North Sea Harbour Energy flags output decline after profit 'wiped out' by tax

UK upstream company Harbour Energy forecast production decline in a range of 4-11% in 2023 on the back of lackluster results from the newly producing Tolmount gas field and a decision to curb activity in the face of sharply higher tax.

Harbour, which was formed out of Premier Oil and Chrysaor in 2021, expects 2023 output of 185,000-200,000 b/d of oil equivalent, down from 208,000 boe/d in 2022, most of it from UK offshore waters and a small portion from Indonesia.

In a statement March 9, it confirmed the Tolmount field, which came on stream in April 2022, had already begun declining after reaching 'plateau' production rates of 40,000 boe/d in July.

It also noted under-performance from a newly started-up well at the Beryl field, operated by US company APA Corporation. At its Catcher oil field, two out of three recently drilled wells were now producing, but a third had proved non-commercial.

On the plus-side, the company highlighted drilling by BP at the Clair Ridge West of Shetland field in the course of 2022, adding that the UK major plans new drilling in the original first-phase Clair area in the first half of 2023.

Harbour also boosted production from the 'J-Area' in the North Sea, which feeds Ekofisk crude flows, after it converted the Jade South exploration well to production in January 2022.

Harbour confirmed plans for some ongoing UK investment, including the Talbot subsea development to be tied in to the J-Area; drilling is due to start in the first half of 2023, with first production at the end of 2024. It also highlighted its Viking and Acorn carbon capture and storage projects, while warning of regulatory delays.

However, the company confirmed it was scaling back its spending plans to $1.1 billion for the year after profits were "all but wiped out" by the energy profits levy, which was first introduced in May 2022 as a 25% temporary tax and later revised upward to 35%, with a 2028 cutoff. Post-tax profits fell from $101 million in 2021 to $8 million in 2022.

"In our first full year as a publicly listed company Harbour delivered materially higher production... However, the UK energy profits levy, which applies irrespective of actual or realized commodity prices, has disproportionately impacted the UK-focused independent oil and gas companies that are critical for domestic energy security," CEO Linda Cook said. "I has all but wiped out our profit for the year. This has driven us to reduce our UK investment and staffing levels" and seek expansion overseas, including Mexico and Norway, she added.

"The thing about Norway is it's stable and you can rely on it for years to come," Cook told an investor call.

"Harbour's UK capital investment is focused on high return, lower risk, near field and infrastructure-led opportunities which add reserves, improve recovery and extend producing life, activities all critical to the UK's energy security. During 2022, we completed [around] 50 well intervention programs and brought online 14 new wells," the company added.

Platts, part of S&P Global Commodity Insights, assessed the North Sea benchmark Dated Brent at $82.36/b March 8, down $1.65/b on the day.