- Canada, Alberta reach carbon compromise that may pave way for new 1M bbl/day oil pipeline
May 17, 2026
[Three Pipeline Reflecting Blue Sky]
zorazhuang/iStock via Getty Images
Canada's Prime Minister Mark Carney and Alberta's Premier Danielle Smith signed a deal Friday that could open the way to start construction on a new crude oil pipeline [https://www.cbc.ca/news/politics/carney-smith-energy-announcement-mou-9.7200652] capable of carrying 1M bbl/day of Canadian oil to the coast of British Columbia, where it can be shipped to Asian countries that need the crude.
The agreement, which builds on the memorandum of understanding that the federal and provincial governments signed in November, includes a plan to increase Alberta's industrial carbon price, though at a slower pace than previously projected.
It would raise the effective carbon credit cost to C$130/metric ton (US$94.59) by 2040 from C$95/ton, but under a previous policy from former Prime Minister Trudeau, the industrial carbon tax was set to climb to C$170/ton by the end of the decade.
The deal is unlikely to satisfy environmentalists or oil executives who fear any industrial carbon price puts the industry at a disadvantage to the U.S., which does not have carbon prices.
But just hours after Friday's signing ceremony in Calgary, Enbridge (ENB [https://seekingalpha.com/symbol/ENB]) CEO Greg Ebel told Bloomberg that his company "definitely would consider [https://www.bloomberg.com/news/articles/2026-05-15/enbridge-warms-up-to-new-canada-oil-pipeline-after-carbon-compromise?srnd=homepage-americas]" backing a new pipeline, calling the agreement "a big step forward for Canada."
Just three months ago, Ebel said his company would not take on the development risk of a new west coast pipeline.
Premier Smith told Bloomberg that the blocking of the Strait of Hormuz has sparked demand in Asia for new and reliable oil supplies and strengthened the case for a new Canadian pipeline.
"They will take whatever amount of energy we're able to provide to them, and it will act as a hedge against that insecurity of what might happen in the Middle East," Smith said.
The premier said the potential owners of a new conduit could be a combination of indigenous groups, foreign oil buyers, and pipeline firms such as Enbridge (ENB [https://seekingalpha.com/symbol/ENB]), South Bow (SOBO [https://seekingalpha.com/symbol/SOBO]), or government-owned Trans Mountain Corp.
The pact was criticized by British Columbia Premier David Eby, who said his province still wants the federal government to keep a federal ban on oil tankers off its northern coast.
Alberta now has until July 1 to submit a proposed pipeline project for federal backing; should the proposal pass muster while other conditions are met, Carney could declare the pipeline project in the national interest, which would accelerate the approval process and set up construction to begin as early as September 2027.
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* Enbridge FQ1 Earnings: An Equity Bond For Uncertain Times [https://seekingalpha.com/article/4902860-enbridge-fq1-earnings-an-equity-bond-for-uncertain-times]
* Important Warning For Enbridge Investors: A Strong Quarter May Not Be Enough [https://seekingalpha.com/article/4897567-important-warning-for-enbridge-investors-a-strong-quarter-may-not-be-enough]
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- South Bow Q1 Earnings Call Highlights
May 15, 2026
Key Points
Interested in South Bow Corporation? Here are five stocks we like better. South Bow reaffirmed its full-year 2026 outlook, keeping normalized EBITDA guidance at $1.03 billion and distributable cash flow at $655 million. First-quarter normalized EBITDA was $257 million and distributable cash flow was $168 million, while the board approved a quarterly dividend of $0.50 per share. The company said its Prairie Connector project is still under review after bids closed in March, with management using a 60-day evaluation period to assess customer proposals, partnerships, costs, permitting and risk allocation before making any commercial decision. Operational performance remained strong, with Keystone running at a 95% system operating factor and moving more than 600,000 barrels per day. South Bow also continued integrity work on Keystone and expects pressure restrictions to be lifted gradually later in the year, potentially extending into 2027.
South Bow (NYSE:SOBO) reported first-quarter 2026 results that management said were supported by stable cash flows, strong system operations and continued progress on key capital and integrity initiatives, while the company held its full-year financial outlook unchanged.
President and Chief Executive Officer Bevin Wirzba said South Bow delivered “solid first quarter results” despite “heightened geopolitical and market uncertainty.” He said the company advanced its 2026 priorities, including placing the Blackrod Connection Project into commercial service, continuing remedial integrity work on the Keystone Pipeline and conducting the open season for the proposed Prairie Connector project.
South Bow reaffirms 2026 EBITDA and cash flow guidance
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Senior Vice President and Chief Financial Officer Van Dafoe said South Bow generated normalized EBITDA of $257 million in the first quarter, which he described as in line with market expectations and modestly higher than the fourth quarter of 2025. He said lower maintenance activity weighed on normalized EBITDA in the Keystone segment, but that decline was more than offset by higher contributions from the marketing segment.
The company reaffirmed its 2026 normalized EBITDA outlook of $1.03 billion, within a range of 2%. Dafoe said any potential upside from the marketing segment, based on current market conditions, is expected to fall within that guidance range.
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Distributable cash flow was $168 million in the quarter, up sequentially, primarily because of lower current taxes. South Bow also maintained its full-year distributable cash flow outlook of $655 million, which management said will be used to fund the dividend, strengthen the balance sheet and, where appropriate, support growth investments.
Story Continues
South Bow ended the quarter with net debt to normalized EBITDA of 4.7 times, unchanged from Dec. 31 and in line with expectations. Dafoe said leverage is expected to improve modestly through the rest of 2026 as Blackrod cash flows ramp up in the second half of the year. The board also approved a quarterly dividend of $0.50 per share.
Prairie Connector remains under evaluation
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Wirzba said South Bow closed bids for the Prairie Connector open season at the end of March and is now in a 60-day evaluation period. He cautioned that management would not provide additional details beyond prior disclosures until the evaluation is complete.
“These are significant decisions for South Bow and our customers being made against a complex macro, regulatory, and policy backdrop,” Wirzba said. “We intend to use the full 60-day evaluation period to reach a commercial determination.”
The Prairie Connector concept would move Canadian crude oil from Hardisty, Alberta, to the Canadian-U.S. border, where it could connect with downstream pipeline systems serving U.S. markets including Cushing, Oklahoma, and the U.S. Gulf Coast. Wirzba noted that a presidential permit was recently issued to Bridger Pipeline for cross-border facilities that would transport the Canadian crude oil South Bow is proposing to move into the U.S.
During the question-and-answer session, Jefferies analyst Sam Burwell asked about key hurdles before a decision on whether to advance Prairie Connector. Wirzba said South Bow must evaluate customer proposals, align with partners and prepare for a potential investment decision. He cited contracting strategy, supply chain procurement, cost estimates, execution planning and permitting work in both the U.S. and Canada as typical elements to be assessed before a final investment decision.
Wirzba also emphasized that South Bow is focused on risk allocation. “We cannot expose our shareholders to risks that they cannot bear, nor can we,” he said.
Keystone throughput tops 600,000 barrels per day
Senior Vice President and Chief Operating Officer Richard Prior said the Keystone Pipeline operated with a 95% system operating factor during the quarter, allowing South Bow to transport more than 600,000 barrels per day. He said the system provided customers with an opportunity to move make-up barrels as well as limited spot movements.
Prior said the company has seen stronger demand for capacity, particularly on the U.S. Gulf Coast segment, with recent geopolitical events increasing demand for export barrels. He said a modest widening of Cushing-to-U.S. Gulf Coast differentials has supported higher throughput on the Marketlink asset in the second quarter.
When asked about Gulf Coast capacity, Prior said South Bow can move more than 800,000 barrels per day on that leg, noting it was originally designed as part of the Keystone XL system and could move roughly 830,000 barrels per day or more. He said the segment is near its designed maximum, though modest optimization or drag-reducing agent could potentially add small amounts of capacity.
RBC Capital Markets analyst Maurice Choy asked about the durability of recent Gulf Coast demand. Wirzba said volumes have been flowing very high on the segment, but he added that recent strength has been driven largely by macro conditions and that the company does not expect the same level of strength through the back half of the year.
Pipeline integrity work continues
Prior said safety and pipeline integrity remain top priorities. South Bow continued remedial work related to the milepost 171 incident, including in-line inspections and integrity digs across the Keystone system. The company is also working with in-line inspection technology providers to improve tool performance and detection capabilities.
Prior highlighted progress on a new phased array ultrasonic tool, saying South Bow has completed three successful runs with it. He said the tool enhances detection capabilities and will be an important part of the ongoing integrity program.
Based on work completed to date, South Bow expects pressure restrictions to begin being lifted in phases later this year. In response to a question from J.P. Morgan, Prior said the process will likely proceed segment by segment and may extend into 2027 before all restrictions are fully removed.
Management points to customer-led growth opportunities
South Bow executives said the company continues to evaluate smaller-scale, customer-led growth opportunities within its existing footprint, including additional connectivity that could bring more barrels onto its systems or deliver barrels to new destinations.
Wirzba said Canadian producers have ambitions to grow their asset bases and that South Bow is focused on competitive solutions that align with its risk preferences and capital allocation principles. He also pointed to potential intra-Alberta opportunities tied to the Grand Rapids corridor and the Blackrod area, saying the company is evaluating ways to attract barrels into pre-invested corridors.
Dafoe said any growth will be evaluated through a disciplined capital allocation framework, including protecting dividend sustainability, preserving the investment-grade credit profile, maintaining leverage neutrality and delivering per-share accretion.
“Growth at South Bow will be balanced with financial discipline,” Wirzba said. “We are committed to maintaining a strong balance sheet and delivering a meaningful and sustainable dividend while investing in growth.”
About South Bow (NYSE:SOBO)
South Bow Corp is a strategic liquids pipeline company. It is a new liquids-focused midstream infrastructure company. South Bow Corp is based in Canada.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
The article "South Bow Q1 Earnings Call Highlights" was originally published by MarketBeat.
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- South Bow Q1 Earnings Call Highlights
May 15, 2026 · marketbeat.com
South Bow NYSE: SOBO reported first-quarter 2026 results that management said were supported by stable cash flows, strong system operations and continued progress on key capital and integrity initiatives, while the company held its full-year financial outlook unchanged.
- South Bow Corporation (SOBO:CA) Q1 2026 Earnings Call Transcript
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South Bow Corporation (SOBO:CA) Q1 2026 Earnings Call Transcript
- South Bow working to secure required permitting for Canada-US oil pipeline proposal
May 8, 2026 · reuters.com
Canadian crude oil pipeline company South Bow said on Friday it is beginning efforts to obtain required permits across the U.S. route of its Prairie Connector project.
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May 7, 2026 · globenewswire.com
CALGARY, Alberta, May 07, 2026 (GLOBE NEWSWIRE) -- South Bow Corp. (TSX & NYSE: SOBO) (South Bow or the Company) announces that its shareholders approved all resolutions at the Company's annual general meeting held on May 7, 2026 (the Meeting).
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CALGARY, Alberta, May 07, 2026 (GLOBE NEWSWIRE) -- South Bow Corp. (TSX & NYSE: SOBO) (South Bow or the Company) reports its first-quarter 2026 financial and operational results. Unless otherwise noted, all financial figures in this news release are presented in U.S. dollars.
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