Harbour Energy to drive international growth

UK-headquartered independent Harbour Energy expects increased capital expenditure this year of around $1.2 billion, with higher spending on its domestic and overseas assets, although production is set to decline.

The operator’s 2024 UK drilling activity will target high-return, quick-payback opportunities in its operated J-Area, Greater Britannia and AELE hubs, in addition to the Talbot development, all of which will add to production and support cash flow starting late this year.

The company's capital expenditure is expected to rise about 20% this year from roughly $1 billion in 2023.

Harbour will invest this year in international growth projects, which have the potential to materially increase the company’s reserves life. These include its exploration campaign in Indonesia, where drilling of the Halwa and Gayo wells on the Andaman II block is under way; and in Mexico, the front-end engineering and design work for the Zama development and drilling of the Kan appraisal well.

Harbour’s production guidance for 2024 is in the range of 150,000 to 165,000 barrels of oil equivalent per day, with the decrease from last year being attributed, at least in part, to an unusually high level of planned shutdowns at its operated hubs and the Beryl area in the UK, coinciding with planned pipeline outages.

Meanwhile, Harbour expects this year’s unit operating cost to be around $18 per barrel of oil equivalent, higher than 2023 due to lower volumes with absolute operating costs broadly flat year-on-year.

The guidance also reflects the impact of deferred partner-operated wells at Beryl and Elgin Franklin in the UK and the anticipated sale of the company’s Vietnam business.

Looking ahead to 2025, Harbour expects production to be similar to 2024, with less maintenance downtime and volumes from new wells and projects substantially offsetting natural decline. It expects unit operating costs to be broadly flat with 2024 while capital expenditure is anticipated to be materially lower.

Harbour last year achieved revenues of around $3.9 billion, down from $5.4 billion in 2022. Its realised post-hedging oil and UK gas prices were $78 per barrel and 54 pence (68.5 US cents) per therm. While crude prices held their own last year, Harbour had achieved 86 pence per therm for its gas in 2022.

Production in 2023 averaged 186,000 boepd, down from 208,000 boepd the previous year with roughly half being gas and half oil.

The operator last year distributed $441 million to shareholders versus $551 million in 2022, comprising around $200 million of dividend payments and $241 million of share buybacks.

Last year’s domestic highlights included the fourth quarter start-up of the Tolmount East field and the successful appraisal of the Leverett discovery, supporting production from late 2024.

Further afield, Harbour made a significant gas discovery with its Layaran-1 wildcat offshore Indonesia and made the Kan oil discovery in Mexico.

Harbour on Thursday confirmed it had also made progress on its two UK carbon capture and storage projects. The FEED contract for the Viking CCS project has been awarded and the project secured its first potential CO2 shipping customer.

Meanwhile, the company’s “transformational” $11 billion acquisition of Wintershall Dea’s asset portfolio is expected to complete in the fourth quarter this year.

“We made significant progress against our strategic goals in 2023. Our safety performance improved. We continued to maximise the value of our UK production base while ensuring disciplined capital allocation, resulting in significant free cash flow and shareholder returns over and above our base dividend," said Harbour chief executive Linda Cook.

"Looking ahead to 2024, our priorities are for the continued safe and responsible operations of our existing portfolio and the successful completion of the Wintershall Dea acquisition," she said.

The 2024 guidance and 2025 outlook relates to Harbour's current portfolio and excludes any effects or contribution from the proposed acquisition of the Wintershall Dea asset portfolio.

It also assumes that the sale of Harbour’s Vietnam business completes on 30 June 2024. The company will announce its full year 2023 results on 7 March.

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