The UK’s largest oil and gas producer, Harbour Energy, has warned that it will make significant job cuts and review its operations in Britain after the country's windfall tax “all but wiped out” the company's profits for the year.
The company, which operates in the North Sea, made a profit before tax of $2.5 billion in 2022, compared with $300 million the year before.
However, after tax, Harbour Energy made $8 million, compared with $101 million in 2021. The company's bottom line was hit by a $1.5 billion one-off non-cash deferred tax charge associated with the UK Energy Profits Levy (EPL).
Reduce staff and investment levels
Harbour Energy's chief executive, Linda Cook, said the EPL, “which applies irrespective of actual or realised commodity prices, has disproportionately impacted the UK-focused independent oil and gas companies that are critical for domestic energy security.”
“This has driven us to reduce our UK investment and staffing levels. Given the fiscal instability and outlook for investment in the country, it has also reinforced our strategic goal to grow and diversify internationally.”
Meanwhile, Harbour also announced a $200 million share buyback, which together with its $200 million annual dividend policy brings total announced shareholder returns to $1 billion since December 2021.
The UK government brought in the Energy Profits Levy in May last year, as a new 25 per cent surcharge on the extraordinary profits the oil and gas sector was making.
At the time, it was predicted that the EPL would raise £5 billion in its first 12 months, most of which the government said would “go towards supporting people with the new cost-of-living measures announced by the Chancellor.”
Within the EPL was a “super deduction” tax relief mechanism, which was supposed to “encourage firms to invest in oil and gas extraction in the UK.”
The government also said that it wanted to see the oil and gas sector “reinvest its profits to support the economy, jobs, and the UK’s energy security.”