Keystone restrictions, market uncertainty weigh on South Bow earnings forecast

Hamilton Spectator

16-05-2025

CALGARY - Oil shipper South Bow Corp. is lowering the upper end of its 2025 earnings forecast due to market uncertainty and ongoing pressure restrictions on its Keystone pipeline.
A segment of the Alberta-to-Texas system ruptured and spilled crude onto North Dakota farmland last month.
The Calgary-based company says earnings before interest, taxes, depreciation and amortization are expected to be around US$1.01 billion this year, as earlier predicted.
However, its most optimistic scenario would see one per cent added to that figure instead of three per cent.
But South Bow also said its more pessimistic scenario has improved thanks to better clarity over the impact of U.S. tariffs and strong first-quarter results.
It's now predicting a two-per-cent downside to its EBITDA, down from three per cent.
South Bow says about 90 per cent of its business is contracted, meaning it has very little risk.
It said it has been able to meet contractual commitments to ship 585,000 barrels of oil per day on Keystone. The system starts in Hardisty, Alta., and delivers oilsands crude to refineries in the U.S. Midwest and Gulf Coast, as well as the Cushing, Okla., storage hub.
During the first quarter, about 613,000 barrels per day flowed on the line, down from 643,000 a year earlier.
'We expect to deliver on our committed contracts for the remainder of the year, though we expect to have limited capacity to transport any uncommitted or spot volumes on our Keystone system with the pressure restrictions in place,' chief financial officer Van Dafoe told analysts on a conference call Friday.
In early April, a segment of South Bow's Keystone pipeline in North Dakota ruptured, spilling more than 556,000 litres of oil onto a field. It was able to bring the pipe back into service a week later, but regulators have ordered it to pump oil at a lower pressure for now.
Chief operating officer Richard Prior said 85 per cent of the spilled oil has been injected back into the pipeline, with the rest disposed of at an approved treatment facility.
The company aims to fully clean up the site by mid-year and expects insurance policies to cover the remediation costs.
Chief executive Bevin Wirzba said there are also contract provisions with customers that allow the company to collect tolls when a pipeline is out of commission.
'No incident is ever acceptable at South Bow, but I'm proud of the way our team came together and demonstrated South Bow's ability to execute and get our system back up quickly and effectively while meeting the expectations of our regulators, the surrounding community, and local leaders,' he said on the call.
'And the collaboration I witnessed throughout our organization showed our strength to be agile and perform as a stand-alone entity while coming together to find answers.'
South Bow was spun off from pipeline giant TC Energy last October.
Late Thursday, it said net income for the first three months of 2025 was US$88 million, down from US$112 million a year earlier, before it became an independent firm.
Net income per share was 42 cents US compared to 54 cents US during the first quarter of 2024.
Revenues were US$498 million, a drop from US$544 million a year earlier.
South Bow said there's more crude oil pipeline capacity in Western Canada than there is supply to fill it.
'As a result, the demand for uncommitted capacity on South Bow's Keystone Pipeline is expected to remain low in the near term,' it said.
'Additionally, rapidly changing global trade policies, including tariffs, have introduced economic and geopolitical uncertainty, leading to significant volatility in commodity prices and pricing differentials.'
This report by The Canadian Press was first published May 16, 2025.
Companies in this story: (TSX: SOBO) (TSX: TRP)
Note to readers:This is a corrected story. An earlier version had an incorrect figure for South Bow's earnings per share in the first quarter of 2024.