By Scott Wright

HARBOUR Energy saw its shares fall by three per cent after the North Sea oil and gas giant underlined that the energy profits levy has led it to focus investment outside the UK, declaring that the country has become “less competitive” because of the tax.

It came just hours after the company revealed it had begun consulting staff in the UK over an unspecified number of redundancies. Harbour, which is the largest oil and gas independent listed in London, employs around 1,500 people in the UK, the bulk of whom are based in Aberdeen. The company has yet to say how many jobs are at risk.

The UK Government introduced the energy profits levy in May to tax the extraordinary profits oil and gas companies were making after Russia’s invasion of Ukraine led energy prices to soar. It increased the levy to 35% from the original 25% in November as the cost-of-living crisis deepened, taking the headline rate of tax for the sector to 75%.

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Harbour, formed by the 2021 merger of Chrysaor and Premier Oil, said that the levy had “necessitated a review of our future activity levels in the UK and reinforced our ambition to grow and diversify internationally”.

Chief executive Linda Z Cook said: “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% 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 diversity internationally.”

Harbour owns and operates some of the biggest oil and gas producing assets in the North Sea, including the giant Britannia and Catcher fields north-east and east of Aberdeen.

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In a trading update yesterday, the company said production had increased to 208,000 barrels of oil equivalent per day in the 12 months to December 31 from 175 kboepd in 2021, taking it towards the top end of the 200-210 kboepd guided. The 19% rise in production was driven by new wells coming online, including at Tolmount off the Yorkshire coast, improved operating efficiency and a full year’s contribution from Premier Oil assets.

Harbour provided production guidance of 185-200 kboepd for 2023, supported by new wells coming on stream including at J-Area, Beryl and Catcher in the North Sea.

Estimated operating costs were lower in 2022 at $13.7 per barrel of oil, down from $15.2 in 2021, which the company said reflected higher volumes, a weaker UK sterling to US dollar exchange rate, and continued progress on the integration front.

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The company also said significant momentum had been made on its two carbon capture and storage developments over the year, including the Harbour-led Viking project, which it said has the potential to meet one-third of the UK Government’s target to capture and store 30 mtpa (million tonnes per annum) of carbon dioxide by 2030.

Harbour expects to report earnings before interest, tax, depreciation, amortisation and exploration costs of $4.1bn for 2022, up from $2.4bn. It said its post-tax earnings for 2022 will be impacted by a significant one-off, non-cash deferred tax charge associated with the energy profits levy in the UK. The company noted that the charge would be materially higher than the previously estimated $0.6bn because of the increase and extension of the levy.

Harbour said it will make total cash tax payments of around $600 million for 2022, more than double that made in 2021, driven in part by the introduction of the energy profits levy.

Shares closed down 10.2p at 312.6p.

The company is due to publish its full-year results for 2022 on March 9.