Harbour Energy has suffered a billion dollar swing in its balance sheet, posting an $8m loss for the first six months of trading this year – weighed down by the higher UK windfall tax rate and falling fossil fuel prices.
This is a sharp downturn on the $984m of post-tax earnings the oil and gas producer recorded at the half-year stage 12 months prior.
The oil and gas producer confirmed a $392.9m hit from UK taxes – including the Energy Profits Levy – leading to an overall tax take of $437.5m.
The Energy Profits Levy has seen imposed an effective 75 per cent tax on North Sea oil and gas producers, which will now last until 2028 after Chancellor Jeremy Hunt toughened the levy last year.
Revenues have also slumped from $2.66nn to $1.99bn amid declining commodity prices, after last year’s historic rallies in oil and gas markets.
It has sought to appease shareholders with returns of $1bn since December 2021, including a $200m share buyback announced in March (of which $160m has been completed).
Harbour also declared an interim dividend of $100m (12 cents per share), in line with its $200m annual dividend policy.
Production has dropped from 211,000 barrels of oil equivalent per day to 196,000 per day, however, this was in line with guidance.
While it is committed to developing Viking and Acorn CO2 capture and storage (CCS) projects in the UK – amid growing expectations of a final investment decision – the company is still looking to diversify operations from domestic waters.
As it stands, 85 per cent of its operations are based in the UK – but it has confirmed the Zama oil development in Mexico has been approved by the country’s regulator, while a multi-well Andaman Sea exploration campaign will begin in Indonesia in October.
Harbour confirmed the price floor in the windfall tax will have no material effect on the company, which has slashed jobs in the UK and opted against participation in the latest oil and gas licensing round.
The company forecasts free cash flow will be unchanged at $1bn, with lower commodity prices offset by reduced capital expenditure – with Harbour hoping to shift from its $200m debt pile to being debt free by the first half of next year.
Linda Z Cook, chief executive, said: “We remain focused on maximising the value of our UK oil and gas portfolio, advancing our organic development projects and disciplined capital allocation. We have also progressed our strategic investment opportunities outside of UK oil and gas – in Indonesia, in Mexico and in CCS. These have the potential to materially increase our reserve life, support shareholder returns and diversify our company over time.”
Harbour is listed on the FTSE 250 at the London Stock Exchange, and will open trading 2.6 per cent down at 241.7p per share in this morning’s session.