CIBC has increased its price target for South Bow (SOBO, Financial), adjusting it from $25 to $26 while maintaining a Neutral rating on the company's shares. This revision comes as the firm updates its Q2 estimates, factoring in the expected delay in unwinding certain marketing positions, which are now projected to extend into Q3.
SOBO Key Business Developments
Release Date: May 16, 2025
- Normalized EBITDA: $266 million for the first quarter.
- Quarterly Dividend: $0.50 per share, payable on July 15th.
- EBITDA Guidance: Reaffirmed at $1.01 billion for 2025.
- Contracted EBITDA: 90% contracted over the next 7 years.
- Net Debt to EBITDA Ratio: Expected to be approximately 4.8 times by the end of 2025.
- System Operating Factor: 98% in the first quarter.
- Keystone Contractual Commitments: 585,000 barrels per day.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- South Bow Corp (SOBO, Financial) reported a strong financial start to 2025 with a normalized EBITDA of $266 million in the first quarter.
- The company successfully maintained its debt metrics despite a volatile market backdrop.
- SOBO declared a quarterly dividend of $0.50 per share, demonstrating its commitment to returning value to shareholders.
- Approximately 90% of SOBO's EBITDA is contracted over the next 7 years, providing financial stability and reducing exposure to commodity price risks.
- The company has made significant progress on its Blackrod Connection Project, which is expected to contribute to future growth.
Negative Points
- SOBO experienced an incident at milepost 171 in North Dakota, which required a system-wide shutdown and pressure restrictions.
- The incident has led to limitations on transporting uncommitted or spot volumes on the Keystone system.
- There is uncertainty regarding the duration of pressure restrictions and the full financial impact of the incident.
- The company faces headwinds from additional pipeline egress capacity and potential tariff impacts, affecting uncontracted volumes.
- SOBO's leverage ratio is expected to increase modestly through 2025 as it advances its Blackrod Connection Project and completes spinoff activities.
