UK's Harbour Energy flags new Tolmount gas field delay, lower reserves

UK oil and gas producer Harbour Energy said Dec. 9 its Tolmount gas field project has been further delayed and is now due on stream in the first quarter 2022, with output to be at the lower end of previous expectations and a reserves downgrade likely.

Tolmount is the largest UK gas project under development, with reserves previously estimated at 500 Bcf, and comes amid sharp declines in UK gas production in the wake of the pandemic.

Harbour, which was formed earlier in 2021 by the merger of privately owned Chrysaor and London-listed Premier Oil, said it anticipated net production of 20,000 b/d of oil equivalent from the field, which implies gross output of 40,000 boe/d given Harbour's 50% stake. That compares with previous guidance of 20,000-25,000 boe/d of net output. Harbour owns the license jointly with South Korea's Dana Petroleum.

Tolmount reserves are also "anticipated to be downgraded reflecting drilling results," Harbour added.

The company is also developing the Tolmount East project, to be tied in to the main facilities, with reserves put at 160 Bcf.

More broadly, Harbour said it was getting closer to the kind of production levels envisaged under the Chrysaor-Premier merger, when the parties stated the goal of becoming the largest independent oil and gas producer on the London stock exchange, with output of 250,000 boe/d.

In October-November Harbour produced 215,000 boe/d, and it now anticipates full-year output this year averaging 175,000 boe/d, reflecting the Tolmount delays, to be followed by full-year production of 195,000-210,000 boe/d in 2022.

In terms of UK output levels, the company is likely to be level-pegging with TotalEnergies, with the French major's production more weighted toward gas.

Tolmount is located in the southern part of the North Sea and was inherited from Premier Oil.

However, the overall Harbour portfolio is weighted toward oil, reflecting Chrysaor's acquisition of assets in the central North Sea from Shell and US upstream company ConocoPhillips, among others.

The company noted it anticipates capital expenditure of $1.3 billion in 2022 and into the medium term, including spending on overseas activity, as it aspires to expansion beyond the UK.

"Harbour is ending 2021 in a strong position," CEO Linda Cook said. "We're producing 200,000 boe/d, with good visibility to sustain production around this level near-term. Together with our robust balance sheet, this enables us to introduce a $200 million annual dividend and fund reinvestment in our portfolio while retaining significant optionality over our future capital allocation."

A minor portion of Harbour's production comes from the former Premier assets in Indonesia and Vietnam, while it has exploration assets in Mexico, Brazil and the Falkland Islands, with a development decision awaited on the Zama discovery offshore Mexico, in which it holds a 12.4% stake. The company has agreed a deal to sell its stake in the Sea Lion oil project in the Falklands, and aims to exit its Brazilian exploration acreage.