South Bow Corporation Q1 FY2026 earnings call

• Safety and pipeline integrity: Continued remedial work on Keystone pipeline, including inline inspections and integrity digs, and developed a new phased array ultrasonic tool with three successful runs. Expect pressure restrictions to be lifted phased manner later this year. - Operations: Keystone pipeline had 95% system operating factor, transporting over 600,000 barrels per day. Strong demand for capacity on U.S. Gulf Coast segment, with higher throughput on MarketLink in second quarter. - Growth: Evaluating smaller-scale customer-led opportunities within existing footprint, including expanding interconnectivity. Advancing opportunities with discipline, considering capital allocation, dividend sustainability, credit profile, leverage neutrality, and per share accretion.

Southbow delivered normalized EBITDA of $257 million in the first quarter of 2026. Normalized EBITDA in the Keystone segment declined due to lower maintenance activity, but was offset by higher contributions from the marketing segment. Distributable cash flow was $168 million, increasing quarter over quarter. Exited the quarter with a net debt to normalized EBITDA ratio of 4.7 times. The Board approved a quarterly dividend of 50 cents per share.

• Normalized EBITDA outlook for 2026 remains $1.03 billion within a 2% range. - Distributable cash flow full-year outlook remains $655 million. - Leverage profile to improve modestly through 2026 as Blackrod cash flows ramp up in second half. - Board approved quarterly dividend of 50 cents per share.

• Geopolitical and market uncertainty can impact performance. - Risks related to Prairie Connector project evaluation, including commercial, regulatory, and last mile risks. - Need to manage and mitigate risks associated with any project to protect shareholders.

Q: Better understand key hurdles remaining for Prairie Connector prior to decision.

A: Evaluate contracting strategy, supply chain procurement, cost estimates, execution plan, and manage last mile risk.

Q: Current max capacity on Gulf Coast portion of Keystone and expansion potential.

A: Excess of 800,000 barrels per day, mostly at design capacity with possible modest optimization.

Q: Durability of higher demand on U.S. Gulf Coast segment and expansion discussions.

A: Volumes driven by macro factors, don't anticipate same strength in back half; in constant dialogue with customers about adding connectivity at southern end.

Q: Thoughts on structure of Prairie Connector and next potential projects after BlackRod.

A: Still baking cake on structure, focused on intra-Alberta system expansions like in Grand Rapids area.

Q: Pressure-restricting lifting process on Keystone and outlook for interruptible volumes.

A: Making good progress, expect to start lifting restrictions phased later this year, volumes to increase once restrictions removed.

Q: Pent-up demand of regional pipeline build-out and balance sheet capex plans.

A: See growth potential, number of barrels to move, focus on reducing leverage, have free cash flow reserved for investment, building cash on balance sheet.

Q: Impact of geopolitical events on WCSB crude oil supply and leverage kick down with BlackRod.

A: Regulatory and policy environment clarity needed; leverage to improve with BlackRod cash flows ramping up, combination of increased EBITDA and cash accumulation.