The North Sea’s biggest oil and gas producer has underlined how much money firms expect to make in the area even as the Chancellor increased the burden of the windfall tax the firm has bitterly opposed.

Harbour Energy revealed it generated $1 billion (£0.8bn) cash from its operations last year after Jeremy Hunt provoked a storm by announcing in his Budget speech that the term of the tax would be extended.

The move will mean firms will have to pay the 35% surcharge until 2029 rather than 2028.

The decision represented a snub to the industry and to Tory MPs in Scotland, who had pleaded with Mr Hunt to think again after his plans became public before the Budget.

Industry leaders were incandescent last week when trade body OEUK warned the move risked jobs, investment and economic growth.

The change is the latest in a series which started in May 2022 when then Chancellor Rishi Sunak introduced the Energy Profits Levy. The rate was increased from 25% in November that year, when the Government noted that UK oil and gas producers were making extraordinary profits following the surge in commodity prices fuelled by Russia’s war on Ukraine.

The total tax rate payable by North Sea firms is 75% currently.

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Harbour Energy has been a prominent critic of the tax from day one. The private equity-backed firm slashed hundreds of jobs in response and claimed the tax wiped out its profits in 2022.

On Thursday the company posted a profit of $32 million profit for 2023, net of a $500m tax provision.

But those numbers reflect the impact of significant non-cash accounting charges and may paint a misleading picture of the performance of Harbour.

The company said it generated $1bn cash last year after making $438 million tax payments in the period “primarily in relation to the UK Energy Profits Levy”. It paid $552m tax in 2022.

Harbour used the cash generated last year to fund $449m payouts to investors and to reduce debts by $600m, to just $200m.

Harbour incurred hefty debts in support of the acquisition-led growth drive it launched during the downturn that started in 2014. It recently clinched an $11bn deal to buy the international portfolio developed by Germany’s Wintershall DEA.  Cash generated in the UK could be used to help fund the acquisition.

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The results statement underlines how profitable North Sea production operations remain even if prices have fallen from the peaks reached after Russia launched its full-scale war on Ukraine.

Harbour received $78 per barrel for oil last year and 54p per therm for gas. Its production costs averaged just $16 per barrel oil equivalent.

Oil and gas prices remain above pre-pandemic levels. With demand for both commodities expected to remain strong, Harbour said it is working on the assumption that it will get $85 per barrel for oil this year and 70p per therm of gas.

Brent crude sold for around $82 per barrel yesterday.

The London-listed firm expects to be able to generate more cash by investing in growing its North Sea business. This will involve drilling wells to boost production from existing assets. Finds on the company’s acreage could be developed relatively cheaply by utilising infrastructure that is already in place.

Harbour noted: “A significant portion of the Group's exploration and evaluation assets relate to prospects that could be tied back to existing infrastructure and hence require less capital investment … compared to large frontier developments.”

Firms can benefit from generous tax relief on North Sea development spending under the investment allowance introduced alongside the windfall tax.

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Harbour offered only a muted response to news of the windfall tax extension, by its standards, saying it was assessing the potential impact of the move.

However, another leading North Sea player hammered home criticism of the windfall tax last week while highlighting the progress it has made since the levy introduced.

“It would be remiss not to express considerable disappointment with the extension of the EPL,” complained Serica Energy, adding: “The kind of approach exhibited in the Budget will lead to more imports."

Serica also noted it had increased its reserves by 24 million barrels after investing in assets acquired since the windfall tax rate was increased.

Given that the likes of Harbour have the funds required to support expensive PR campaigns, Mr Hunt’s decision to extend the windfall tax has sobering implications for the industry.

In comments that made headlines in Scotland, Mr Hunt told the BBC the oil and gas industry was a loser from the Budget. He said those with the broadest shoulders should pay more.

It may be that when Mr Hunt needed to find £1.5bn to help meet his five-year debt reduction target he concluded that the least risky way to achieve that aim was by soaking oil and gas firms.

The move took some nerve given that the Government published the results of a review of the North Sea fiscal regime in November. But the Chancellor probably felt he could get away with it because he knew that most people think oil and gas firms should pay more tax.

While industry bigwigs scream that the windfall tax is unfair and will damage investment those claims don’t resonate outside oil and gas heartlands such as Aberdeen.

The industry does not appear to have responded to the change in sentiment triggered by the surge in household energy prices that was recorded amid the recovery from the pandemic and the war in Ukraine.

Before the pandemic oil and gas firms were warned they risked losing their social licence to operate amid concern about global warming.

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The sight of giants such as Shell and BP paying out billions to investors on the back of record profits has caused huge anger in recent months.

Harbour seemed to vie with North Sea-focused Neptune Energy in terms of distributions to shareholders before the latter firm was acquired by Italian giant Eni in June for $4.9bn. That deal suggested the prospect of windfall tax bills did not concern Eni unduly.

Mr Hunt may also have been encouraged to take the risk of extending the windfall tax because he knew the move could put the Scottish Government in a tricky position.

After basing the 2014 independence campaign on claims the industry would make Scotland rich SNP leaders cooled on oil and gas as they courted the green vote.

Former First Minister Nicola Sturgeon opposed Shell’s plans to develop the huge Cambo field West of Shetland.

Last year her successor Humza Yousaf expressed disappointment that the Government had approved plans for the development of the Rosebank field.

Mr Yousaf faced ridicule recently after denouncing Labour’s plans for a further hike in the windfall tax.

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All the same, the SNP’s leader at Westminster Stephen Flynn tried to make capital out of Mr Hunt’s windfall tax move, by accusing him of selling out the north-east of Scotland to fill the pockets of the UK Treasury.

Such bluster is unlikely to persuade either Mr Hunt or Shadow Chancellor Rachel Reeves to go easier on the oil and gas industry.

Labour has said it will increase the total tax rate payable by North Sea firms to 78%, in line with Norway, and scrap the investment allowance introduced by the Government.

The prospect horrifies OEUK, which insists the oil and gas industry can make a vital contribution to the energy transition.

That claim may be sincerely made. However, after ditching Labour’s plans to invest £28bn annually in green projects, the chances of party leader Keir Starmer performing a U-turn on the windfall tax seem slim.