Profits at North Sea giant Harbour Energy (LON: HBR) have been subdued as the firm counts the cost of the UK tax regime, which took a half-billion-dollar chunk of its earnings.
An “effective tax rate” of 95% on its UK operations kept profits to just $32m for the 2023 financial year, after a tax expense of $565m.
That rate is higher than the standard 75% due to non-deductible items in the UK sector, Harbour said.
The London-listed firm said it is still assessing the impact of the extension to the windfall tax (Energy Profits Levy (EPL)) announced by Chancellor Jeremy Hunt on Thursday.
Despite these measures, the firm still returned more than $400m to its shareholders during 2023.
Harbour, which has cut 350 jobs due to the windfall tax (less than 100 of which were compulsory) previously said that shareholder returns were an important measure to secure investor support in light of the EPL.
Last year, Harbour took a one-off non-cash charge of $1.46bn forecasting the expected write-down for its assets through the life of the EPL.
Revenues and production down
© Wullie Marr/ DCT MediaRevenues were down by nearly a third, from $5.4bn in 2022 to $3.7bn, as production dropped 10% from 208,000 barrels per day to 186,000 per day due to natural decline.
Losses linked to hedging played a role, with Harbour losing $911m on its hedging position on natural gas and $93m on oil.
Free cash flow was down to $1.04bn from $2.11bn, while debt reduced from $704m to $213m.
Reserves (2P) rose from 865m barrels of oil equivalent to 880 million, while two of the firm’s CCS projects received “Track 2” status from the UK Government to progress.
Harbour issued production guidance of 150-165,000 barrels per day for the 2024 year.
Harbour Energy ‘on track’ for Wintershall DEA
Harbour said it is on track to complete its takeover of Germany’s Wintershall DEA in Q4 of this year, having unveiled the $11.2bn deal in December.
The deal is expected to transform its portfolio at Harbour pivots away from the punitive tax regime in the UK, with assets in Norway, Argentina, Germany and Mexico.
Publication of a prospectus and shareholder circular, followed by a shareholder meeting to approve the deal, is expected in Q2.
CEO Linda Cook said: “Harbour materially advanced its strategy during 2023. We improved our safety performance, generated material free cash flow, and progressed our international growth opportunities and CCS projects, while maintaining our capital discipline.
“This enabled continued shareholder returns over and above our base dividend while retaining the flexibility that allowed us to announce a transformational acquisition in December.
© Supplied by Offshore Energies UK“We remain focused on the successful completion of the Wintershall Dea acquisition and the ongoing safe and efficient management of our existing portfolio. We are excited about our future as we look to continue to build a geographically diverse, large scale, independent oil and gas company focused on safe and responsible operations, value creation and shareholder returns.”
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