Sources: South Bow in Canada reduces crude trading team, shifts focus to pipeline volumes

Sources have revealed that South Bow, a Calgary-based pipeline company, has downsized its crude trading team to concentrate on increasing the volume of oil sold through contracted pipelines while decreasing crude trading activities. Following South Bow’s spin-off from TC Energy in October 2024 to help alleviate TC’s debt burden, the company recently laid off two traders, reducing the team from five members to two.

The decision to reduce the trading team aligns with South Bow’s efforts to enhance revenue stability by focusing on contracted volumes shipped through its pipeline systems, rather than trading in the market. With the completion of the Trans Mountain pipeline in Canada, South Bow faced reduced trading opportunities, prompting the company to shift its focus to contracted arrangements.

South Bow’s marketing unit, which includes the crude trading team, is projected to experience a negative EBITDA in 2025, decreasing by $30 million from the previous year. Despite this, the company anticipates its normalized overall EBITDA to be approximately $1.01 billion in 2025, slightly lower than the $1.09 billion reported in 2024.

The anticipated loss in the marketing unit is attributed to the operational start of the Trans Mountain pipeline expansion, diverting arbitrage opportunities from South Bow. CEO Bevin Wirzba highlighted during an investor call that the Trans Mountain pipeline’s operation poses challenges to South Bow’s trading activities. Additionally, increased Canadian pipeline capacity and potential tariffs further impede marketing earnings.

South Bow aims to secure 90% of its EBITDA in 2025 through committed arrangements, emphasizing a contracted strategy to enhance shareholder value by ensuring consistent revenue streams. The company manages the Marketlink pipeline system, capable of shipping 750,000 barrels per day from Cushing, Oklahoma, to the U.S. Gulf Coast via the Keystone pipeline extension.

To increase contracted shipments to third-party customers, South Bow plans to reallocate available spot capacity on the Marketlink pipeline, previously utilized by the trading team. Though the company’s stock experienced a dip following the Keystone pipeline shutdown after an oil spill, it showed signs of recovery, indicating investor confidence in South Bow’s strategic decisions.