TC Energy Corp. (“TC” or “the Company”) operates oil and gas pipelines, storage facilities, and power-generation plants. As such it is in a sector that has seen particular hardship as a result of the Covid-19 pandemic, with insolvency and liquidity concerns having a greater impact in oil and gas than in other industries as a result of the dramatic global fall in their prices. And while these prices have been rebounding back of late, aided by factors such as more and more airlines taking to the air with the gradual easing of rules associated with travel restrictions and social distancing, the market as a whole still has to overcome difficult obstacles and complex disputes in the coming months and years as parties argue about how the huge costs of the pandemic should be allocated.
Yet even against this bleak backdrop there can still be companies that appear to be going in the right direction at the very least, and in TC’s case it has stated it has predictable and growing cash flows from operations, cash on hand, substantial committed credit facilities, and various other financing levers available to it, and so is well positioned to continue funding its obligations, capital program, and dividends through a prolonged period of disruption. The concept of thriving and not just surviving is what any investment should be about, and as such TC is primed more than most to emerge from the other side in great financial health. While question marks deservedly remain as to whether one should enter into the energy sector, TC nonetheless represents income, growth, and stability in a volatile market.
➤ Key Factors: The pandemic has affected all businesses that operate in the physical world (as opposed to those existing only virtually/online, say), and the energy industry is no exception. In addition to the disruption in global supply chains and construction activities, companies like TC have also had to endure plunging oil and gas prices, all adding to increased operating costs that have to be mitigated somehow.
➤ Financial Stress Test: TC has solid financials overall, with a strong balance sheet and enhanced liquidity available to limit the impact of the pandemic. The strong potential for growth via its numerous projects is also evident, such that an affordable share price at this point in time can be viewed as being particularly low risk / high reward.