TIDMHBR
RNS Number : 0201L
Harbour Energy PLC
11 May 2022
Harbour Energy plc
"Harbour" or the "Company" or the "Group"
Trading Update
11 May 2022
Harbour Energy plc provides the following unaudited Trading
Update. This is issued ahead of the Company's Annual General
Meeting which is being held today at 10.00 BST.
Highlights
-- Q1 production averaged 215 kboepd, up c.35 per cent on Q1
2021; on track to meet full year guidance of 195-210 kboepd
-- Q1 operating costs of $14.1/boe; full year guidance unchanged
at $15-16/boe
-- New wells on-stream at J-Area, AELE and Tolmount (UK); active
2022 rig programme including drilling underway at the Catcher- and
J-Areas (UK) and the Andaman II licence (Indonesia)
-- Total capex (including decommissioning spend) of c.$160
million for Q1; full year guidance of $1.3 billion unchanged, an
increase of c.40 per cent versus 2021 levels reflecting the
increase in drilling activity
-- Continued progress on Harbour's UK CCS projects in line with
the Group's goal of Net Zero by 2035
-- Net debt reduced to $1.7 billion at 31 March from $2.3
billion at 31 December 2021
-- Proposed final dividend of $100 million (8.4505 pence per
share) for full year 2021 to be paid on 18 May, subject to
shareholder approval
Linda Z Cook, Chief Executive Officer, commented:
"We have had a strong start to the year. Our increased
production reflects the addition of the Premier portfolio, improved
operating reliability and increased UK drilling activity. The
Tolmount field in the UK began production in April and, once
plateau levels are reached, the project is expected to increase UK
domestic gas production by more than 5 per cent.
We continue to invest in high return, infrastructure-led
opportunities within our asset base to sustain production while at
the same time generating material free cash flow. This together
with our robust balance sheet provides us with significant
optionality over future capital allocation.
We are committed to producing oil and gas responsibly. As well
as taking action to reduce emissions from our operations, we are
very focused on progressing our CCS activities in the UK which
include the V Net Zero project in the Humber region and an interest
in the Acorn project in Scotland. These projects have the potential
to capture and store multiple times Harbour's annual
emissions."
Enquiries
Harbour Energy plc 020 3833 2421
Elizabeth Brooks, Head of Investor Relations
Brunswick 020 7404 5959
Patrick Handley, Will Medvei
Notes to editors
2021 comparator numbers are provided on a reported basis with
the Premier portfolio contributing from 31 March 2021.
Operational review
A strong production base
Production during the first quarter averaged 215 kboepd (Q1
2021: 158 kboepd), split 117 kboepd from liquids and 98 kboepd from
gas. This c.35 per cent increase on the first quarter of 2021 was
driven by the addition of the Premier portfolio, improved
operational reliability and increased UK drilling activity
resulting in new wells on-stream. Full year production guidance of
195-210 kboepd is reiterated and reflects planned summer
maintenance campaigns during the second and third quarter.
Production during the first quarter benefited from limited
planned shutdowns and no material unplanned outages. Following the
completion of the extensive maintenance programmes in 2021, Harbour
has now returned to a more normal maintenance cycle.
Harbour's production also reflects continued outperformance from
the Greater Britannia satellite wells in the Central North Sea and
recent new wells on-stream. In particular, the Jade South well was
brought on-stream at J-Area in January and, post quarter end in
April, the LAD well was tied in for production at Everest at the
AELE hub. Also in April the Tolmount field in the southern North
Sea began production and is currently ramping up to expected
plateau rates of c. 20 kboepd (net to Harbour).
Harbour has numerous high return, infrastructure-led investment
opportunities within its portfolio to sustain production at current
levels. Notably over 20 development and infill wells plus several
well interventions are planned for 2022. This includes a three well
programme at the Catcher Area which commenced drilling in March;
two J-Area development wells where drilling is also underway; and
drilling campaigns in Southeast Asia at Chim Sao (Vietnam) and
Natuna Sea Block A (Indonesia).
Pre-development growth opportunities
Harbour has several international pre-development projects which
together could add materially to future production. In Mexico, the
Zama project continues to progress. The unitisation process
concluded in March with the Mexican regulatory authority SENER
issuing the unitisation resolution. The Zama Unit partners are now
working to finalise a unit development plan ahead of a possible
final investment decision in 2023.
In Indonesia Harbour is assessing the data from its successful
2021 Tuna appraisal campaign and finalising the development concept
ahead of submitting an initial development plan later this year.
Tuna and Zama together represent almost 150 mmboe of the Group's 2C
resource. Elsewhere in Indonesia, Harbour and its partners BP and
Mubadala spudded the Timpan-1 exploration well on the Andaman II
licence in May.
In April, Harbour signed agreements to divest its Falkland
Islands interests, including its position in the Sea Lion project,
to Navitas Petroleum thereby, subject to certain conditions being
met (including Falkland Islands Government approval), effecting our
exit from the region.
Energy transition
Harbour has interests in two early-stage UK CCS projects, V Net
Zero and Acorn, which have the potential to capture and store
multiple times the Group's annual emissions. The transportation and
storage capacity for the V Net Zero project alone is upwards of 10
million tonnes per annum. The first quarter saw Harbour award
energy engineering specialist Kent the pre-front end engineering
design contract for the V Net Zero pipeline systems. Subject to
receiving clarity from the UK government on inclusion of V Net Zero
in Track 2 as well as the fiscal, regulatory and commercial
framework, Harbour is aiming to progress the project to a final
investment decision in 2024 with first CO(2) injection as early as
2027.
Harbour, together with its partners, also continues to progress
the Acorn project, which was awarded Track 1 Reserve status in
2021. On 31 March, Shell was appointed technical developer for the
capture module and the transportation and storage module of the
Acorn project which has the potential to address up to 9 million
tonnes per annum of CO(2) .
Financial review
Estimated revenue for the first quarter was c.$1.5 billion.
Average realised oil prices pre- and post-hedging were $103/bbl and
$84/bbl respectively. Average realised gas prices pre- and
post-hedging were $160/boe and $66/boe respectively. A full
schedule of the Group's hedging position is set out in Appendix
2.
Operating costs for the first quarter were $272 million and
$14.1/boe on a unit of production basis. Full year unit operating
cost guidance remains unchanged at $15-16/boe reflecting planned
summer maintenance programmes during the second and third quarter.
Integration of the Premier portfolio continues as the Group works
to consolidate its supply chain contracts and capture the benefits
of scale.
Harbour's total capex (production, development, exploration and
decommissioning) for the first quarter was c.$160 million.
Harbour's full year 2022 total capex guidance of $1.3 billion is
unchanged with the majority of the spend in the UK. This is an
increase of c.40 per cent when compared to capex levels in
2021.
Group cash tax paid in the first quarter was around $140
million, predominantly reflecting a UK tax payment in January
relating to Harbour's 2021 UK activities.
In December 2021, Harbour announced a $200 million per annum
dividend. The first $100 million distribution (8.4505 pence per
share) will be in respect of the final dividend for the 2021
financial year and will be paid on 18 May 2022, subject to
shareholder approval.
As a result of strong operational performance, underpinned by
continued investment in the Group's asset base, and improved
commodity prices Harbour is generating material free cash flow. At
the end of March Harbour's net debt (excluding unamortised fees)
was c. $1.7 billion, reduced from $2.3 billion at the end of 2021,
with available liquidity (cash and undrawn facilities) in excess of
$2 billion.
At $100/bbl and 200p/therm average prices for 2022, Harbour
continues to expect to generate between $1.5 and $1.7 billion of
free cash flow (after tax and the $200 million dividend payment)
with the potential to be net debt free in 2023. As a result, we
have significant optionality over our future capital allocation,
including for meaningful value accretive transactions and
additional shareholder returns. In the event commodity prices
remain elevated and we continue to rapidly de-lever, additional
shareholder returns will be considered as we progress through the
year within the context of our existing capital allocation
framework.
A summary of Harbour's performance for the first quarter and
guidance for the full year 2022 is set out in Appendix 3.
Upcoming events
Harbour will hold its Annual General Meeting (AGM) today at
10.00 and the voting results will be announced shortly after the
meeting.
As previously announced, immediately following the AGM, Harbour
will hold a General Meeting, regarding a proposed capital
reduction. The proposed capital reduction, if approved by
shareholders, would create additional distributable reserves to
provide flexibility for future dividend payments and / or share
buybacks.
As announced by FTSE Russell on 9 May, Harbour will be added to
the FTSE 100 Index with effect from start of trading on Thursday 12
May.
Harbour's next scheduled update to the market is on Thursday 25
August 2022 when it will issue its Half Year results for the period
1 January to 30 June 2022.
Appendix 1: Group production
Equity Q1 2022 Q1 2021
(%) (net, kboepd) (net, kboepd)
Greater Britannia
Area 26.3-93.8 34 35
---------- ---------------- ----------------
J-Area 67-67.5 34 28
---------- ---------------- ----------------
AELE hub 32-100 27 32
---------- ---------------- ----------------
Catcher 50 22 -
---------- ---------------- ----------------
Elgin Franklin(1) 19.3 26 18
---------- ---------------- ----------------
Buzzard 21.7 16 16
---------- ---------------- ----------------
Beryl 34-49 13 14
---------- ---------------- ----------------
West of Shetlands(2) 7.5-100 15 10
---------- ---------------- ----------------
Other North Sea(3) 8.4-100 12 5
---------- ---------------- ----------------
North Sea 7.5-100 199 158
---------- ---------------- ----------------
International 28.7-53.1 16 -
---------- ---------------- ----------------
Total Group 7.5-100 215 158
---------- ---------------- ----------------
(1) In Q1 2021, Harbour had a 14.1 per cent interest in Elgin
Franklin. This increased to 19.3 per cent following the Premier
Merger. (2) West of Shetlands comprises Clair, Schiehallion in Q1
2021 and Clair, Schiehallion and Solan in Q1 2022. Other Europe
includes East Irish Sea and Galleon in Q1 2021 and East Irish Sea,
Galleon and Ravenspurn North in Q1 2022.
Appendix 2: Hedging schedule(1)
2022 2023 2024
Volume Price Volume Price Volume Price
(mmboe) (p/th, (mmboe) (p/th, (mmboe) (p/th,
$/bbl) $/bbl) $/bbl)
--------- -------- --------- -------- --------- --------
UK gas
--------- -------- --------- -------- --------- --------
Swaps 19.1 42 21.5 40 9.9 52
--------- -------- --------- -------- --------- --------
Collars 5.2 50-60 1.6 50-56 - -
--------- -------- --------- -------- --------- --------
Options 1.1 35 - - - -
--------- -------- --------- -------- --------- --------
Oil
--------- -------- --------- -------- --------- --------
Swaps 18.8 61.2 7.3 61.1 3.7 80.5
--------- -------- --------- -------- --------- --------
(1) As per 3 May 2022
Appendix 3: 2022 guidance
Actual Guidance
(Q1 2022) (FY 2022)
Production 215 kboepd 195-210 kboepd
--------------- -----------------
Operating costs $14.1/boe $15-16/boe
--------------- -----------------
Total capex (including decommissioning) $160 million $1.3 billion
--------------- -----------------
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