South Bow Corporation (SOBO) Earnings Call Transcript & Summary

Good morning, everyone. And welcome to South Bow's Inaugural Investor Day. I'm Martha Wilmot, Director of Investor Relations. We really appreciate you being here and your support of South Bow's Investor Relations program over the last year and a bit. I also want to welcome all of those who are joining us via live webcast. So up here with me today are Bevin Wirzba, South Bow's President and Chief Executive Officer; Van Dafoe, Senior VP and CFO; Richard Prior, Senior VP and COO. We also have additional members of our executive team and the other half of our IR team, Ben Pike in the room. So our agenda for this morning, we'll go through our presentation materials followed by a Q&A session. And then we'll have 2 breakout sessions where you'll have the opportunity to ask questions of some other members of our team. So the first session will be with Gary Salsman and then Mark Yeomans to talk about our asset integrity and safe operations at South Bow. And then the second session will be with Blaine Trout and Richard to talk about our growth outlook. And so with that, I'll hand it to Bevin.

Yes. So thank you, everyone, for coming. Really appreciate you taking the time. I know you -- a lot of you had to travel to come, so I really appreciate you making the effort. I'm so excited about our business and thrilled to have the team that we have and the Board that we have to go on this journey. The first year was tough. Doing a spin is not something you want to do every day, but we're now done the spin. We're done spinning. We're South Bow and we're going forward. And so I wanted to say that why am I so excited about this business? It's just a business that just makes total sense to me. It's -- we're connecting the strongest supply of heavy oil in the world to the strongest demand of heavy oil in the world, and we're an integrated part of our customers' value chain. So I don't know many businesses, particularly in infrastructure that can be part of an integrated value chain in that way. So we're really happy to be there. Another key aspect of what I'm really -- what makes my days go very well is I feel like we're a partner with our customers, that the relationship with our customers has moved in such a great direction. There's a lot of things we're going to talk to -- through this presentation to show you some great points of reference that we're actually not only just -- not accreting value just to shareholders, but we're accreting a lot of value to our customers, and that's important to us. And when we focus on our business as owners, every dollar and cent matters, and it matters to shareholders and it matters to our customers. And that's really important to me. So on this slide, just really quickly, we wanted to tell you where we came from. So from July of 2023, when we made the announcement of the intention to spin the business, there was a lot of concern in the market, how is this team going to actually do this? What will it look like? What will be its value proposition? What will be -- what's its goals and ambitions over the next number of years? When we set out that announcement, we also made a marker of a number of milestones that you can see on the screen. We've achieved every single milestone that we've committed to as a team and delivered upon those. And so whether it be getting a very positive shareholder vote to initiating a massively new capital structure at a great starting point of the business. But also we had to build much of our team from scratch. I was talking to our directors last week at our Board meeting. All of them started on the same day. We're -- they're now a year in the business with us, just over a year, and we feel like a real integrated team between Board and management, which is really exciting. And so we intended to launch on October 1 last year. Yesterday, we were very fortunate as a team to ring the bell upstairs on the NYSE. We listed on the NYSE on October 8, 2024. And as of basically in the last 48 hours, we just got off the last of our material TSAs. I know I mentioned to some that we had SCADA still left. That is now done. So we are completely a separate and new independent company, and we can now start talking about our future. So I've been asked even in the last couple of days, why are we even having an Investor Day. We've asked you to trust us through this spin through the year. And we haven't really talked a lot about where we want to go as a business. And trust to me is sincerity, reliability and competence. And we're here to be held accountable on all of those aspects. And so we have our team here. We'll have the breakouts. Many of you have heard from Martha, Ben and Van and I mostly in terms of the capital markets, but you have Richard and Gary and Mark and Lori and Blaine and Kevin are in the room as well. And so you can ask us anything, and we'll be genuine in terms of how we respond to you. So please bring your questions. We do intend to answer everything that we get with as much clarity as we can provide. So if you look at what's South Bow at a glance, we are an irreplaceable corridor. There is no other corridor that will ever be established like this in the infrastructure space, and as I mentioned, it connects the strongest supply of heavy oil in the world. That is actually a growing basin. There's not a lot of growing basins in the world left of oil, and we're serving a growing basin to a very strong demand market in the Midwest and the Gulf Coast. When this business was established, it was created to serve that market and first deliver into the Patoka, Illinois market. That demand -- but the demand in the Gulf Coast was so strong, it allowed us to underwrite an extension down to the Gulf Coast, which is now where most of our product gets moved to and that we serve. Yes, there are other systems that serve these markets. But there are no other systems that serve these markets the way we do. We're the only market-based bullet system that has batched and market-based rates. We do so in an unrivaled time, and we do so very, very reliably. And our business over the last 6 years, we'll talk to it even in terms of our safety performance continues to get better and stronger. And when you think about the other elements of the fundamentals that are so important, the greatest source of GDP growth in Canada coming up will be the growth in the energy section, and the greatest demand growth of a very strong and growing economy in the United States will be served by our systems. And so we think that, that is a very enduring business model and a platform that we can now leverage to grow materially going forward. So another key aspect of our business was that we took deliberate steps to not have dis-synergies through the spin. And that's very important because we're a customer-focused business. So when we spun out of TC, we could have easily passed through incremental costs through our customers that were spin related. We purposely came out in a very lean model, which we've since even optimized further to be on a journey where we're going to be reducing the cost of our business materially, which accrete back against to our customers, which then again make us way more competitive going forward as a business. And so in our first year as a team, we've executed really well. You think about we've assembled a high-caliber Board of Directors. We've made one of the big commitments that we made to our shareholders was in the first year, we'll get the right people on the bus in the right roles growing in the right direction. We've made a bunch of tweaks. We did that deliberately, and we feel like we've assembled the right team to deliver this business. We also committed to always operate safely. We've got a great track record in the past year plus in terms of our safety performance, but we also executed extremely well. Our Blackrod project was delivered to a mechanical completion in the last few weeks. We're still just cleaning up the last little bits of it. But we did that on time, on budget with a very strong safety record. And that was something that we proved to the market that we can go execute to what we said we're going to do. We also safely responded to our -- an incident at Milepost 171. And what was most important to me was that the communities that -- where we were in and the regulator that regulates our business was confident in us bringing that system back into service within 7 days, and that was a record for us. Now we believe and we'll spend a lot of time talking about our pipeline integrity that, that journey, we've learned a lot over the last year. Our system is the most studied system in the world from an oil pipeline perspective. And we have utmost confidence that we can ensure that we can continue to improve our record in terms of our safety on the system. From a capital markets perspective, as I mentioned, we've made a bunch of commitments to you, and we've lived up to every single one of those commitments. And I believe that we've been rewarded because of that. If you look at our total return performance, we were one of the top-performing infrastructure names in the segment. And that is not only capital appreciation back to our shareholders, but we have a very meaningful and sustainable dividend that is part of that value proposition.

Okay. We spent a lot of time as a team establishing the values of our company, which have proven foundational to how we approach our work. I'm wondering if you can each describe our values in action, starting with you, Richard.

Okay. Thanks, Martha. And so maybe before I talk about we are safe for our first value, I'd just expand a little bit on just -- it was a really neat process at South Bow, where we involved every single leader in the organization around creating the values for our company. So that was from the CEO all the way through to the people who manage our field operations teams. We got everybody together. We workshopped on what was really going to embody South Bow and what were values that all of our organization could relate to, would resonate with and were just said in plain speak and in plain words, so that all of our employees could see themselves in our values. I'd start with we are safe. Like I think this is a key critical value for our company. And this means that we are safe and that our workforce will be safe. We will be safe in the communities where we have operations and that we will keep our assets safe. And if I look at 2025, we've achieved now 1.5 million work hours without a single recordable incident or injury. So that means with all the construction work, our Blackrod project, our maintenance program and all of our operations, nobody who's working on the South Bow system has been hurt this year. And that's something that we're very proud of, and that's something that is extremely important to us as a company. And I'd just say the ingredients for that have been, number one, just seeing all of our employees really live our values. Like I could say it's not just the teams in the field, it's the commercial teams, it's the finance teams that are looking at, is what I'm asking for safe and can it be executed safely. And I see that in practice every single day. We've put a lot of effort into what we call decluttering or simplifying our safety processes. Safety processes, over time, can get very complex because they're normally built by responding to when things go wrong. But when you have 10 and 12 page safety documents to complete pretty standard procedures, that overcomplexity actually tends to create issues. So we've taken -- we've gone on a journey to try to simplify things and put accountability into the hands of the workers that are performing the work. And then it's been a very big focus of us to keep the majority of our organization just focused on the day-to-day business and not distracted by all the work that Bevin mentioned with the spin. And so that -- we've realized that in our safety results. I think we've also realized that in our business performance through the year-to-date. So with that, I'll pass it to -- who's doing, we do the right thing?

I'm doing that. Yes. So doing the right thing, I think how we think about that is going beyond just following the rules. It involves all our stakeholders. And so I'll just give you one example of that. There's many, but I'll just give you one. So once we spun, we inherited some physical and financial marketing contracts from our former parent. If you remember, in early this year, President Trump, there was some threats of large tariffs for Canadian oil, amongst other things. And what that did is there was a potential that our financial trades weren't effective and wouldn't match our physical trades. So if tariffs went through, South Bow could have suffered some serious financial losses. So what we did is we made a conscious decision to reduce that risk. We unwound some of those transactions, and we took small losses to ensure that we didn't incur a big loss. I think what we did as well is we were transparent with the market, and we disclosed those decisions and the rationale behind those decisions.

Yes. Thanks, Van. So I'll take the last 2. So we take pride in what we do. We have what we call a single light post that we're all driving to. When we were part of a much larger organization, we relied on different teams within that organization, but they weren't necessarily focused on getting to our one light post. So as a team, we have our legal teams, our finance teams, our operational teams, our HR teams, our field teams, we have just one goal. We have one direction that we're all rowing to, and we take pride in making sure that everything that everyone does gets us closer to our goal. If it doesn't get us closer to our goals, and we'll talk about the attributes that we aspire to as a business in the presentation coming forward, anything that can get us closer to our goals we will lean into as a team. And we're just one -- we are one team. There are no individual medals in our business. And that's -- the last value is that we win as a team. And even in our cross-functional approach to resolving big problems. When we -- when you're managing a spin, we had some legacy issues that we had to clean up. I talked to our team about we climbed a mountain, but we didn't just climb a mountain with 1 backpack. We had 2 or 3 backpacks on. We had to have solved multiple things that were just a part of our business that we inherited and to set us on our course forward. So as a team, we helped get up that mountain. Now we've been able to shed those extra backpacks, and we've got just one mission going forward. And a great example of that was, another big accomplishment this year of the team was we had a long-standing litigation with some of our customers, very important customers. We resolved that, and it wasn't just resolving it with our customers. We resolved it with our former parent because they were involved in part of the indemnification of that. So we take that cross-functional approach as winning as a team. There wasn't one winner, but we accomplished these goals as a team. So those are our values, and we could go on and on about proof points on every single one of them, but I hope that gives you a sense of what's driving us and how -- and we use these values on a day-to-day basis on making sure that we do the right things in the right ways to help deliver the right value for our customers and our shareholders.

So with a very busy first year behind us, Bevin, what's the team focused on as we enter our second year as a public company?

Yes. So we're pretty simple people. So we only set ourselves simple goals. The one table stakes every year is safe operations. We had a great first year. we will have a better second year as our goal. We will always try to get better at the way we operate our systems and simplify and declutter as Richard said. So that's going to be always table sakes. But the 3 things that we've committed to our shareholders is we've been working. We've got a good team that's been working on how to grow this business. We really believe that our foundation is one that can be grown. And so we're going to -- in this year, we've increased our scorecard weighting on the growth pillar because we want to mature and execute on a growth portfolio of both organic and inorganic opportunities. We believe that if we template the way that we can do business with customers and the way we approach our business, that we can be very successful in both organic growth like we've demonstrated through Blackrod, but also inorganic opportunities where we can fold other assets and revenue streams into our business which will then also help lower our variable toll by spreading our governance costs around more revenue lines. That, again, will make us more competitive for our customers. And the second big bullet is we got off all of the TSAs. We had to let a lot of things break. We have a lot of manual processes still. Now this year is about optimizing and really getting -- like, for example, we have our new ERP system. It's a brand-new system. Now we've got to build the right supply chain approach to using that ERP system going forward. So ensuring that everything we do from a business competitiveness perspective is in our workflows. And just as we're decluttering our safety practices or decluttering our company bureaucratic practices. We're trying to be extremely lean, very flat, and we value everyone on the team is -- in the same way. And then finally, our commitment to you is you've hired us or the shareholders have hired us to manage the capital allocation. We have not wavered on our capital allocation priorities, and we'll continue to deliver on them. We have actually -- we've -- and Van will give an update later, but we committed to get our leverage. We got handed a debt and a dividend level. We're committed to managing through those levels. We had a target of getting our leverage down to 4x by the end of '28, that now has a '27 in it. We're a year ahead, 9 to 12 months ahead on our schedule on our delevering. And so having that financial discipline, making the right choices of where we allocate capital between organic and inorganic is critical and a key expectation of our shareholders. So maybe, Richard, it would be great for you to talk through -- oh, wait a second, strategic overview side. Okay. So we'll go -- before I pivot to Richard, an important element of our first year is I mentioned that our Board all started on the same day. We wanted to ensure that we spent the year with them in each Board meeting, and we had a separate June strategy session with the Board to make sure that we were really aligned on our strategy going forward. We don't have a lot of time to be misaligned. We have a strong and competitive growth objective. We wanted to make sure that in each area that we were aligned with our Board on the key attributes of our business. So we're going to walk through. We have an attribute table that was agreed to with our Board. We're going to give you a highlight of what those attributes look like. It's obviously not all the attributes that are guiding our strategy, but it's going to at least point you to where we're headed. So we'll start on the operational strategy side.

Sure. So the components of the operational side, like starting with safety. Our focus here is just to continue year-over-year to improve and month-over-month and day-over-day really to improve the safety performance of our company. We're shifting our focus to more the forward-looking indicators. We're trying to pivot from looking backwards with statistics to like what can we do to get ahead of issues and incidents before they happen. And when you do have issues and incidents because mistakes will happen and accidents will happen, like how do you fail safely. Like how do you design your programs such that when there is a misstep, nobody has to get hurt. It's just a misstep, and we move on from it. And so we have a big focus on what we call like sticky. That's our saying in our organization, it's called stuff that can kill you or stuff that can hurt you really. And it's how does everybody like get focused on those like high consequence things as a forward look to make sure that we remain as safe as possible. On the asset integrity side, and I'm going to get into the asset integrity side on some future slides in some more detail. But we're second quartile performance right now. And our aspiration or our goal here is be an industry-leading performer in the top decile of this. And I'll touch on some more details in some further slides. When you look at system availability, this is one where we have been on a journey since we really started operating the Keystone system when we were originally operating about -- in the mid-80s in terms of a system operating factor, to now over time, we've incrementally improved that to being in the 90s. We're at a 94% system operating factor at this point this year. And what that does is that, a, that enables us to be more competitive. It enables us to move more barrels through our system. We've actually been able to contract more barrels on our Keystone system, largely in part because of the operating availability and reliability that we've been able to generate on running our pipelines. And then as has been touched on our cost structure, we are -- we've taken a number of steps already as part of the spin to drive our cost structure down. We're continuing to take steps. We think that this is an area that as a smaller, more focused company can be a competitive advantage for us. And if we can continue through organizational enhancements through how we execute our programs to the systems and tools we used, continue to drive our cost down. That is a reduction in our variable toll that passes through to our customers. It helps improve their netbacks, which is a win-win. And then some of that also is improved financial performance for South Bow because it doesn't all show up in the variable toll. And I think on the cost structure side, like as we get to the point next year where we start to lift pressure restrictions, we're really going to see the benefits of some of this cost optimization work that we've been doing.

Yes, that's great. From a portfolio perspective, what's our light post is we've committed to paying a meaningful and sustainable dividend. So when we think about what we allocate capital to, we're going to remain in that same low-risk profile. We believe that just as when we added the Port Neches Link, when we added the Blackrod connection, those are on both tenor and risk profiles that are very consistent to our base Keystone system. And so that we don't want to change. We're not going to shift into a more risky cash flow profile or just to grow quicker. We're going to maintain our disciplined approach to our risk. The number of revenue streams now is 3. It's really dominated by one, as you can appreciate, a lot of people view us as a single asset risk. We believe that the benefit of going into multiple revenue streams is one where we can then spread our governance costs, all that cost optimization over multiple revenue streams, which makes our base business that much more competitive going forward. We also believe that our approach to how we want to run our business can find synergies in the inorganic opportunities where we can pass those savings back to our shareholders. From a geographic split perspective, right now, 30% of our revenues are generated in Canada, 70% in the United States. We don't see a great need to change or move that in any specific direction, but we are going to be -- remain focused on Canada and U.S. opportunities. It's amazing. I wouldn't have thought that when we launched a little company like South Bow that we'd be approached to consider opportunities outside of North America. We can just be focused in this corridor, in this kind of industry and be very successful. So we don't see any need to deviate from that. And then from a marketing segment contribution, we're going to maintain that at a very low level. There are some of our peers that have much more meaningful marketing exposure. We don't think that those revenue streams are as valuable as contracted assets. And so even on our Marketlink asset, we've increased the focus on moving those revenues into contracted positions as opposed to using our marketing affiliate. We've turned the corner on the losses that Van has highlighted earlier. We see that, that marketing segment can be a great way to keep our pipe full and our costs very efficient for our customers on the system. So it's a very important part of our business, but it won't be an outsized part of our business. So I'm going to transition over here to Van, who can go through some more attributes of our strategy from a financial perspective.

Yes. Thanks, Bevin. And so you heard Bevin say it this morning and you've heard us say it over the last year, we did not choose our debt levels and our dividend obligation. We knew they're high, but we're also confident that this management team could manage it. We saw a path to reducing leverage and delivering that 2% to 3% growth within free cash flow. And we've talked about our capital allocation priorities, and those are our top 2. It's our highly contracted EBITDA profile that gives us that confidence. With respect to size, we feel that growing our enterprise value accretively benefits both the shareholders and our customers. Bevin talked about the fact that if we have governance costs over multiple revenue streams, that will benefit us. I had a few comments about kind of the audacious nature of tripling our size, but we think that, that's attainable and helps us be a better company. With total return proposition with our 7% to 8% yield, our 2% to 3% EBITDA growth, we deliver a double-digit return to our shareholders, and we do think that is compelling.

Great. So over to you, Martha.

Well, I'll just intro it to you. South Bow's capital allocation priorities are well understood, but they are worth repeating. So Bevin, how is the team thinking about capital allocation in the context of the strategic attributes we are targeting?

Yes. I think we -- first and foremost, we have to make sure that we can live to the commitments that we have set already. And so that is paying our base dividend. We believe that's a very important part of our value proposition. It is giving a return to our shareholders as we build this business and as we grow. It's reliable. It will show up every quarter. So that's -- it's an important part of our value proposition. When we think about strengthening our financial position, we -- it's easy to be distracted by the growth objectives, but we've been challenged often is also if you do grow, are you going to reverse your course on where you're headed to with your balance sheet strength? No, we will not. Anything that we pursue going forward on an organic or an inorganic way, we will maintain our focus on getting that leverage down to the right spot. And why is it important to us? It's not just to -- we believe lowering interest payments is accretive to the equity investor as well. But what's more important is making sure that we're not run at a razor edge in our business. There can be a lot of volatility in the macro environment. This year alone, the trade war that was in the background between a number of nations. These are not little things that could affect our customers in a variety of ways. So getting to a 4x target in the medium term is still very important to us. And we want to not only maintain our investment-grade level, but we're looking to find ways to see whether we can see that our rating improve by a notch. And why that's important is our customers are not just multiples of our size. They dwarf us in their size, and they expect to be dealing with investment grade and investment-grade service provider. And so we want to relay the confidence back to our customers through our strength of our financial position. And when we think about growing in our corridor organically or inorganically, we want to leverage that pre-invested capital that we have in the ground that we've carried with us through the spin. So I mentioned the extension of the Gulf Coast, down to the Gulf Coast. So that was -- it is an unoptimized system at this point. There's a lot of future value that we can unlock in that system going forward that the shareholders have already paid for. When the business was originally contracted in just real round numbers, 600,000 barrels a day were contracted to go from Hardisty to Patoka, Illinois. 400,000 of those barrels now are choosing to be directed permanently or temporarily down to the Gulf Coast. So when we go through our process to even recontract in the future, leveraging that value of that Gulf Coast system will be important. Similarly, in Alberta, our corridors in the Grand Rapids and the investments that we've made there, that allowed us to advance Blackrod at a very competitive price for our customer. And so when we think about anything that we do, we think about it on a per share basis. We're -- yesterday, our team, we met with a number of shareholders, and we were challenged on a few things. And we said, no, we're really stingy on our share count, with increasing share count that comes with increasing dividend obligations. We want to make sure everything that we do is accretive on a per share basis for our shareholders going forward. And while we've had strong capital appreciation, we got challenged that our 2% to 3% growth rate was kind of uninspiring to some people. Well, we can consistently deliver that with our free cash flow, and we won't turn away other business. And so when you saw the ambitious goal of being 2 to 3x our size in the next 5 years, we believe we can do that, and we won't turn down opportunities, and we'll find ways of financing it outside of our free cash flow that is accretive to our shareholders.

We'll just flip over to Van here.

Okay. Flip it over to Van. Sorry. Go ahead, Van.

Yes. So as I mentioned earlier, our distributable cash flow provides necessary funds for our dividend, for our debt reduction and for our growth capital. And so it's really, really important to self-fund those 3 things and not rely on outside capital to prosecute our value proposition. That being said, any large organic or inorganic opportunity would be separately financed, and we'll get into that, how we would do that a little bit later. So South Bow's stable cash flow underpins our sustainable dividend. Our current dividend payout ratios are on the high side. And again, we don't have to overemphasize that, but we are committed to bringing those down. A good example of that, our distributable cash flow payout ratio, you noticed the wins that we had on DCF this year and next year from originally $535 million as guidance up to $700 million that we just announced. So that helps to bring that ratio down. And on a net income basis, in the 2027, 2028 time frame, that will be under 100%. And again, that is our target. Our debt. Our debt as well is at the higher end of the benchmarking, and we're committed to bringing that down. As we showed before, our target is 4x, and we'll get there in the next few years. Until then, we're confident and comfortable that our BBB- rating is intact. And again, that's because of our long-term highly contracted EBITDA profile. I'd say a focus of ours is maintaining our investment-grade rating, and we look to upgrading to a BBB flat over the long term.

Okay. We're going to switch gears here. So we've spent a lot of time with investors and analysts leading up to the spin going through South Bow's asset integrity program and even more so this year with the Milepost 171 incident. So Richard, asset integrity has been and always will be a key focus for the team. Can you describe our approach to asset integrity and safe operations at South Bow?

Yes. Yes, absolutely. So first of all, just like our goal, as I said earlier, is to be an industry leader in asset integrity and pipeline integrity. And we're taking a proactive approach across our integrity management and our risk management of our systems. We employ about 50 full-time resources that are subject matter experts and highly regarded professionals in the pipeline integrity space, like that's all that they do every single day. And we're investing around $150 million every year in our pipeline integrity programs across the board. And that includes running in-line inspection tools, integrity digs, analyzing data and all in the name of keeping our assets safe. We take an approach of working with our industry peers, working with our industry associations around how we benchmark ourselves, how we set performance targets with respect to pipe integrity. If you look at the 2 charts on the right, on my right, we're -- if you look at the 10-year average for industry versus the 5-year average, industry as a whole is improving with respect to pipe integrity. It's improved about 20% if you take the 10-year compared to the 5-year. But South Bow relative to industry is also improving. We're up -- our performance has improved about 40% if you compare the 10-year performance to the 5-year performance. And so that, as I mentioned earlier, it ranks us kind of second quartile, and we want to be way over on the left side of this graph. But it's certainly been a journey for us to continue to improve, and this is a very, very big focus of ours, and we're setting aggressive targets for ourselves to improve our pipe integrity performance. And then we're taking the approach of partnering with industry in technologies with the leading industry vendors and applying those technologies to our pipeline integrity programs. So like one example that I would talk about is our partnership with our in-line inspection provider. And so we're working with them where we have just had the newest in tool technology built and adapted so that it can run across our whole Keystone system. This uses what's called phased array ultrasonics. This is the latest in ultrasonic technology. It's very similar technology to what you see in the medical field, like if you were to get a 3D ultrasound, it's that kind of vision that you can see like inside of the pipe. And so it's extremely high resolution. It produces a significant amount of data that our vendor and our own integrity engineers can really look at and analyze like what is going on with the pipe. And I think it puts us on the leading edge across industry in terms of what we're doing, especially on long-seam pipe integrity, which is an area that we've had a couple of issues on. Another thing that we're working with industry vendors on is just on our -- I'll give an example is our aerial patrol process. Like we've partnered with a provider that has got like the latest in leak detection cameras and software. And so like when we're doing aerial patrols of the pipeline, which on Keystone happens every couple of weeks, like it can identify like the almost trace amounts of hydrocarbons that you would see out there so that we can get ahead if there's a leak or identify it as soon as absolutely possible. And we haven't -- since we started applying this, we haven't had anything on or any issues in Keystone. But as evidence it's working, like we've been able to see like extremely small like diesel spills on a farmer's field where they would be probably refueling a tractor or something using this technology. And then it also takes imagery of the whole pipeline right away. And every time you fly it through AI and advanced analytics, it compares the runs and it will tell you like has there been encroachment? Has there been geotechnical issues? And so we think applying these kinds of technologies really puts us on the forefront of the pipe integrity space.

Yes. So Richard, we're doing a lot of great work. My confidence level has increased so significantly seeing what we've been able to do, but we did have an incident this year. So what can you tell our shareholders about what we've learned from Milepost 171?

Yes. So to me, just -- I'll quickly just spend a minute to one, I do want to acknowledge the local first responders, our emergency response, our project managers, engineers, environmental team and the control center for the tremendous work they did in this response. Because of their efforts, we were able to limit the issues to a single piece of private landowner property. The control center and our field operations, they identified that we had an issue and the system shutdown started within 2 minutes. In under 9 minutes, we had the pipeline isolated. So all the valves are closed and any ongoing impacts are stopped. And then we had hundreds of people mobilized to the site. And over a course of 7 days, we were able to get to the point where our regulator, PHMSA, approved the restart of the pipeline and getting the pipeline back into service that quickly minimizes the impacts both to our customers and the crude oil markets. And then I'd say the efforts continued through cleanup, and the cleanup and remediation was completed within a couple of months to the point that a release that happened in April, the landowner of that site was able to get their crops on and planted and yielding crops by the summer. And so it was -- I think we're definitely -- our goal is not to have these issues, but we are proud with how the response was. With respect to the initial findings, we have conveyed that this was an axial crack. That means it's a crack along the pipeline on what's called the long-seam weld. So that is a weld that's made at the pipe manufacturers facility while they are actually rolling the pipe. Likely, the crack was induced during transportation between the pipe mill and the site. But we're -- some of the details will come out with that in the root causes assessment, which we are expecting is probably going to be posted here within the next couple of weeks. We were actually expecting that would have already been communicated. But with the U.S. government shutdowns, a number of things got delayed at PHMSA, including the publication of this report. The metallurgical studies have already confirmed that the manufacturing process of the pipe, though, it was completed within all applicable codes and standards, and our own analysis of the operations of the pipeline suggests that the pipeline was operating within all of its design requirements at the time of the failure. We'll probably go to the next slide. But although the RCA hasn't been released yet, we didn't wait for the RCA in order to get started on our remedial work programs. And we started with like almost immediately after the incident, certainly once we had the failed component of the pipe is going back and relooking at all of the pipe integrity runs that we had completed on the section. We had numerous integrity runs that were previous on this section, reanalyzing that data all in light of the fact that we had now seen an actual failure. And we did discover that there was a gap in what the in-line inspection data was able to see in terms of this specific causal factor. And through our remedial work programs, we've identified that gap, but we've also now put in measures to close that gap, and we are confident that we have got measures to prevent further reoccurrence. We've started a pretty comprehensive additional integrity program. We've run 6 in-line inspections. We've completed 37 integrity digs. That work is going to continue through the remainder of this year, and it will continue on through next year. And as we do all this work, we're being very transparent with the regulator PHMSA, and we're providing all of our efforts and the actual information that we're gathering in real time to PHMSA. And we're confident that at some point in 2026 that we'll be able to start removing the pressure restrictions, probably in increments and probably in components across the pipeline system. But at some point next year, we'll start returning the Keystone system into baseline operations, and that will give us more ability to move in addition to our contract space and get more spot barrels and uncommitted barrels flowing on the pipeline system again. I'd maybe just point out in the bottom right graph, the thing with our integrity program is we've got 4,900 kilometers of pipe, 4,700 kilometers of that is going to be run with inspection tools this year, almost 4,800 kilometers next year. So almost the entire pipeline system is being inspected on an annualized basis. And then in addition to that, there's a comprehensive integrity assessment program that goes along with those tools -- tool runs. So -- and all of this is with the goal of identifying issues and preventing further incidents.

Okay. So the market fundamental backdrop is a critical piece of South Bow's growth story. Richard, you again, can you speak to our outlook for the supply and demand for heavy crude oil?

Sure. And so if you look at the supply side story, I think all of you are very familiar with the WCSB. It's a phenomenal resource, 160 billion barrels of reserves, 5.5 million barrels of production. And this is long-term steady-state production that has very low decline rates. Significant capital investments were put in place with the initial production. And we forecast that this basin is just going to continue producing for many, many years to come. And that with the majority of our business attached to the WCSB, whether it be receipt barrels onto Keystone or Alberta systems that move barrels with the basin, we think we're -- this is just such a world premier crude oil production area that we're very fortunate to have our assets plugged into. And then if you were to look at the demand side of the equation, we're delivering into the PADD 2 and PADD 3 markets. Again, in the United States, very resilient markets where there is likely going to be refining declines in the U.S. are probably going to come in PADD 1 and PADD 5, and we think PADD 2 and PADD 3 are going to remain very steady for a long period of time. PADD 2 is consuming almost 100% of its heavy crude needs from Canadian sourced crude oil. PADD 3 is getting about 2/3 of its crude oil from Canada. And so we see opportunity actually for up to another 700,000 barrels a day that could -- of Canadian crude that could potentially displace imports that the Gulf Coast is bringing in from Mexico, Venezuela and the Middle East. And with increasing production in Canada, even if the Gulf Coast refineries don't take all of that crude, there's such a wealth of infrastructure on the Gulf Coast in terms of marine facilities that you can get crude onto that we see that there's a long-term home for all the barrels that are currently moving into the Gulf Coast, but then lots of upside for additional barrels that could expand that market in the Gulf Coast. And we really continue to think that, that is the natural and best home for the Canadian barrel.

Yes. So I'll just talk through a little bit with -- there's a lot of discussion going on right now in a lot of circles around pipelines. It's now a fun thing to talk about again. And there's a lot of focus on matching those fundamentals that Richard talked about, the supply growth and the demand quality that exists down in the PADDs 2 and 3. We've seen over the last decade, in a decade where things were extremely challenging, and it wasn't really fun to talk about pipelines and infrastructure, the oil sands grew basically 1 million barrels a day of production. So in an environment where it wasn't necessarily a strong and easy environment for that growth, the quality of those resources are such that we're seeing that growth. And we believe that over the next 10 years, we could see again another 1 million barrels of growth potential out of that basin. The first 500,000 of that actually doesn't need a lot of capital to be even sanctioned. If you've listened to the recent quarters of our customers, many have announced optimizations, new solvent technology, new well designs, well pairs performing at IP rates much higher than they used to. The consolidation in the industry has also been occurring, making operations more efficient. And so we believe that the first half of that growth really is just going to be coming from optimization. And so you've heard quite a lot about our competitors having optimization projects. That's great for industry. The industry needs to be able to get its commodities to market. But it's not capturing the long-term growth, the material long-term growth, it's getting the early low-hanging fruit optimization barrels. So if our customers want to unleash more growth, if they see that as a reality with some of the latest discussions that are ongoing with our federal government, we believe that we're in a great position to see very strong competitive growth outlooks in the basin that we would look to serve. If you think about -- it's not just our base Keystone system that is important, but gathering within the province of Alberta to get those barrels to the other systems will be another key area of growth. And so that's why our team is really focused on the competitiveness of our tolls. We are market-based rates. So when you hear us talk over and over and over again about making sure that we're a low cost and an efficient provider, that will maintain our leadership position in being the path that is always wanting to be chosen first that we're not the back end of the stack, we're the first in the stack. We've talked about our connection from supply/demand. We've talked about maintaining very competitive tolls and commercial structures. We are the most direct path. We have firm surface offerings, which allows customers to know that their barrels are committed. They don't have to rely on historical rights or worry about apportionment. They've got firm contracts. Our transit time is very fast. In a commodity market that's often backwardated, having product on a system for longer than a month is another risk exposure for a lot of our customers. So we get to the Gulf in the fastest transit time, and we are a batch system. So the crude -- so the refiners that take the product off our systems know exactly the barrel they're getting, and then they can optimize the barrel on how they crack it and optimize their netbacks. And so we believe that we can maintain this unrivaled kind of position. We have a unique structure that we will preserve, and we already have approval from the CER and FERC on renewals on the same structure. So that is not at risk in the future as well. So I'm going to talk now about growth, how we get to some of our ambitious targets. So I'll -- we would never -- I mean, we often get asked even on conference calls, what are you looking at? Well, I don't know any company that would tell you what they're looking at. That would be kind of uncompetitive. So we're not going to tell you what we're looking at. But we're going to tell you kind of the scope and scale of what we've been evaluating, the number that we've been screening and that we -- I mentioned earlier, we were climbing up a mountain with a bunch of backpacks, but we were evaluating opportunities while doing that. So we're not starting from a flat foot today. We've been in data rooms. We've been in commercial discussions with our customers. And so I'm going to get Richard to lead off because really what's important is listening to our customers. So perhaps, Richard, you can share with us like what you're hearing from our customers.

Yes. And I think if you were to look at the conversations we're having with our customers now and over the course of the year versus the conversations we were probably having the year prior to that and the year before that, there's a lot of dialogue going on right now about opportunities. There's excitement, I would say, coming from our customers about the prospect to grow the WCSB. We have a constructive and productive policy environment, I think, in both Canada and the United States more so than we've had in many, many years. And so we're really hearing our customers start to talk about egress and what they need to do beyond likely the 2027 time frame when egress is expected to firm and tighten again, and then you're going to see a likely widening of differentials. I'd say we're screening certainly more opportunities than I was expecting to be screening at this point when we had first announced the spin. It's -- our current customers are trying to talk to us about receipts and deliveries and optimizations and anything we can do there is a win-win because that helps pull more barrels through the system. It helps set us up better for recontracting in the long term, and it's generally for our customers, creating better economics or better netbacks for them. We're -- I certainly look at our footprint and our assets, and we're engaged with all the Canadian producers around those egress conversations, and we'll see where they lead. But we think we're very well positioned to offer competitive solutions that are -- have similar types of terms than you see on the Keystone system and offer great netbacks for our customers and the ability for the basin to grow. On the U.S. side, there's a lot of conversations we're having about continuing to optimize. The refiners are always looking at how do they optimize their refining slate? So how do we get more delivery connections? How do we allow them better connectivity? And there's some things that we're considering on the system that could perhaps enhance or optimize the flows so that they can do some more things and maybe we can even get some more barrels down our existing infrastructure. And so we've got screening -- the screening things in the millions of dollars that are on the connectivity side to things in the hundreds of millions of dollars that are optimizations of our systems, things that we can do within the province of Alberta to things that go into the billions of dollars that create either expansions of systems within Alberta to move barrels from the production area into the hubs or create incremental egress from the province.

And I think it's really important that we get asked a lot, are you focused purely inorganically, like an M&A strategy or organically? And I said at the outset of this business of spin, you never want to have your value proposition underwritten by inorganic opportunities because you can't control someone doing a transaction with you. So our base value proposition is our organic strategy, which delivers the 2% to 3%, which gives us the opportunity to support that sustainable and meaningful dividend, but we'll augment it. If you have growth within your company, that growth is also part of the meaningful currency that you're using to attract other people to take your equity perhaps in an exchange if you're doing an inorganic transaction. So we see them as very complementary, the inorganic and the organic, but it's really that our front foot is on the organic path. That's what's going to drive the most meaningful returns to shareholders. When you can invest at a 6x build multiple, it's a lot cheaper than investing at inorganic multiples. And so don't take our messaging when we -- yes, we will need both angles to get to our end goals in the end of the day. We won't be able to build up to that 2 to 3x the size in the next 3 to 4 years, but think of the inorganic as complementary and likely will also come with other growth opportunities that will become organic in nature. So maybe -- and one thing, a great example of that, and we put it in our proxy to demonstrate it was Blackrod. So maybe, Richard, if you can go through where we got to on that.

Yes. And one thing I would just touch on as I provide an update on Blackrod is for a company of our size and stature, we've been very fortunate to have -- to leave TC Energy really with a very capable project development and execution organization. We have a team of people who have built landmark projects across North America, whether that includes our Keystone system and our Grand Rapids system, but we have a team that has built extensive infrastructure in the Appalachian Coastal GasLink. So whether it be our maintenance capital program or a multibillion-dollar investment, I feel that we're very well positioned both to develop and execute on these projects. And when I talk about these resources, we have people that -- who've done front-end First Nations consultation, environmental work, land work, permitting, construction and execution. So it's a very, very capable resource base that we have in order to go ahead and develop and execute successful organic projects. But -- so with -- and that -- I think we saw that play out on the Blackrod project. This was announced just prior to our spin. We have started to put this project into service actually. We put the gas line into service a few weeks ago. It's achieved mechanical completion. We're on time and on budget. And I expect that we're going to put the final touches on this and have this project commercially in service in the first quarter of next year on time and on budget and with a safety performance record that I'm very proud of because this was a project where we had 0 incidents and 0 injuries across the board. And so I think very successful. It's going to be at the lower end of our 6 to 8x build multiple. And yes, it will ramp up. It's in service starting next year through the next couple of years as our customer ramps up their production. And then just on intra-Alberta growth, with the 1 million barrels of potential production increases that we talked about in the WCSB, that is going to require incremental infrastructure within the province as well. There's going to be more pipelines needed to move barrels from the producing areas into the hubs. We see the existing corridor that we have right now between our White Spruce and our Grand Rapids system being a prime example of an area where we can capture some of that growth. There's upwards of 400,000 barrels of potential production increase that could touch that corridor. And we -- this is an area where -- another area where we have a pre-capitalized investment and that this was permitted and originally developed to be a bigger system. It was originally going to be a 24-inch system that -- a 20-inch system that flowed diluent north and a 36-inch system that flowed crude south. And we still have the permits and the initial scope put in place. And so that's an area that we could certainly expand, and I think we'd be very well positioned to capture some of that. And then there's going to be other infrastructure opportunities within the province, both on the organic side. And I think there's going to be some very interesting things on the inorganic side within the province of Alberta that we'll keep a very close eye on. Just touch on our connectivity into the U.S. markets. We're -- outside of this map, we're very well connected at Cushing. We've got our own terminal at Cushing, and we're connected to the key terminals there. So our customers can both deliver barrels into the markets that Cushing serves, but also that we can receive barrels from the other hubs so that we can move them down Marketlink. On the Gulf Coast, if I look at the Houston market there, we have our own terminal. We're connected to all the refineries in the Houston area. We're also connected now down to the refineries in the Texas City area via a joint venture that we have in place with ONEOK. And then in the Port Arthur area, we've got connectivity to the major terminals and hubs as well as into the Valero refinery, and we have a shared asset that we own with Motiva that connects into their refinery, which is the largest refinery actually in the area. And so we think we're very well positioned that our customers can get their barrels into all the locations that they need to get to, whether that's a refining consumer or a lot of the terminals that we're connected to also have marine access. And so they can get their barrels onto the water if needed.

That's great. So I'll just touch on a few things on the inorganic side, just so you can hold us accountable to the discipline that we'll have when we do pursue these. So as I mentioned earlier, we're not going to sacrifice any of our capital allocation principles and priorities that we've made. Those are priority. Part of those, as you know, is leveraging our pre-invested capital. So if we can find opportunities that deliver more volumes into Cushing or into other areas that help us leverage that pre-invested capital, that's great. We're not going to sacrifice our leverage targets. So anything that we do will either be leverage neutral or accretive, not dilutive. When you think about what we're trying to do with that growth is really find ways to strengthen the competitiveness of our base business because the largest prize that we have is preserving that base business over the next 20, 30 years plus. We will stay within the same risk profile. And what is great about the market that we serve is that the resource that we serve, those customers can underwrite long-dated contracts because their resource is long-dated. On the refining side, they want to secure long-dated contracts to ensure that they get the product that they want into their refineries. And so we have a natural -- we're not in a basin that's a high decline basin where it's a -- it's an area dedication type transaction or a shorter-term higher risk opportunity. So we're looking at things that match and pass that same logic test. Often, you'll hear from folks, does it pass the map test or the screen test. That's what we're looking for. I've talked about accretion on a per share basis, making sure that we don't grow the plaque within our business, that corporate overhead. When you grow a business, it's easy to start adding extra things. We're going to be very disciplined by keeping the plaque down within our organization and remain very lean. And then I'm going to turn it over to Van, who can talk about the financing.

Great. Thanks, Bevin. Yes. So as we've mentioned this morning, our distributable cash flow funds our base value proposition, and that is our base dividend, our EBITDA growth and our deleveraging. So any large organic or inorganic opportunity would be funded separately outside that distributable cash flow. So this slide just represents some of the list of potential funding sources and would pick from this list depending on the new assets' attributes. So all these financing options have pros and cons, and we'd weigh those as we think about using them. I will say that Kevin and our finance team, we're working with our capital providers to look at all these options and make sure that we're ready to pull the trigger if we need to immediately. I'll say as well that when we're funding any of these large projects, and Bevin pointed this out before, maintaining that investment-grade status is table stakes, and we won't compromise that.

All right. We've already discussed our priorities for the second year at South Bow. So having just released our 2026 guidance last week, Van, could you highlight some of the key points?

Sure. Yes. So we mentioned this on the earnings call. Our normalized EBITDA guidance for '26 of $1.030 billion within that tight range of 2% and that's an increase of $20 million from 2025 guidance, and we talked about what that is. That's mainly marketing EBITDA, getting those losses behind us and having slightly positive EBITDA for our marketing business. Blackrod EBITDA coming in the later quarter of 2026, and that's partially offset by lower Keystone EBITDA, and that's decreased maintenance capital and some tighter differentials on Marketlink. With distributable cash flow, we started 2025 at $535 million, and we've increased that over the year to $700 million, and that's due to tax and 2 pieces within tax, the One Big Beautiful Bill, which allows us to deduct additional interest expense. There was a cap on that and that -- how we get to that cap has changed. And the second thing is our tax team identified some tax pools that we were able to accelerate. So those tax pools, we were using over a long period of time, and we found the opportunity to use them over the next 2 years. So you'll see tax savings compared to our normal current taxes of around $175 million for 2025 and 2026. And then 2027, we will go back to a more even current tax number. And what I will say is if you're thinking about net income, our effective tax rate doesn't change all that much. It's really just a flip between current tax and deferred tax. Our DCF guidance for 2026 is $655 million. So again, that's down from the $700 million this year, and that's because we don't get the same tax benefit that we do in '25. With growth capital, we've guided to $10 million. And the only reason that is, is because we haven't sanctioned any growth capital. So once we do that, we will update our guidance. That $10 million is just finalizing Blackrod.

Okay. And Richard, there are some operational considerations incorporated into our outlook for next year. So what kind of environment should investors and customers be rooting for in order for South Bow to exceed our guidance of $1.3 billion (sic) [ $1.03 billion ]?

Yes. And I think the key takeaway from this is that it is pretty tight. We're in a kind of a plus/minus 2% error bar here. I think the 2 big drivers that would move things either left or right of that are going to be timing of removing the pressure restrictions. There is some uncertainty with that. And with removing the pressure restrictions that will enable us to flow more uncommitted barrels. I'd remind you that some of those uncommitted barrels are going to be consumed with makeup rights. Some of them are going to be spot. And so there's a little bit of variability there, but it's tough to pin down an exact time frame on when pressure restrictions would be lifted because we're going to have to work with the regulator, and we're going to have to complete our remedial work plan and our integrity work. And so as we develop that, we'll -- and as we execute on that, we'll provide more information. And then the second component is the arbs or the differentials. We don't take a market position with our forecast, we look at the forward curves on the differentials, and we'd use that to help come up with our guidance. And they could be wider, they could be tighter, like sometimes there is things within market, there's just even operational things within industry that can either shrink or widen the arbs. And so those are probably the 2 major drivers of what's going to impact our EBITDA in 2026.

Okay. Thanks, Richard. Okay. So Bevin, we've covered several aspects of our business, including our strategy, our capital allocation priorities and our growth outlook. So what final thoughts would you like to share with everyone today?

Yes. I just wanted to remind everyone, often even as a management team, we were just fighting through a lot of stuff through the spin, and it was easy to get focused on all the challenges and all the hard things that we've done. But really, if I look back at the ledger of what we've accomplished, we've got off our TSAs. We've completed Blackrod. We settled a litigation that was long lasting over 6 years. We've done tax optimization. We've created more space in terms of cash flow to -- we had a pretty tight amount of cash flow to use to grow our business. We've expanded that in the near term as we wait for the EBITDA to show up from Blackrod. We've made the hard decisions around some of the organization, made some of those calls. We're not afraid of getting this business in the right spot. We've identified a ton of growth that we're confident in, and that's why we relayed that confidence in this presentation. And we've got great alignment as a management and Board. We've done all those things while doing the main takeaways of operating safely, prioritizing how we do that day in, day out and ensuring that the integrity of our assets is the first focus of our business. We're leveraging this corridor that we've inherited. Many -- as Richard said, many of the folks on our team have been on the team since the beginning. We rang the bell earlier this year in the TSX and a control room operator rang the bell, who was part of that first starting the Keystone system and the person that co-ranged the bell with them is one of our safety leads down at the Houston Tank Terminal. We're a business that extends from Fort McMurray down to the Gulf Coast, and we've been really delivering a strong business through that. We've got a strong portfolio strategy. We're pairing it with strong fundamentals that are not -- that are undeniable as we go forward. And we will be disciplined in terms of our capital allocation. We're not a shiny toy team. We're not going to be coming back and changing directions. What you see is what you get. We're probably not going to have an Investor Day next year. We'll just -- we'll update you on the strategy as we go. And if there's any material things that we think we need to have a good discussion over, we'll definitely have an Analyst Day again in the future. But we felt that we wanted to talk about what we've accomplished in our first year to give you the confidence that as we set our goals going forward, that you can trust that we'll be very transparent and we will deliver a strong return going forward. So why invest in South Bow? I'll tell you what I tell our field team, do you think our system is going to run for the next 7 years? Do you think our system is going to be recontracted? Do you like getting a 7% to 8% yield? It means that you basically get this company for free if you hold and reinvest alongside us. And so we have a strong and sustainable base dividend on a business that is a strategic franchise in a premium corridor. You can't get -- you can't buy this asset anywhere else in the infrastructure space. Irreplaceable assets with a compelling growth profile. There's a very strong alignment between our 2 nations that we serve, Canada and the United States. Energy is undebatable that, that corridor is really important between our 2 countries. And that we're very disciplined and focused on our financial strength and maintaining that investment-grade rating as a company. And so we serve a robust marketplace, and we're really excited about growing this business over the next number of years. So that's why I'd invest in us.

Okay. Thanks, Bevin, Richard and Van. So we're going to turn it to Q&A. We've run over a little. So we've got enough time to answer all your guys' questions. So Ben is at the back of the room with a mic. So if you want to raise your hand, I saw Catellier go up the fastest, so we can go to Rob first.

Rob Catellier, CIBC. I guess I'll start with the one that we were talking about this morning. There's been a lot of rhetoric on the political front about a potential liquids pipeline to Alberta's West Coast, and you've obviously described the advantages of your system and the economics there. So I'll just throw the question to get you started on it. But what -- under what conditions would South Bow consider investing in a liquids pipeline to the West Coast? And then I'll have a follow-up.

Well, thanks, Rob. It starts with customers. Customers have to see line of sight of being able to underwrite a project for multi-decades, and it would have to be at material scale. I mean, the scope and scale of a West Coast pipe, Richard mentioned a few of us were a part of building a West Coast pipe. So know what it takes to go up and down a few mountain ranges. It's not for the faint of heart. But it really starts first with customers feeling confident that they actually have the barrels to commit to a project of that scope and scale. Secondly, it needs very strong alignment with governments and regulators, provincial, federal and indigenous governments to ensure that there is an alignment of a need to support and make a pathway clear. We have already committed a number of individuals to support the Alberta government with a few of our peer companies to do an evaluation of that project. But really, we see it as a long-term project that will take many, many years to develop, if at all, but needs to have all of those conditions that the CEO's letter that was signed to the federal government really have to be acknowledged and resolved. So there's many, many things that would have to come ahead. Our approach to our business is we see a tremendous amount of growth in the near term. And really, you need that growth to create the cash flow to support the development of those big, large projects that would help underwrite the longer-term West Coast pipeline.

Okay. My second question was just on diversification. In your operational and portfolio attribute slide, you talked about the 3 revenue streams. I'm just curious, you also talked about wanting to get to significantly larger size. But I just wonder what the diversification goal and a diversified portfolio looks like to you.

Yes. So focused on risk preferences, focused on that we have an ability to deliver on a business attribute. So are we afraid of operating the gas pipeline that serves Blackrod? No, we've operated gas pipelines before on our team. Are we afraid of refined products? Are we afraid of other crude systems? We're more focused on finding the solutions that our customers want and enduring businesses that are similar to kind of our base business. So we have evaluated a lot of things. You would expect that the vast majority of what we've looked at are crude opportunities because we're focused on our corridor and leveraging our pre-invested capital. But we're not afraid of looking at other things. There are asset classes that we certainly don't have any competitive advantage in. So I can be pretty clear we're not going to get into the NGL business probably. There's enough people doing that. But we have a nice runway of other assets and asset classes that we could get into, whether that be pipes, terminals and other commodities within that space.

Rob, do you want to hand the mic over to Keith -- oh, sorry, Ben has got it. Yes, Keith.

Keith Stanley with Wolfe Research. I want to start on the EV goal, aspirational goal of going $10 billion to $30 billion. And I think you said 3 to 5 years, Bevin, which would require probably a lot of M&A to get there and hit that target. So the stock has done well. How confident are you, though, that you can find opportunities to acquire that would be accretive to your stock valuation while also focusing, as you said, on assets that are similar in risk profile to what you currently operate? So very low-risk assets that generally trade at pretty high multiples.

Yes. Great question, Keith. That's certainly not one we haven't thought a lot about. We set a goal, we say internally 2 to 3x the size. If you don't try to get to 3x, you won't get to 2x. So we do see that it is an ambitious goal, but there are a tremendous amount of opportunities that we've already been looking at that we believe that we can add value strategically and accretively to our business. There are a number of assets that are held within private financial sponsors, we're a great marker of what a crude system valuation should look like. That sets a level or a valuation that could be very competitive in those financial situation -- in those private financial situations. And so -- and we're willing to partner with other infra providers or infra capital players along that journey. A lot of the history of our parent company was going it alone on assets like 100%. We believe that we can partner with others very strategically to get access to other larger opportunities. And so I think you'll see that as part of our mix as well that we won't just be going alone at things, but we may be partnering with others on that journey. But again, that organic first front foot has to be there to set that pathway to allow those opportunities to exist.

And then I had a question for Richard. Just on the -- what are your expectations as the pressure restrictions are lifted on being able to move uncommitted or spot volumes, keeping in mind, Enbridge has announced, I think it's 430,000 barrels a day by 2028. So do you see an opportunity to have a lot more uncommitted barrels come on to the system over the next few years? Or is it more of a longer-dated opportunity?

Yes. Good question, and we'll see what transpires in terms of timing of bringing other egress capacity on, where #1 focus right now is putting the conditions in place so that we can physically move the barrels, and that's removing the pressure restrictions and getting the pipe set up to be able to -- we're able to move all of our contracted volumes right now. And I think in 2026, we're going to see us be able to take an increasing amount or we'll be able to have an increasing amount of capacity to move beyond that. Like I think if you look at the attributes that Bevin went through about the system in terms of transit time, delivery optionality, delivery flexibility, all the markets that we serve. And then you also look at the fact that we do have a marketing affiliate as well that participates in the market. I am confident that we will be able to move barrels and keep the system pretty full. And even historically in the past, when there hasn't been as much for constraints, we've been able to keep the Keystone system pretty much chock-a-block full.

We'll go to Praneeth there.

Praneeth, Wells Fargo. I'll just kind of combine these 2 questions in 1. But I guess, I think you mentioned getting to leverage of 4x by the end of 2027. Maybe if you could just talk about what CapEx assumptions you're assuming there? Is that based on what you have contracted today, which is a low amount? Or does that assume additional FIDs? And then the follow-up question is, I guess, when should we expect new FID project announcements? How close are you in some of these potential discussions? And can it come before the next earnings call?

So I'll start and then pass it to Van for the first question. So FIDs, it takes 2 to do a dance on both organic and inorganic. And so we're in daily conversations with our customers on the organic side, and we're in daily conversations with counterparties on the inorganic side. So I can't tell you. I don't know. We've set a goal as an organization through our scorecard that will become public kind of in the new year once it gets formally approved, but we've increased the weighting on growth to the management scorecard. And the reason why we have is if we're not growing, we'll be the growth for someone else. And I think we have something special as a team, and I think we want to have that opportunity. Certainly, if we're not able to do it, then someone else will take that turn. So Van?

Yes. And so on the growth target, so we've mentioned that late '27, early '28, we'd get to that 4x. So there may be some capital spent, but there'll be no EBITDA associated with that growth capital. So we have Blackrod coming on full in 2027, but there's no other EBITDA growth from -- like from a growth project to get to those targets.

Maurice is right there.

Maurice Choy from RBC Capital Markets. The first question, and I'll just ask both of them at the same time. I think you had a comment earlier about potentially improving your debt credit rating by a notch. And the 2-part question, is it tied to tripling your company? Or is it separate? And quite frankly, how would you achieve that? What threshold would get you to the next notch? And the second question is, why is getting bigger important to you? You mentioned earlier about sharing costs. You mentioned earlier about listening to your customers. I had to assume that your customers are speaking to every other provider and saying relatively same message. So why you -- why would you be the consolidator?

Yes. Great questions. So with respect to the credit agencies and their ratings, these are multivariate things. So first of all, it's separate from being 2 to 3x the size. It's just where we want to be because when we go to recontract, we want to be in a stronger position with our customers on investment grade. One of the key issues is business risk with credit agency. And when we have -- our contracts right now, they come due 2030, 2031. We've got a long runway before then. Having multiple revenue streams, that's where it does tie to growth, diversifies the risk profile of the business and impacts that business rating within the agencies. And they all have different approaches of how they get there, and we've heard from them, and we're working very closely with them. But everything that we've conveyed to the rating agencies from the beginning, from the first meetings about the spin, we've accretively been better. So our debt was raised at a lower coupon. We didn't have Blackrod modeled into the project. We had a dividend increase as a proxy that we're not increasing the dividend. We've accelerated the pathway on getting our leverage down to 4x by that increased DCF. So in every aspect of what we've shared with the agencies, we've done better, and we want to continually do that so that we give them confidence, they've only seen us operate for a year. We've now responded to an incident. That was one of their concerns. Would the insurance be there? Would we be able to respond? So it's all about just as we're trying to relay confidence to our shareholders, we have to relay confidence to our -- the agencies that we work with as partners in our business to establish the value of our credit. Why do we think we need to be bigger? I think in the last couple of weeks, we just saw the transaction with MEG couldn't happen. We saw NuVista. We've seen across the U.S., the midstream infrastructure space has been in massive consolidation. We believe that we have a very strong foundation, and we believe we have a pathway to add businesses to us that make our base business even more attractive. And within that structure, I think we can relay more shareholder value back to our shareholders through that. And so what I mean by that is if you think about -- because we're the only market-based rates pipeline of scale going from the oil sands to the Gulf Coast, if we added another revenue stream, so it was a 30% increased revenue stream, but we didn't add a CFO and we didn't add another COO and we didn't add a different Board, we could spread all of our governance costs on that 30% increased revenue business, and that lowers our variable toll on our base business materially. And every $0.10 of our variable toll is worth $20 million of EBITDA. And so that is a strong prize for us that we could accrete back to shareholders over time. It's not an immediate price, but there is a long-term prize there for shareholders.

Take your pick, Ben.

Eli Jossen from JPMorgan. Maybe just thinking a little bit about the vertical integration opportunities. I know you talked about terminals and other products. But can you just talk about the way that vertically integrated businesses would benefit your pre-capitalized corridor and just what kind of synergies those would provide specifically?

Sure. Thanks, Eli. I'll start and then pass it to Richard. Really, the way the business was created on our base business, Keystone, it was really a bullet line and a lot of liquid systems and crude systems started with terminal operations and others. So we originated a little bit differently, but really, we're seeking to provide customer solutions. So I'll turn it to Richard to describe that.

Well, yes, it's pretty -- I think it's pretty straightforward with the vertical integration. Like just we're -- right now, we have one component of the flow path from a production source to a market. And the more components of that total flow path you have, like the better products that you can put in the marketplace, the better synergies you can create, the less value leakage that you have as the barrel transfers from one operator to another. So like going -- like there's a point where vertical integration ends because you start to get into different risk attributes and different risk portfolios, especially if you get into gathering businesses or other things. But I think we can definitely extend the value chain beyond the mainline trunk line that we have right now into things where we can create commercial synergies that able us to put better products in the marketplace. So that's definitely something we have an eye on.

AJ O'Donnell from TPH. It seems like there's a pretty robust growth opportunity in the intra-Alberta pipelines connections. I was just wondering maybe if you could talk a little bit about the competitive nature for those projects. And because it's such already a pre-capitalized corridor, would you see returns kind of trend more towards that 6x versus the 8x?

Yes. And so yes, anywhere that you can take advantage of pre-capitalized investments, permits are very, very valuable things to have, rights of way are very, very valuable things to have in corridors. I think you set yourself up with a strong competitive advantage over alternatives. There -- with the growth that is anticipated in the province, there's definitely going to be new infrastructure required within the province to support that growth. And to answer your question, yes, like anywhere where we're able to use or take advantage of those pre-investments, we would expect the returns to be at the lower end of the range, if not even lower than the lower end of the range we provided.

Aaron -- oh, sorry. You'll be next Aaron.

Rob Hope, Scotiabank. Thanks for the Investor Day. And in the overall kind of project description, you did highlight incremental egress out of the province of Alberta. When we think about the base -- or the Keystone system, on a longer-term basis, how much incremental capacity do you think you could get on there, whether it be through optimization, pumping, DRA? Like what's the ultimate capacity, do you believe?

Yes. So we are -- like when we have pressure restrictions removed, the capacity on Keystone right now is slightly above 620,000 barrels a day. Incremental improvement beyond that with some investments are -- I'd say they're fairly modest. In order to get meaningful egress from the basin, it would require a more significant expansion than just pumping or DRA or optimizations of our system.

Aaron MacNeil here from TD Cowen. Can you provide any additional details in terms of like the sequencing of opportunities? And specifically, what I'm relating to is for, say, intra-Alberta pipelines, does the timing of an expansion on TMX matter? Do you need to see an FID before a customer would then sanction a project upstream of that with you? And what are the sort of lead times to build an expansion in the intra-Alberta pipeline segment?

Yes, I can start briefly. So Aaron, I think what we've seen very quickly this year is from really no dialogue from our federal government and even provincial government around opportunities and growth to one that there's a very significant active dialogue. And so those decisions and opportunities and the sequencing is a bit unknown to us, to be honest. Where we're advantaged is that we do have some pre-invested corridors that are already permitted. So we don't -- we can get right after it in some cases. And in other areas, we'll be happy to compete and move forward. Fortunately, both Alberta and Texas, where we've had recent projects are good environments to build in. So intra-Alberta, if there was a scale, like if you look at Blackrod, we didn't even have it fully sanctioned by the time of the shareholder vote, it was an opportunity, and now it's already constructed. So within -- under 2 years, we went from sanctioning to in service. So that's kind of the time line that is available to us in Alberta.

Fair enough. And then maybe as a related question, and I know you're not going to speak to specific opportunities, but a larger oil sands customer recently talked about an expansion to their production. And I believe even mentioned South Bow at a recent Q&A. Like I presume that would be one of the bigger projects. But how far along are some of the bigger opportunities in that $1 million to $2 billion? And is it really just like typically, the smaller opportunities are further advanced, but can you give us a sense of the advancement of some of the larger versus smaller opportunities?

Well, it's interesting because I've -- through my career, I found that small things and large things both are hard to do. They both take time because they're meaningful in some way, right? But we're -- like I said, we're literally in daily conversations with customers and counterparties. Some have been underway for quite some time and -- but are still -- some are edging forward. We talk about using the word maturing our portfolio. And so we have been maturing it to get ready and to make our commitments. And so -- and that's why we've said a mark in the sand, we will get after it in 2026. Something will happen on one of those fronts. So...

Which is like all of the producers that are our key customers, they're very sophisticated companies. They've got people that know the pipeline infrastructure extremely well. They understand the time frame it takes to get things built. Like typically, the egress out of the province into markets away from the province has been the long lead item that people want to ensure is in place. I think all of the producers are not going to be caught flat-footed and not have a market to grow into. And so stitching all these things together so that the timing all works with their growth aspirations and that you've got the pipeline and the infrastructure in place so that they can ensure that they get a fair netback for their production is it's all very complex, but all those dialogues and discussions are going on. And I think they're very productive and constructive right now. And it's just -- it's such an amazing opportunity for the basin that we haven't seen in a long time to see these opportunities in active dialogue. So that's great.

It's Ben Pham, BMO Capital Markets. First question, distributable cash flow per share, just given your focus on deleveraging and cash tax benefit, is there any thought process around guidance for DCF? And just your overall thought process, isn't that really your more key driver for the business going forward versus EBITDA, CAGR guidance?

And so we do -- Ben, we do guide, obviously, on distributable cash flow. And I agree that is important. And we talked about that a few months ago, you could have a company with the same EBITDA but with very different DCF because of capital structure and tax structure. So we pay a lot of attention to DCF for sure. We got wins in 2025 and 2026 and then back to more normal levels in '27, but then we have Blackrod coming on. So yes, we do look at it.

Okay. So it's more a go-forward figure versus a CAGR guidance?

Yes. And I'd say the CAGR guidance is a little tougher because there's more moving parts. If we start from the -- if we start from $700 million, obviously, our DCF is going down over the next few years. And so -- but if we started at the $535 million as original guidance and say what '27 or '28 would be, it would just -- I guess it's just a little harder to give a growth percentage to it because of the moving parts.

And we were completely unoptimized at the time of spin on a lot of that front. So we didn't even know what we had within even the pools or otherwise. We were basically spun without very much. And so we're just starting on that journey. So it's just a bit too unpredictable for us to give guidance that we could be held accountable to at this point.

Okay. That makes a lot of sense. And maybe just on Slide 28, the intra-Alberta growth potential. I'm just looking at this map, it looks like you're well positioned on that left side of the map there, a lot of those white flames. And on the right, it's most -- it seems like most of the optimizations. So how do you think about that in your comments around this first 500,000 barrels a day? Is that more to peers capturing that growth then? On optimization, you got more of the second phase then of growth for the laterals that kick in. Is that how we should think about that?

Well, I think it ultimately, I think, depends on which production projects get funded first. And our customers are evaluating amongst and stacking a number of priorities that they have. And so we'll have to see what decisions they make in the near term versus the midterm. So depending on which production growth increases happen, I think that some of them will very logically have got closer proximity to our pipeline, which we have some latent capacity on right now. And then as I talked about, we have some expansion capacity that we could build into. So we'll have to kind of see how some of that transpires. So -- but there are other pipelines that obviously, that serve similar parts of the corridor that we'll have to compete with.

And there are a number of SAGD operators that have historically and continue to this day truck their production entirely to Edmonton. And so there's opportunities to potentially aggregate that don't require optimization. It's just a different way of getting to market. So the credit quality of a lot of those original developers was very poor, and so they couldn't underwrite a pipeline. Credit quality of some of these operators has improved materially. So there may be other opportunities on that front.

Sam Burwell, Jefferies. One thing I just wanted to clarify on the tripling of enterprise value. I mean, is that inclusive of potentially large noncontrolling interest or JV partners interest in a potential project? And then also on the organic opportunities, would that $2 billion upper bound be your equity share, your total share of the CapEx or like the total project CapEx? Just trying to frame like how potentially large some of these opportunities could be and how it's reflected in the tripling of the EV.

Yes. So we didn't include partner capital or otherwise. Those are numbers that we would be exposed to. And that's why we went through the list of financing choices that we would consider in order to move a business forward. Things of scale in terms of new big projects, like you look at that Grand Rapids corridor, we extend right into the northern part of the oil sands, expanding that corridor to what it was originally envisioned is probably $1 billion to $2 billion with all the terminal assets that would go along with it. So they're all within the realm of possibility of what we could be pursuing. We just don't have -- well, we haven't sanctioned any of them at this point, but we're saying that we're going to deliver a value proposition that is very meaningful in that 2% to 3% EBITDA growth with strong dividend. when we see opportunities within our corridor, we're going to compete for them, and we'll need to finance them from a different perspective because we don't have the full free cash flow available to do it off of our balance sheet. That's the message that we really wanted to convey today is that we're going to deliver a solid base value, and we're going to compete for bigger things, and we have an ambition to get to that larger scale because we believe that scale also will accrete more value back to the shareholder.

Okay. Understood. And you talked a little bit about recontracting, but just curious if you could give us a little bit more on the magnitude or scale of that opportunity over the next, say, 5 years? And is any benefit from recontracting embedded in the sort of enterprise value accretion?

No, none is in the enterprise value accretion. And fortunately, this year, as I mentioned, a big highlight was getting the resolution on our variable toll litigation behind us. We'll be working with customers over the next number of years. We don't -- there's -- we have quite a bit of time to determine our recontracting strategy and listen to our customers in terms of what they want. So we have -- we've still got just over 5 years of contract life on that 90% take-or-pay. So we've got a lot of time to make sure that we optimize that and give a good -- find a win-win with our customers.

Any more questions?

Okay then. So thank you for all the great questions. So please keep them coming in the breakout sessions. But with that, we're going to say goodbye to those joining via webcast. So thank you for tuning in and for your interest in South Bow.