 13,717) | 19,566) | |
| Stockholders’ equity attributable to Devon | 11,167) | 9,262) | 2,885) | 5,802) | 9,186) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.12 | 2.27 | 3.44 | 2.36 | 2.13 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Chevron Corp. | 1.62 | 1.72 | — | — | — | |
| ConocoPhillips | 1.95 | 2.00 | — | — | — | |
| Exxon Mobil Corp. | 1.89 | 2.01 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Oil, Gas & Consumable Fuels | 1.79 | 1.90 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Energy | 1.82 | 1.93 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity attributable to Devon
= 23,721 ÷ 11,167 = 2.12
2 Click competitor name to see calculations.
The financial leverage profile exhibits a period of significant volatility between 2018 and 2022, characterized by a sharp increase in leverage during the middle of the period followed by a strong recovery toward baseline levels.
- Total Asset Trajectory
- A contraction is observed from 2018 to 2020, with total assets declining from US$ 19,566 million to a low of US$ 9,912 million. This trend reversed sharply in 2021 and 2022, with total assets expanding to US$ 23,721 million, indicating a substantial expansion of the balance sheet.
- Stockholders' Equity Trends
- Equity attributable to the company experienced a steep decline, falling from US$ 9,186 million in 2018 to US$ 2,885 million in 2020. A rapid recovery occurred thereafter, with equity increasing to US$ 11,167 million by the end of 2022, suggesting a strong replenishment of the equity base.
- Financial Leverage Ratio Analysis
- The financial leverage ratio reflects a heightened reliance on debt relative to equity during the 2019-2020 period. The ratio climbed from 2.13 in 2018 to a peak of 3.44 in 2020. Subsequent to this peak, the ratio declined sharply to 2.27 in 2021 and reached 2.12 by the end of 2022, effectively returning the solvency position to 2018 levels.
Overall, the analysis indicates a cycle of deleveraging following a period of significant balance sheet compression. The convergence of the 2022 leverage ratio with the 2018 figure suggests a return to previous levels of financial stability despite the intervening volatility.
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Interest Coverage
Devon Energy Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings (loss) attributable to Devon | 6,015) | 2,813) | (2,680) | (355) | 3,064) | |
| Add: Net income attributable to noncontrolling interest | 22) | 20) | 9) | 2) | 160) | |
| Less: Net earnings (loss) from discontinued operations, net of income taxes | —) | —) | (128) | (274) | 2,460) | |
| Add: Income tax expense | 1,738) | 65) | (547) | (30) | 156) | |
| Add: Interest based on debt outstanding | 370) | 388) | 259) | 260) | 298) | |
| Earnings before interest and tax (EBIT) | 8,145) | 3,286) | (2,831) | 151) | 1,218) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 22.01 | 8.47 | -10.93 | 0.58 | 4.09 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Chevron Corp. | 97.27 | 31.39 | — | — | — | |
| ConocoPhillips | 36.07 | 15.38 | — | — | — | |
| Exxon Mobil Corp. | 98.43 | 33.98 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Oil, Gas & Consumable Fuels | 74.46 | 26.79 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Energy | 62.30 | 23.05 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 8,145 ÷ 370 = 22.01
2 Click competitor name to see calculations.
The analysis of interest coverage from 2018 to 2022 reveals a period of extreme volatility followed by a substantial strengthening of solvency. The company transitioned from a stable position to a state of critical financial distress before achieving a highly robust capacity to service its debt obligations.
- Earnings Before Interest and Tax (EBIT) Trends
- EBIT exhibited severe fluctuations, declining from 1,218 million USD in 2018 to a significant deficit of 2,831 million USD in 2020. This downward trajectory was reversed sharply in 2021 and 2022, with EBIT peaking at 8,145 million USD, representing a dramatic increase in operational profitability over the final two years of the period.
- Interest Obligation Stability
- Interest expenses based on debt outstanding remained relatively stable throughout the five-year period, ranging between 259 million USD and 388 million USD. The absence of significant variance in interest costs indicates that the volatility observed in solvency ratios was driven almost entirely by operational earnings rather than changes in debt levels or financing costs.
- Interest Coverage Ratio Dynamics
- The interest coverage ratio mirrored the volatility of EBIT, falling from 4.09 in 2018 to 0.58 in 2019, and reaching a low of -10.93 in 2020. This sequence indicates a period where operating profits were insufficient to cover interest payments. A rapid recovery followed, with the ratio climbing to 8.47 in 2021 and reaching 22.01 by the end of 2022, signifying an exceptionally strong margin of safety for creditors.
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Fixed Charge Coverage
Devon Energy Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings (loss) attributable to Devon | 6,015) | 2,813) | (2,680) | (355) | 3,064) | |
| Add: Net income attributable to noncontrolling interest | 22) | 20) | 9) | 2) | 160) | |
| Less: Net earnings (loss) from discontinued operations, net of income taxes | —) | —) | (128) | (274) | 2,460) | |
| Add: Income tax expense | 1,738) | 65) | (547) | (30) | 156) | |
| Add: Interest based on debt outstanding | 370) | 388) | 259) | 260) | 298) | |
| Earnings before interest and tax (EBIT) | 8,145) | 3,286) | (2,831) | 151) | 1,218) | |
| Add: Operating lease cost | 22) | 25) | 10) | 40) | 11) | |
| Earnings before fixed charges and tax | 8,167) | 3,311) | (2,821) | 191) | 1,229) | |
| Interest based on debt outstanding | 370) | 388) | 259) | 260) | 298) | |
| Operating lease cost | 22) | 25) | 10) | 40) | 11) | |
| Fixed charges | 392) | 413) | 269) | 300) | 309) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 20.83 | 8.02 | -10.49 | 0.64 | 3.98 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Chevron Corp. | 18.28 | 8.43 | — | — | — | |
| ConocoPhillips | 28.76 | 11.94 | — | — | — | |
| Exxon Mobil Corp. | 31.21 | 13.55 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Oil, Gas & Consumable Fuels | 25.07 | 10.99 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Energy | 20.61 | 9.19 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 8,167 ÷ 392 = 20.83
2 Click competitor name to see calculations.
The analysis of solvency metrics between 2018 and 2022 reveals a period of extreme volatility followed by a significant strengthening of the company's ability to meet its fixed obligations. The trajectory is characterized by a severe downturn peaking in 2020, succeeded by an aggressive recovery in earnings and coverage capacity.
- Fixed Charge Coverage Ratio Trend
- The coverage ratio experienced a drastic decline from 3.98 in 2018 to 0.64 in 2019, eventually falling into negative territory at -10.49 in 2020. This indicates a period where earnings were insufficient to cover fixed charges. However, a rapid reversal occurred in 2021, with the ratio climbing to 8.02, and reaching a peak of 20.83 by the end of 2022, signifying a substantial increase in the margin of safety regarding debt and fixed obligations.
- Earnings Before Fixed Charges and Tax (EBFCT)
- Earnings exhibited high variance, dropping from US$ 1,229 million in 2018 to a deficit of US$ 2,821 million in 2020. This collapse in earnings was the primary driver of the solvency stress observed during the 2019-2020 period. The subsequent recovery was exponential, with EBFCT rising to US$ 3,311 million in 2021 and further increasing to US$ 8,167 million in 2022.
- Fixed Charges Stability
- In contrast to the volatility of earnings, fixed charges remained relatively stable throughout the five-year period. Charges fluctuated within a narrow range, starting at US$ 309 million in 2018, dipping to US$ 269 million in 2020, and settling at US$ 392 million by 2022. The relative consistency of these costs amplified the impact of earnings swings on the final coverage ratio.
The convergence of stabilizing fixed costs and surging operational earnings resulted in a solvency position at the end of 2022 that far exceeded the levels seen at the start of the analyzed period. The transition from a negative coverage ratio in 2020 to a ratio of 20.83 in 2022 reflects a profound improvement in financial resilience.
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