Full Transcript: South Bow Q2 2026 Earnings Call

South Bow (TSX: SOBO ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

S. Gulf Coast segment. The company secured 465,000 barrels per day of 20-year customer commitments, marking a significant milestone and reinforcing its market position. 04 billion and distributable cash flow guidance to $665 million.

Key strategic initiatives include the Prairie Connector and Liberty Bridge projects, with a focus on stakeholder engagement and securing permit durability by mid-2027. 4 times net debt to EBITDA. A leadership transition was announced, with George Lewis appointed as Chair of the Board, succeeding Hal Quizley. The company is exploring inorganic growth opportunities while emphasizing disciplined capital allocation.

South Bow is actively engaging with stakeholders and governments to ensure the permit durability needed for future projects. The company remains focused on long-term value creation for shareholders through safe operations, disciplined growth, and financial strength. Full Transcript OPERATOR Good day and thank you for standing by. Welcome to South Bow Q2 2026 Results Conference Call and Webcast.

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Martha Wilmot. Please go ahead.

Martha Wilmot, Investor Relations Thank you, Dana, and welcome everyone to South Bow's second quarter 2026 earnings call. With me today are Bevin Wirzba, President and Chief Executive Officer; Van Dafo, Senior Vice President and Chief Financial Officer; and Richard Pryor, Senior Vice President and Chief Operating Officer. Before I turn it over to Bevin, I'd like to remind listeners that today's remarks include forward-looking information and statements that are subject to the risks and uncertainties addressed in our public disclosure documents available under South Bow's SEDAR+ profile and in South Bow's filings with the SEC.

Today's discussion will also include non-GAAP financial measures and ratios that may not be comparable to those presented by other entities. With that, I'll turn it over to Bevin Wirzba, President and Chief Executive Officer Good morning everyone. We appreciate you joining us today. While we're proud of our safe and reliable operations, strong financial performance and improved outlook for 2026, the defining achievement of the first half of the year was the success of our open season and the momentum we've continued to build across our growth program portfolio.

Securing 465,000 barrels a day of 20-year customer commitments from a broad producer group was a significant milestone for our team and, more importantly, a strong endorsement from our customers. This demonstrates the value of our corridor, the strength of our market position and the continued need for additional egress capacity to support growing Western Canadian crude oil production and deliver significant long-term economic benefits. These commitments are also a critical enabler for our customers.

The production growth associated with these commitments will help generate the cash flows needed to enable ambitious, larger-scale investments across the Western Canadian Sedimentary Basin in the years ahead. Achieving commercial success has enabled us to move into the next phase of development as we advance the work required to support a final investment decision, which we are targeting for mid-2027. Over the coming months, we will focus on stakeholder engagement, execution planning, cost refinement, financing and securing the permit durability needed to support that decision. As we've said previously, permit durability remains a key requirement for South Bow.

The infrastructure we operate today and the infrastructure we are looking to develop will be needed for decades to come, spanning multiple governments and market cycles while delivering significant long-term economic benefits. That's why it's critical that the certainty needed is in place to support these investments through the duration of their construction and throughout their operations.

We have considered that requirement at every stage of this process and we would not have launched the open season or advanced commercialization activities if we did not believe there was a credible path to securing the certainty needed to support a project of this importance and this scale. As with all growth opportunities, we will continue to evaluate the opportunity through the same disciplined, low-risk framework that defines South Bow. With that, I'll hand it over to Richard to provide more detail on our operational performance, integrity activities and the progress we're making across our growth portfolio.

Richard Pryor, Senior Vice President and Chief Operating Officer Thanks, Bevin. Safe and reliable operations, strong asset integrity and disciplined execution remain the foundation of our business. Starting with pipeline integrity, we continue to make meaningful progress on the remedial actions associated with the milepost 171 incident. The data and insights gained through this work are being incorporated into our ongoing integrity management programs and helping to strengthen system integrity and support long-term safe and reliable operations.

We remain encouraged by the progress we've made and continue to expect pressure restrictions to be lifted in a phased manner through the end of 2026 and into 2027 as this work advances. Turning to operations, Q2 was another solid quarter for the business. S. Gulf Coast segment of the Keystone Pipeline system was particularly strong, as disruptions to global crude drove increased demand for connectivity to refining and export markets.

S. Gulf Coast segment, reflecting close collaboration across our commercial and operational teams and highlighting the value of our corridor. Our team and assets continue to respond effectively to changing market conditions while providing customers with reliable access to the PADD 2 and 3 markets. More broadly, the quarter reinforced the strategic value of South Bow's corridor.

As Western Canadian production continues to grow, our customers increasingly value competitive market access, which we provide to North America's strongest demand markets. That same demand for market access underpins the growth opportunities we are advancing today, bringing me to our proposed Prairie Connector project and the joint development of the Liberty Bridge project with our partner Bridger. As Bevin outlined in his earlier comments, our efforts today are focused on advancing the work required ahead of a final investment decision to support disciplined planning and efficient execution.

South Bow and Bridger are coordinating efforts while leveraging execution expertise and direct experience across our respective geographies. For Prairie Connector, our team continues to advance stakeholder engagement, execution planning and other development workstreams. For Liberty Bridge, which would utilize an established corridor on privately held land to connect the Guernsey Hub and Cushing, our teams are active across a number of development workstreams. That effort is focused on stakeholder and landowner engagement, permitting and execution planning.

As we advance these projects, South Bow and Bridger will continue to bring the same operational, technical and commercial rigor that underpin our businesses. With that, I'll turn it over to Van to discuss our financial performance and updated outlook for 2026. Van Dafo, Senior Vice President and Chief Financial Officer Thanks, Richard, and good morning. Our second quarter results demonstrate the strength of South Bow's underlying business.

S. Gulf Coast segment of our system translated into another quarter of solid financial results. At the same time, we continue to strengthen our balance sheet, return capital to shareholders and advance our growth priorities. Our strong results during the first half of the year reflect the competitive positioning of our assets and the efforts of our team to deliver value through a dynamic market environment.

04 billion within a range of 2% at the upper end and 1% at the lower end. We have also increased our full-year distributable cash flow guidance to 665 million within a range of 2%. Our strong earnings and cash flow generation continue to support balance sheet improvement. 4 times net debt to normalized EBITDA, reflecting continued progress towards our highest capital allocation priority.

This continued improvement in our financial position strengthens our ability to pursue growth opportunities while maintaining the disciplined capital allocation approach that defines South Bow. Accordingly, we have increased our growth capital outlook for the year to support development activities associated with the Prairie Connector and Liberty Bridge projects. These investments are focused on advancing the development activities required to support a final investment decision and are being evaluated through the same disciplined capital allocation lens that guides all investment decisions at South Bow.

50 per share yesterday, reflecting our ongoing commitment to returning capital to shareholders. With that brief overview of our financial performance and outlook, I'll turn it back to Bevin for closing remarks. Bevin Wirzba, President and Chief Executive Officer Thanks, Van. Thanks, Richard.

So, before we move to questions, I'd like to briefly touch on an important board leadership transition that we announced yesterday as part of our Board of Directors' ongoing succession planning process. Hal Quizley stepped down as Chair of the Board and George Lewis was appointed Chair. On behalf of the entire management team and myself personally, I'd like to thank Hal for his leadership, counsel and mentorship through South Bow's launch as an independent company and congratulate George on his appointment. We look forward to continuing to work closely with both Hal and George as we execute on our long-term strategy.

So, in closing and looking more broadly at the first half of the year, I believe South Bow continues to demonstrate the strengths that differentiate our business. We have delivered safe and reliable operations, strengthened our financial position and advanced our growth portfolio in a disciplined manner. At the same time, we continue to advance opportunities that build on the strategic advantages of our corridor and the capabilities we have collectively developed through decades of operating critical energy infrastructure.

These opportunities have the potential to strengthen our competitive positioning and support the next phase of growth for both South Bow and our customers. The success of the open season reinforces our view that customers strongly support the additional egress capacity needed to grow Western Canadian crude oil production and that South Bow is uniquely positioned to help meet that demand. As we look ahead over the coming months and quarters, our priorities remain unchanged. We will continue to focus on safe and reliable operations, disciplined growth and financial strength.

We believe those principles, combined with the advantages of our corridor and the opportunities in front of us, position South Bow to continue creating long-term value for shareholders while meeting our customers' evolving market access needs. With that, I'll now ask the operator to open the line for questions. OPERATOR Thank you. At this time we will conduct the question-and-answer session.

As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Maurice Choi of RBC Capital Markets.

Your line is now open. Maurice Choi, Analyst at RBC Capital Markets Thank you and good morning everyone. Just want to start with the incremental details you share about your successful open season. Obviously there are many pipeline alternatives that are being proposed out there.

So just curious whether, at a very high level, what are your customers telling you about why your pipeline was the one that, or at least one of the ones that, they supported. Bevin Wirzba, President and Chief Executive Officer Yeah. Thank you, Maurice. Our customers, you know, we've indicated all along that we are a customer-led strategy and we had the opportunity to listen and listen to what they like about our base systems and what they're really striving for.

And obviously having the highest netback that you can deliver is important to our customers and so having a competitive Toll is very critical, which we delivered in our open season, very competitive toll over the long term with certainty around those tolls over a 20-year period. The second thing was getting to a market that was resilient. And we've consistently said that the demand in the Gulf Coast for Canadian crude into that refining market was, was, and is, and will be resilient for decades to come. And so enabling a batch system to serve directly in a bullet down to the Gulf Coast is what our customers were looking for.

In addition to that, we have, since creating the initial system of Keystone, been able to deliver to multiple delivery points. And having that flexibility for our customers to deliver into different kind of exit markets is very critical for our customers. Maurice Choi, Analyst at RBC Capital Markets Thanks. And maybe you could finish off with a question on Liberty as well as Prairie Connector.

You mentioned multiple times today in the past about permit durability, and that's being a key requirement. I wonder if you could just paint a blue-sky scenario for us what the ideal situation is for you in terms of permit durability. What does that look like? And just take one step further, like what are some of the things that your counterparty who can give you that durability still wants to see before giving you that durability?

Bevin Wirzba, President and Chief Executive Officer Maurice, I'd like to answer that by going back to first principles. As a developer, we've learned over the years that risk allocation in a project is really important. And there's risks that we should be managing, and there's risks that our customers are undertaking, and there's risks that are not able to be mitigated by ourselves or our customers. And that's what we focus on in terms of the permit durability component.

And so while we, while we all take execution and development risk across the project with our partner, our customers have taken 20-year commitments and commodity price exposure through that period. Ensuring that we have a permitted project in place that can remain durable through that period is something that we'll need others to step in on. And so we've been working on programs in the United States that are well established to apply and to work through the process of seeking that durability in the United States. In Canada, there are fewer precedents, but we did achieve a precedent when we advanced previously projects, and we're trying to navigate those right now.

And so we're going to be a little bit light on the details on what that looks like specifically, Maurice, but we were well advanced in those discussions to seek what we can achieve. And what's important for us is that we don't want to expose our shareholders to risks that they shouldn't be exposed through the development of a project like this. So we've proven that commerciality is there, we've proven that there's a desire to have the project move forward. We believe there's been very constructive support both in Canadian governments as well as the United States government.

And we're just trying to finalize what form that takes over the next number of months. Maurice Choi, Analyst at RBC Capital Markets Perfect. That makes sense. Thank you very much.

OPERATOR Thank you. Our next question comes from the line of Sam Burwell of Jefferies. Your line is now open. Sam Burwell, Analyst at Jefferies Hey guys.

Good morning. Wanted to ask how much progress has been made on permitting Liberty, given that you've characterized it as an existing corridor? So is there any pre-existing permitting to leverage and then maybe at a higher level, how much is baked into the FID timeline in the way of contingencies, particularly in regards to permitting on the US side? Richard Pryor, Senior Vice President and Chief Operating Officer Yeah, thanks.

It's Richard here. So with respect to the Liberty Bridge project, as we've mentioned, you know, we acquired a significant amount of work that was previously done.