South Bow Corporation (SOBO) Q3 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Southport Third Quarter 26 Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you would need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. And to withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Martha Wilmot. Director of Investor Relations. Please go ahead.

Thank you, Michelle, and good morning, everyone. Welcome to South Bow's Third Quarter 26 Earnings Call. With me today are Bevin Mark Wirzba, President and Chief Executive Officer; Van R. Dafoe, Senior Vice President and Chief Financial Officer; and Richard J. Prior, Senior Vice President and Chief Commercial Officer. Before I turn it over to Bevin, I would like to remind that today's remarks include forward looking information and statements that are subject to the risks and uncertainties addressed in our public disclosure documents available under South Bow's SEDAR+ profile and in SouthBow's filings with the SEC. Today's discussion will also include non-GAAP financial measures and ratios that may not be comparable to those presented by other entities. With that, I will turn it over to Bevin.

Good morning, everyone. We appreciate you joining us today. South Bow delivered another solid quarter, reflecting the continued strength of our base business. Results were in line with expectations while we strengthened our financial position and advanced our growth portfolio. At the same time, the outlook for the Western Canadian sedimentary basin continues to strengthen. Production is growing, and importantly, our conversations with customers are becoming increasingly focused on how we can support those growth and expansion plans. We see the potential for a broader set of opportunities across our corridor. From additional connectivity and expansions to our existing infrastructure to larger scale projects that can support the next meaningful phase of resource development in Western Canada. That momentum reinforces what we heard through the prairie Connector open season as our customers look to grow production at scale, they need additional egress to established markets. They need interbasin solutions, and they will need solutions that can be executed in the near term. Prairie Connector is an important part of how we can support that growth. And we continue to advance the project toward a targeted mid-2027 final investment decision. Alongside our partner, our teams are advancing a number of activities, including permitting and land acquisitions, stakeholder engagement, execution planning, cost refinement, and financing arrangements. In parallel, we are working toward the regulatory certainty and permit durability needed to support an investment decision. As we said on our second quarter call, projects of this scale involve a number of interconnected work streams, and we are making good progress across each of them. Some of that work involves complex and sensitive discussions that we are not in a position to address publicly at this stage. What I would emphasize is that our approach and investment discipline remain unchanged. We are executing the plan we laid out following our successful open season while continuing to evaluate the opportunity against the same criteria we apply to all our investments, With that, I will hand it over to Richard to provide more detail on our integrity activities and operational performance.

Thanks, Bevin. I will start with pipeline integrity and the continued progress we are making on the remedial work associated with Milepost 171. During the quarter, PHMSA approved our remedial work plan, and we continue to advance our in line inspection program using phased array ultrasonic technology, which is being validated through field integrity digs. Following internal engineering reviews, we have begun lifting pressure restrictions on certain segments of the Keystone pipeline. We are encouraged by the continued progress consistent with what we have shared previously, we expect pressure restrictions to continue being lifted in phases through the end of this year and into 2027. Turning to operations. The third quarter played out largely as expected. As indicated on our last call, we anticipated activity on our U.S. Gulf Coast segment will be moderated from the strong levels we experienced in the second quarter as tighter pricing differentials and low Cushing inventories weighed on demand for capacity on Marketlink. We also completed significant in line inspection work during the quarter in support of the Milepost 171 remedial work plan. This reduced available capacity but advanced the work required to remove pressure restrictions. As we move into the fourth quarter, transportation differentials have since widened from third quarter levels supporting stronger demand for capacity to finish the year. Looking further ahead, we continue to see a constructive setup for our corridor run. Western Canadian crude oil production is growing, while supply remains below total pipeline egress capacity, today, we expect production growth to begin outpacing incremental egress additions later in 2020 Over time, that should support strong demand for uncommitted capacity on our Keystone system. With that, I will turn it over to Van to discuss our financial performance and outlook for 2027.

Thanks, Richard. Our third quarter financial results were in line with our expectations and continue to demonstrate the strong cash generation of our business. We reported normalized EBITDA of $248 million and distributable cash flow of $187 million with distributable cash flow up 7% from the second quarter. Supported by a 1 time payroll tax adjustment. Given our strong performance so far this year, we are increasing our 2026 distributable cash flow guidance by 4% to approximately $690 million Our normalized EBITDA outlook of approximately $1.04 billion remains unchanged. That performance continues to support our deleveraging priority. We exited the quarter with net debt of approximately $4.4 billion and leverage of 4.3x normalized EBITDA. During the quarter, we also reduced absolute debt by repurchasing and extinguishing $320 million of senior unsecured notes with cash on hand. Turning to 2022. 2027, we expect the underlying strength and stability of our business to continue. We are guiding to normalized EBITDA of approximately $1.07 billion within a range of 2%. A key driver of the year over year increase will be Blackrod, as cash flows associated with the project continue to ramp up and make a more meaningful contribution to South Bow's results. Approximately 70% of the contribution will come from the oil lateral and will be recorded as normalized EBITDA. While the remaining 30% will come from the natural gas lateral and will be recorded as interest income. The remainder of our outlook reflects the stability of our highly contracted base business, while the range around the normalized EBITDA captures variability in price differentials and the associated demand for uncommitted capacity. We expect to generate distributable cash flow of approximately $630 million in 2027 within a range of 4%. The year over year decrease primarily reflects higher expected current income taxes following the significant tax savings South Bow realized in 2026. For capital spending, we expect approximately $40 million of maintenance capital plus or minus $10 million and approximately $65 million of growth capital for pre-FID activities for Prairie Connector and Liberty Bridge. We will evaluate accelerating certain pre-FID development spending as greater regulatory certainty and permit durability are achieved. At the same time, we expect to continue strengthening our financial position with net debt to normalized EBITDA declining modestly over the course of the year. Finally, our Board of Directors have approved our quarterly dividend of $0.50 per share. With that, I will turn it back to Bevin for closing remarks.

Thanks, Van, and thanks, Richard. Before we open the line for questions, I want to come back to the broader picture. South Bow's business is performing very well. We are strengthening our financial position and the fundamentals supporting our corridor continue to move in the positive direction. Western Canadian production is growing, and our customers are increasingly looking toward the next phase of growth. That is creating opportunities across our corridor. From our existing footprint to the large scale projects we are advancing. Prairie Connector remains an important part of that opportunity set. We have strong customer and stakeholder support. And we are making good progress across the work needed for a targeted mid-2027 final investment decision. While remaining focused on achieving the conditions necessary to allocate capital with confidence. As we pursue these opportunities, our priorities remain unchanged. We will operate safely and responsibly, strengthen our balance sheet, and remain disciplined in how and where we invest shareholder capital. That combination of a resilient base business, and a growing opportunity set positions South Bow well for 2027 and beyond. Before we open the line for questions, I would like to welcome Heather Krislock, our new Chief Operating Officer, who recently joined Southbow. We are very pleased to have Heather on board. With that, I will turn it back to the operator for Q&A. With Van and Richard joining me for questions.

To withdraw your question, please press *11 again. The first question comes from Robert Hope with Scotiabank. Your line is open.

Morning, everyone. So good to see the Prairie Connector continue to track to the mid 27 FID. Can you add a little bit more color on what progress was made there over the last quarter as well as what kind of goalposts the investment community should be looking for over the next couple of quarters to ensure that you are tracking towards that FID.

Yeah. Thank you, Robert. You know, we are progressing, as I mentioned in my remarks, on multiple fronts. And so from permitting and land acquisitions securing kind of more regulatory certainty as we go within with discussions in both Canada and the United States, refining our execution plans, long-lead equipment, strategies. All of that is moving forward in what you would normally anticipate. And so we are really, feeling good about the progress we have made. We have established the team. All of those kind of arrangements are moving forward great, And then in terms of milestones, obviously, permitting processes are, you know, multi quarter type activities that advance securing all the land. You know, that will be a milestone to look towards. And then, obviously, you know, some form of certainty around permit durability is what we are really focused on, and that is what we need to see before we will allocate any more meaningful capital towards the project.

Appreciate that. And then maybe diving a little bit deeper if possible, on that concept of permit durability. How are the conversations with stakeholders both north and south of the border ongoing Are they understanding of what conditions are required for South Bow to invest capital? Are they willing to accommodate that? Can you maybe just give us a little bit incremental color on how those discussions are going?

Yeah, Robert. You know, stepping back, you know, what is what is fundamental, and I meant in my comments saying that, you know, the fundamentals remain strong, and I think the fundamentals around energy security in both Canada and The US are very aligned. And because of that alignment, we are seeing from stakeholders that they understand that we need that certainty to move forward. You know, I have said pretty clearly that, you know, that those conversations are pretty complex, and they are very sensitive. And so we are we are we are not going to be able to share any specific details around how we are advancing on that front, but I can say that I do not think that there is any kind of there. there is you know, I think we are pretty aligned on what we need and governments on understand what we are looking for in order to allocate capital. This is a project that is very meaningful for both countries. And we are hope hopeful that we can move that forward here in the next few quarters. I appreciate that. Thank you.

And our next is going to come from Sam Burwell with Jefferies. Your line is open.

Hey, guys. Good morning. Guess shifting away from that a little bit. Of the organic opportunities that you guys are evaluating, so you put that in the press release. Could those be things that are tied fairly closely to Prairie, or this maybe be a desire to diversify a little bit away from that and go after projects maybe elsewhere along the system?

Yes. You know, since our Investor Day, you know, just over a year ago, we said we would be advancing organic opportunities across system, and we are very encouraged to see that portfolio of opportunities is maturing. We are maturing opportunities that are south of the border that are clearly not connected to Prairie Connector. And then with the increased growth that we are seeing intra-Alberta, there it is directly tied to our existing corridors, which is also part of the strategy. You know, our second capital allocation priority was to leverage the preinvested capital that we already have in our corridors, that includes our inter-Alberta assets. So, quite a number of things maturing, and we hope we can share some more on that over the next few quarters as well as these projects advance.

Okay. Great. And, obviously, I understand that you guys reiterated the mid 27 FID target, and Van mentioned that you probably want some more certainty around the permit durability before more capital gets budgeted pre FID. So I am curious about is, do you need certainty on permit durability in the form of a backstop or whatnot a certain time before that mid 27 FID target such that you can make firm orders for long lead items and things like that? Or is there maybe some underrated flexibility within that framework?

Yes, Sam. I would say we are evaluating a number of alternatives of how to move the project forward. You know, clearly, to take FID, we need the certainty around permit durability. We need permits in place and the like. The timing of achieving that permit durability just basically alters, you know, the path forward of what time frame we move it forward. If we get earlier acknowledgment or earlier definition of what that looks like, that might allow us to expose a bit more capital ahead of an FID. But at this point, we are we are we are just remaining very firm on our discipline around capital allocation. And not going to expose capital that has risks that we would not want our shareholders to take. Got it. Thank you, Bevin. Thank you.

And the next question will come from Maurice Choi with RBC Capital. Your line is open.

Thank you, and good morning, everyone. I just wanna dive deeper into this exact same topic about major projects. You know, speaking more pointedly about the US election. What do you think the results mean for your projects? I assume the path to delivering the projects remain open, but does the Democrat control congress change your available options for permit durability?

Yep. Maurice, you know, you know, if you take a look at, you know, stepping back from the election results themselves, the fundamentals that underpin our business have not changed. You know, Canadian production is at record levels and continues to grow. You know, a lot of quarters just got released, and our customers are suggesting that growth is continuing. They are in very strong financial positions with their balance sheets. And the demand from the refining markets really has not changed either. They remain very strong. There was even an announcement of an idled refinery being brought back into service. So strengthening the demand fundamentals in the Gulf Coast. So we. We have always maintained, I think, through South Bow and even, you know, legacy previous to that we build our business agnostic to the administrations that are in place in states and provinces and federally and, you know, the results of the midterms will obviously have some effects broadly. They do not really affect our strategy, and they do not affect the plans that we have going forward.

that is crystal clear. Thank you very much. And maybe just a quick 1 on the outlook. Obviously, Richard mentioned that the dips have widened in Q4, so that underpins some possibly good results for Q4. But for 2027, could you comment on the assumptions you have on this as well as volumes for both the base Keystone and marketing?

Yeah. I will start, Maurice, but I will pass it over to Richard. We just took to our board our budget for next year and a lot of things that we had to contemplate in it is, obviously, the supply growth that we are seeing from our customers, egress optionality. Some of our peers have added some capacity impacting, you know, take away and egress out of the basin. But, you know, the macro with you know, the Ukraine war and volumes building up in The Gulf have impacted our. In. our outlook. And I will turn it over to Richard to give you some high level, kind of high-level observations of what we are looking for next year in terms of volume.

Sure. Yeah. And maybe I would just start by. You know, we are we are only talking about a small portion of our business. You know, 90% plus of our throughput is contracted, and that will continue to flow and we expect that show up day to day. But when you look at the outlook for year, like we looking at the overall pricing dynamics and fundamentals, like we do not forecast based on events or outliers. I would say that we have some tailwinds. We see growing production in Alberta. We expect in sometime in 2027, that is gonna firm up, production will probably outstrip even some of the incremental capacity that is coming on. So that will create demand for the Keystone I think we are going to see inventories start to be replaced at some point in the future, whether that be at the Cushing Hub or in the Gulf Coast with the SPR starting to draw back in some of the inventories that were utilized over the past year. And then some of these shipping dynamics, you know, vessel transportation rates that we are seeing in the Gulf Coast, I think, at some point, those were normalized. And when we see those normalized, that will, I think, return to more exports coming out of The Gulf, and that will also continue to help pull more barrels through our quarter. So that is generally how we frame our outlook for next year. Understood. Thank you very much, and my congratulations to you, Richard, and, to Heather as well on the new appointments. Thank you. Thank you.

And the next question will come from Robert Catellier with CIBC. Your line is open.

Good morning. You are getting pretty close to your intended leverage target. So in light of that, how are you viewing capital allocation? For example, you know, you as you approach that leverage target, you also have some potentially significant projects ahead of you. Are you likely to wait for those to materialize before deciding what to do next and similar to that, do you have any plans for further debt repurchases?

Yeah. Robert, I will start, but Van is really the owner of our balance sheet. But at the high level, our capital allocation principles remain intact. You know, we believe and continue to believe that, reaching our leverage target is very important irrespective of how we move the business forward. it is also accretive to the equity investor to have lower interest payments, and we have had some debt repayments already. Second, you know, on capital allocation, we are trying. We have per my answer to a previous question, we have been maturing a number of opportunities, in the background organically that are going well. So we have we have built up our capacity now with BlackRock coming on of being able to allocate, north of, you know, $175 million per year of free cash flow after paying our interest and dividends. To our to allocate that to growth CapEx. And so we have built a nice balance on the balance sheet But over to you, Van, in terms of more on the capital structure and debt repayment.

Sure. Sure. So when we spun, you know, we came out at 5x debt to EBITDA, and we talked about getting down to 4 kind of in the 2028, 2029 time frame. That has accelerated. So if you look at your assumptions in your model with the $65 million of growth capital, you are probably getting there you know, by the end of the year. Obviously, that $65 million is just pre FID Prairie Connector, so a lot can change. And so, once we get to FID, then you know, we will see where. You know, our debt will obviously not end up at the 4x. So as we get to FID, we will think about how we were gonna finance Prairie Connector. With debt, other debt repurchases, We have a note coming due in August 2027 of $600 million. We have just over $500 million of cash on hand. So, again, we will just we will. We likely will not purchase more debt, and we will look to refinance or pay down that August note depending again what happens with Prairie Connector.

Yeah. That makes sense. And then, just last 1 for me. I am just curious on what you think PHMSA needs to see in order to lift the pressures restrictions?

Yeah. it is Richard. So we. PHMSA approved our remedial work plan, and we have been in very close dialogue with PHMSA over the last year. And I think we have got a very good idea Like, we have a plan submitted that, you know, involves and approved, that involves the use of you know, in line inspection technology. This is the ultrasonics, you know, paired with field verifications and correlations. You know, So far, that work is going very well, we are optimistic that we will get through that sometime in 2027. So I think we have got a pretty clear approach currently with PHMSA. And maybe, like, 1 thing I just while I am on the topic, like, I would say that you know, we are really pleased with what we are seeing and what we are finding with this new tool technology. The results are correlating very well between what the tool is showing and what we are seeing in the field And so this is only just improving our confidence and our understanding about what we have in terms of our pipeline system and our ability to maintain integrity and to continue safe operations in the future. that is great. Thank you. Thank you.

And the next question will come from Aaron MacNeil with TD Cowen. Your line is open.

Hey, morning all. Thanks for taking my questions. Bevin or maybe Van, I am not sure. Prairie Connector was showcased at the Canada Investment Summit in September. Is there anything interesting that came out of that process in terms of potential financing structures or ways to fund the project?

Yeah. Erin, You know, we you know, we submitted the information on our project and I would say we did not really need that much advertising. With respect of our plans on Prairie Connector just given the history and the scale of the initiative. And so we have been in active dialogue, across the capital markets on. With you know, infrastructure sponsors, strategics, and others. And so, know, we are happy to be a part of part of it, but, really, that was just part of a broader our broader set of conversations that we are already engaged with. So nothing in particular came out of it other than just reinforcing our key messages on the project.

Okay. Fair enough. And then just following up on the sort of organic opportunities you mentioned. That are maturing across all your existing corridors. Could you potentially have a competing use of capital you know, by the time you get to a potential Prairie Connector FID in mid 27 and would that sort of factor into the investment decision for the big 1?

Yeah. Absolutely. You know, we have know, at the outset of spin, we indicated that we believed we could generate you know, organic opportunities across our portfolio. And we have a certain amount of free cash flow to fund those. We will not turn away accretive opportunities for our shareholders that we believe we can execute within our risk preferences. And so you know, Van and team are have evaluated. And I think we pointed out in our investor day last year you know, all the different colors of the rainbow of different finance choices that we have. Notably, first, first is cash on our balance sheet, which we have been growing. And so as projects compete, we will look at that full capital structure to make sure that we can advance all of all of what we think meet the criteria against our capital allocation priorities. Okay. Great. Thanks, everybody. I will turn it back. Thank you.

And our next question will come from AJ O’Donnell with TPH Research. Your line is open. AJ O’Donnell: Hey, good morning, everyone. Just 1 for me today. As most of my other questions were kind of already asked. But just thinking about the deadline for the MOU kinda quickly approaching, you know, if that agreement does get signed and there is some more clarity kind of around Western Canada growth over the next few years. How are you thinking about a potential upsize in Prairie Connector? Is that. Is there potential to see know, maybe an additional open season unlock before the official FID, or is that way further down the path?

Yeah. AJ, you know, the MOU discussions I know from talking with our customers, those are very active dialogues there is. You could imagine they are they are extremely complex, and there is a lot. Going on. They are trying to develop certainty around their own growth projects. I would say that we would not contemplate an open season ahead of FID, and we would not anticipate that there would be demand for us to do that ahead of FID from our from our customers as, even with a settled MOU, it is going to take time for our customers to develop their long term plans with respect to growth. They are all well aware of the optionality that we have to expand and we have prewired conditions for that to occur. So, our job is to work towards the conditions to get to an FID, and that is our first priority. K. Thanks, Bevin. I will I will turn it back. Thank you.

And our next question will come from Benjamin Pham with BMO. Your line is open.

Hi. Thanks. Good morning. I wanted to start off in more detail question. The 2027 growth CapEx, 65 million appears to be largely pre-FID spending for Prairie Connector. Can you confirm that 65 million is that is that most stakeholder cost you are spending? Is there deposits you are putting in on steel in that? And another question I had too is as you think about the capital spend for Prairie Connector, post FID How does. How should we think about the scale of that? Is it really ramp up quite quickly in the second half of 2027? And then also it is quite high in 2028? Yeah.

Thank you, Ben. So with the 65 million that. that is primarily. I mentioned in an earlier response that we have multiple pathways that we are pursuing on the project and subject to when we can achieve permit durability and how that looks, that will adjust that time frame. The 65 million is primarily around the activities that I highlighted that we have been advancing really on the permitting and the land acquisition side, things to continue to move the project forward. Where we are we are ensuring that we can advance the project in a very timely fashion. Once we once we secure permit durability or the conditions around that, then that number largely, will expand. The profile to your second part of the question in terms of where how does it look in 2027-2028. I would say it is a fairly steady ramp up. Obviously, the first things to spend would be the long lead equipment orders. As you point out, So, no, we have not made any steel purchases to date. We are we are looking at all of the kind of critical path items that we would need to acquire. But, really, you shift early spend is on the equipment orders, and then it ramps into kind of field execution and is kind of a steady increase all the way through to completion. And then and then post construction, reclamation costs in the post. So our team, you know, Van and team have been looking at the financing strategy around that on the balance post FID. And once we achieve FID, we will provide real clarity to shareholders in terms of our cost estimate outlook, our schedule, strategy, and execution plan, those details will all be revealed at an FID. Time frame.

Okay. Got it. Thank you. And maybe a broader question on the project economics. You piloted attractive build multiple on all your opportunities before. Can you comment directly that change at all for the better or for the worse? And how do you think about organic growth returns in organic and also adding Prairie Connector in there as well?

Yep. Then we were remaining disciplined on our capital allocation. The cost. I mentioned 1 of the key activities that we are doing is just refining, refining our costs. And cost refinement really comes from the strat. Your execution strategy. Just thinking through different ways to do the project more efficiently. Efficiently going forward. And so we have not seen any material change to our ability to deliver within our stated kind of investment, requirements of that 6x to 8x. We have seen different you know, for example, the AI and data center build out is put a higher emphasis on, you know, things that are electrical. Have become more critical in terms of accelerating or making sure that we have the right supply chain strategy to secure those elements. So there is been some ebbs and flows, but nothing that would change that. I think the thing that our underwriting case really is strong is that we have been able to commercialize 465 thousand barrels a day. That allows us to lift the project and then we have a tremendous opportunity to expand all the way through to million barrels a day with low capital and very capital efficient pump station additions in the future. Okay. Got it. Thank you. that is very helpful. Thank you.

And our next question will come from John McKay with Goldman Sachs. Your line is open.

Hey, team. Thank you for the time. My 2 questions might be maybe clarifications of earlier ones. But just on the first 1, going back to the broader conversation around basin egress, when you are thinking about opportunities on the intra Alberta side, the next Blackrod, etcetera, are you hearing from your customers that they are waiting to get clarity there before they are moving forward? Or do you think we could see some more lateral type projects announced before we know exactly what egress will look like.

Yeah, John. I would say it is a mix of certainly when we became open for business. As a liquids pipeline, and we have. We flagged BlackRock. That already precipitated a lot of different discussions from other operators, looking to get service intra Alberta. We developed the 10%. And so that if you look at about a 4 million barrel a day, base oil sands business today expanding by 10% just happens to be what Prairie Connector looks like, 465 thousand barrels a day. So our base strategy going forward is to address that near term production growth that we are seeing and see very direct line of sight to that does not need the. Any other further kind of regulatory or other conditions to advance. And then we are set up really well for the long term, kinda growth projects that will emerge post kind of MOU, for greenfield production. Oh, that makes sense. Thank you for that Second 1 for me, Bevin, just going back to your comments earlier around kind of evaluating different options to move Prairie Connector forward. I guess I just wanted to clarify, does that include changes in like, scope or route or anything on that kind of you know, physical side? Or were your comments more on you know, permitting process, general process towards FID, etcetera? Just to clarify? Thanks. Yeah. Thanks for the clarifying question. We chose the Prairie Connector route and strategy with our partner, Bridger, on the 3 projects to leverage the existing corridors that we have in those 3 projects. So we are not making any changes with respect to the execution strategy around brooding, etcetera. You know, there is some very key advantages in each of the 3 projects that would continue to encourage us to pursue the path that we have taken. I would say that the broader strategies that we are looking to in terms of securing the development going forward are just trying to. We are we are in a constant dialogue of what are the available programs and things that we can take advantage of to find that security we need to allocate capital at an FID. And those are things that we just cannot talk to at this point in time because of the nature of those conversations. No. Understood. That makes sense. Thank you. Yeah. Thanks, John. Thank you.

And the next question will come from Sumantra Banerjee with UBS. Your line is open.

Hi, good morning and thanks for taking the question. Just curious as you are evaluating your next organic growth opportunities, if there is any high level takeaways or learnings from getting BlackRock completed that you could apply to the next project.

So I will start and I do not know, Richard, if you have any direct comments. I think what we learned from. I guess, my highest level learning is and I mentioned it, I think, in my previous response is that we are open for business. And, you know, listening to what our customers want and providing them the solution that works for them, we can be competitive, and we have proved we can be competitive. But no, I would just say that, you know, what we were able to utilize on Blackrod that made that, you know, that successful commercial venture is just where we can utilize existing capacity or existing corridors you know, places where we have existing permits, you know, put us in a position where we can where we could compete. And if successfully been able to secure some business. And so when I look going forward, I think that is the that is the type of opportunity that we are we are highly focused on. On developing. Got it. That makes sense. Thank you so much. I will turn it over. Thank you.

And the question is going to come from Theresa Chen with Barclays. Your line is open.

Hi, there. Thank you for taking my questions. And also like to echo congratulations to Richard and Heather on their new roles. When we look at 2027 with refinery turnaround activity likely to be higher next year, both planned and potentially unplanned given how highly utilized the system has been this year. Is that fully reflected in the volume assumptions underpinning your 2027 EBITDA outlook, how do you think about implications to volumes in light of this?

Yeah. Good question. it is Richard here. Hard to say exactly what refinery turnarounds are going to look like. The refinery utilizations have been extremely high this year. And I think as long as crack spreads continue to be wide, refineries are going to continue to want to look to ways to optimize that and produce products. You know? But if you have refineries that are having turnarounds, whether they be planned or unplanned, you know, there is also been a lot of inventories drawn down. And so our view is that 2027, you are going to see production coming online that is, at some point, we think, likely going to outpace the egress. And so that is gonna drive widening of the differentials and send the barrels to move. And I think there is going to be there is going to be opportunities people are going to want to take of to start returning barrels into storage as well. So I would say our base case is high utilization of our assets next year. that is helpful. Thank you. Thank you.

And I am showing no further at this time. I will now turn the call back over to Bevin for closing remarks.

Yes. Thank you, Michelle. And thank you all for joining us today and for your continued interest in Southboat. I hope everyone has a great day.

This concludes today's conference call. Thank you for participating and you may now disconnect.