Harbour Energy to increase UK oil investments ahead of election

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Harbour Vitality, the biggest oil producer within the UK and a vocal critic of the windfall tax, will improve spending within the North Sea this yr and doubtlessly subsequent because it fears the following authorities will lower funding deductions.

Linda Cook dinner, chief govt of the London-listed producer, stated that, whereas the corporate was nonetheless decided to diversify outdoors the UK, there was a “window of alternative” earlier than 2025. She linked that partly to the big tax breaks for funding embedded within the windfall tax.

“Our UK capex this yr is definitely a bit of bit greater than it was final yr,” Cook dinner stated, including they have been taking a look at “short-cycle, high-return alternatives”.

“What occurs past subsequent yr is the place the uncertainty creeps in,” she stated.

Cook dinner didn’t immediately point out the opposition Labour occasion. Nevertheless, Labour has closely criticised the federal government’s resolution to incorporate important deductions in its windfall tax for producers that make investments — previously yr the tax price on oil and gasoline producers has elevated from 40 per cent to 75 per cent.

Producers can restrict the quantity of tax paid underneath the measure, which was launched in response to hovering family payments throughout the power disaster, by as a lot as 91p within the pound by offsetting it towards new investments.

Labour, which has a robust lead within the polls forward of an anticipated common election in direction of the top of subsequent yr, has additionally stated it is not going to license new oil tasks if it involves energy. Nevertheless, it has stated it is not going to reverse these awarded by the present Conservative authorities.

Cook dinner stated the corporate was persevering with to foyer the federal government over together with different investments and expenditure within the deductions obtainable underneath the windfall tax. Among the many deductions it could like included underneath the measure — formally often called the Vitality Earnings Levy (EPL) — are investments in carbon seize and storage tasks, and decommissioning prices.

Harbour is concerned in two CCS tasks within the UK that have been lately awarded authorities backing to proceed, together with the Viking undertaking on Humberside and Acorn in Aberdeenshire.

“We’d like the money circulate to be able to do this and in the event you’re taking all of it away with the EPL it makes it harder, so we proceed to foyer them on that,” Cook dinner stated.

Cook dinner stated the corporate would proceed to pursue potential mergers or acquisitions with a view to diversifying its operations outdoors the UK, partly on account of the EPL.

The corporate stated the windfall tax had made securing entry to credit score tougher, with its reserve-based lending facility shrinking to $1.1bn billion in contrast with $2.7bn beforehand. Nevertheless, Cook dinner stated the corporate retained good entry to liquidity.

Harbour had been reported earlier this yr to have held preliminary talks with Talos, a US-based producer. However an individual acquainted with the conversations stated a tie-up between the 2 firms was not being pursued.

The corporate has decreased its internet debt to close zero, from $2.9bn in 2021 when it accomplished its merger with Premier Oil.

Referring to outdoors strategies of potential M&A targets, Cook dinner stated Harbour was getting lots of “inbounds” and that the corporate was reviewing quite a few choices.

“Individuals know we do have a technique that’s primarily based on M&A,” Cook dinner stated.

Half-year outcomes have been broadly consistent with expectations, with income earlier than tax falling to $400mn from $1.5bn in the identical interval final yr, largely due to decrease commodity costs. The corporate reported a small post-tax lack of $8mn pushed largely by a tax fee underneath the EPL of $302mn.

“Our capex can be more and more diversified outdoors the UK,” Cook dinner stated. “However that doesn’t imply we aren’t pursuing these short-cycle, high-return choices in our UK portfolio.”