CALGARY – South Bow Corp., the oil pipeline operator spun off from TC Energy Corp. last year, says its marketing segment, which provides transportation, storage and logistics services, could come under pressure if a 10 per cent tariff on U.S. energy exports persists.
The levy imposed this week, and Canadian countertariffs against the U.S., have caused volatility in the price difference between heavy Canadian and light U.S. crude prices, said the Calgary-based company.
“Persistence of this uncertainty may create additional headwinds for uncommitted capacity on South Bow’s pipeline systems and impact South Bow’s marketing segment results,” South Bow said in its inaugural financial report as an independent company, released late Wednesday.
On Tuesday, a 10 per cent tariff on energy shipments into the United States came into effect, with a 25 per cent levy on all other goods.
U.S. President Donald Trump signed an executive order Thursday pausing tariffs on some imports linked to the auto industry and lowering tariffs on potash, a fertilizer in high demand for American farmers, to 10 per cent.
South Bow chief executive Bevin Wirzba told analysts on a conference call Thursday that there was a change in customer behaviour in anticipation of potential tariffs, since they have to decide a month in advance where to send their barrels.
“The other options for our customers are to leave those barrels in storage or move them east or west,” Wirzba said.
“So we anticipate that will continue to be a headwind as long as tariffs are in place, as it provides another incentive for customers to consider other options than moving their barrels south.”
South Bow said it has cut its 2025 outlook for normalized earnings before interest, taxes, depreciation and amortization in its marketing segment by about $30 million compared with 2024 due in part to the market uncertainty resulting from tariffs.
Other factors in the changed outlook include pipeline capacity exceeding the supply of oil coming out of Western Canada and the unwinding of some hedging positions.
South Bow shares dropped more than 10 per cent on the TSX on Thursday to $35.18.
During the last three months of 2024, South Bow reported normalized net income of $112 million, compared with $94 million during the same period a year earlier when its business was still part of TC Energy.
That amounted to 54 cents per share, compared with 45 cents per share.
Revenue in the quarter dropped to $488 million from $540 million.
Last week, U.S. President Donald Trump posted on Truth Social, the platform he owns, that he’d like to see the revival of the Keystone XL oil pipeline, which would have allowed more oilsands crude to flow to the U.S. Gulf Coast.
TransCanada Corp., which changed its name to TC Energy almost six years ago, first proposed the project in 2008, kicking off a years-long saga that saw intense environmental opposition and pitched political and legal battles.
The Keystone XL project — a 1,900-kilometre pipeline that would have run from Hardisty, Alta., to the major U.S. crude storage hub at Cushing, Okla., and then on to Gulf Coast refineries — was first proposed during the Obama administration, which rejected it on environmental grounds.
It was then revived under the first Trump administration, before former president Joe Biden killed it again by revoking the pipeline’s permit on his first day in the White House in 2021.
South Bow, which now owns the existing Keystone system, has said it has “moved on” from the XL expansion and is looking at other ways to serve customers.
This report by The Canadian Press was first published March 6, 2025.
Companies in this story: (TSX: SOBO) (TSX: TRP)
