South Bow Secures Transport Commitments for 465,000 Barrels a Day, Raises 2026 Earnings Outlook
Key Facts
South Bow raised its 2026 adjusted EBITDA outlook to US$1,040 million after posting $280 million in the second quarter, and announced binding 20-year transportation commitments from 9 customers for total capacity of 465,000 barrels a day. The commitments relate to the proposed Prairie Connector project, which would transport crude from Hardisty to U.S. delivery points. The company said its higher annual outlook followed stronger-than-expected first-half results and strong operational performance. However, it expects adjusted earnings in the third quarter to be about 10% below the second-quarter level as demand for U.S. Gulf Coast segment capacity moderates. The project remains in development, with a final investment decision targeted for mid-2027.
The company reported second-quarter revenue of $546 million, compared with $524 million in the same period a year earlier, while adjusted earnings rose to $280 million from $250 million. The comparison shows year-over-year growth in revenue and adjusted operating earnings, alongside the net income reported in the results disclosure. On a quarter-over-quarter basis, distributable cash flow was $175 million, up 4% from the first quarter. The company declared a dividend of $0.50 per share. Net debt also declined to $4.6 billion at June 30, equal to 4.4 times adjusted earnings, from 4.7 times at the end of March.
Crude flows across the company’s assets improved in the second quarter. Average throughput on the Keystone pipeline was about 596,000 barrels a day, compared with 544,000 a year earlier. On the U.S. Gulf Coast segment, the average rose to 800,000 barrels a day from 760,000. South Bow attributed strong demand for capacity on the segment to disruptions in global crude oil trade flows. These operational factors support the company’s explanation for raising its annual outlook, along with stronger-than-expected first-half results. However, the company expects demand for Gulf Coast capacity to moderate in the third quarter, explaining its forecast for adjusted earnings below the second-quarter level.
The commitments tied to Prairie Connector followed a binding open season that closed on March 30, 2026, and whose success the company announced on May 29. The agreements require customers to reserve transportation capacity for 20 years from Hardisty to U.S. delivery points. According to the design disclosed by the company, the project includes about 380 kilometers of new 36-inch pipeline. It also makes use of about 150 kilometers of previously installed and preserved pipeline of the same diameter, as well as two pump stations. The contracts give the project a disclosed commercial foundation, while final investment approval remains subject to completing development requirements, regulatory certainty and permit robustness.
South Bow raised its 2026 adjusted earnings outlook to $1,040 million, with a range of up to 2% above and 1% below the base outlook. It also raised its distributable cash flow outlook to $665 million, within a 2% range. The company said the higher earnings outlook reflects stronger-than-expected first-half results, strong operational performance and elevated demand for U.S. Gulf Coast segment capacity. By contrast, it expects third-quarter earnings to be about 10% below the $280 million recorded in the second quarter as that demand moderates. The company plans to spend about $65 million during 2026 on pre-final-investment-decision development costs for the Prairie Connector and Liberty Bridge projects.
Securing capacity does not constitute a final decision to build Prairie Connector. South Bow said a final investment decision is targeted for mid-2027 and will remain conditional on completing development work, achieving regulatory certainty and ensuring permit robustness. The expected spending ahead of that decision is part of preparing the two projects, not an announcement that construction is starting. The company is scheduled to report its third-quarter financial and operating results after markets close on November 4, 2026. Management will hold a call to discuss the results and its 2027 outlook on November 5. In the latest EL7 data available for this coverage, SOBO shares closed at $35.43 on October 23, 2026.