Morningstar DBRS Confirms Credit Ratings on Gibson Energy Inc. at BBB (low) With Stable Trends

DBRS Limited (Morningstar DBRS) confirmed Gibson Energy Inc.'s (Gibson or the Company) Issuer Rating and Senior Unsecured Notes credit rating at BBB (low) as well as its Junior Subordinated Debt credit rating at BB. All trends are Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings are supported by relatively stable and contracted cash flows from the Company's infrastructure assets, primarily its crude oil storage and export terminals as well as gathering pipelines. The credit ratings are constrained by earnings volatility in Gibson's Marketing segment and competition at its crude oil export terminal. The Stable trend reflects progress on integrating the South Texas Gateway Terminal (Gateway) after its acquisition, significant capital investments into expanding capacity and efficiency in that asset, and Morningstar DBRS' expectation that the Company will maintain its financial risk profile over the medium term.

Since the acquisition closed in August 2023, operating performance at Gateway has shown increasingly positive momentum supported by significant growth capital investments. The Company is on track to meet its target of 15% to 20% EBITDA growth relative to the time of acquisition by YE2025. In December 2024, the Company also announced its 2025 growth capital guidance of up to $150 million, including $100 million of growth capital to be deployed predominantly at Gateway, and the remainder focused on other projects at and around other Gibson facilities, which are currently being assessed in a disciplined manner. This guidance also includes the Cactus II pipeline connection, which would enable additional supply of up to 700,000 barrels per day (bpd) of crude from the Permian Basin, and a dredging project, which would allow customers to load 20% to 25% more volume on very large crude carriers and to fully load Suezmax vessels.

Growth at Gateway has also been driven by recontracting success with existing customers and the addition of new customers. Gibson successfully negotiated with existing customers at Gateway to recontract capacity, resulting in a contract extension with one existing customer that refreshed the initial term with further renewal options and that resulted in fixed Gateway revenue from that customer increasing by approximately 40%. Gibson also added new customers at Gateway, all of which were major global crude exporters. The operating performance at Gibson's Canadian assets remained stable. The startup of the Trans Mountain Expansion Project resulted in higher volumes at the Company's Edmonton terminal with two new 435,000 bpd storage tanks placed in service in 2024. While earnings in the Marketing segment declined materially in 2024 and Q1 2025, Gibson's key credit metrics remain supportive of the current credit rating.

Morningstar DBRS expects Gibson's business risk profile to improve over the medium term as the Company recontracts capacity at Gateway and its Canadian storage terminals as well as adds new customers that extend the weighted-average life of its contracts without a material decrease in service fees. The Company also identified $1 billion in growth capital projects, $500 million of which it could deploy at Gateway alone for additional tankage and a third dock. Beyond Gateway, Gibson could invest another $200 million in its Edmonton assets for additional tankage and infrastructure as well as another $350 million in its Hardisty assets for its diluent recovery unit and for additional tankage. This potential backlog of capital projects would further improve the Company's business risk profile over the long term by adding increased scale.

CREDIT RATING DRIVERS
Morningstar DBRS could take a positive credit rating action if Gibson's business risk profile improves through favourable contract renewals at Gateway while its cash flow-to-debt ratio recovers and is maintained above 17.5%. Morningstar DBRS could take a negative credit rating action if the Company's cash flow-to-debt ratio weakens below 14.0% on a sustained basis.

EARNINGS OUTLOOK
Morningstar DBRS expects Gibson's EBITDA in 2025 to be modestly higher relative to 2024 driven by growth in Infrastructure segmented profit backed by significant capital investment and consistent customer demand. However, lower Marketing segmented profit driven by lower commodity price assumptions under Morningstar DBRS' base-case scenario offsets the growth in Infrastructure.

FINANCIAL OUTLOOK
Morningstar DBRS expects cash flow in 2025 to decline modestly relative to 2024 because of a lower contribution from the Marketing segment and increased general and administrative expenses. However, Morningstar DBRS expects the Company to maintain its cash flow-to-debt ratio higher than 15% over the forecast period and for Gibson's credit metrics to remain supportive of the current credit ratings.

CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): BBBL/BBH
Gibson's overall business risk score of BBBL/BBH reflects the Company's stable contractual profile and positive supply and demand considerations. The business risk score also factors in the competitive environment across Gibson's business segments. The CBRA also incorporates, through a negative adjustment, the price and volume risk associated with the Company's Marketing segment.

Comprehensive Financial Risk Assessment (CFRA): BBB
Gibson's CFRA of BBB reflects strong financial metrics for the current credit rating category. Morningstar DBRS expects that the Company's financial profile will continue to improve to reflect increased cash flows associated with investments in growth capital, primarily in the Gateway asset, over the medium term. Morningstar DBRS also expects debt levels to remain stable over the near and medium term and remain supportive of the current credit rating. The CFRA incorporates, through a negative adjustment, the price and volume risk associated with the Company's Marketing segment and impact of excluding goodwill from total capital.

Intrinsic Assessment (IA): BBBL
The IA of BBBL is in the middle of the IA Range. The selection also considers the current credit rating trend and peer comparisons, among other factors.

Additional Considerations: None
Gibson's credit ratings include no further negative or positive adjustments because of additional considerations.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/458182.

Notes:
All figures are in Canadian dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in the Oil & Gas, Oilfield Services, and Pipeline and Midstream Energy Industries (May 6, 2025), https://dbrs.morningstar.com/research/453396

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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