South Bow Corp’s Earnings Call: Stability Amid Challenges

South Bow Corp ((TSE:SOBO)) has held its Q3 earnings call. Read on for the main highlights of the call.

South Bow Corp’s recent earnings call painted a picture of stability and strategic execution, despite some operational hurdles. The company reported stable earnings and successful project completions, while also addressing ongoing challenges that could impact future performance. Overall, the sentiment was cautiously optimistic, with a focus on overcoming current obstacles and leveraging recent successes.

Stable Earnings and Financial Strength

South Bow Corp reported a normalized EBITDA of $250 million and distributable cash flow of $236 million for the third quarter of 2025. The company reaffirmed its full-year forecast for normalized EBITDA at $1.01 billion, highlighting its financial resilience and strength in maintaining stable earnings.

Successful Execution of Blackrod Project

The Blackrod project marked a significant milestone with its overall mechanical completion. The project successfully placed a 25-kilometer natural gas lateral into service on schedule and within budget, demonstrating South Bow’s capability in executing key projects efficiently.

Dividend and Shareholder Returns

In a move to reinforce its commitment to shareholder returns, South Bow’s Board approved a quarterly dividend of $0.50 per share. This decision underscores the importance of dividends in the company’s total return proposition, providing consistent value to its shareholders.

Tax Optimization Wins

South Bow achieved a $71 million tax recovery due to changes in U.S. tax legislation and optimization efforts. This recovery significantly improved the company’s distributable cash flow, showcasing effective financial management.

Indemnification and Legal Resolution

The company resolved legal proceedings related to variable toll disputes, securing indemnification up to USD 22 million for pre-spin issues. This resolution removes a significant legal hurdle, allowing South Bow to focus on its core operations.

Keystone Pressure Restrictions and Maintenance

Operational challenges persist with Keystone’s pressure restrictions, expected to remain in place into 2026. These restrictions are likely to affect potential EBITDA from spot volumes, posing a challenge to future earnings.

Milepost 171 Incident Remedial Actions

Following the Milepost 171 incident, ongoing remedial actions are in place, with a full system return anticipated in 2026. These actions are crucial for restoring operational capacity and mitigating impacts on future earnings.

Marketing Losses Offset by Higher Maintenance Costs

Earlier marketing losses were largely offset by increased maintenance capital expenditures. This reflects the operational challenges faced by South Bow, as the company navigates through higher costs to maintain its systems.

Forward-Looking Guidance

Looking ahead, South Bow forecasts a normalized EBITDA of $1.03 billion for 2026, with distributable cash flow expected to be around $655 million. The company remains focused on strategic priorities, including safe operations, growth portfolio execution, and capital allocation optimization. The Blackrod project remains a focal point, with service expected in early 2026, while efforts to exit transition services with TC Energy by the end of 2025 aim to enhance efficiencies and reduce costs.

In conclusion, South Bow Corp’s earnings call highlighted a balanced mix of stability and strategic execution, alongside challenges that require careful management. The company’s commitment to shareholder returns and strategic priorities provides a foundation for future growth, despite the operational hurdles that lie ahead.