Profits soar for UK North Sea's largest oil and gas producer

Harbour Energy expects to pay $500 million in UK tax for 2022

Smoke and steam rises from Grangemouth Refinery, operated by Ineos Group Holdings Plc., in Grangemouth, Scotland, on Tuesday, July 26, 2011. Ineos units based at Grangemouth in Scotland have written to Chancellor of the Exchequer George Osborne to warn him of "grave consequences" for U.K. manufacturing should he proceed as planned in 2013 with the carbon-trading price floor, Richard Longden, a spokesman for Ineos, said in an e-mail. Photographer: Mike Wilkinson/Bloomberg
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The North Sea’s largest oil and gas producer has reported a tenfold increase in profits as the war in Ukraine casts a shadow over energy supply and consumer prices reach new highs.

Pre-tax profits for the first six months of 2022 at Harbour Energy soared to almost $1.5 billion (£1.3bn), up from $120 million a year earlier.

The results, announced on Thursday, bumped London's blue-chip stock index off two-week closing lows, where energy stocks also received a lift from rising crude prices and investor confidence.

Harbour, which reduced its net debt to $1.1bn, from $1.7bn in March, expects to pay $500m in UK tax for 2022.

About $300m of this is due to a 25 per cent windfall tax on oil and gas producers introduced in May, said chief executive Linda Cook.

“At a time when many are struggling with high energy prices, we are increasing investment by 30 per cent compared to last year, focusing on doing what we can to deliver reliable, domestic oil and gas from our existing portfolio in a safe and responsible manner.”

Having reduced its debt, Harbour, which is set to produce slightly more than 200,000 barrels of oil equivalent per day this year, has less stringent requirements from its lenders to hedge its output.

“What we're trying to do is give ourselves … more exposure to the upside,” Ms Cook said.

Harbour's shares jumped about 9 per cent to 474 pence in early trading, their highest in more than three months, outperforming a sector index which rose about 1.3 per cent.

Harbour expects to be debt free next year, assuming an average oil price of $100 a barrel and gas price of 200 pence per therm this and next year.

The lower second-half free cash flow is due to the higher tax payments, more spending on drilling and lower production in the period, Cook said.

In terms of its non-UK portfolio, Harbour said it expected to submit a development plan for the giant Mexican Zama field next year with a final investment decision by the end of 2023.

Updated: August 25, 2022, 12:47 PM