Shares in Harbour Energy fell on Thursday after warning an “unusually high level” of North Sea shutdowns and deferred drilling will hit its production levels.
After averaging 186,000 barrels of oil equivalent in 2023, production is expected to be down to 150-165,000 boe per day in 2024.
Harbour Energy (LON: HBR), the largest producer in the UK North Sea, said “unusually high level of planned shutdowns at our operated hubs and the Beryl area, coinciding with planned pipeline outages” are to blame.
Guidance “also reflects the impact of deferred partner-operated wells at Beryl and Elgin Franklin in the UK and the anticipated sale of the Vietnam business”.
Shares dropped 8% on Thursday following the announcement to 289 pence.
The production drop means unit operating costs are guided to be $18 per barrel for the year ahead, up from $16 in 2023 and $14 in 2022.
Harbour’s trading update reported full-year revenues of nearly $4 billion, compared with $5.4bn in 2022, and estimated free cash flow of around $1bn before shareholder distributions.
Leverett won’t be any time soon
Harbour Energy’s trading announcement on Thursday pointed to some boosts for its British projects on Thursday, guiding that “other material UK investments included the Talbot development and the successful appraisal of the Leverett discovery, supporting production from late 2024”.
However the firm later confirmed it does not in fact have any near-term plans to produce the Leverett discovery.
Wintershall timeline and capex boost
Harbour also provided a timeline for its $11.2bn acquisition of Wintershall Dea, which it expects to complete in Q4 2024.
The company plans to publish a prospectus and shareholder circular in Q2 this year which will include historical financial information and an independent valuation of 2P reserves for the Wintershall Dea assets. It will also set out the details of the shareholder meeting needed to approve the deal.
Elsewhere apex spend will increase this year to $1.2bn on the back of higher investment in the North Sea and internationally, it added.
This includes “increased UK drilling activity” targeting “high return, quick payback” opportunities in the J-Area, Greater Britannia and AELE hubs, in addition to the Talbot development. All of these will add to production and support cash flow starting in late 2024, it said.
Internationally Harbour will pursue its exploration campaign in Indonesia, where drilling of the Halwa and Gayo wells on the Andaman II license is underway. In Mexico, FEED work for the Zama development and the drilling of the Kan appraisal well is also in progress.
Sizeable cash by end of 2025
Harbour expects to pay $200m in dividends this year, comprising a $100m final dividend for 2023 and a $100m 2024 interim dividend
The first half of the year will see the group remain net debt free, though will close the year in “a small net debt position” owing to the weighting of UK tax payments.
2025 would see similar production to 2024, albeit with less maintenance and additional volumes from new wells and projects offsetting decline.
However, it hopes for “significantly higher” free cash flow compared to this calendar, resulting in “a sizeable net cash position” by the end of 2025.
CEO looks ahead
© Supplied by Harbour EnergyHarbour CEO Linda Cook commented: “We made significant progress against our strategic goals in 2023. Our safety performance improved. We continued to maximise the value of our UK production base while ensuring disciplined capital allocation, resulting in significant free cash flow and shareholder returns over and above our base dividend.
“We also advanced our UK CCS projects and our international growth opportunities in Indonesia and Mexico, delivering against key milestones. And, at year end, we announced the transformational acquisition of the Wintershall Dea portfolio.
“Looking ahead to 2024, our priorities are for the continued safe and responsible operations of our existing portfolio and the successful completion of the Wintershall Dea acquisition. We are proud of our achievements over the past year and excited about the future of the company.”
The company’s full year results announcement is set for 7 March.
This article has been amended from earlier version which said Leverett was due to be brought online in 2024.
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