Q: I have a question about South Bow- Are they a true pipeline company only? In the event the price of oil rose, would they benefit from that, or do they get paid the same shipping a $70 barrel vs a $100 barrel? If the same then I feel it is a volume game, they get more revenue for extra barrels they ship. And the yield and price likely remain stable if WTI rises dramatically. If so then this is a pure income play not capital gain added on top. Thanks
5i Research Answer:
SOBO is an energy infrastructure company, and its fortunes are more dependent on volume rather than pricing. There is some price sensitivity, in that when prices are higher drilling and therefore shipping volume can increase. The company charges a throughput rate regardless of price, but most contract details are not disclosed. We would consider it 'mostly' for income but sentiment and valuation can change to the positive if the whole sector is rising due to rising commodity prices.