Harbour Energy plc said that increased UK tax rates on oil and gas had prompted it to reduce its future activity and investment in the country, including job cuts, and plan more international growth.
DECREASED EXPENDITURE
In the company’s unaudited trading and operations report for the year ended 31 December 2022, chief executive Linda Cook added that although oil and gas prices had reverted to more normal levels, tax changes had made investment in the UK less competitive.
Total UK capital expenditure will reduce compared with previous expectations and Harbour will no longer pursue “certain opportunities” including the Total-operated EIH well at Elgin Franklin and participation in the 33rd Licensing Round.
OPERATIONS
The Aberdeen-based company reported a rise in production of 208 kboepd (2021: 175 kboepd), divided 50-50 for liquids and gas.
The increased figure was driven by new wells online including at Tolmount, improved operating efficiency and a full year’s contribution from the Premier assets.
In Indonesia, Harbour made the gas discovery at the Timpan prospect (Andaman II licence) and plans further drilling for 2023 and 2024.
The Indonesian government approved plans to develop the Tuna field.
In Mexico, Harbour is finalising the Zama development plan before submission to the Mexican Government.
FINANCES
The company estimated revenue for the period of $5.4 billion and EBITDAX of $4.1bn (2021: $2.4bn).
Harbour added that a “significant” one-off non-cash deferred tax charge associated with the energy profits levy (EPL) in the UK had effected post-tax earnings.
Capital expenditure in 2022 totalled $1bn, in line with latest guidance, materially lower than the $1.3 billion forecast at the start of the year.
The company said that the reduction was due to the decisions not to proceed with several North Sea exploration and appraisal wells, delayed arrival of rigs at some locations and the weaker UK sterling to US dollar exchange rate.
Harbour made total cash tax payments of $600 million, more than double than in 2021, partly driven by the EPL.
The company holds estimated 2022 free cash flow (post tax, pre-shareholder distributions) of $2.1bn (2021: $0.7bn), following higher production levels and commodity prices.
Harbour distributed total shareholder distributions of $600 million comprising $200m annual dividend and $400 million of share buybacks.
Over 2022, the company repurchased 8.5% of its issued share capital.
Net debt reduced from $2.3bn to $0.8bn and the company held cash and undrawn facilities of $2.5bn.
2023 GUIDANCE
Harbour expects production of 185-200 kboepd, supported by new wells coming on-stream, including at J-Area, Beryl and Catcher.
Total capital expenditure of $1.1bn split 85% in the UK and 15% internationally.
Spending in the UK will focus on high return, lower risk, infrastructure-led investment opportunities including Tolmount East and Talbot development drilling, Callanish F6 infill well, Leverett appraisal and the Jocelyn South exploration well.
The company will announce its full year results on 9 March 2023.