Two Ways to Play the Same Energy Shock
Brent crude climbed above $112 a barrel intraday Thursday, giving the energy trade another push. There could be two names worth examining before treating every energy company as another way to bet on the price of a barrel.
Permian Resources (NYSE: PR) produces oil and gas. TC Energy (NYSE: TRP | TSX: TRP) operates natural gas pipelines and power assets. Both appear on Goldman Sachs’ list, but the events that improve their earnings can be quite different.
The supply backdrop remains uncomfortable. Washington’s emergency cushion has shrunk to 282.2 million barrels in the Strategic Petroleum Reserve, according to DOE’s October 16 inventory breakdown. That leaves less flexibility to respond to disruptions, although it does not establish that the reserve becomes unusable below a particular inventory threshold.
A smaller reserve supports caution about supply security. It cannot tell investors what price to pay for an energy stock. For that, the companies’ own production plans, costs and customer contracts become more useful.
Permian Resources Has Cash Flow Behind the Oil Exposure
Permian Resources gives investors direct exposure to a producer concentrated in the Delaware Basin, which spans West Texas and southeastern New Mexico. Interest centers partly on its oil-focused production mix and potential cash-flow growth.
The latest reported results provide a starting point. PR generated $751 million in adjusted free cash flow in the second quarter, a company-defined non-GAAP measure. Management’s August outlook called for second-half oil production above 200,000 barrels per day, with less than $1 billion in cash capital expenditures.
Those figures put the operating plan ahead of the geopolitical forecast. Higher oil prices can lift receipts, while production growth and disciplined spending determine how much additional cash remains after developing the wells.
We would watch whether PR delivers that production without expanding its spending envelope. Beating an earnings estimate because crude rose is helpful; producing more efficiently can remain valuable after the headline premium fades.
PR still carries direct commodity risk. A meaningful supply recovery or weaker consumption could reduce realized prices, and shale production requires continued drilling. The attraction is a measurable operating plan whose progress investors can test against the next results.
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TC Energy’s Customers Are Signing Up for Decades
TC Energy offers a different angle: earning from the infrastructure needed to move natural gas toward power plants, industrial customers and LNG facilities.
By the end of June, the company had sanctioned approximately C$3 billion in new growth projects. Two U.S. gas pipeline expansions announced with its second-quarter results were supported by 20-year take-or-pay contracts. Such arrangements commit customers to specified payments under contract terms, reducing dependence on day-to-day transportation usage.
One project, Central Virginia Capacity, is designed to supply new gas-fired generation supporting data-center development, with anticipated service dates in 2028 and 2030. The customer need reaches beyond today’s oil disruption into the longer buildout of North American electricity supply.
Long contracts do not remove construction, financing or regulatory risk. TC Energy must still turn approved projects into operating assets at costs that justify the investment.
For investors assessing its next growth announcements, a signed customer commitment is the beginning of the case. Secured funding, permits and an achievable construction schedule will determine when those decades of expected payments can start contributing to earnings.
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