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Cimarex Energy Co (NYSE:XEC)
Interest Coverage
29.50 (As of Jun. 2014)

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense. Cimarex Energy Co's Operating Income for the three months ended in Jun. 2014 was $240 Mil. Cimarex Energy Co's Interest Expense for the three months ended in Jun. 2014 was $-8 Mil. Cimarex Energy Co's interest coverage for the quarter that ended in Jun. 2014 was 29.50. The higher the ratio, the stronger the company’s financial strength is.

XEC' s 10-Year Interest Coverage Range
Min: 29.63   Max: 224.14
Current: 38.18

29.63
224.14

During the past 12 years, the highest interest coverage of Cimarex Energy Co was 224.14. The lowest was 29.63. And the median was 93.77.

XEC's Interest Coverageis ranked higher than
80% of the 612 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 12.73 vs. XEC: 38.18 )

Definition

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage=-1*Operating Income/Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

Cimarex Energy Co did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, or Interest Expense is positive, then

Cimarex Energy Co had no debt.

Cimarex Energy Co's Interest Coverage for the fiscal year that ended in Dec. 2013 is calculated as

Here, for the fiscal year that ended in Dec. 2013, Cimarex Energy Co's Interest Expense was $-23 Mil. Its Operating Income was $896 Mil. And its Long-Term Debt was $924 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*895.638/-23.456
=38.18

Cimarex Energy Co's Interest Coverage for the quarter that ended in Jun. 2014 is calculated as

Here, for the three months ended in Jun. 2014, Cimarex Energy Co's Interest Expense was $-8 Mil. Its Operating Income was $240 Mil. And its Long-Term Debt was $1,500 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2014 )/Interest Expense (Q: Jun. 2014 )
=-1*240.418/-8.149
=29.50

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

The higher the ratio, the stronger the company’s financial strength is.


Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company’s overage financial strength.


Related Terms

Operating Income, Interest Expense, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Cimarex Energy Co Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage 224.1465.9287.9329.63At LossAt Loss123.19127.9040.3838.18

Cimarex Energy Co Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
interest_coverage 191.1925.3032.5733.9436.0330.3633.6853.2732.5829.50
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