Harbour Energy posts loss due to windfall tax and falling prices

Harbour Energy swung to a small first-half loss as the effect of declining energy prices was compounded by high tax payments.

Britain’s largest North Sea oil and gas producer reported an $8million loss for the six months ending June, having made a $1billion profit for the same period last year.

The company saw turnover from hydrocarbon production plummet by around a quarter to $1.99billion as oil and gas prices slid from their elevated highs.

Its tax bill was lower than in the prior year, but the Energy Profits Levy still resulted in the group paying $437million (£344million) to HM Treasury.

Harbour complained back in March that its annual profits were ‘all but wiped out’ by the UK Government’s windfall tax, which was introduced following the surge in oil and gas prices in late 2021 and early 2022.

Energy prices skyrocketed due to loosening Covid-related restrictions enabling people to travel more regularly, and Russia’s invasion of Ukraine prompting countries to reduce their dependence on Russian energy.

They have slid considerably since thanks to warm weather spells reducing demand for heating, households and businesses conserving more electricity, and fears of an economic slowdown.

In the opening half of 2023, Harbour sold crude oil at an average of $76 per barrel and UK natural gas at 58 pence per British thermal unit.

The equivalent for the first half of 2022 was $82 and 69p, respectively.

But while they remain above historical levels, the British energy sector has said the EPL has discouraged firms from expanding production in the North Sea.

Under the scheme, oil and gas firms pay a 35 per cent surcharge on their profits, meaning they have an effective corporate tax rate of 75 per cent.

Harbour has blamed the levy for its recent decisions to snub the UK exploration licensing round, scale back domestic investment and plan around 350 job cuts.

Linda Z Cook, chief executive of Harbour Energy, remarked: ‘We remain focused on maximising the value of our UK oil and gas portfolio, advancing our organic development projects and disciplined capital allocation.’

It expects to produce 185,000 to 195,000 barrels per day across this year, below the 196,000 barrels per day output in the first half, partly because of drilling delays at its Beryl field.

The company’s announcement comes a day after Ithaca Energy warned that it was cutting production and cancelling some projects due to the windfall tax.

Yet Russ Mould, investment director at AJ Bell, said the problem was ‘not so much’ the UK energy sector’s high taxes, but ‘the constant tinkering which makes it very difficult for businesses to commit to long-term projects.’

Harbour Energy shares were 4.1 per cent, or 10p, lower at 231.7p on early Thursday afternoon, meaning they have slumped by 46 per cent over the past 12 months.