North America Midstream and Refining: Project commercialization in focus amid heightened competition

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North America Midstream and Refining: Project commercialization in focus amid heightened competition

Barclays | North America Midstream and Refining

In terms of incremental data points on the total cost, SOBO has not given an estimate and

does not expect to give an estimate with 2Q26 earnings, but will likely provide color on the

level of pre-FID capex necessary with 2Q26 earnings. Given SOBO's currently elevated

leverage of 4.7x (as of 3/31) relative to its target of 4.0x, the company will not be able to fully

self-finance the project and will likely rely on some combination of debt and equity financing.

While the Prairie Connector project is compelling, and the successful open season is a

positive indicator of available demand, there remain multiple hurdles between now, an FID

announcement, and a potential in-service date. If anything were to go wrong between

permitting, financing, and/or construction, we would expect the stock to react negatively as a

result.

•• Also of note, beyond hurdles related to permitting, financing, and construction of the

pipe, there is significant competition from other operators also building and/or seeking

to build egress out of the WCSB. After sanctioning MLO1 in 2025 (+150 kbpd; ISD 2027), ENB

remains on track to sanction MLO2 later this year as part of a JV with ET. MLO2 would reverse

an existing line from Cromer to Manitoba, thus freeing up 250 kbpd of heavy crude

transportation capacity on Mainline for delivery onto DAPL, which will likely have excess

capacity following upcoming contract roll-offs (if it does not already). From DAPL, shipper

customers have significant connectivity to refineries across the upper Mid-Con, as well as the

USGC via other downstream systems, providing relatively more optionality than SOBO's