TIDMHBR
RNS Number : 1461F
Harbour Energy PLC
03 November 2022
Harbour Energy plc
"Harbour" or the "Company" or the "Group"
Trading and Operations Update
3 November 2022
Harbour Energy plc provides the following unaudited Trading and
Operations Update for the nine months to 30 September 2022.
Operational highlights
-- Production of 207 kboepd, an increase of 27 per cent on the
corresponding prior period; full year production now expected to be
in the upper half of 200-210 kboepd guidance
-- Unit operating costs of $14/boe, a decrease of 18 per cent on
the corresponding prior period; forecast 2022 operating costs
reduced to c.$14/boe (versus previous guidance of the lower end of
$15-16/boe)
-- Improved safety record with total recordable injury rate of
0.78 per million hours worked
-- Successful drilling at J-Area and Catcher (UK) and Natuna Sea
Block A (Indonesia) supporting production; eight rigs currently
active including at J-Area and Beryl (UK) and Chim Sao
(Vietnam)
-- International projects progressed
- Mexico: Zama Unit development plan well-advanced
- Indonesia: Initial plan of development for the Tuna field
submitted; planning underway for further drilling across the
Andaman Sea acreage following the material Timpan gas discovery
-- Increased momentum on UK CCS projects including new Viking
CCS partnerships with West Burton Energy and Associated British
Ports
Financial highlights
-- Revenue of $4.1 billion with realised post-hedging oil and UK
gas prices of $80/bbl and 86 pence/therm versus the average Brent
price of $105/bbl and NBP gas price of 209 pence/therm
-- 2022 total capex guidance reduced to c.$1.0 billion from
c.$1.2 billion, primarily driven by the late arrival of drilling
rigs and the weaker pound sterling to US dollar exchange rate
-- 2022 total UK tax liability expected to be c.$900 million, of
which c.$400 million relates to the recently enacted UK Energy
Profits Levy
-- Forecast 2022 free cash flow increased to $2-2.2 billion(1)
(after c.$700 million of total cash tax payments)
-- Net debt of $1.1 billion as at period end; continue to expect
to be net debt free in 2023
-- Shareholder distributions of $500 million completed year to
date, including c.$100 million interim dividend paid on 19 October;
new $100 million buyback programme approved
Linda Z Cook, Chief Executive Officer, commented:
"Harbour is delivering operationally with higher production
volumes and lower costs, supported by improved efficiency and our
capital investment programme. We also remain focused on reducing
our own greenhouse gas emissions and advancing our two UK CCS
opportunities, Harbour-led Viking CCS in England and Acorn in
Scotland. Our company is proud to be the UK's largest oil and gas
producer and, through the combination of these activities,
contributing meaningfully to domestic energy security while at the
same time working to help realise a shared ambition of UK
leadership in CO(2) capture and storage.
However, the recently enacted UK Energy Profits Levy (EPL) and
speculation about further fiscal changes have created uncertainty
for independent oil and gas companies like Harbour. As a result,
evaluating expected returns from long term investments has become
more difficult and investors are advocating for geographic
diversification.
While we fully recognise the significant challenge in the UK to
put public finances on a sustainable footing, we urge the
government to carefully consider the consequences of any increase
in or extension of the EPL. At a time when oil and gas producers
are being asked to invest more to help ensure the UK's energy
security and are considering longer term, material investments in
CCS, additional taxes would run the risk of undermining our ability
to do either."
Enquiries
Harbour Energy plc Tel: +44 20 3833 2421
Elizabeth Brooks, Head of Investor Relations
Brunswick
Tel: +44 20 7404 5959
Patrick Handley, Will Medvei
(1) Assumes $90/bbl Brent, 220p/therm day ahead NBP and a pound
sterling to US dollar exchange rate of $1.1/GBP for the fourth
quarter; on a 2022 full year basis this equates to $102/bbl for
Brent, 212p/therm for NBP and a $1.2/GBP exchange rate.
This announcement contains inside information.
Operational review
Strong production performance
Production for the first nine months of the year averaged 207
kboepd (194 kboepd UK, 13 kboepd International), an increase of 27
per cent on the 2021 corresponding period. Production was split
approximately 51 per cent liquids and 49 per cent gas.
Production was underpinned by continued outperformance from the
Greater Britannia Area satellite fields, an active well
intervention programme and new wells, primarily gas, brought
on-line including at J-Area, Everest and Tolmount.
The Tolmount gas field reached plateau rates of 20 kboepd (net,
Harbour 50 per cent interest) in July and cash payback in
September, less than six months after first production in April.
While production remains above 20 kboepd today, pressure and other
performance data suggests the field will come off its production
plateau early next year. Tolmount activities in 2023 include
compression start-up, drilling of the Tolmount East well which is
expected online in 2024 and testing of the near field Earn prospect
which if successful would be tied into the existing Tolmount
infrastructure.
Production continues to be supported by high reliability across
our asset base with three of our hubs - Greater Britannia, J-Area
and Elgin Franklin - each achieving operating efficiency in excess
of 95 per cent for the period. The planned maintenance programmes,
including a ten-day shut down at the Tolmount field post period end
in October, have now been completed. No major campaigns are planned
for the remainder of the year.
2022 full year production is now expected to be in the upper
half of 200-210 kboepd guidance.
Targeted high return, short cycle investment
The bulk of Harbour's capex programme is targeted at high
return, short cycle, infrastructure-led investment opportunities to
help support near term production levels.
Activity increased in the third quarter with eight rigs
currently active across the portfolio. At J-Area, the Jade-JM well
was brought on-stream in October and the Judy-RD well was
successfully tested and is expected online before year end. The
Catcher Area drilling programme recently concluded with Catcher
North now tied into production and Burgman Far East due online in
early 2023. At Beryl, drilling is ongoing at Buckland South West
following the delayed arrival of the rig while platform drilling
from Beryl Bravo has been deferred to early next year. In
Indonesia, the rig programme at Natuna Sea Block A was successfully
completed and the two well programme at Chim Sao in Vietnam
commenced in October following late delivery of the rig.
Harbour is making good progress on its UK organic projects,
Talbot and Leverett. On Talbot, drilling of the three development
wells to be tied back to J-Area infrastructure is expected to
commence shortly while the Leverett appraisal well, close to
Harbour's Greater Britannia Area, is expected to spud in the first
half of 2023.
International growth opportunities
Harbour's international growth opportunities include the Zama
project in Mexico where Harbour and its partners are nearing
agreement on a unit development plan which will be submitted to the
Mexican National Hydrocarbon Commission for review. FEED is planned
for 2023, followed by a final investment decision possibly as early
as the end of next year. To the southwest of Zama at Block 30, a
two well, non-operated exploration campaign commenced in October,
later than anticipated due to a prolonged rig acceptance process.
The first well is currently drilling ahead and targeting the
amplitude-supported Kan prospect.
In Indonesia, Harbour submitted an initial plan of development
for the Tuna field in October for government review. Elsewhere in
Indonesia, following the Timpan discovery earlier this year,
Harbour is acquiring 3D seismic across the eastern part of its
Andaman II licence. Planning is also underway with partners for
further drilling activity across the Andaman Sea acreage which is
anticipated to commence in late 2023, targeting amplitude-supported
prospects which have been de-risked by the Timpan discovery.
Positioning for the Energy Transition
During the period we have made good progress on our Viking CCS
project in the UK Humber region where we can leverage our extensive
subsurface and offshore expertise and existing asset base. Through
Viking and our interest in Acorn in Scotland, our UK CCS projects
could capture and store multiple times Harbour's annual CO(2)
emissions and play a critical role in achieving the UK's net zero
emissions targets.
Over the past few months, the Harbour-led Viking CCS network has
grown significantly to include West Burton Energy's West Burton B
power station which expands Viking's geographic footprint beyond
the Humber region to inland emitters in Nottinghamshire. In
addition, Harbour has entered into an exclusive commercial
relationship with Associated British Ports who plan to develop a
CO(2) import terminal at Immingham enabling Viking CCS to offer a
solution for stranded CO(2) emissions across the UK. Separately,
statutory consultation for the Viking CCS onshore pipeline which
will connect the Humber region to Theddlethorpe on the Lincolnshire
coast is scheduled to commence later this year ahead of the
submission of a planning application in 2023.
Subject to government progress related to the regulatory
framework, Harbour is aiming to progress both Viking CCS and Acorn
to a final investment decision in 2024 with first CO(2) injection
as early as 2027.
Financial review
Estimated revenue for the first nine months of the year was $4.1
billion. Harbour realised oil prices pre- and post-hedging of
$103/bbl and $80/bbl respectively for the period versus the average
Brent market price of $105/bbl. Harbour realised UK gas price pre-
and post-hedging of 200p/therm and 86p/therm respectively versus
the average NBP market price of 209p/therm. We continue to secure
incremental hedges where future pricing is attractive, via swaps
for oil and through zero cost collars for gas. A full schedule of
the Group's hedging position is set out in the Appendix 2.
Operating costs for the first nine months were $800 million and
$14/boe on a unit of production basis, reflecting a weaker pound
sterling to US dollar exchange rate and robust production volumes
which together have more than offset inflationary pressures. We now
expect operating costs on a full year basis to be c.$14/boe,
compared to previous guidance of the lower end of $15-16/boe. This
assumes a $1.10/GBP exchange rate for the remainder of the
year.
Total capital expenditure to the end of September was $700
million, lower than anticipated due to the late arrival of drilling
rigs, including at Beryl (UK), Block 30 (Mexico), Chim Sao
(Vietnam) and for our UK Southern North Sea decommissioning
programme. Capital expenditure is also lower resulting from the
decision not to proceed with several North Sea exploration and
appraisal wells following further technical analysis and risk
assessment. In addition, with a significant portion of our total
capex being sterling denominated, the weaker pound sterling to US
dollar exchange rate has also impacted capex levels. As a result,
full year 2022 total capex is now expected to be c. $1.0 billion,
reduced from prior guidance of $1.2 billion.
Assuming Brent oil and UK gas market prices average $90/bbl and
220p/therm for the fourth quarter, resulting in $102/bbl and
212p/therm for the full year, and assuming no further changes to
the UK fiscal regime, we forecast 2022 free cash flow (after tax
and before shareholder distributions) of $2-2.2 billion, compared
to previous guidance of $1.8-2.0 billion. The c.$200 million
increase is driven by improved production levels, lower capital
expenditure and higher commodity prices partially offset by the
resulting higher UK cash tax payments, now forecast at c.$650
million. This includes c.$240 million relating to the December
payment of Harbour's 2022 UK EPL liability now forecast to be
c.$400 million with the c.$160 million balance to be paid in
January 2023.
Harbour continues to forecast to be net debt free in 2023. This
financial position together with our strong cash flow continues to
allow us significant optionality over future capital allocation,
including for value accretive M&A and additional shareholder
returns. As a result, we have approved a new buyback programme for
a maximum aggregate consideration of $100 million to be completed
by no later than 28 February 2023.
Year-to-date we have returned c.$500 million to shareholders.
This comprises our c.$200 million annual dividend, including a
c.$100 million interim dividend which was paid on 19 October, and
the previously announced c.$300 million share buyback programme.
This programme, which completed in September, resulted in the
purchase and cancellation of c.63 million shares, representing c. 7
per cent of our issued share capital.
Appendix 1: Group production(1)
1 Jan - 30 Sept 2022 1 Jan - 30 Sept 2021
(net, kboepd) (net, kboepd)
Greater Britannia
Area 37 31
--------------------- ---------------------
J-Area 29 26
--------------------- ---------------------
AELE hub 27 22
--------------------- ---------------------
Catcher 19 16
--------------------- ---------------------
Tolmount 12 -
--------------------- ---------------------
East Irish Sea 8 4
--------------------- ---------------------
Elgin Franklin(1) 24 15
--------------------- ---------------------
Buzzard 15 13
--------------------- ---------------------
Beryl 11 12
--------------------- ---------------------
West of Shetlands(1) 10 12
--------------------- ---------------------
Other North Sea(2) 2 2
--------------------- ---------------------
North Sea 194 153
--------------------- ---------------------
International 13 10
--------------------- ---------------------
Total Group 207 163
--------------------- ---------------------
(1) West of Shetlands comprises Clair, Schiehallion and Solan.
Other Europe includes Galleon and Ravenspurn North. 2021 production
provided on a reported basis and includes the contribution from
Premier's portfolio from 31 March 2021.
Appendix 2: Hedging schedule(1)
FY 2022 FY 2023 FY 2024 FY 2025
Volume Av.
Av. price Av. price (mmboe price Av. price
Volume (p/th, Volume (p/th, p/th, Volume p/th,
(mmboe) $/bbl) (mmboe) $/bbl) $/bbl mmboe $/bbl
UK
gas
Swaps 19.3 42 21.5 40 9.9 52 1.6 45
Collars 5.0 50-62 1.6 55-69 1.3 135-292 0.4 140-325
Options 1.1 34 - - - - - -
Oil
Swaps 18.8 61 11.0 74 7.3 84 2.4 81
--------- ---------- --------- ---------- -------- -------- ------- ----------
(1) As at 30 September 2022
Appendix 3: 2022 guidance
2022 Guidance Actual 2022 Guidance
(as at Aug (1 Jan to 30 (as at Nov 22)
22) Sept 2022)
Upper half of
Production (kboepd) 200-210 207 200-210
--------------- ------------- ----------------
Operating costs ($/boe) Lower end of
15-16 c.14 c.14
--------------- ------------- ----------------
Total capex ($ billion) c.1.2 c.0.7 c.1.0
--------------- ------------- ----------------
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