Harbour Energy profits hit $2.46bn. Revenues increased to $5.4bn
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The decision by the UK government to implement a windfall tax last year has been ruinous for the Harbour Energy share price over the last 12 months, sliding from highs of just over 520p last April, they hit a low of 270p back in February, just shy of their record lows of 260p back in 2020, and hasn't recovered since then.
It turns out the tax has also been ruinous for its profits, despite higher production levels of 208 kboepd, a 19% increase from 2021, the company has seen profits after tax collapse from $101m last year to $8m.
Profits before tax on the other hand rose from $315m to $2.46bn, while revenues rose from $3.6bn to $5.4bn, with a more or less 50/50 split between oil and gas.
As a largely domestic producer, and a company that recently upped its contribution to UK energy security to 5% of UK gas output. 90% of its UK production takes place through 5 key hubs with the latest one to come online being the Tolmount Gas field.
We already knew from earlier statements from company management that they would have to set aside a higher amount than the $600m it set aside in its H1 numbers, with an additional $1.5bn, having to be set aside to cover the (EPL) Energy Profits Levy.
The total tax paid by Harbour Energy increased from $213m in 2021 to a total of $2.45bn this current tax year, with the company saying it will still pay a final dividend of 12c a share for the current year. Harbour Energy also said they would be proceeding with another $200m share buyback.
Total capex for the upcoming year will be lower at $1.1bn, down from the previous $1.3bn due to the decision not to proceed with several North Sea exploration and appraisal wells. This decision came about as a result of the EPL, with the company reassessing its future investment plans in the North Sea, a decision which was reinforced by the decision not to bid for the new round of UK oil and gas licences, which resulted in the company announcing job losses earlier this year, with the prospect of further job cuts when the review is completed later this year.
Guidance for 2023 has been set lower at between 185-200kboepd.
While the decision to rethink its UK investment plans is not surprising, it is depressingly predictable given current government policy, and while the government will welcome the tax windfall, one can't help feeling that at a time of energy insecurity, penalising small oil and gas producers like Harbour sends completely the wrong message.
Judging by some of the recent mood music being heard from various businesses across the UK, it is a message that is being heard loud and clear and they are not investing, or even worse they are leaving.
If you take the decision to overtax businesses, especially small ones, don't be surprised if they choose to walk away.
