South Bow Raises 2026 Cash Flow Guidance 4% To $690 Million, Guides 2027 Lower At $630 Million
The pipeline operator also projects 2027 normalized EBITDA of about $1,070 million as third-quarter demand for capacity cooled.
South Bow, which operates 4,900 kilometres of crude oil pipeline linking Alberta supply to U.S. refiners, raised its 2026 distributable cash flow guidance by 4% to $690 million in its third-quarter results on Wednesday, then guided 2027 to about $630 million.
Taxes lift 2026, then pull 2027 down
The company credits the 2026 raise to lower-than-expected current income taxes, with a range of 2%. It reaffirmed 2026 normalized EBITDA, an adjusted earnings measure, at $1,040 million. For 2027 it expects distributable cash flow of about $630 million, within a range of 4%, mainly because current income taxes will be higher than in 2026.
For 2027 it projects normalized EBITDA of about $1,070 million, within a range of 2%, including added contribution from the Blackrod Connection Project. It guided financial charges of about $300 million and a 22% to 23% effective tax rate, and said most EBITDA comes from committed arrangements with minimal commodity-price or volume risk.
Demand for capacity cools from the second quarter
Third-quarter revenue was $503 million and net income was $99 million, or $0.47 per share. Normalized EBITDA was $248 million, in line with expectations and down 11% from the second quarter. Distributable cash flow was $187 million, up 7% from the second quarter, helped by a one-time favourable current income tax adjustment.
The company said pricing differentials tightened and demand for capacity moderated as the second quarter's disruptions to global crude trade flows eased. Throughput on the Keystone Pipeline averaged about 586,000 barrels a day, and on the U.S. Gulf Coast segment about 663,000, against 800,000 on that segment in the second quarter.
South Bow expects Cushing, Oklahoma, inventories to stay low and conditions to remain volatile through 2027, potentially tempering demand for uncommitted capacity. It also expects Western Canadian supply growth to outpace added pipeline capacity in 2027, which it says should support wider differentials.
Deleveraging, dividend and projects
Long-term debt ended the quarter at $5.4 billion and net debt at $4.4 billion. Net debt to normalized EBITDA was 4.3 times, down from 4.4 times at June 30. South Bow repurchased $320 million of senior notes for $314 million in cash, and expects the ratio to decline modestly through 2027.
The board declared a $0.50 per share quarterly dividend, payable Jan. 15, 2027, to holders of record on Dec. 31, 2026.
The Prairie Connector and the Liberty Bridge Pipeline, a joint project with Bridger Pipeline, are advancing toward a targeted mid-2027 final investment decision. South Bow expects its share of pre-decision development costs at about $65 million in each of 2026 and 2027.
On safety, the company said the federal pipeline regulator approved its remedial work plan for the Milepost 171 incident in the third quarter, and it has begun lifting pressure restrictions on some Keystone segments. A contractor died at its Cushing facility during the quarter; the incident is under investigation. Heather Krislock became chief operating officer and Richard Prior chief commercial officer, effective Oct. 19.
South Bow hosts its results call and webcast Thursday at 10 a.m. Eastern.
