Earnings release
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SOUTHBOW EXHIBIT 99.1 NEWS RELEASE South Bow Reports Second - quarter 2026 Results and Declares Dividend -- CALGARY , Alberta , Aug. 05 , 2026 ( GLOBE NEWSWIRE ) South Bow Corp. ( TSX & NYSE : SOBO ) ( South Bow or the Company ) reports its second - quarter 2026 financial and operational results . Unless otherwise noted , all financial figures in this news release are presented in U.S. dollars . Highlights Safety and operational performance • Recorded second - quarter 2026 average throughput of approximately 596,000 barrels per day ( bbl / d ) on the Keystone Pipeline and approximately 800,000 bbl / d on the U.S. Gulf Coast segment of the Keystone Pipeline System . • Throughput on the Keystone Pipeline and the U.S. Gulf Coast segment of the Keystone Pipeline System averaged approximately 606,000 bbl / d and 755,000 bbl / d , respectively , during the first half of 2026 . • Continued to advance remedial actions relating to the Milepost 171 ( MP - 171 ) incident , including in - line inspections and integrity digs , while continuing to work closely with the Company's in - line inspection technology vendors . Findings from these activities are being incorporated into the Company's remedial work plan and ongoing integrity management programs to enhance system integrity and support safe , reliable operations . Financial performance ⚫ Delivered strong second - quarter 2026 financial results , as disruptions to global crude oil trade flows drove strong demand for capacity on the U.S. Gulf Coast segment of the Keystone Pipeline System . • Generated revenue of $ 546 million and net income of $ 134 million ( $ 0.64 / share ) . • Recorded normalized earnings before interest , income taxes , depreciation , and amortization ( normalized EBITDA ) ¹ of $ 280 million , an increase of 9 % from the first quarter of 2026 . Reported distributable cash flow¹ of $ 175 million , an increase of 4 % from the first quarter of 2026 . • Strengthened the Company's financial position , maintaining total long - term debt and net debt¹ outstanding of $ 5.7 billion and $ 4.6 billion , respectively , at the end of the second quarter of 2026. As at June 30 , 2026 , the Company's net debt - to - normalized EBITDA ratio¹ was 4.4 times , down from 4.7 times as at March 31 , 2026 . Returns to shareholders • Returned $ 104 million or $ 0.50 / share to shareholders in the second quarter of 2026 through South Bow's sustainable dividend . • Declared a quarterly dividend of $ 0.50 / share , payable on Oct. 15 , 2026 , to shareholders of record at the close of business on Sept. 29 , 2026. The dividend will be designated as an eligible dividend for Canadian income tax purposes . 1 Non - GAAP financial measure or non - GAAP ratio that does not have a standardized meaning under generally accepted accounting principles ( GAAP ) and may not be comparable to similar measures presented by other entities . See " Specified financial measures " in this news release . Corporate updates • Announced the successful outcome of South Bow's previously disclosed open season , securing 20 - year binding commitments from nine customers , totalling 465,000 bbl / d of firm transportation service from Hardisty , Alta . , to U.S. delivery points . • Advanced execution planning , permitting activities , and stakeholder engagement across the Company's growth initiatives , including South Bow's proposed Prairie Connector project and the jointly proposed Liberty Bridge Pipeline project with Bridger Pipeline LLC ( Bridger ) . See " Growth initiatives " in this news release for additional details . • Increased 2026 normalized EBITDA guidance to $ 1,040 million , with a range of 2 % at the upper end and 1 % at the lower end , and 2026 distributable cash flow guidance to $ 665 million , within a range of 2 % , following stronger - than - expected first - half 2026 results ; and revised 2026 growth capital expenditures guidance to approximately $ 80 million , within a range of $ 10 million , primarily to reflect $ 65 million of anticipated pre - final investment decision ( FID ) development costs associated with the Prairie Connector and Liberty Bridge Pipeline projects . South Bow's unaudited consolidated interim financial statements and notes ( the financial statements ) as at and for the three and six months ended June 30 , 2026 , and related management's discussion and analysis ( the Q2 2026 MD & A ) are available on South Bow's website at www.southbow.com , under South Bow's SEDAR + profile at www.sedarplus.ca , and in South Bow's filings with the U.S. Securities and Exchange Commission ( SEC ) at www.sec.gov . Certain disclosure within " Specified Financial Measures " in the Q2 2026 MD & A is incorporated by reference into this news release . Financial and operational results $ millions , unless otherwise noted FINANCIAL RESULTS Revenue Three Months Ended March 31 , June 30 , 2026 2026 June 30 , 2025 Six Months Ended June 30 , June 30 , 2026 2025 491 546 524 1,037 1,022
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Income from equity investments 13 14 13 27 26Net income 77 134 96 211 184 Per share 1 0.37 0.64 0.46 1.01 0.88 Normalized net income 2 92 104 87 196 185 Per share 1 2 0.44 0.50 0.42 0.94 0.89Income before income taxes 100 174 126 274 240 Normalized EBITDA 2 257 280 250 537 516Keystone Pipeline System 233 259 234 492 469Marketing 9 2 (1) 11 15Intra-Alberta & Other 15 19 17 34 32 Distributable cash flow 2 168 175 167 343 324 Dividends declared 104 104 104 208 208 Per share 1 0.50 0.50 0.50 1.00 1.00 Total capital expenditures 3 27 18 34 45 66Total long-term debt 5,751 5,734 5,774 5,734 5,774 Net debt 2 4 4,738 4,594 4,903 4,594 4,903 Net debt-to-normalized EBITDA (ratio) 2 4.7 4.4 4.6 4.4 4.6Common shares outstanding, weighted average diluted (millions)208.5 208.8 208.8 208.7 208.7Common shares outstanding (millions) 208.6 208.6 208.2 208.6 208.2 OPERATIONAL RESULTS Keystone Pipeline System Operating Factor (SOF) (%) 5 95 93 93 94 95Keystone Pipeline throughput (Mbbl/d) 616 596 544 606 578 U.S. Gulf Coast segment of Keystone Pipeline System throughput (Mbbl/d) 6 709 800 760 755 744Marketlink throughput (Mbbl/d) 537 642 625 590 588 1. Per-share amounts, with the exception of dividends, are based on weighted average diluted common shares outstanding.2. Non-GAAP financial measure or non-GAAP ratio that does not have a standardized meaning under GAAP and may not be comparable to similarmeasures presented by other entities. See "Specified financial measures" in this news release.3. Supplementary financial measure. See "Specified Financial Measures" in the Q2 2026 MD&A, certain information from which is incorporated byreference into this news release.4. Includes 50% equity treatment of South Bow's junior subordinated notes.5. SOF measures South Bow's ability to deliver crude oil at the planned maximum rate of the Keystone Pipeline.6. Comprises throughput originating in Hardisty, Alta. transported on the Keystone Pipeline, and throughput originating in Cushing, Okla.transported on Marketlink for destination in the U.S. Gulf Coast. Growth initiatives South Bow continues to advance its organic growth strategy, with a focus on the proposed Prairie Connector project and the joint development ofthe proposed Liberty Bridge Pipeline project with Bridger. In the second quarter of 2026, South Bow reached a significant milestone by securing20-year binding commitments from nine customers, totalling 465,000 bbl/d of firm transportation service from Hardisty, Alta., to U.S. deliverypoints, reflecting strong commercial support. Key activities underway include advancing permitting and regulatory approvals, pursuing government assurances related to permit durability,progressing execution planning, refining cost estimates, engaging with communities, landowners, Indigenous and Tribal Nations, and otherstakeholders, and evaluating financing alternatives. As development activities progress, South Bow and Bridger remain focused on securing the regulatory certainty and permit durability required tosupport a FID, targeted for mid-2027. Any FID will remain subject to the successful completion of these activities and will be evaluated inaccordance with South Bow's risk preferences and capital allocation framework. South Bow expects its share of total pre-FID development costs in 2026 to be approximately $65 million. South Bow continues to evaluate select inorganic growth opportunities that would strengthen the competitiveness of its base business and furtherdiversify its portfolio. Prairie Connector project South Bow continues to advance development of the proposed Prairie Connector project, including progressing stakeholder engagement andexecution planning activities. If sanctioned, the 530-kilometre (330-mile) Prairie Connector project would extend from Hardisty, Alta., to the Canada-U.S. border, where itwould connect to Bridger's downstream facilities. The project is expected to include approximately 380 kilometres (240 miles) of new 36-inchpipeline and associated facilities, while also leveraging approximately 150 kilometres (95 miles) of previously installed and preserved 36-inchpipeline and two pump stations. Liberty Bridge Pipeline project South Bow and Bridger continue to jointly advance development of the proposed Liberty Bridge Pipeline project, including progressingstakeholder engagement, permitting, and execution planning activities. Development efforts are supported by a route that follows an existingcorridor on privately held lands. If sanctioned, the Liberty Bridge Pipeline project would extend from Guernsey, Wyo., to Cushing, Okla., where it would connect to the U.S. GulfCoast segment of the Keystone Pipeline System and other downstream facilities.
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Outlook Market outlook Recent geopolitical events have caused significant market volatility, underscoring the importance of a secure and reliable North American energysupply. In this environment, South Bow's strategically positioned infrastructure continues to play an important role in connecting growing WesternCanadian crude oil supply to key refining and export markets. South Bow continues to expect modest growth in Western Canadian Sedimentary Basin (WCSB) crude oil supply through 2026, with productionremaining below total pipeline egress capacity. As a result, demand for uncommitted capacity on the Keystone Pipeline is anticipated to remaintempered in the near term. Following strong demand for capacity on the U.S. Gulf Coast segment of the Keystone Pipeline System in the second quarter of 2026, decliningcrude oil inventories in Cushing, Okla. have caused pricing differentials to tighten, and as a result, demand for capacity on the U.S. Gulf Coastsegment of the Keystone Pipeline System is expected to moderate in the second half of 2026. 2026 guidance South Bow's annual guidance aims to inform readers about Management's expectations for 2026 financial and operational results. Readers arecautioned that these estimates may not be suitable for any other purpose. See "Forward-looking information and statements" in this news releasefor additional information regarding factors that could cause actual events to be significantly different from those anticipated. South Bow is increasing its 2026 normalized EBITDA guidance to $1,040 million, with a range of 2% at the upper end and 1% at the lower end,driven by stronger-than-expected first-half 2026 results, including strong operational performance and elevated demand for capacity on the U.S.Gulf Coast segment of the Keystone Pipeline System.South Bow expects third-quarter 2026 normalized EBITDA to be approximately 10% lower than second-quarter 2026 normalized EBITDAof $280 million as demand for capacity on the U.S. Gulf Coast segment of the Keystone Pipeline System moderates. South Bow is increasing its 2026 distributable cash flow guidance to $665 million, within a range of 2%, driven by higher normalized EBITDA,partially offset by increased current income taxes. South Bow is increasing its 2026 growth capital expenditures guidance to approximately $80 million, within a range of $10 million, whichincludes $65 million of anticipated pre-FID development costs associated with the proposed Prairie Connector and Liberty Bridge Pipelineprojects. The remaining growth capital expenditures include approximately $10 million for completion of the Blackrod Connection Project and $5million for land purchases. The Company continues to expect its net debt-to-normalized EBITDA ratio to decline modestly through 2026 relative to year-end 2025. South Bow's updated 2026 annual guidance and results for the six months ended June 30, 2026 are outlined below: $ millions, except percentages 2026 Guidance1 2 (Nov. 2025) 2026 Guidance2 (Aug. 2026)2026 YTD Actuals3 Normalized EBITDA 4 1,030 +/- 2%1,040 +2% / -1% 537 Financial charges 5 315 +/- 2% 315 +/- 2% 152 Effective tax rate (%) 22% - 23% 22% - 23% 23% Distributable cash flow 4 655 +/- 2% 665 +/- 2% 343 Capital expenditures Growth 4 6 7 10 80 +/- 10 14 Maintenance 4 6 8 25 +/- 10 25 +/- 10 8 1. See South Bow's Nov. 13, 2025 news release "South Bow Reports Third-quarter 2025 Results, Provides 2026 Outlook, and Declares Dividend",available on South Bow's website at www.southbow.com, under South Bow's SEDAR+ profile at www.sedarplus.ca, and in South Bow's filingswith the SEC at www.sec.gov.2. Assumes average foreign exchange rate of C$/U.S.$1.39.3. The historical results for the six months ended June 30, 2026 should not be relied upon as a basis for forecasting results for the year ended Dec.31, 2026.4. See the Company's MD&A for the year ended Dec. 31, 2025 for historical normalized EBITDA, distributable cash flow, growth capitalexpenditures, and maintenance capital expenditures for such period.5. Comprised of interest expense and interest income and other.6. Supplementary financial measure. See "Specified Financial Measures" in the Q2 2026 MD&A, certain information from which is incorporated byreference into this news release.7. Includes approximately $65 million of anticipated pre-FID development costs associated with the proposed Prairie Connector and Liberty BridgePipeline projects, subject to development cost-sharing agreements with open season customers.8. Maintenance capital expenditures are generally recoverable through South Bow's tolling arrangements. Capital allocation priorities South Bow takes a disciplined approach to capital allocation to preserve optionality and maximize total shareholder returns over the long term.The Company's capital allocation priorities are built on a foundation of financial strength and supported by South Bow's stable, predictable cashflows. South Bow's capital allocation priorities include:paying a sustainable base dividend; strengthening the Company's investment-grade financial position; and leveraging existing infrastructure within South Bow's strategic corridor to offer customers competitive connections, enhanced optionality,and value chain expansions.
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Board of Directors update Hal Kvisle has stepped down as Chair of the Board of Directors (the Board) and George Lewis has been appointed Chair, effective immediately,as part of the Board's ongoing succession planning process. Mr. Kvisle will continue to serve as a director of South Bow and has been appointedChair of the Governance and Risk Committee. "On behalf of the management team, I would like to thank Hal for his leadership and guidance through South Bow's launch as an independentcompany, including his mentorship as I transitioned into the role of Chief Executive Officer, and congratulate George on his appointment asChair," said Bevin Wirzba, South Bow's Chief Executive Officer. "It has been a privilege to serve as Chair of South Bow and support the Company through its early stages as a standalone business," said Mr.Kvisle. "South Bow has established a strong foundation, and I look forward to continuing to contribute as a director as the Company advances itslong-term strategy." About George Lewis Mr. Lewis has served as a director of South Bow since 2024 and brings extensive executive leadership and public company board experience,including a 30-year career with Royal Bank of Canada. "I am honoured to assume the role of Chair and thank my fellow directors for their confidence," said Mr. Lewis. "Hal's leadership has helpedshape South Bow's strong position today, and I look forward to working with the Board and management team as we continue executing ourstrategy and creating long-term value for shareholders." Conference call and webcast details South Bow's senior leadership will host a conference call and webcast to discuss the Company's second-quarter 2026 results on Aug. 6, 2026 at 8 a.m.MT (10 a.m. ET). Date Aug. 6, 2026Time 8 a.m. MT (10 a.m. ET)Conference call link https://register-conf.media-server.com/register/BI4c42e527f3684cf59c8cbb7c73ad3bc4Webcast link https://edge.media-server.com/mmc/p/m559tn9h/ Register ahead of time to receive a unique PIN to access the conference call via telephone. Once registered, participants can dial into the conference callfrom their telephone via the unique PIN or click on the "Call Me" option to receive an automated call directly on their telephone. Visit www.southbow.com/investors for the replay following the event. Specified financial measures Non-GAAP financial measures and non-GAAP ratios In this news release, South Bow references certain non-GAAP financial measures and non-GAAP ratios that do not have standardized meanings underGAAP and may not be comparable to similar measures presented by other entities. These non-GAAP financial measures and non-GAAP ratios includeadjustments to the composition of the most directly comparable GAAP measures. Management considers these non-GAAP financial measures and non-GAAP ratios to be important in evaluating and understanding the operational performance and liquidity of South Bow. These non-GAAP financialmeasures and non-GAAP ratios should not be considered in isolation or as a substitute for financial information or measures of performance presentedin accordance with GAAP. South Bow's non-GAAP financial measures used in this news release include: normalized EBITDA; segment normalized EBITDA; normalized net income; distributable cash flow; and net debt. South Bow's non-GAAP ratios used in this news release include: normalized net income per share; and net debt-to-normalized EBITDA ratio. These non-GAAP financial measures and non-GAAP ratios are further described below, with a reconciliation to their most directly comparable GAAPmeasure. Normalizing items Normalized measures are, or include, non-GAAP financial measures and non-GAAP ratios and include normalized EBITDA, segment normalizedEBITDA, normalized net income, normalized net income per share, distributable cash flow, and net debt-to-normalized EBITDA ratio. Managementuses these normalized measures to assess the financial performance of South Bow's operations and compare period-over-period results. During certain
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reporting periods, the Company may incur costs that are not indicative of core operations or results. These normalized measures represent income (loss),adjusted for specific normalizing items that are believed to be significant; however, are not reflective of South Bow's underlying operations in theperiod. These specific normalizing items include gains or losses on sales of assets or assets held for sale, unrealized fair value adjustments related to riskmanagement activities, tariff charges, separation, acquisition, integration, and restructuring costs, and other charges, including but not limited to,impairment, contractual costs, preliminary costs associated with major business development projects, and settlements. South Bow excludes the unrealized fair value adjustments related to risk management activities, as these represent the changes in the fair value ofderivatives, but do not accurately reflect the gains and losses that will be realized at settlement and impact income. Therefore, South Bow does notconsider these items reflective of the Company's underlying operations, despite providing effective economic hedges. Realized gains and losses ongrade financial contracts are adjusted to improve comparability, as they settle in a subsequent period to the underlying transaction they are hedgedagainst. South Bow excludes tariff charges as they are not reflective of ongoing business conducted by the Company and are subject to uncertainty. Separation costs relate to internal costs and external fees incurred in connection with the spinoff from TC Energy Corporation on Oct. 1, 2024. Theseitems have been excluded from normalized measures, as Management does not consider them reflective of ongoing operations and they are non-recurring in nature. Business development projects represent initial expenditures incurred by the Company for the evaluation of future growth projects. These costs havebeen excluded from normalized measures, as Management does not consider them reflective of ongoing operations conducted by the Company. Normalized EBITDA and segment normalized EBITDA Normalized EBITDA and segment normalized EBITDA are used as measures of earnings from ongoing operations. Management uses these measures tomonitor and evaluate the financial performance of the Company's operations and to identify and evaluate trends. These measures are useful for investorsas they allow for a more accurate comparison of financial performance of the Company across periods for ongoing operations. Normalized EBITDA andsegment normalized EBITDA represent income (loss) before income taxes, adjusted for the normalizing items described above under the heading"Normalizing items", in addition to excluding charges for depreciation and amortization, interest expense, interest income and other, and other income. Normalized EBITDA and segment normalized EBITDA guidance are forward-looking non-GAAP financial measures. South Bow does not provide areconciliation of such forward-looking measures to the most directly comparable financial measure calculated and presented in accordance with GAAPdue to unknown variables and the uncertainty related to future results. These unknown variables may be inherently difficult to determine withoutunreasonable efforts. Guidance for normalized EBITDA and segment normalized EBITDA are calculated in the same manner as described above forhistorical normalized EBITDA and segment normalized EBITDA, as applicable. The following table reconciles income (loss) before income taxes to normalized EBITDA for the indicated periods: $ millions Three Months Ended Six Months EndedMarch 31,2026 June 30,2026 June 30,2025 June 30,2026 June 30,2025Income before income taxes 100 174 126 274 240 Adjusted for specific items: Depreciation and amortization 64 65 63 129 125 Interest expense 84 84 81 168 164 Interest income and other (11) (5) (8) (16) (14)Risk management instruments 32 (37) (15) (5) (9)Keystone variable toll disputes (18) — — (18) — Separation costs 1 — 3 1 6 Business development projects 5 — — 5 — Tariff charges — — — — 1 Keystone XL costs and other — (1) — (1) 3 Normalized EBITDA 257 280 250 537 516 The following tables reconcile income (loss) before income taxes to normalized EBITDA by operating segment for the indicated periods: $ millions Three Months Ended March 31, 2026KeystonePipelineSystem MarketingIntra-Alberta &Other TotalIncome (loss) before income taxes 197 (22) (75) 100 Adjusted for specific items: Depreciation and amortization 60 — 4 64 Interest expense — — 84 84 Interest income and other (6) (1) (4) (11)Risk management instruments — 32 — 32 Keystone variable toll disputes (18) — — (18)Separation costs — — 1 1 Business development projects — — 5 5 Tariff charges — — — — Keystone XL costs and other — — — — Segment normalized EBITDA 233 9 15 257
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$ millions Three Months Ended June 30, 2026Keystone PipelineSystem MarketingIntra-Alberta &Other TotalIncome (loss) before income taxes 202 41 (69) 174 Adjusted for specific items: Depreciation and amortization 60 — 5 65 Interest expense — — 84 84 Interest income and other (2) (2) (1) (5)Risk management instruments — (37) — (37)Keystone variable toll disputes — — — — Separation costs — — — — Business development projects — — — — Tariff charges — — — — Keystone XL costs and other (1) — — (1)Segment normalized EBITDA 259 2 19 280 $ millions Three Months Ended June 30, 2025KeystonePipelineSystem MarketingIntra-Alberta &Other TotalIncome (loss) before income taxes 177 14 (65) 126 Adjusted for specific items: Depreciation and amortization 59 — 4 63 Interest expense — — 81 81 Interest income and other (2) — (6) (8)Risk management instruments — (15) — (15)Keystone variable toll disputes — — — — Separation costs — — 3 3 Business development projects — — — — Tariff charges — — — — Keystone XL costs and other — — — — Segment normalized EBITDA 234 (1) 17 250 $ millions Six Months Ended June 30, 2026Keystone PipelineSystem MarketingIntra-Alberta &Other TotalIncome (loss) before income taxes 399 19 (144) 274 Adjusted for specific items: Depreciation and amortization 120 — 9 129 Interest expense — — 168 168 Interest income and other (8) (3) (5) (16)Risk management instruments — (5) — (5)Keystone variable toll disputes (18) — — (18)Separation costs — — 1 1 Business development projects — — 5 5 Tariff charges — — — — Keystone XL costs and other (1) — — (1)Segment normalized EBITDA 492 11 34 537 $ millions Six Months Ended June 30, 2025Keystone PipelineSystem MarketingIntra-Alberta &Other TotalIncome (loss) before income taxes 352 23 (135) 240 Adjusted for specific items: Depreciation and amortization 118 — 7 125 Interest expense — — 164 164 Interest income and other (4) — (10) (14)Risk management instruments — (9) — (9)Keystone variable toll disputes — — — — Separation costs — — 6 6 Business development projects — — — —
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Tariff charges — 1 — 1 Keystone XL costs and other 3 — — 3 Segment normalized EBITDA 469 15 32 516 Normalized net income and normalized net income per share Normalized net income represents net income adjusted for the normalizing items described above under the heading "Normalizing items" and is used byManagement to assess the earnings that it believes are representative of South Bow's operations. By adjusting for non-recurring items and other factorsthat do not reflect the Company's ongoing performance, normalized net income provides a clearer picture of the Company's continuing operations. Thismeasure is particularly useful for investors as it allows for a more accurate comparison of financial performance and trends across different periods. Ona per-share basis, normalized net income is derived by dividing the normalized net income by the weighted average diluted common shares outstandingat the end of the period. Management believes this per-share measure is valuable for investors as it provides insight into South Bow's profitability on aper-share basis, assisting in evaluating the Company's performance. The following table reconciles net income to normalized net income for the indicated periods: $ millions, except common sharesoutstanding and per-share amounts Three Months Ended Six Months EndedMarch 31,2026 June 30,2026 June 30,2025 June 30,2026 June 30,2025Net income 77 134 96 211 184 Adjusted for specific items: Risk management instruments 32 (37) (15) (5) (9)Keystone variable toll disputes (19) — — (19) — Separation costs 1 — 3 1 6 Business development projects 5 — — 5 — Tariff charges — — — — 1 Keystone XL costs and other — (1) — (1) 3 Tax effect of the above adjustments (4) 8 3 4 — Normalized net income 92 104 87 196 185 Common shares outstanding, weighted average diluted (millions)208.5 208.8 208.8 208.7 208.7 Normalized net income per share - diluted 0.44 0.50 0.42 0.94 0.89 Distributable cash flow Distributable cash flow is used to assess the cash generated through business operations that can be used for South Bow's capital allocation decisions,helping investors understand the Company's cash-generating capabilities and its potential for returning value to shareholders. Distributable cash flow isbased on income (loss) before income taxes, adjusted for depreciation and amortization, the normalizing items described above under the heading"Normalizing items", and further adjusted for specific items, including income and distributions from the Company's equity investments, maintenancecapital expenditures, which are capitalized and generally recoverable through South Bow's tolling arrangements, and current income taxes. Distributable cash flow guidance is a forward-looking non-GAAP financial measure. South Bow does not provide a reconciliation of such forward-looking measure to the most directly comparable financial measure calculated and presented in accordance with GAAP due to unknown variables andthe uncertainty related to future results. These unknown variables may be inherently difficult to determine without unreasonable efforts. Guidance fordistributable cash flow is calculated in the same manner as described above for historical distributable cash flow, as applicable. In the second quarter of 2025, South Bow modified the definition of distributable cash flow to no longer adjust income (loss) before income taxes forinterest income and other. Management believes that this modified definition of distributable cash flow more accurately reflects the amount of cashgenerated through business operations that can be used for South Bow's capital allocation decisions. Comparative measures have been restated to reflectthese changes. The following table reconciles income (loss) before income taxes to distributable cash flow for the indicated periods: $ millions Three Months Ended Six Months EndedMarch 31,2026 June 30,2026 June 30,2025 June 30,2026 June 30,2025Income before income taxes 100 174 126 274 240 Adjusted for specific items: Depreciation and amortization 64 65 63 129 125 Income from equity investments (13) (14) (13) (27) (26)Distributions from equity investments 18 3 18 21 37 Maintenance capital expenditures 1 2 (4) (4) (8) (8) (21)Current income tax expense (12) (19) (10) (31) (32) Normalizing items, net of tax 3 15 (30) (9) (15) 1 Distributable cash flow 168 175 167 343 324 1. Supplementary financial measure. See "Specified Financial Measures" in the Q2 2026 MD&A, certain information from which is incorporated byreference into this news release.2. Maintenance capital expenditures are generally recoverable through South Bow's tolling arrangements.3. Refers to the adjustments made to normalized net income, net of tax, and includes other income, risk management instruments, Keystone variabletoll disputes, separation costs, business development projects, tariff charges, and Keystone XL costs and other. Net debt and net debt-to-normalized EBITDA ratio
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Net debt is used as a key leverage measure to assess and monitor South Bow's financing structure, providing an overview of the Company's long-termdebt obligations, net of cash and cash equivalents. Management believes this measure is useful for investors as it offers insights into the Company'sfinancial health and its ability to manage and service its debt obligations. Net debt is defined as the sum of total long-term debt with 50% equitytreatment of the Company's junior subordinated notes, operating lease liabilities, and dividends payable, less cash and cash equivalents. Net debt-to-normalized EBITDA ratio is used to monitor South Bow's leverage position relative to its normalized EBITDA for the trailing four quarters.This ratio provides investors with insight into the Company's ability to service its long-term debt obligations relative to its operational performance. Alower ratio indicates stronger financial health and greater capacity to meet its debt obligations. The following table reconciles total long-term debt to net debt as at the dates indicated: $ millions, except ratios March 31, 2026June 30, 2026June 30, 2025Senior unsecured notes 4,665 4,648 4,688 Junior subordinated notes 1,086 1,086 1,086 Total long-term debt 5,751 5,734 5,774 Adjusted for: Hybrid treatment for junior subordinated notes 1 (543) (543) (543)Operating lease liabilities 25 25 20 Dividends payable 104 104 104 Cash and cash equivalents (599) (726) (452)Net debt 4,738 4,594 4,903 Normalized EBITDA for the trailing four quarters 2 1,013 1,043 1,068 Net debt-to-normalized EBITDA (ratio) 4.7 4.4 4.6 1. Includes 50% equity treatment of South Bow's junior subordinated notes.2. Calculated as the normalized EBITDA for the trailing four quarters from the applicable period end. Supplementary financial measures The information under the heading "Supplementary Financial Measures" in South Bow's Q2 2026 MD&A is incorporated by reference into this newsrelease. The Q2 2026 MD&A is available on South Bow's website at www.southbow.com, under South Bow's SEDAR+ profile at www.sedarplus.ca,and in South Bow's filings with the SEC at www.sec.gov. Forward-looking information and statements This news release contains certain forward-looking statements and forward-looking information (collectively, forward-looking statements), includingforward-looking statements within the meaning of the "safe harbor" provisions of applicable securities legislation, that are based on South Bow's currentexpectations, estimates, projections, and assumptions in light of its experience and its perception of historical trends. All statements other thanstatements of historical facts may constitute forward-looking statements. In some cases, forward-looking statements can be identified by terminologysuch as, "anticipate", "will", "expect", "estimate", "potential", "future", "outlook", "strategy", "maintain", "ongoing", "intend", and similar expressionssuggesting future events or future performance. In particular, this news release contains forward-looking statements, including certain financial outlooks, pertaining to, without limitation, the following:expectations regarding the remedial actions of the MP-171 incident, including the continued incorporation of findings into the Company's ongoingintegrity management programs; expected dividends and the designation thereof; the Company's continued advancement of its growth strategy and itsfocuses; expectations regarding the advancement of the Prairie Connector project, including continued focus on obtaining regulatory certainty,anticipated timing of a FID, and the Company's share of estimated total pre-FID development costs in 2026; expected pipelines and facilities associatedwith the Prairie Connector project; the Company's continued evaluation of select inorganic growth opportunities that would strengthen thecompetitiveness of its base business and provide portfolio diversification; expectations regarding the advancement of the Liberty Bridge Pipelineproject; expected pipelines and facilities associated with the Liberty Bridge Pipeline project; that South Bow's strategically positioned infrastructurecontinues to play an important role in connecting growing Western Canadian crude oil supply to key refining and export markets; South Bow's updatedfinancial guidance for 2026 and beyond, including 2026 normalized EBITDA and third-quarter 2026 normalized EBITDA, 2026 financial charges, 2026effective tax rate, 2026 distributable cash flow, 2026 growth and maintenance capital expenditures, 2026 net debt-to-normalized EBITDA ratio, and theCompany's share of the total amount of pre-FID development costs anticipated to be incurred in 2026; that WCSB crude oil supply will grow modestlythrough 2026 and expectations regarding uncommitted capacity on the Keystone Pipeline as a result thereof; expectations regarding demand for capacityon the U.S. Gulf Coast segment of the Keystone Pipeline System; South Bow's expectation that its net debt-to-normalized EBITDA ratio will declinemodestly through 2026; that South Bow's maintenance capital expenditures in 2026 will generally be recoverable through its tolling arrangements;South Bow's corporate vision and strategy, including its strategic and capital allocation priorities, its satisfaction thereof, and outlook; and South Bow'sfinancial strength and flexibility. The forward-looking statements are based on certain assumptions that South Bow has made in respect thereof as of the date of this news releaseregarding, among other things: oil and gas industry development activity levels and the geographic region of such activity; WCSB crude oil supply; thatfavourable market conditions exist and that South Bow has and will have available capital to fund its capital expenditures and other planned spending;prevailing commodity prices, interest rates, inflation levels, carbon prices, tax rates, and exchange rates; the ability of South Bow to maintain currentcredit ratings; the availability of capital to fund future capital requirements; future operating costs; asset integrity costs; that all required regulatory andenvironmental approvals can be obtained on the necessary terms in a timely manner; the timely and effective implementation of the plan to remediatethe material weakness in the Company's internal controls; and prevailing regulatory, tax, and environmental laws and regulations. Although South Bow believes the assumptions and other factors reflected in these forward-looking statements are reasonable as of the date hereof, therecan be no assurance that these assumptions and factors will prove to be correct and, as such, forward-looking statements are not guarantees of futureperformance. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual events orresults to differ materially, including, but not limited to: the regulatory environment and related decisions and requirements; the impact of competitiveentities and pricing; reliance on third parties to successfully operate and maintain certain assets; the strength and operations of the energy industry;weakness or volatility in commodity prices; non-performance or default by counterparties; actions taken by governmental or regulatory authorities; theimpacts of ongoing geopolitical events; the ability of South Bow to acquire or develop and maintain necessary infrastructure; fluctuations in operatingresults; adverse general economic and market conditions; the ability to access various sources of debt and equity capital on acceptable terms; theremediation of the material weakness in the Company's internal controls and the timing thereof; the identification of additional material weaknesses or
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Contact information Investor Relations Media RelationsMartha Wilmot Sara Hunterinvestor.relations@southbow.com communications@southbow.com deficiencies in the Company's internal controls; and adverse changes in credit. The foregoing list of assumptions and risk factors should not beconstrued as exhaustive. For additional information on the assumptions made, and the risks and uncertainties which could cause actual results to differfrom the results implied by forward-looking statements, refer to South Bow's annual information form for the year ended Dec. 31, 2025, available underSouth Bow's SEDAR+ profile at www.sedarplus.ca and, from time to time, in South Bow's public disclosure documents, available on South Bow'swebsite at www.southbow.com, under South Bow's SEDAR+ profile at www.sedarplus.ca, and in South Bow's filings with the SEC at www.sec.gov. The forward-looking information in this news release also includes financial outlooks and other related forward-looking information. Managementapproved the financial outlooks contained in this news release, including 2026 normalized EBITDA and segment normalized EBITDA, third-quarter2026 normalized EBITDA, 2026 financial charges, 2026 effective tax rate, 2026 distributable cash flow, 2026 growth and maintenance capitalexpenditures, 2026 net debt-to-normalized EBITDA ratio, and the Company's share of the total amount of pre-FID development costs anticipated to beincurred in 2026, as of the date of this news release. This financial outlook information is based on, among other things, the various assumptionsdisclosed in this news release, including those under "Forward-looking information and statements" as of the date hereof. The internal projections,expectations, or beliefs are based on the 2026 budget, which is subject to change in light of ongoing results, prevailing economic conditions, commodityprices, and industry conditions and regulations. The purpose of these financial outlooks is to inform readers about Management's expectations for theCompany's financial and operational results in 2026, and such information may not be appropriate for other purposes. South Bow's future shareholder distributions, including but not limited to the payment of dividends, if any, and the level thereof, is uncertain. Anydecision to pay dividends on South Bow's shares (including the actual amount, the declaration date, the record date, and the payment date in connectiontherewith and any special dividends) will be subject to the discretion of the Board and may depend on a variety of factors, including, without limitation,South Bow's business performance, financial condition, financial requirements, growth plans, expected capital requirements, and other conditionsexisting at such future time, including, without limitation, contractual restrictions and satisfaction of the solvency tests imposed on South Bow underapplicable corporate law. Further, the actual amount, the declaration date, the record date, and the payment date of any dividend are subject to thediscretion of the Board. There can be no assurance that South Bow will pay dividends in the future. The forward-looking statements contained in this news release speak only as of the date hereof. South Bow does not undertake any obligation topublicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws. All forward-lookingstatements contained in this news release are expressly qualified by this cautionary statement. About South Bow South Bow safely operates 4,900 kilometres (3,045 miles) of crude oil pipeline infrastructure, connecting Alberta crude oil supplies to U.S. refiningmarkets in Illinois, Oklahoma, and the U.S. Gulf Coast through our unrivalled market position. We take pride in what we do—providing safe andreliable transportation of crude oil to North America's highest demand markets. As an investment-grade entity based in Calgary, Alberta, South Bow'scommon shares trade on the Toronto Stock Exchange and the New York Stock Exchange under the symbol SOBO. To learn more, visitwww.southbow.com.