Jefferies has revised its price target for South Bow (SOBO, Financial), increasing it from C$33 to C$37, while maintaining a Hold rating on the company's shares. This adjustment reflects an updated assessment of the company's potential market performance.
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.