LEADING North Sea oil and gas companies have underlined how much money firms are making in the area following the surge in commodity prices in recent months by announcing plans to make huge payouts to investors.

Neptune Energy declared an $800m dividend yesterday. The company’s executive chairman Sam Laidlaw, said: “We remain on track to achieve significantly higher operating cash flow in 2021 as a result of higher commodity prices, robust production and good cost control.”

Harbour Energy announced plans to start paying an annual dividend of $200 million. Shareholders are set to get a first instalment worth $100m in total in May next year.

The moves provide graphic evidence of how good business is for some firms following a big improvement in trading conditions amid the recovery in the economy from the slump triggered by the pandemic.

Gas prices have surged to record highs in recent weeks as strong demand and geopolitical factors combined to provide a big boost for producers. Oil prices have been trading at above pre-pandemic levels. Concerns about the impact of the Omicron variant of Covid-19 have eased in recent days.

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The rise in prices has run well ahead of costs meaning some firms operating in the North Sea are generating huge amounts of cash from their operations.

Neptune said it expects to generate more than $2 billion from operations in the current year.

Harbour said it expected to generate around $600m free cash flow from its operations this year.

In an update on trading, chief executive Linda Cook said the company is on course to end the year in a strong position with enough cash in the bank to fund continued investment in its portfolio after making the proposed payout to investors.

The Herald: Harbour Energy chief executive Linda CookHarbour Energy chief executive Linda Cook

She said Harbour expects to be able to maintain production at around 200,000 barrels of oil equivalent per day. Production costs are expected to continue to average around $16 per barrel.

Brent crude sold for $75.20 per barrel yesterday. The price fell to below $20/bbl in April last year. from around $70/bbl before the pandemic

Natural gas prices have risen even faster in a development market watchers say partly reflects a fall in UK production and the decision made by Russia to limit supplies to Europe amid tensions over Ukraine.

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Harbour signalled it could use some of the cash it will generate to fund acquisitions. The company said it wants to establish a material production base outside the UK but will continue to invest in its existing asset base.

Fomerly known as Chrysaor, Harbour acquired control of Premier Oil in April and took over the company’s listing on the stock exchange. Premier amassed hefty debts after expanding during the last downturn in the North Sea.

Chrysaor was formed in 2014 with backing from US financiers. It acquired big North Sea portfolios from Shell and US giant ConocoPhillips, in multi-billion deals concluded in 2017 and 2019 respectively.

Shell retrenched in the North Sea and focused North Sea investment on prize assets, such as big developments West of Shetland.

Last week it dropped plans to develop the Cambo find West of Shetland with Siccar Point Energy, citing concerns about the economics of the project and potential delays.

The plans were heavily criticised by environmental campaigners.

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Harbour sees potential to increase production in the North Sea by making the most of opportunities close to its existing production infrastructure, rather than through greenfield projects along the lines of the planned Cambo development.

The company said yesterday the integration of Premier is on track and it expects to realise material synergies. It expects to produce first gas next year from the Tolmount development, which Premier initiated.

In a presentation to investors, Harbour said oil has a continuing role in the global energy system and new supply is still required to offset production declines.

Ms Cook said: “We remain committed to producing oil and gas responsibly and to the continued execution of our strategy.”

The company is supporting efforts to develop a carbon capture and storage cluster in Scotland. This could utilise depleted North Sea fields to store emissions.

Harbour also has operations in Asia and the Americas, which were developed by Premier.

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Neptune Energy is investing in North Sea projects, including the development of the Seagull oil field east of Aberdeen.

The company was also formed with backing from US financiers. It has operations in other European countries, including Norway, and in Asia and Africa as well as the UK.

Meanwhile, UK North Sea-focused Serica Energy said it had made good progress in the second half of 2021.

Chief executive Mitch Flegg said: “Commodity prices have been exceptionally strong during the period with a resulting positive impact on income.”

The company started production from the Columbus gas field east of Aberdeen in November. It brought an additional well on the Rhum field off Shetland into production in September.

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Serica acquired an interest in Rhum from BP in 2017, along with stakes in the Bruce and Keith fields.

Shares in Serica Energy closed up one per cent, 3p, at 228.5p.

Harbour Energy shares closed down 12%, 51p, at 379.6p.

Neptune shares are privately held.