Harbour Energy profit sinks but edges towards Wintershall acquisition

(Alliance News) - Harbour Energy PLC on Thursday said profits dropped by three quarters in 2023, though Harbour highlighted that the valuable acquisition of Wintershall Dea AG's upstream oil and gas assets is expected to close in late 2024.

Harbour is an oil and gas company operating in the UK North Sea, with additional assets in Indonesia, Vietnam, Mexico and Norway.

In 2023, Pretax profit dropped to less than a quarter of that delivered in 2022, down to USD597 million from USD2.46 billion. Revenue was down 31% to USD3.75 billion from USD5.43 billion a year prior.

Earnings before interest, tax, depreciation, amortisation and exploration sank 33% to USD2.68 billion from USD4.01 billion.

Harbour attributed the decline to weaker production rates, lower oil and gas prices compared to 2022, and an increase in its total impairment charges to USD239 million from USD170 million a year prior.

Harbour proposed a final dividend of 13 cents for 2023, 8.3% ahead of 2022's final payout of 12 cents per share. This takes the company's total 2023 dividend to 24 cents per share, 4.3% above the 23 cents paid to shareholders for 2022.

Production fell 11% to 186,000 barrels of oil equivalent per day in 2023 from 208,000 barrels in 2022.

Harbour attributed this slowdown in output to several extended shutdowns in the second half of the year at its AELE hub in the North Sea and at its East Irish Sea assets.

Operating costs of USD16 per barrel were in line with the company's guidance, but dearer than the USD14 spent per barrel in 2022 as a result of Harbour's decreased production.

As at December 31, Harbour had 880 million barrels of oil equivalent in proven and provable reserves, up 1.7% from 865 million barrels at the end of 2022.

The company also reported continued progress at its UK North Sea carbon capture storage projects, Viking and Acorn, in which it holds a 60% and 30% interest, respectively.

Both projects were awarded Track 2 status by the UK Government in December, allowing them to move toward front end engineering and design, and discussions over the terms of economic licencing with the government.

Independent estimates put the projects' storage capacity at over 200 million tonnes.

Looking ahead, Harbour expects to be "marginally" free cash flow positive in 2024, assuming a Brent oil price of USD85 per barrel and gas prices of 70 pence per therm.

Harbour added that "significant progress" had been made in its acquisition of Wintershall's upstream oil and gas assets, and expects this deal to close in the fourth quarter of 2024, subject to shareholder and regulatory approvals.

In December, Harbour agreed to purchase the assets from the oil and gas company for USD11.2 billion, and expects the acquisition to increase its production rate to around 500,000 barrels of oil equivalent per day.

Harbour said that the Wintershall portfolio will "transform our scale and asset diversification as well as our capital structure".

Chief Executive Officer 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."

There was no comment from Harbour on Wednesday's UK government budget announcement, in which Chancellor Jeremy Hunt announced that the 75% windfall tax on the oil and gas sector will be extended by one year to 2029.

Shares in Harbour Energy were down 1.2% at 270.10 pence each in London on Thursday morning.

By Hugh Cameron, Alliance News reporter

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