Financial Data and Key Metrics Changes - South Bow generated normalized EBITDA of $1.09 billion and distributable cash flow of $608 million in 2024 [13] - The company expects to generate normalized EBITDA of $1.01 billion in 2025, reflecting a range of 3% [15] - The net debt to normalized EBITDA ratio is forecasted to be approximately 4.8x by the end of 2025 [16] Business Line Data and Key Metrics Changes - The marketing segment is expected to see a reduction of approximately $30 million year-over-year due to decreased activity and certain unwinds of positions to reduce risk [99] - 90% of normalized EBITDA is secured through committed arrangements, minimizing commodity price or volumetric risk [14][28] Market Data and Key Metrics Changes - There is significant demand for uncommitted capacity on Keystone and continued strength in demand for capacity on the U.S. Gulf Coast segment [14] - The company has observed extreme demand in the Gulf Coast for heavy barrels out of Canada, indicating strong supply and demand fundamentals [24] Company Strategy and Development Direction - The company is focused on leveraging existing infrastructure to deliver high returns for shareholders, with a keen interest in energy solutions in the U.S. and Canada [11] - South Bow's capital allocation priorities include paying a sustainable dividend and strengthening its investment-grade financial position [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage risks associated with tariffs and market volatility, with a strong contracted base supporting guidance [28][29] - The company is entering 2025 in a strong financial position and remains on track to meet near-term deleveraging targets [16] Other Important Information - The company received approval from PHMSA to lift pressure restrictions on a segment of the Keystone system, which is expected to improve operational efficiency [96] - The ongoing uncertainty around tariffs may create headwinds for uncommitted capacity, prompting a shift towards a more contracted strategy [15][72] Q&A Session Summary Question: Discussion on open season and interest levels - Management noted that Western Canadian sedimentary basin has been egress constrained for years, but there is encouragement from both supply and demand fundamentals [22][24] Question: Changes in long-term debt-to-EBITDA target - Management confirmed a focus on deleveraging to reach a target of four times by 2028, emphasizing the importance of maintaining a strong balance sheet [26] Question: Guidance on tariffs and downside risks - Management indicated that 90% of EBITDA is contracted, allowing for management of uncertainties within a 3% range [28][29] Question: Future growth opportunities and recapitalized optionality - Management discussed the pre-capitalized corridors and ongoing optimization of existing infrastructure to enhance capacity [38][40] Question: Marketing strategy and market conditions - Management highlighted a shift towards a contracted marketing strategy to mitigate volatility and improve shareholder value [72][106] Question: Variable toll issues and customer relations - Management is prioritizing customer-centric solutions and is in discussions to resolve ongoing commercial and legal issues [78][81] Question: Long-term EBITDA growth outlook - Management expressed confidence in achieving a 2% to 3% growth rate, driven by increased delivery points and capturing additional volumes [87][106] Question: PHMSA approval impact on capacity - Management confirmed that lifting the pressure restriction will enhance operational efficiency but did not provide specific throughput increases [96] Question: Balancing growth and deleveraging - Management stated that growth opportunities are aligned with deleveraging efforts, particularly through projects within pre-capitalized corridors [110][111]
South Bow Corporation(SOBO) - 2024 Q4 - Earnings Call Transcript