First gas from Harbour’s Tolmount project in July, shares dip on lower output forecast

Harbour Energy has confirmed that its Tolmount development is on course to start up production at the end of next month.

But shares were down 2.8% to 20.46p as of 11:25am in London as the firm warned its production would be at the lower end of guidance.

In an operational update, the oil and gas firm said final commissioning at the Southern North Sea gas project is underway, with start-up expected towards the back end of July.

Two of the four development wells were successfully completed in the first five months of the year, while operations to spud the third are ongoing.

Once at plateau rates, Tolmount is expected to add 20 to 25 thousand barrels of oil equivalent per day (kboepd) to group production, Harbour said.

Meanwhile, a final investment decision on the Tolmount East development is expected in Q3.

Premier Oil previously said the project has potential to “add significantly” to the existing development.

Harbour was launched in March following the completion of private-equity backed Chrysaor’s all-share merger with Premier.

The newly formed company is the UK Continental Shelf’s top producer, as well as being the largest independent oil and gas company listed in London.

The operational update is the first issued by Harbour since the merger took place.

Covering the five months to the end of May, the company said its pro forma production averaged 197 kboepd, split 109 kboepd from liquids and 88 kboepd from gas.

Previous estimates had pro forma production of between 200 to 215 kboepd.

The marginal drop was put down to “under-performance” at the group’s West of Shetland assets.

“Unplanned outages” in its non-operated portfolio, including a three week shut down at the Elgin Franklin Area in April due to unexpected maintenance on the Unity platform, also contributed.

As a result, Harbour now expects its pro forma reported production to be at the “low end” of the guidance, at around 185 to 200 kboepd.

But production is expected to increase through the second half of the year as maintenance campaigns at the Armada, Everest, Lomond and Erskine fields, launched to coincide with the Forties pipeline shutdown, wrap up.

Drilling activity is also predicted to ramp up across the company’s portfolio this year and in to 2022.

At the AELE hub, the LAD infill development well, targeting the East Everest Extension Area, is expected to spud in July – first gas is forecast early 2022.

In addition, a second rig is due to arrive in the J-Area in early Q3 to drill the Talbot appraisal well and the near-field Dunnottar exploration prospect.

Further infill programmes are also being progressed in the Catcher and Beryl Areas.

Harbour’s estimated reported revenue for the first five months of the year was around $1.2bn.

Operating costs to the end of May were about $470m, in line with expectations, but unit of production costs were up slightly at $15.7 per barrel of oil equivalent (boe), due to lower production volumes.

Full year unit operating costs are now forecast to be between $15 and $16 boe, a slight increase on previous predictions.

Harbour’s total capex to the end of May was around $330m, with full year total capex guidance unchanged at $1.1bn.

Net debt dropped slightly to $2.7bn, down from $2.9bn at the end of March, reflecting cash from operations and post-closing adjustments.

© Harbour Energy

Available liquidity was around $1bn at the end of May.

Linda Cook, Harbour’s chief executive, said: “Since completion of the merger, integration continues apace and we remain excited by the significant cash generation potential of the combined portfolios.

“Despite the impact of maintenance programmes and some unplanned outages, our financial performance has been robust, underlining the resilient cash-generative nature of our business. This, together with our strong balance sheet, provides financial flexibility to fund reinvestment in our portfolio, growth and shareholder returns.

“With the majority of this year’s planned maintenance shutdowns nearing completion, drilling activity ramping up and Tolmount first gas expected shortly, we look forward to production increasing over the remainder of 2021.”