By Nicholas Earl
Harbour Energy, the largest oil and gas producer in the North Sea has confirmed it still expects to cut hundreds of jobs in the UK ahead of its AGM with shareholders later today.
It first announced its intentions to downsize its UK operations last month, after its profits were scrubbed out by the windfall tax.
In its latest quarterly update, Harbour revealed the company’s review of its British operations is on track to complete in the second half of this year – including the slashing of 20 per cent of its Aberdeenshire-based workforce.
It now predicts “a reduction of about 350 onshore positions,” which would deliver annual savings of about £40m from 2024 – alongside an estimated £12m one-off charge in Harbour’s 2023 results.
Harbour has suffered heavily from the windfall tax since it was introduced last May – which has effectively established a 75 per cent tax on profits in the North Sea for the next six years.
The Energy Profits Levy was first introduced last May by then Chancellor Rishi Sunak and was tightened further last November by Jeremy Hunt.
Harbour blamed the tax for driving down its full-year profits from £2.1bn to just £7m last year – with the energy firm calculating a £1.3bn hit from the Energy Profits Levy alone.
This had fuelled its decisions to both not enter the latest licensing round for new projects and to announce jobs cuts for hundreds of staff from its base in Aberdeen.
It has also contributed to less UK activity, including partner cancelled programmes at Elgin Franklin and Beryl.
The company is keen to diversify internationally, but over 80 per cent of its assets are based in British waters.
Harbour offers dividends in robust update
Ahead of today’s AGM, Harbour is set to offer a proposed final dividend of £79m (9.5p per share) to appease shareholders amid strong production levels and hefty revenues.
It also initiated a £159m buyback programme in March earlier this year – of which £39.6m been completed so far.
Meanwhile, its headline figures over the first three months are encouraging, with the FTSE 250 company posting an estimated revenue of £870m, with realised, post-hedging, oil and UK gas prices of $76 per barrel and 71p per therm.
Net debt has been slashed from £633m at year end to £158m at the end of March, while free cash flow for the period was £554m.
Total capital expenditure (including decommissioning spend) over the quarter climbed to £158m, with full year guidance of £870m reiterated.
In terms of operational performance, Harbour revealed it has maintained production at an average of 202 thousand barrels of oil equivalent per day (kboepd).
While this is down 13,000 barrels per day compared to the first quarter of 2022 – it still keeps Harbour on track to meet its full-year guidance on hydrocarbon production of 185-200 kpoed.
It also reflects new wells coming on-stream such as Tolmount, partially offsetting natural decline from its wider operations.
The firm also confirmed it was making headway with its carbon capture and storage efforts, with its operated Viking and non-operated Acorn projects closing in on the government funding.
Harbour argues both projects are “recognised as best placed” to meet the “government’s objectives for the Track 2 regulatory approval process.”
Chief executive Linda Z Cook said: “We delivered a strong first quarter. Continuing to invest in our portfolio while actively managing our cost base has enabled us to further deleverage our balance sheet and return additional capital to shareholders.
“At the same time, we’ve built good momentum in our international development opportunities in Mexico and Indonesia which have the potential to add materially to our reserves and future production, and in our CCS projects, all of which will lead to future diversification of our business.”
Harbour’s shares are up 0.9 per cent on the FTSE 250 in this morning’s trading following the latest updates.
The post Harbour Energy blames windfall tax for scrubbing out profits as it confirms heavy jobs cuts appeared first on CityAM.
