Core Viewpoint - South Bow Corporation (SOBO) has a strong track record of exceeding earnings estimates and is well-positioned for future earnings surprises, particularly in its upcoming quarterly report [1][5]. Earnings Performance - In the most recent quarter, South Bow Corporation reported earnings of $0.42 per share, surpassing the expected $0.38 per share, resulting in a surprise of 10.53% [2]. - For the previous quarter, the company reported $0.47 per share against an expectation of $0.42 per share, achieving a surprise of 11.90% [2]. Earnings Estimates and Predictions - Recent estimates for South Bow Corporation have been trending upward, with a positive Earnings ESP (Expected Surprise Prediction) indicating a strong likelihood of an earnings beat [5][8]. - The current Earnings ESP for the company is +2.70%, reflecting increased analyst optimism regarding its earnings prospects [8]. Zacks Rank and Success Rate - South Bow Corporation holds a Zacks Rank of 3 (Hold), which, when combined with a positive Earnings ESP, suggests a high probability of beating consensus estimates, with historical data indicating nearly 70% success in such scenarios [6][8].

Core Viewpoint - South Bow Corp. is set to release its third-quarter 2025 financial and operational results on November 13, 2025, followed by a conference call and webcast on November 14, 2025, to discuss these results and the outlook for 2026 [1][2]. Financial and Operational Results - The third-quarter 2025 financial and operational results will be disclosed after market close on November 13, 2025 [1]. - A conference call and webcast will take place on November 14, 2025, at 8 a.m. MT (10 a.m. ET) to discuss the results and future outlook [2]. Conference Call and Webcast Details - Participants can register for the conference call via a provided link to receive a unique PIN for access [3]. - The conference call can be accessed by dialing in with the unique PIN or using an automated call option [3]. - A replay of the event will be available on the company's investor relations website following the event [4]. Company Overview - South Bow operates 4,900 kilometers (3,045 miles) of crude oil pipeline infrastructure, connecting Alberta crude oil supplies to U.S. refining markets [6]. - The company is recognized for providing safe and reliable transportation of crude oil to high-demand markets in North America [6]. - South Bow is an investment-grade entity, with its common shares traded on both the Toronto Stock Exchange and the New York Stock Exchange under the symbol SOBO [6].

Financial Data and Key Metrics Changes - The company generated $250 million of normalized EBITDA in the second quarter, maintaining debt metrics for the second consecutive quarter [4] - The outlook for normalized EBITDA for 2025 is reaffirmed at $1.01 billion, while distributable cash flow is revised to $590 million from $535 million [10][12] - Maintenance capital expenditures outlook is reduced by $10 million to $55 million for 2025 [11] Business Line Data and Key Metrics Changes - 90% of normalized EBITDA is contracted, indicating stability in the base business despite market volatility [10] - The company continues to fulfill contractual commitments of 585,000 barrels per day while addressing operational challenges [7] Market Data and Key Metrics Changes - The company anticipates lower demand for uncommitted capacity in the near term due to the startup of the TMX pipeline [27] - 94% of the Keystone system is fully contracted, with only 6% reserved for spot capacity [28] Company Strategy and Development Direction - The company is transitioning from a rate-regulated entity to a more commercially focused organization, optimizing workflows for long-term competitiveness [4][5] - Strategic focus includes leveraging pre-invested capital in Alberta and Gulf Coast systems to provide incremental capacity solutions [17] Management's Comments on Operating Environment and Future Outlook - Management expresses confidence in the safety of operations and the ability to address corrective actions from the Milepost 171 incident [6][9] - The company is on track to meet near-term deleveraging targets and maintain a quarterly dividend of $0.50 per share [12][13] Other Important Information - The total estimated cost for the Milepost 171 incident, including response and cleanup, is approximately $60 million, with insurance expected to cover most of these costs [7] - The root cause failure analysis is ongoing, with results expected by the end of September [8][24] Q&A Session Summary Question: Energy infrastructure development in Canada - Management anticipates higher crude oil production and is committed to leveraging existing infrastructure to meet demand [16] Question: Opportunities post-TSA exit - Exiting TSAs allows the company to focus solely on its business and accelerate workflow optimization [18][19] Question: Delay in root cause analysis - Management clarifies that there is no significant delay, and the analysis is expected to be completed in September [22][23] Question: Demand for uncommitted capacity - The company remains competitive in the Gulf Coast market and anticipates limited spot volumes in the near term [27][28] Question: Organic and inorganic growth opportunities - The company is actively pursuing growth opportunities in both Canada and the U.S., with a balanced focus [33][34] Question: Cash tax trajectory - Current tax reductions are expected to be around $15 million, which will be used for growth capital or deleveraging [40][42] Question: Metallurgical analysis findings - The analysis indicates an isolated issue rather than a systemic problem, with further details pending the completion of the root cause analysis [44][46] Question: Future toll revisions - Management expresses confidence in the market-driven contracts of Keystone, differing from competitors' tolling mechanisms [50][52]

Financial Data and Key Metrics Changes - The company generated $250 million of normalized EBITDA in Q2 2025, maintaining debt metrics for the second consecutive quarter [5][6] - The outlook for normalized EBITDA for 2025 is reaffirmed at $1.01 billion, while distributable cash flow is revised to $590 million, up from $535 million [13][15] - Maintenance capital expenditures outlook is reduced by $10 million to $55 million for 2025 [14] Business Line Data and Key Metrics Changes - 90% of normalized EBITDA is contracted, indicating stability in the base business despite market volatility [13] - The company continues to fulfill contractual commitments of 585,000 barrels per day while addressing operational challenges [10][12] Market Data and Key Metrics Changes - The company anticipates lower demand for uncommitted capacity in the near term due to the startup of the TMX pipeline [31] - 94% of the Keystone system is fully contracted, with only 6% reserved for spot capacity, reflecting a competitive position in the Gulf Coast market [31] Company Strategy and Development Direction - The company is transitioning from a rate-regulated entity to a more commercially focused organization, optimizing workflows for long-term competitiveness [5][6] - Strategic focus includes leveraging pre-invested capital in Alberta and Gulf Coast systems to provide incremental capacity solutions [20] Management's Comments on Operating Environment and Future Outlook - Management expresses confidence in the company's ability to address operational challenges and maintain a solid financial outlook for 2025 [6][10] - The company is committed to enhancing its value proposition by providing optimal paths to strong demand markets [7] Other Important Information - The total estimated cost for the incident related to Milepost 171 is approximately $60 million, with insurance expected to cover most of these costs [10] - The company is on track to exit 2025 with a net debt to normalized EBITDA ratio of approximately 4.8 times [15] Q&A Session Summary Question: Future energy infrastructure in Canada and its impact on SOBO - Management anticipates higher crude oil production and is committed to leveraging existing infrastructure to meet demand [19][20] Question: Opportunities post-exiting TSAs - Exiting TSAs allows the company to focus solely on its business and accelerate workflow improvements [21][22] Question: Delay in third-party root cause analysis - Management clarifies that the process is dynamic and expects analysis results by September [26][28] Question: Demand for uncommitted capacity and competition - The company remains competitive in the Gulf Coast market and anticipates limited spot volumes in the near term [31][32] Question: Organic and inorganic growth opportunities - Management is focused on pursuing growth opportunities in both Canada and the U.S., with a balanced approach [39] Question: Cash tax trajectory and its impact on CapEx - Current tax reductions will provide additional distributable cash flow for growth capital or deleveraging [47] Question: Findings from metallurgical analysis - The analysis indicates an isolated issue rather than a systemic problem, with further details expected from the root cause analysis [50][51] Question: Comparison with other Canadian pipeline assets - Management is confident in the market-driven contracts of Keystone, differing from competitors' tolling mechanisms [55]

Group 1 - South Bow (NYSE: SOBO) is an oil-focused midstream company that was spun off from TC Energy (TRP) and became public last year, attracting interest due to its favorable valuation [1] - The investment group European Small Cap Ideas specializes in high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income [1] - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]

Revenue and Income - Revenue for Q2 2025 was $524 million, a decrease of 5% from $554 million in Q2 2024; for the first half of 2025, revenue was $1,022 million, down 7% from $1,098 million in the same period of 2024[8][32][33] - Income before income taxes for Q2 2025 increased to $126 million from $110 million in Q2 2024; however, for the first half of 2025, it decreased to $240 million from $256 million in the same period of 2024[15][25] - Revenue for the Keystone Pipeline System decreased by 7% to $794 million for the six months ended June 30, 2025, primarily due to lower throughput volumes[55] - Marketing segment revenue decreased by 21% to $106 million in Q2 2025, attributed to lower volumes sold at lower prices[62] EBITDA and Cash Flow - Normalized EBITDA for Q2 2025 was $250 million, up from $241 million in Q2 2024; for the first half of 2025, it decreased to $516 million from $539 million in the same period of 2024[19][29] - Distributable cash flow for Q2 2025 was $167 million, significantly higher than $90 million in Q2 2024; for the first half of 2025, it increased to $324 million from $276 million in the same period of 2024[8] - Cash from operating activities increased to $194 million in Q2 2025 from $91 million in Q2 2024, primarily due to lower non-cash operating working capital[69] - The company modified the definition of distributable cash flow in Q2 2025, which now excludes adjustments for interest income and other, aiming for a more accurate reflection of cash generated from operations[137] Capital Expenditures - Capital expenditures for Q2 2025 were $34 million, compared to $20 million in Q2 2024; for the first half of 2025, capital expenditures were $66 million, up from $32 million in the same period of 2024[8] - The company invested $27 million in the Blackrod Connection Project during Q2 2025, alongside other capital expenditures related to information systems[68] - Capital expenditures for the Intra-Alberta & Other segment increased by 48% to $37 million in Q2 2025, reflecting investments in maintenance and growth[65] - The company invested $27 million in growth capital expenditures for the Blackrod Connection Project in Q2 2025, compared to $7 million in Q2 2024, reflecting a significant increase in capital investment[89] Debt and Financial Position - Total long-term debt as of June 30, 2025, was $5,774 million, unchanged from June 30, 2024[8][10] - Net debt as of June 30, 2025, was $4,903 million, down from $5,578 million as of June 30, 2024; net debt-to-normalized EBITDA ratio improved to 4.6 from 5.0[8][10] - The net debt-to-normalized EBITDA ratio increased to 4.6 times at June 30, 2025, compared to 4.5 times at December 31, 2024, due to lower normalized EBITDA[53] - The total long-term debt as of June 30, 2025, was $5,774 million, a slight increase from $5,716 million at the end of 2024[145] Dividends - Dividends declared in Q2 2025 amounted to $104 million, with dividends per share at $0.50; for the first half of 2025, total dividends declared were $208 million, with dividends per share at $1.00[8] - The company declared a quarterly dividend of $0.50 per share on May 15, 2025, payable on July 15, 2025, to shareholders of record on June 30, 2025[85] Operational Performance - Keystone Pipeline throughput for Q2 2025 was 544 Mbbl/d, down from 623 Mbbl/d in Q2 2024; for the first half of 2025, throughput was 578 Mbbl/d, down from 633 Mbbl/d in the same period of 2024[8][32] - The Keystone System Operating Factor was 93% for Q2 2025, a decrease from 94% in Q2 2024, indicating a slight decline in operational efficiency[181] - The Company completed cleanup and reclamation of the MP-171 incident site in early June 2025, with ongoing remedial actions[188] Guidance and Outlook - South Bow's 2025 guidance for normalized EBITDA is approximately $1.01 billion, with a range of +1% to -2%, supported by highly contracted cash flows[105] - The company expects distributable cash flow for 2025 to be $590 million, reflecting a 3% variability[102] - South Bow revises its outlook for distributable cash flow to $590 million, reflecting a three percent range adjustment due to lower expected current taxes[107] - The Company anticipates a financial outlook for 2025, including normalized EBITDA, interest expenses, and capital expenditures, with specific guidance for Q3 2025[196] Incident and Costs - The Company incurred $54 million in costs related to the MP-171 incident during Q2 2025, with an additional $4 million provision for expected costs[112] - Separation costs associated with the Spinoff are expected to be approximately $30 million to $40 million in 2025, down from a previous estimate of $40 million to $50 million[109] - The company incurred separation costs of $6 million for the six months ended June 30, 2025, down from $10 million in the same period of 2024[135] Other Financial Metrics - The company’s interest expense for the six months ended June 30, 2025, was $164 million, compared to $189 million for the same period in 2024, reflecting a decrease of 13.2%[132] - The company recorded a normalized EBITDA of $250 million for Q2 2025, compared to $241 million for Q2 2024[131] - The company’s income from equity investments for the six months ended June 30, 2025, was $(26) million, slightly higher than $(25) million in the same period of 2024[140]

Core Viewpoint - South Bow Corp. reported its second-quarter 2025 financial and operational results, highlighting stable performance despite challenges in the market and ongoing projects related to its spinoff from TC Energy [1]. Financial Performance - Revenue for Q2 2025 was $524 million, with a net income of $96 million, translating to $0.46 per share [8]. - Normalized EBITDA for Q2 2025 was $250 million, a 6% decrease from Q1 2025, primarily due to lower contributions from the Marketing segment [5][8]. - Distributable cash flow reached $167 million in Q2 2025 [5]. - The company maintained total long-term debt of $5.8 billion and net debt of $4.9 billion, with a net debt-to-normalized EBITDA ratio of 4.6 times as of June 30, 2025 [5][8]. Operational Performance - Average throughput on the Keystone Pipeline was approximately 544,000 barrels per day (bbl/d) in Q2 2025, with the U.S. Gulf Coast segment averaging about 760,000 bbl/d [5]. - The company completed construction of a 150,000-barrel crude oil storage tank as part of the Blackrod Connection Project, which is expected to be operational in early 2026 [5]. - South Bow successfully completed cleanup and reclamation of the Milepost 171 incident site, with costs estimated at $58 million, largely recoverable through insurance [5][12]. Returns to Shareholders - The company declared dividends totaling $104 million, or $0.50 per share, during Q2 2025, with the next dividend payment scheduled for October 15, 2025 [5][8]. - South Bow's capital allocation priorities include paying a sustainable base dividend and strengthening its investment-grade financial position [23]. Outlook - The demand for uncommitted capacity on the Keystone Pipeline is expected to remain low in the near term due to excess pipeline egress capacity in the Western Canadian Sedimentary Basin [13]. - South Bow anticipates a modest increase in its net debt-to-normalized EBITDA ratio through 2025, with expectations to begin reducing leverage once the Blackrod Connection Project starts generating cash flow in 2026 [14].

Operational Highlights - South Bow's pipeline footprint spans 4,900 km[2] - The company safely and reliably delivers 1.25 million barrels of crude oil per day (MMbbl/d)[2] - Terminal storage capacity reaches 7.6 million barrels (MMbbl)[2] - Keystone Pipeline throughput commitments are currently at 585 Mbbl/d[9] Financial Highlights - The company has 208 million shares outstanding[3] - Market capitalization stands at $5.5 billion[3] - Enterprise value is $10.9 billion[3] - The annual base dividend is $2.00 per share, resulting in a dividend yield of approximately 8%[3] - Q2 2025 normalized EBITDA was $250 million[5] - The net debt-to-normalized EBITDA ratio is 4.6x[5] - The company anticipates exiting 2025 with a net debt-to-normalized EBITDA ratio of approximately 4.8x[7] Contractual Framework - Approximately 90% of normalized EBITDA is contracted[13] - 96% of revenue exposure is to investment-grade counterparties[13] - Approximately 95% of customers are refiners, vertically integrated companies, and producers[13]

Core Insights - South Bow Corporation (SOBO) is positioned to potentially continue its earnings-beat streak in the upcoming report, having surpassed earnings estimates by an average of 20.24% over the last two quarters [1][5] Earnings Performance - For the most recent quarter, South Bow Corporation reported earnings of $0.42 per share, which was below the expected $0.47 per share, resulting in a surprise of 11.90%. In the previous quarter, the company exceeded the consensus estimate of $0.42 per share by reporting $0.54 per share, achieving a surprise of 28.57% [2] Earnings Estimates and Predictions - There has been a favorable change in earnings estimates for South Bow Corporation, with a positive Zacks Earnings ESP of +12.99%, indicating that analysts have recently become more optimistic about the company's earnings prospects [5][8] - The combination of a positive Earnings ESP and a Zacks Rank of 3 (Hold) suggests a high likelihood of another earnings beat, with historical data showing that stocks with this combination beat consensus estimates nearly 70% of the time [6][8] Earnings ESP Explanation - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions, which may provide a more accurate prediction of earnings [7][9]

Core Viewpoint - South Bow Corp. has announced the extension of the expiration dates for its Canadian and U.S. Exchange Offers related to certain outstanding notes, providing holders additional time to exchange their notes for new series with the same interest rates and due dates [1][3][6]. Canadian Exchange Offer - The expiration date for the Canadian Exchange Offer has been extended from 5:00 p.m. ET on August 4, 2025, to 5:00 p.m. ET on August 6, 2025 [3]. - Holders of the 7.625% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2055 and 7.500% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2055 are offered the opportunity to exchange their notes for new series with the same interest rates and due dates [2][4]. - The deadline to withdraw tenders of the Initial Canadian Notes has also been extended to the new expiration date, with all other terms remaining unchanged [3][4]. U.S. Exchange Offer - The expiration date for the U.S. Exchange Offer has similarly been extended from 5:00 p.m. ET on August 4, 2025, to 5:00 p.m. ET on August 6, 2025 [6][7]. - Holders of the 4.911% Senior Notes due 2027, 5.026% Senior Notes due 2029, 5.584% Senior Notes due 2034, and 6.176% Senior Notes due 2054 are offered the opportunity to exchange their notes for new series with the same interest rates and due dates [5][8]. - The deadline to withdraw tenders of the Initial U.S. Notes has also been extended to the new expiration date, with all other terms remaining unchanged [7][8]. Company Overview - South Bow operates 4,900 kilometers (3,045 miles) of crude oil pipeline infrastructure, connecting Alberta crude oil supplies to U.S. refining markets [12]. - The company is based in Calgary, Alberta, and is an investment-grade spinoff of TC Energy, having become a standalone entity on October 1, 2024 [12].