The North Sea’s biggest oil and gas producer has underlined how much money firms are making in the area and revealed it is eyeing ‘material’ acquisition opportunities.
Harbour Energy said it is line to generate around $1 billion (£0.8bn) cash from its operations this year and declared it had continued to maximise the value of its UK oil and gas portfolio in the first nine months.
The cash generated by the UK business has been used to fund generous payouts to investors while leaving Harbour in a position to make bold moves as a wave of consolidation sweeps the sector.
READ MORE: North Sea giant eyes bumper return on investments made off Scotland
Chief executive Linda Cook said Harbour is evaluating a number of material mergers and acquisition opportunities as directors seek to build a global and diverse oil and gas company.
She noted: “Recent large transactions in our sector and our own discussions with potential counterparties indicate that market conditions for M&A are improving.”
The comments follow reports that Harbour is mulling a bid for the Wintershall DEA oil and gas business, which is thought to command a valuation of around $10bn.
A spokesperson for Harbour said it had no comment to make on the reports.
Harbour threatened to shift investment overseas following the introduction of the windfall tax in the UK last year. The company cut 350 jobs in the North Sea business. It snubbed the North Sea exploration round held by the Government this year in support of official efforts to “max out” the area’s reserves.
READ MORE: 'Despicable' North Sea licences show Big Oil interest in North Sea
Harbour has operations in Mexico and Indonesia, which Ms Cook said provide diversification opportunities.
However, more than 90% of its production comes from North Sea oil and gas fields.
In a trading and operations update issued yesterday Harbour made clear that the North Sea operation has been trading very profitably although market conditions are not as favourable as they were last year.
Oil and gas prices surged to multi-year highs last year amid Russia’s war on Ukraine. They have fallen in the last 12 months as concerns about the outlook for the global economy have mounted.
The company said it got an average of $77 per barrel for its UK oil production and 53 pence per therm for gas in the first nine months of this year. Production costs averaged $16 per barrel oil equivalent.
READ MORE: Humza Yousaf's £500m plan to boost green jobs looks half-baked
Harbour has distributed $440 million to investors in the year to date, through dividends and share buy backs.
It approved $600m distributions last year.
Shareholders include US private equity firms which backed Harbour to buy big North Sea portfolios during the downturn that started in 2015.
It expects to make tax payments totalling $400m for the current year.
In March Harbour claimed the windfall tax had “all but wiped out” the profit it made last year.
This was after taking account of a $1.5bn non-cash deferred tax charge in respect of the windfall tax.
In August Harbour said it got £22.7m tax rebates in the first half following refunds of amounts paid in the UK in prior years.
Harbour noted yesterday that it has made progress in the emerging carbon capture and storage industry in the UK in recent months.
READ MORE: Investors eye big returns as carbon capture bandwagon accelerates
The Viking project which Harbour is leading with BP in the Humber region passed important development milestones including the start of front-end engineering and design work.
Harbour is a partner in the Acorn project, which will involve storing carbon dioxide beneath the North Sea off Scotland. In July the Scottish carbon cluster scheme, which Acorn forms part of, won a place on the Government’s Track-2 programme to support CCS schemes.
Analysts at Stifel investment bank said yesterday’s update showed that Harbour was performing in line with guidance, and should be in a good position to continue to return cash to shareholders in 2024.
They added that Ms Cook’s positive remark about M&A market conditions suggested the gap between buyers and sellers is decreasing after the commodity price shocks of 2022.
In the USA ExxonMobil last month bought Pioneer Natural Resources for $59.5bn. Chevron bought Hess for $60bn.
Harbour Energy shares closed up 5.2p at 223.5p, leaving the company with a stock market capitalisation of around £1.7bn.
The North Sea Transition Authority yesterday welcomed the fact that seven North Sea development projects valued at almost £4bn have been approved by regulators and investors this year.
The bulk of the value is accounted for by the $3.8bn plan to develop the Rosebank field which was approved by Equinor and Ithaca Energy in September.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here