UK gas glut slashes one quarter off Harbour Energy’s returns sheet
Lower UK gas prices have hit fossil fuel major Harbour Energy as revenues for 2023 are expected to have fallen by over a quarter.
The FTSE250 company, which is now the largest independent oil producer in the North Sea, has projected 2023 revenues to come in at $3.9bn, down 27 per cent from $5.4bn in 2022.
This, the company said, is a result of UK gas prices falling from 86p /therm in 2022 to 54p/therm last year.
Production came in within guidance, averaging 186,000 barrels a day split approximately half and half between gas and liquids and operating costs stayed stable at $16/ barrel of oil equivalent (boe).
Shareholders were distributed $441m for the period, $110m less than what they received in 2022, while total capital expenditure (capex) sat at $1bn, remaining within the guidance of $0.9bn.
The company’s net debt also dropped from $800m the year to $200m for the year ending 31st December 2023.
For Harbour, the year was defined by a dramatic last act, announcing on 21st December the $11.2bn buy of Wintershall Dea’s oil and gas assets from German owner BASF.
The deal, which sees Harbour gain oil and gas production facilities in Denmark, Netherlands, Germany, Algeria, Libya, Egypt, UAE, Mexico and Argentina, is expected to be completed in Q4 2024.
Looking ahead, production is expected to fall to between 150-165,000 barrels per day owing to “unusually high levels” of planned shutdowns across Harbour hubs and operating costs are expected to rise to $18/boe owing to lower volumes.
Capex is expected to jump by $200m, mostly focused around supporting increased UK drilling targeting “high return, quick payback” opportunities.
Linda Z Cook, chief executive officer, said: “In 2023 we continued to maximise the value of our UK production base while ensuring disciplined capital allocation, resulting in significant free cash flow and shareholder returns over and above our base dividend.
“We also advanced our UK CCS projects and our international growth opportunities in Indonesia and Mexico, delivering against key milestones. And, at year-end, we announced the transformational acquisition of the Wintershall Dea portfolio.
“We are proud of our achievements over the past year and excited about the future of the company.”
The comppany will report its full results on 7th March.