South Bow (SOBO) Q3 2025 earnings summary

Executive summary

• Delivered stable third-quarter results with strong operational and financial performance, supporting capital allocation priorities in the first year as an independent entity.

• Paid sustainable dividend, funded BlackRod growth project, and strengthened financial position.

• Nearing completion of transition services with TC Energy, ahead of schedule, driving cost savings and efficiency.

• Significant progress on remedial actions and regulatory compliance following the Milepost 171 incident, with system integrity reinforced.

• Mechanical completion of the BlackRod Connection Project, with commercial service started and full in-service expected in early 2026.

Financial highlights

• Q3 2025 revenue was $461 million, net income $93 million ($0.45/share), and normalized EBITDA $254 million, up 2% sequentially.

• Distributable cash flow for Q3 reached $236 million, aided by a $71 million tax recovery and up $69 million from Q2 2025.

• Revised 2025 distributable cash flow outlook to ~$700 million; effective tax rate expected at 20-21%.

• 2026 normalized EBITDA forecasted at $1.03 billion, with distributable cash flow at ~$655 million.

• Quarterly dividend of $0.50 per share approved, totaling $104 million for Q3 2025, payable January 15th.

Outlook and guidance

• 2025 normalized EBITDA guidance reaffirmed at $1.01 billion (+/-1%), with distributable cash flow outlook raised to $700 million (+/-2%) due to lower expected taxes.

• 2026 outlook supported by highly contracted cash flows and structural demand, with 90% secured through committed arrangements.

• Key EBITDA drivers: marketing recovery (+$25M), BlackRod ramp-up (+$10M), Keystone maintenance (-$15M).

• Guidance range influenced by pressure restrictions and price differentials; upside if restrictions lift early and differentials widen.

• Net debt-to-normalized EBITDA ratio expected to decrease modestly through 2026.