South Bow (SOBO) Q4 2024 earnings summary

Executive summary

• Achieved record safety and operational performance in 2024, with system availability and throughput at all-time highs; Keystone Pipeline SOF at 95% and throughput up 5% year-over-year.

• Completed spinoff from TC Energy on Oct. 1, 2024, launching as an independent company, repaid affiliate debt, and raised $5.8 billion through a notes offering.

• Completed successful debt raise, dual IPOs, and attracted a top-tier board.

• Advanced Blackrod Connection Project, targeting in-service in early 2026.

• Received PHMSA approval to lift pressure restrictions on the affected pipeline segment, improving operational efficiency.

Financial highlights

• 2024 revenue was $2,120 million, up from $2,005 million in 2023; Q4 revenue was $488 million.

• Generated $1.09 billion in normalized EBITDA and $608 million in distributable cash flow for 2024; Q4 normalized EBITDA was $290 million, up 11% sequentially.

• Net income for 2024 was $316 million ($1.52/share), down from $442 million ($2.13/share) in 2023.

• 2025 normalized EBITDA expected at $1.01 billion (±3%), with 90% secured through committed arrangements.

• Quarterly dividend of $0.50 per share approved, payable April 15th; annual dividend guidance for 2025 is $416 million ($2.00/share), subject to board approval.

Outlook and guidance

• Entering 2025 with a strong financial position and on track to meet deleveraging targets; net debt-to-normalized EBITDA ratio expected to rise to ~4.8x by end of 2025, then decline as Blackrod generates cash flow.

• Distributable cash flow expected at $535 million (±3%) in 2025.

• Growth capital expenditures for Blackrod Connection Project estimated at $110 million; maintenance capex at $65 million.

• Deleveraging to begin in 2026 as Blackrod generates cash flow; target of 4.0x leverage by 2028.

• Guidance incorporates tariff and market volatility risks, with a 3% range to account for uncertainties.