Nov. 13, 2025

South Bow’s 3Q25 update was operationally focused: the Keystone Pipeline System maintained steady utilization while the company advanced integrity work tied to the MP-171 incident, and progressed the Blackrod Connection Project (a 25-km natural gas lateral) toward in-service in early 2026. The key message for producers is that Western Canada / WCSB egress remains adequate relative to expected 2026 supply growth, with the company explicitly forecasting continued low demand for uncommitted Keystone capacity and tight differentials supporting Gulf Coast segment pricing.

The two items to track are (1) the pace and outcomes of the MP-171 integrity program and regulator approvals tied to operating restrictions, and (2) the timing and cash flow ramp from Blackrod, which begins commercially now and scales into 2H26–2027.

Basis / differential implications

South Bow’s outlook frames Western Canada / WCSB as structurally oversupplied by pipeline egress capacity into 2026: crude supply growth is expected to remain below available pipeline capacity, implying low demand for uncommitted Keystone capacity. That backdrop is generally consistent with more stable WCS differentials, all else equal, because system egress constraints are not expected to be the marginal driver next year.

On the U.S. Gulf Coast destination side, South Bow expects pricing differentials impacting Gulf Coast segment rates to remain tight throughout 2026. Tight differentials reduce the upside for variable toll capture and can pressure realizations tied to uncommitted/spot market exposure on the downstream segment, even if physical throughput remains solid.

Flow indicators (read-through on system utilization)

Keystone remained in the “steady-but-not-maxed” range in 3Q25:

• Keystone Pipeline throughput: ~584 Mbbl/d in 3Q25 (vs. 616 Mbbl/d in 3Q24)

• U.S. Gulf Coast segment throughput: ~703 Mbbl/d in 3Q25 (vs. 815 Mbbl/d in 3Q24)

• Marketlink throughput: ~547 Mbbl/d in 3Q25 (vs. 636 Mbbl/d in 3Q24)

• System Operating Factor (SOF): 92% in 3Q25 (vs. 95% in 3Q24)

Net: throughput is healthy, but year-over-year volumes were lower across Keystone, Gulf Coast segment, and Marketlink in 3Q25, consistent with a market that is not running up against a hard egress ceiling.

Commercial / tariff watch-outs

1) MP-171 regulatory restrictions and integrity outcomes
PHMSA’s Corrective Action Order requires pressure restrictions on specific segments. The company has completed six in-line inspections and 37 integrity digs to date, with preliminary results indicating no injurious issues, but additional inspections/digs are planned through 2025–2026 and South Bow is finalizing its remedial work plan for regulator approval. The timing of the independent third-party root cause analysis release was impacted by a U.S. federal government shutdown. Operationally, this remains a key constraint risk until pressure restrictions are fully lifted and the remediation plan is finalized.

2) Gulf Coast segment rate sensitivity to differentials
South Bow explicitly expects tight differentials to continue placing downward pressure on the U.S. Gulf Coast segment in 2026. If differentials loosen materially (or if congestion re-emerges), the rate environment could change quickly, but the company is signaling the opposite—stable/tight differentials and limited upside from variable pricing.

3) Variable toll dispute resolution removes a lingering overhang
South Bow and counterparties withdrew all complaints/protests related to variable toll disputes (Canada Energy Regulator, FERC, Alberta Court, D.C. Circuit). That reduces uncertainty around toll structures and retroactive dispute risk, and simplifies the forward commercial posture.

Watch list

1) MP-171 remediation milestones
Track: additional ILI runs and digs, regulator review of the remedial work plan, and any updates on pressure restriction lift timing.

2) Blackrod Connection Project in-service timing
Mechanical completion is done and the natural gas lateral is already in commercial service, but final facility work continues with full project in-service expected early 2026. Cash flows are expected to build 2H26–2027, so timing and ramp matter.

3) WCSB supply growth vs. egress headroom
South Bow expects supply growth to remain below egress capacity in 2026—any change in supply trajectory or an outage elsewhere that reduces egress can quickly reprice differentials and uncommitted capacity value.

Bottom line

South Bow’s 3Q25 update reinforces a stable Western Canada / WCSB egress outlook into 2026: Keystone throughput remained solid (though down year-over-year), and management expects modest supply growth to stay below available pipeline capacity, keeping demand for uncommitted Keystone capacity low. The two real swing factors are the MP-171 integrity/regulatory path—until restrictions are fully resolved—and the Blackrod Connection Project’s full in-service timing and ramp, which begins contributing meaningfully in 2H26 and into 2027.