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RNS Number : 1959N
Harbour Energy PLC
19 January 2023
Harbour Energy plc
"Harbour"
Trading and Operations update
19 January 2023
Harbour Energy plc provides the following unaudited Trading and
Operations update for the year ended 31 December 2022, ahead of
announcing its Full Year Results on 9 March 2023.
2022 Operational Highlights
-- Increased production of 208 kboepd (2021: 175 kboepd),
towards the top end of 200-210 kboepd guidance and split 50 per
cent liquids / 50 per cent gas. The 19 per cent increase versus
2021 was driven by new wells online including at Tolmount, improved
operating efficiency and a full year's contribution from the
Premier assets.
-- Lower estimated operating costs of $13.7/boe (2021:
$15.2/boe), reflecting higher volumes, a weaker UK sterling to US
dollar exchange rate and continued progress with our integration
efforts.
-- Improved safety performance with total recordable injury
rate(1) materially reduced to 0.8 per million hours worked (2021:
1.3).
-- Organic growth opportunities progressed
- UK: Investment decisions taken on Talbot development and Leverett appraisal
- Indonesia: Significant gas discovery at the Timpan prospect
(Andaman II licence) with further drilling planned for 2023 and
2024; plan of development for the Tuna field approved by the
Indonesian Government
- Mexico: Zama development plan being finalised ahead of submission to the Mexican Government
-- Lower GHG intensity(1) of c.21 kgCO(2) e (2021: 23 kgCO(2)
e), reflecting improved operational efficiency and the
implementation of emission-reduction projects.
-- Significant momentum on our two UK CCS projects, including
the Harbour-led Viking project which has the potential to meet one
third of the UK government's target to capture and store 30 mtpa of
CO(2) by 2030. Milestones included completion of pre-FEED work, new
partnerships formed with major customers and CO(2) storage capacity
independently verified.
2022 Financial Highlights
-- Estimated revenue of $5.4 billion with realised post-hedging
oil and UK gas prices of $78/bbl and 86 pence/therm versus an
average Brent price of $101/bbl and UK NBP gas price of 198
pence/therm.
-- Estimated EBITDAX of $4.1 billion (2021: $2.4 billion). Post
tax earnings impacted by a significant one-off non-cash deferred
tax charge associated with the Energy Profits Levy (EPL) in the UK.
As a result of the increase in and extension of the EPL, the
revaluation deferred tax charge (2) will be materially higher than
the previously estimated $0.6 billion charge disclosed in our 2022
Half Year Results .
-- 2022 total capital expenditure of $1.0 billion, in line with
latest guidance and materially lower than the $1.3 billion forecast
at the outset of the year. This was due to the decisions not to
proceed with several North Sea exploration and appraisal wells as
well as the delayed arrival of rigs at some locations. The weaker
UK sterling to US dollar exchange rate was also a factor.
-- Total cash tax payments of c.$600 million, more than double
that made in 2021, in part driven by the introduction of the EPL.
Estimated 2022 EPL liability of over $350 million of which c.$200
million was paid in 2022 with the balance to be paid in 2023.
-- Estimated 2022 free cash flow (post tax, pre-shareholder
distributions) of $2.1 billion (2021: $0.7 billion). The increase
was driven by higher production levels and the improved commodity
price environment offset by hedging losses and increased cash tax
payments.
-- Total shareholder distributions of $600 million announced
comprising c.$200 million annual dividend and $400 million of share
buybacks. The buybacks comprised a $300 million programme which
completed in September and a $100 million programme which was 57
per cent complete at year-end. As a result, over the course of 2022
we repurchased 8.5 per cent of our issued share capital.
-- Net debt reduced from $2.3 billion to $0.8 billion and
leverage reduced from 0.9x to 0.2x. Significant liquidity with cash
and undrawn facilities of $2.5 billion.
2023 Guidance and Outlook
-- Production of 185-200 kboepd, supported by new wells coming
on-stream, including at J-Area, Beryl and Catcher.
-- Unit operating cost of c.$16/boe(3) , higher than 2022 due to
lower volumes and inflationary pressures partially offset by
ongoing consolidation of key supply chain contracts.
-- Total capital expenditure of c.$1.1 billion(3) , including
c.$0.2 billion decommissioning, split 85 per cent UK / 15 per cent
international
- UK capital expenditure focused on high return, lower risk,
infrastructure-led investment opportunities including Tolmount East
and Talbot development drilling, Callanish F6 infill well, Leverett
appraisal and the Jocelyn South exploration well.
- Total UK capital expenditure reduced compared to previous
expectations with certain opportunities no longer being pursued
following the changes to the EPL announced in November, including
the Total-operated EIH well at Elgin Franklin and participation in
the 33rd Licensing round.
- International capital expenditure largely comprised of further
exploration drilling across our Andaman Sea licences.
-- Review initiated of UK organisation to align with lower
future activity and investment levels in the country.
-- Continued progress advancing our two UK CCS projects towards
investment decisions (subject to receiving clarity from the UK
Government on the regulatory regime).
-- Continue to forecast to be net debt free in 2023. Flexibility
over future capital allocation retained, including for meaningful
acquisitions and additional shareholder returns over and above our
stated $200 million annual dividend.
Linda Z Cook, Chief Executive Officer, commented:
"Against a backdrop of ongoing geopolitical, economic and fiscal
instability, I am proud of the company's accomplishments during
2022. Thanks to the Harbour team's performance and significant past
investment, production was materially higher which, together with
improved margins, enabled us to continue to deleverage and make
material shareholder distributions. We delivered c.15 per cent of
the UK's domestic oil and gas supplies, supporting energy security
at a critical time while reducing our greenhouse gas emissions and
progressing our UK CCS projects.
We remain committed to playing an important role in the
continued supply of reliable and responsible domestic oil and gas
in the UK. However, while oil and gas prices have reverted to more
normal levels we still face a tax rate of 75 per cent in the UK due
to the recent tax changes, making investment in the country less
competitive. As a result, the EPL necessitated a review of our
future activity levels in the UK and reinforced our ambition to
grow and diversify internationally.
As we look to 2023, we enter the year in a strong financial
position and with plans to advance a number of exciting
opportunities. As always, we will remain disciplined and very
focused on optimizing the allocation of our capital between the
balance sheet, investment in growth and shareholder returns."
Enquiries
Harbour Energy plc Tel: 020 3833 2421
Elizabeth Brooks, Head of Investor Relations
Brunswick Tel: 020 7404 5959
Patrick Handley
Will Medvei
(1) We report our safety and environment KPIs including TRIR and
GHG intensity on a gross operated basis. GHG emissions include
Scope 1 and Scope 2.
(2) The quantum of this charge will be released within our
audited 2022 Full Year Results
(3) Assumes a US dollar to UK sterling exchange rate of
$1.2/GBP
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