REG - Harbour Energy PLC - Half-year Results
08/08/2024 07:00
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RNS Number : 6356Z Harbour Energy PLC 08 August 2024
Harbour Energy plc
Half-year results
8 August 2024
Improved production guidance; acquisition completion now expected early Q4
Harbour Energy plc ("Harbour" or the "Company" or the "Group") today announces
its unaudited half-year results for the six months ended 30 June 2024.
Highlights(1)
Solid operational delivery
§ Production of 159 kboepd (H1 2023: 196 kboepd), split broadly equally
between liquids and gas
§ Continued strong safety record with TRIR of 0.7 per million hours worked
(H1 2023: 0.8)
§ Harbour-operated UK capital projects, including Talbot, on track to
significantly increase production in Q4
§ Further exploration success in Indonesia with the significant Tangkulo
discovery; Layaran appraisal drilling underway
§ Strategic investment opportunities Zama (Mexico) and Viking CCS (UK)
progressing through FEED
Financial performance in line with expectations
§ Revenue of $1.9bn (H1 2023: $2.0bn) and EBITDAX of $1.2bn (H1 2023: $1.4bn)
§ Profit before tax of $0.4bn (H1 2023: $0.4bn); profit after tax of $0.1bn
(H1 2023: loss of $8m) with an effective tax rate of c.85% reflecting
Harbour's current UK concentration
§ Free cash flow of $0.4bn (H1 2023: $1.0bn), after $0.1bn of
acquisition-related fees, resulting in a small net cash position at period end
§ Declared $100m (13 cents per share) interim dividend, in line with $200m
annual dividend policy and representing 8% dividend per share growth
year-on-year
Improved 2024 production guidance with outlook for 2025 reiterated
§ Production guidance narrowed to 155-165 kboepd (from 150-165 kboepd),
reflecting good progress on our capital projects and planned maintenance
shutdowns
§ Unit operating cost and total capital expenditure guidance reiterated at
c.$18/boe and c.$1.2bn, respectively
§ At $85/bbl Brent, 70 pence/therm UK NBP, expectation to be marginally free
cash flow positive for the full year unchanged with current estimate of
$100m-$200m
§ In line with prior guidance, 2025 free cash flow expected to be
significantly higher versus 2024 reflecting similar levels of production and
operating costs but materially lower capital expenditure
Targeting early Q4 2024 for completion of Wintershall Dea portfolio
acquisition
§ Financing workstreams substantially completed, including the voluntary
bondholder consent process relating to the porting of the $4.9bn investment
grade bonds and the syndication of the $3bn RCF and $1.5bn bridge facility
§ Prospectus and shareholder circular published; Harbour shareholder approval
received with 99.99% of votes in favour of the acquisition
§ Regulatory, anti-trust and foreign direct investment (FDI) approvals
progressing as planned including, post period end, receipt of UK FDI approval
and UK regulatory consent from the NSTA
§ Acquisition now on track to complete in early Q4 2024
Linda Z Cook, Chief Executive Officer, commented:
"During the first half of 2024 we maintained our focus on safe operations,
maximising the value of our existing portfolio and advancing our organic
growth projects. At the same time, we made significant progress towards
completing the Wintershall Dea acquisition, which is now expected early in the
fourth quarter.
The acquisition will transform the scale, geographical diversity and longevity
of our portfolio and strengthen our capital structure enabling us to deliver
enhanced shareholder returns over the long run while also positioning us for
further opportunities."
Harbour Energy plc
Elizabeth Brooks, Head of Investor Relations +44 20 3833 2421
Brunswick
Patrick Handley, Will Medvei +44 20 7404 5959
(1)All operational and financial highlights, guidance and outlook exclude the
impacts of the announced Wintershall DEA asset portfolio acquisition and any
fees relating to the acquisition as well as the recently proposed changes to
the UK Energy Profits Levy, unless stated otherwise.
Summary of 2024 half-year performance
Solid operational delivery
Production averaged 159 kboepd (H1 2023: 196 kboepd), split 53 per cent
natural gas and 47 per cent liquids.
First half production was underpinned by strong reservoir performance and high
operating efficiency across our operated GBA, AELE, Tolmount and Catcher hubs
in the UK. GBA and AELE also benefitted from active well intervention
programmes helping to mitigate natural decline while Tolmount production was
bolstered by Tolmount East which achieved first gas at the end of 2023. This
was offset by a prolonged shutdown at East Irish Sea and the start of the
significant planned UK maintenance shutdowns in May.
2024 production guidance is narrowed upwards to 155-165 kboepd. This reflects
good progress to date on the maintenance shutdowns and our UK capital projects
which are on track to materially increase production in the fourth quarter.
2024 guidance has also been updated to include an extra six months
contribution from Chim Sáo due to the deferred sale of our Vietnam business
(c.2 kboepd annualised).
Operating costs for the first half were broadly flat at $0.5 billion (H1 2023:
$0.5 billion), reflecting strong cost control in the face of ongoing
inflationary pressures and a stronger sterling to US dollar exchange rate. On
a unit of production basis, operating costs were higher at $18/boe (H1 2023:
$15/boe) mainly because of lower volumes. 2024 unit operating cost guidance of
c.$18/boe is unchanged.
The first half saw us continue to deliver a strong safety record with a total
recordable injury rate of 0.7 per million hours worked (H1 2023: 0.8).
Total capital expenditure for the period was $0.6 billion (H1 2023: $0.4
billion), with full year forecast reiterated at c.$1.2 billion. The increase
on the prior period is driven by the Andaman exploration and appraisal
campaign in Indonesia which is nearing completion and higher investment in our
UK operated hubs.
Maximising the value of our existing portfolio
Higher 2024 UK investment is driven by the Talbot development and accelerated
drilling activity focused around our operated hubs targeting high return,
short cycle investment opportunities. In February, we returned to drilling at
the Britannia satellite fields with the Callanish F6 infill well. The well was
successfully brought on-stream post period end, materially increasing
production from our GBA hub ahead of its scheduled c.40-day maintenance
shutdown starting in August. Preparations are also well advanced for further
drilling at Brodgar, including a development well later this year.
At AELE, the North West Seymour well spudded in June with production start-up
expected towards the end of the third quarter. This, together with plant
modifications, has the potential to extend Armada's field life beyond 2030.
Regarding the Talbot oil field development, the topside modifications to the
Judy platform to allow for Talbot production were completed during the planned
J-Area shutdown in June and the bulk of the subsea infrastructure has now been
installed. The project remains on track for start-up around the end of the
year.
During the first half, Harbour successfully amended its gas sales agreements
with the Singapore buyers of Natuna Sea Block A gas in Indonesia, increasing
the take-or-pay commitment under a tiered pricing structure, enabling the
potential for increased production.
Looking to 2025 and excluding the impact of proposed acquisitions and
disposals, we anticipate production from Harbour's existing portfolio to
remain broadly stable compared to 2024 with increased volumes from new wells
and projects coming on-stream in the second half of 2024 and early 2025
substantially offsetting natural decline.
Strategic, long life investment opportunities progressed
The first half saw us reach key milestones on our organic growth projects.
Accounting for c.60 per cent of our c.0.5 billion boe 2C resource base, these
projects have the potential to materially add to our reserves and production
over time.
In Indonesia, we made a significant gas discovery at Tangkulo (20 per cent
interest) in May. This follows the major Timpan (Harbour-operated, 40 per cent
interest) and Layaran (20 per cent interest) gas discoveries, and underscores
the play's multi-TCF potential. The Tangkulo well flowed 47 mmscf/d of gas
while constrained by the testing facilities, reflecting the good porosity and
permeability of the reservoir. The rig has since moved to appraise the Layaran
discovery, the final well of the campaign. Development options for the Andaman
area are in the early phase of evaluation.
Elsewhere in Indonesia, the sales process for our partner's interest in the
Harbour operated Tuna project (50 per cent interest) is well advanced. If
successful, this would enable Harbour to commence FEED on the approved plan of
development for the Tuna oil and gas field with an estimated recoverable
volume of c.100mmboe gross.
In Mexico, FEED for the Zama development (c.12 per cent interest) commenced in
June, marking an important milestone. Once completed, the Zama unit
partnership will look to tender the major contracts to secure refreshed cost
and schedule estimates ahead of a final investment decision. Zama has the
potential to add reserves equivalent to over a year's worth of Harbour's
current production. Our interest in Zama will increase to c.32 per cent
following completion of the Wintershall Dea portfolio acquisition.
To the southwest of Zama in Block 30, preparations are well advanced for the
appraisal of the Kan oil discovery (30 per cent interest) with drilling
scheduled to commence in the third quarter of 2024. In parallel, Harbour and
its partners are undertaking early engineering studies on a potential
development. As a result of the acquisition of the Wintershall Dea portfolio,
Harbour will become operator of Block 30 with a 70 per cent interest.
The first half of the year saw continued progress at our two UK CCS projects,
the Harbour-operated Viking project (60 per cent interest) and Acorn (30 per
cent interest). At Viking, this included commencement of FEED in January and
significant momentum on the Development Consent Order for the onshore pipeline
which will connect the emitters in the Humber to the offshore transportation
system. Viking, which has the potential to store 10 mtpa of CO(2) by 2030, is
one of the largest planned CCS projects in the world.
Active portfolio management
We continue to actively manage our portfolio, looking to divest assets in
countries or regions where we see no pathway to scale, either organically or
via M&A.
In June 2024, we took the decision to terminate the previously announced sale
of our Vietnam business. We have since relaunched the sales process with an
aim to complete a sale in early 2025, as we continue to ensure that our
capital and resources are deployed in line with our strategy.
Targeting early Q4 2024 for completion of the Wintershall Dea portfolio
acquisition
We are on track to complete the Wintershall Dea portfolio acquisition early in
the fourth quarter of 2024. This will mark our fourth major acquisition since
Harbour was founded in 2014 and will transform the Company into one of the
world's largest and most geographically diverse independent oil and gas
companies.
With respect to the financing of the acquisition, the syndication of the $3
billion RCF and $1.5 billion bridge facility and the voluntary bondholder
consent process relating to the porting of the $4.9 billion investment grade
bonds were successfully completed in the first quarter.
In June we published the shareholder circular and prospectus for the
acquisition. This included a Competent Person's Report which certified the
target portfolio's 2P oil and gas reserves of 1.1 billion boe with an
estimated value of $10.5 billion, and 2C resources of 1.2 billion boe, as at
year end 2023. Harbour shareholder approval was subsequently received at a
General Meeting held in July with 99.99 per cent of votes in favour of the
acquisition.
All regulatory, anti-trust and foreign direct investment approvals are
progressing as expected. These include clearance from the Federal Ministry of
Economics and Climate Action in Germany and consent from the Norwegian
Ministry of Energy. Post period end, in July, Harbour received clearance under
the National Security Investment Act for BASF to acquire a greater than 25 per
cent shareholding in Harbour, satisfying the UK foreign direct investment
closing condition. In addition, in early August, Harbour received UK
regulatory consent from the NSTA. The small number of outstanding approvals
required for completion, including Mexico regulatory consents, are expected
during the third quarter.
We have also made significant progress on the workstreams which are focused on
ensuring business continuity and the safe and responsible transfer of
operations. This includes the design and implementation of the corporate
organisation and systems required to support the enlarged company
post-completion.
As a result of the significant progress made to date on the workstreams and
approvals required for completion, Harbour now expects to complete the
acquisition early in the fourth quarter.
Strong financial position and outlook
Revenue for the period was $1.9 billion with realised oil and UK gas prices of
$85/bbl and 61 pence/therm, respectively. Our realised UK gas price was
impacted by our first quarter hedging with c.70 per cent of our UK gas
production hedged at c.45 pence/therm. For the second half of 2024, we have
hedged c.40 per cent of our UK gas production at an average price of c.80
pence/therm. Harbour's 2024 oil hedges are distributed broadly evenly over the
year with c.25 per cent of production hedged at c.$84/bbl.
Free cash flow during the first half was $0.4 billion, after $0.1 billion of
financing and other fees associated with the acquisition, resulting in a small
net cash position at period end. Our 2024 free cash flow is weighted towards
the first half driven by the phasing of UK tax payments partially offset by
our more attractive hedge book for the last six months of the year. As a
result, at $85/bbl Brent and 70 pence/therm UK NBP, and before the impacts of
the acquisition, we continue to anticipate to be marginally free cash flow
positive for the year - current estimate $100 million to $200 million - with
the improved production outlook offsetting the effect of the deferred Vietnam
sale.
In line with our $200 million annual dividend policy, a $100 million final
dividend in respect of the 2023 financial year was paid in May. The Board is
today declaring an interim dividend for 2024 of $100 million, equating to 13
cents per share and reflecting dividend per share growth of 8 per cent
year-on-year.
Looking to 2025, our current portfolio is expected to generate significantly
higher free cash flow compared to 2024, reflecting broadly stable production,
with increased volumes from new wells and projects substantially offsetting
natural decline, and materially lower capital expenditure.
Financial Review
Summary of financial results
Analysis of these key metrics are discussed in detail across the following
pages of the Financial Review.
Units 6 months ended 30 June 2024 Unaudited 6 months ended 30 June 2023 Unaudited
Production and post-hedging realised prices
Production kboepd 159 196
Crude oil $/bbl 85 76
UK natural gas pence/therm 61 58
Indonesia natural gas $/mscf 13 12
Income statement
Revenue and other income $ million 1,916 2,016
EBITDAX(1) $ million 1,216 1,429
Profit before taxation $ million 392 429
Profit/(loss) after taxation $ million 57 (8)
Basic earnings/(loss) per share cents/share 7 (1)
Other financial key figures
Total capital expenditure(1) $ million 587 434
Operating cash flow $ million 953 1,487
Free cash flow(1) $ million 383 1,046
Shareholder returns paid(1) $ million 100 246
30 June 2024 31 Dec 2023
Unaudited Audited
As restated
Net cash/(debt)(1 ) $ million 45 (207)
Leverage ratio(1) times 0.0 0.1
(1) See Glossary for the definition of non-IFRS measures. Reconciliations
between IFRS and non-IFRS measures are provided within this review.
Income Statement
6 month ended 30 June 2024 6 months ended 30 June 2023
$ million Unaudited $ million Unaudited
Revenue and other income 1,916 2,016
Cost of operations (1,178) (1,224)
EBITDAX(1) 1,216 1,429
Operating profit 542 654
Profit before tax 392 429
Taxation (335) (437)
Profit/(loss) after tax 57 (8)
Cents /share Cents /share
Basic earnings/(loss) per share 7 (1)
(1) Non-IFRS measure - see Glossary for the definition.
Revenue and other income
Total revenue and other income decreased to $1,916 million (H1 2023: $2,016
million). This was driven by lower production volumes, partially offset by
higher commodity prices.
6 months ended 30 June 2024 6 months ended 30 June 2023
$ million Unaudited $ million Unaudited
Revenue and other income 1,916 2,016
Crude oil 1,114 1,115
Gas 692 759
Condensate 81 100
Tariff income and other revenue 19 17
Other income 10 25
Revenue earned from hydrocarbon production activities decreased to $1,906
million (H1 2023: $1,991 million) after realised hedging losses of $55 million
(H1 2023: $486 million). This decrease was mainly driven by lower production
volumes partially offset by higher post-hedging realised commodity prices.
Crude oil sales decreased to $1,114 million (H1 2023: $1,115 million) after
realised hedging gains of $1 million (H1 2023: losses of $31 million). This
was driven by lower production volumes, partially offset by higher realised
post-hedging oil prices of $85/bbl (H1 2023: $76/bbl). During the period,
Harbour resolved a long-term Urals linked pricing dispute with the buyer of
the Company's crude from two of its UK oil fields. This resulted in the
recognition of an additional $56 million of revenue for the period of which
$47 million related to crude sales in prior periods. The realised price
disclosed above excludes the impact of the additional $47 million of revenue.
Gas revenue was $692 million (H1 2023: $759 million), split between UK natural
gas revenue of $638 million (H1 2023: $699 million), after realised hedging
losses of $56 million (H1 2023: $455 million), and international gas revenue
of $54 million (H1 2023: $60 million). The realised post-hedging price for UK
and Indonesia gas was 61 pence/therm (H1 2023: 58 pence/therm) and $13/mscf
(H1 2023: $12/mscf), respectively.
Other income amounted to $10 million (H1 2023: $25 million) which mainly
includes partner recovery on related lease obligations. H1 2023 included a
receipt related to the Viking CCS Development Agreement entered into with bp
in March 2023.
Cost of operations
Cost of operations decreased to $1,178 million (H1 2023: $1,224 million)
driven primarily by a reduction in depreciation of oil and gas assets as a
result of the lower production volumes in the period.
6 months ended 30 June 2024 6 months ended 30 June 2023
$ million Unaudited $ million Unaudited
Operating costs
Field operating costs 561 575
Non-cash depreciation on non-oil and gas assets (11) (15)
Tariff income (16) (14)
Total operating costs 534 546
Operating costs per barrel ($ per barrel)(1) 18 15
Movement in over/(underlift) balances and hydrocarbon inventories 44 (67)
Depreciation, depletion and amortisation (DD&A)
before impairment charges
Depreciation of oil and gas properties (cost of operations only) 565 708
Depreciation of non-oil and gas properties 17 20
Total DD&A 582 728
DD&A before impairment charges ($ per barrel)(1) 20 21
(1) Non-IFRS measure - see Glossary for the definition.
Total operating costs were broadly flat period on period at $534 million (H1
2023: $546 million). Operating costs were higher on a unit of production basis
at $18/boe (H1 2023: $15/boe) due to lower production volumes.
Depreciation, depletion and amortisation (DD&A) unit expense, which
reflects the capitalised costs of producing assets divided by produced
volumes, was $20/boe (H1 2023: $21/boe).
EBITDAX(1)
EBITDAX(1) was $1,216 million (H1 2023: $1,429 million), with the reduction
mainly driven by lower production and negative movement in over/underlift
balances.
6 months ended 30 June 2024 6 months ended 30 June 2023
$ million Unaudited $ million Unaudited
Operating profit 542 654
Depreciation, depletion and amortisation 582 728
Impairment of property, plant and equipment 33 19
Impairment of right-of-use assets 20 -
Exploration and evaluation expenditure, and new ventures 22 15
Exploration costs written-off 17 13
EBITDAX(1) 1,216 1,429
(1) Non-IFRS measure - see Glossary for the definition.
The Group has recognised a net pre-tax impairment charge on property, plant
and equipment of $33 million (H1 2023: $19 million). This includes a pre-tax
impairment charge of $49 million on one of our UK fields in the East Irish Sea
driven primarily by a reduction in the gas price outlook compared to the 2023
year-end view, partially offset by revised decommissioning cost profiles in
respect the Group's non-producing assets with no remaining net book value.
The Group has also recognised a pre-tax impairment of $20 million on
right-of-use assets (H1 2023: $nil) in respect of an office building which,
due to relocation to another office, has no future use.
During the period, the Group expensed $39 million (H1 2023: $28 million) for
exploration and appraisal activities. This includes exploration write-off
expense of $17 million (H1 2023: $13 million) mainly in relation to the Halwa
well in Indonesia, $5 million (H1 2023: $4 million) of costs associated with
licence relinquishments and uncommercial well evaluations, and expenditure of
$17 million (H1 2023: $11 million) associated with our energy transition
projects.
Net financing costs
Finance income amounted to $15 million (H1 2023: $33 million). The reduction
compared to H1 2023 is mainly due to derivative gains in 2023 that related to
changes in the fair value of an embedded derivative within one of the Group's
gas contracts.
Finance expenses amounted to $165 million (H1 2023: $258 million). This
included interest expense incurred on debt facilities of $15 million (H1 2023:
$25 million), the reduction reflecting lower use of the reserve based lending
(RBL) facility during the period. Other financing expenses include the
unwinding of the discount on decommissioning provisions of $92 million (H1
2023: $74 million) which increased due to higher cost estimates and interest
rates, lower bank and financing fees of $23 million (H1 2023: $48 million) and
$5 million of foreign exchange losses, with sterling remaining stable during
the period (H1 2023: $85 million).
Earnings and taxation
Profit after tax amounted to $57 million (H1 2023: $8 million loss). This
resulted in earnings per share of 7 cents (H1 2023: 1 cent loss per share)
after taking into account the weighted average number of ordinary shares in
issue of 770 million (H1 2023: 829 million) following the share buyback
programme in the prior year.
Harbour's tax expense decreased in H1 2024 to $335 million (H1 2023: $437
million). The lower effective tax rate for the six months ended 30 June 2024
is primarily caused by changes in the weighting of results profits taxed at
rates below the 75 per cent UK oil tax headline rate. The tax expense is split
between a current tax expense of $226 million (H1 2023: $413 million), which
includes an EPL current tax charge of $213 million (H1 2023: $302 million) and
a deferred tax expense of $109 million (H1 2023: $24 million).
The effective tax rate is 85 per cent (H1 2023: 102 per cent) which is higher
than the standard UK tax rate for the period of 75 per cent. This is in part
due to period specific costs which are not fully deductible at the UK
statutory rates.
Shareholder distributions
A final dividend with respect to 2023 of 13 cents per ordinary share was
proposed on 7 March 2024 and approved by shareholders at the AGM on 9 May
2024. The dividend was paid on 22 May 2024 to all shareholders on the register
as at 12 April 2024, totalling $100 million.
In line with the Company's dividend policy, the Board is pleased to announce
an interim dividend of 13 cents per ordinary share to be paid on 25 September
2024 to all shareholders on the register on 16 August 2024 (the "Record
Date"). A dividend re-investment plan ("DRIP") is available to shareholders
who would prefer to invest their dividend in the shares of the Company. To
participate in the DRIP, shareholders must submit their election notice to
Equiniti, the Company's Registrar, by 4 September 2024 (the "Election Date").
Statement of Financial Position
30 June 2024 31 Dec 2023
$ million Unaudited $ million
Audited
As restated
Assets
Goodwill 1,302 1,302
Other intangible assets 1,242 1,172
Property, plant and equipment 4,681 4,836
Right-of-use assets 648 632
Other assets including deferred tax assets 1,367 1,406
Derivative assets 116 282
Cash 539 286
Total assets 9,895 9,916
Liabilities and Equity
Borrowings net of transaction fees 501 509
Decommissioning provisions 4,102 4,108
Deferred tax liabilities 1,338 1,297
Lease creditor 817 768
Derivative liabilities 209 284
Other liabilities 1,454 1,397
Total liabilities 8,421 8,363
Equity 1,474 1,553
Total liabilities and equity 9,895 9,916
Net cash/(debt) 45 (207)
Assets
The decrease in total assets of $21 million is mainly as a result of lower
derivative asset balances of $166 million, and a reduction in property, plant
and equipment (PP&E) and right-of-use assets of $139 million due to
DD&A and impairment charges less additions in the period. These were
partially offset by an increase in cash balances of $253 million.
Liabilities
The increase in total liabilities of $58 million is mainly driven by higher
deferred tax and current tax liabilities of $41 million and $120 million
respectively, higher lease creditors of $49 million, following recognition of
a new office lease. These were partially offset by lower derivative
liabilities of $75 million and lower trade and other payables of $60 million.
The net deferred tax position on the balance sheet is a liability of $1,330
million (Dec 2023: $1,290 million). This is primarily made up of a deferred
tax liability in respect of the future profits which will flow from our
PP&E of $2,845 million offset by a deferred tax asset in respect of future
tax relief on decommissioning spend of $1,574 million. Whilst our future UK
profits in the period to 31 March 2028 will be subject to 75 per cent taxation
due to the EPL, UK decommissioning spend is not deductible for EPL and so
relieved at 40 per cent.
The post balance sheet events note below describes the new Government's
announcements on the fiscal regime since the balance sheet date.
Equity and reserves
Total equity decreased mainly due to the dividend payments of $100 million
made in the period, offset by losses in comprehensive income mostly related to
negative fair market value movements on cash flow hedges of $21 million
post-tax (H1 2023: $546 million profit). There were no share buybacks in the
period (H1 2023: $151 million). Purchases of ESOP trust shares amounted to $20
million (H1 2023: $12 million). Retained earnings increased by the profit
after tax.
Net cash
As at 30 June 2024, net cash of $45 million (Dec 2023: net debt of $207
million) consisted of cash balances of $539 million (Dec 2023: $286 million),
net of the $500 million bond (Dec 2023: $500 million) adjusted for unamortised
fees of $6 million (Dec 2023: $7 million). The RBL facility remains undrawn
(Dec 2023: $nil). Unamortised RBL fees and arrangement fees associated with
financing the acquisition of the Wintershall Dea asset portfolio of $109
million (Dec 2023: $61 million) have been reclassified to debtors.
Available liquidity, being undrawn RBL facility plus cash balances of $0.5
billion, was $1.4 billion at the end of the period, compared with $1.6 billion
at year end.
As at 30 June 2024, the leverage ratio(1) was 0.0x (Dec 2023: 0.1x) which has
reduced primarily as a result of higher cash balances at the period end.
30 June 2024 31 Dec 2023
$ million As restated
$ million
Leverage ratio
Net cash/(debt)(1) 45 (207)
EBITDAX(1) 1,216 2,675
Leverage ratio(1) 0.0 0.1
(1) Non-IFRS measure - see Glossary for the definition.
Derivative financial instruments
We carry out hedging activity to manage commodity price risk, to ensure we
comply with the requirements of the RBL facility and to ensure there is
sufficient funding for future investments. We have entered into a series of
fixed-price sales agreements and a financial hedging programme for both oil
and gas, consisting of swap and option instruments. Our future production
volumes are hedged under the physical and financial arrangements in place at
30 June 2024. These are set out in the following table. Hedges realised to
date are in respect of both crude oil and natural gas.
The current hedging programme is shown below:
Hedge position H2 2024 2025 2026 2027
Oil
Volume hedged (mmboe) 4 8 7 -
Average price hedged ($/bbl) 84 78 73 -
UK natural gas
Volume hedged (mmboe) 5 9 6 1
Average priced hedged (pence/therm) 79 89 83 80
At 30 June 2024, our financial hedging programme on commodity derivative
instruments showed a pre-tax negative mark-to-market fair value of $102
million (H1 2023: $1,027 million negative), with no ineffectiveness charge to
the income statement. The UK gas hedge collars reflect the forward UK gas
(NBP) price curve at the period end.
Statement of cash flows(1)
6 months ended 30 June 2024 6 months ended 30 June 2023
$ million Unaudited $ million Unaudited
Cash flow from operating activities after tax 953 1,487
Cash flow from investing activities - capital investment (349) (337)
Cash flow from investing activities - other 20 65
Operating cash flow after investing activities 624 1,215
Cash flow from financing activities(2) (241) (169)
Free cash flow(3) 383 1,046
Cash and cash equivalents 539 494
1 Table excludes financing activities related to debt principal movements.
2 Interest and lease payments only, excludes shareholder distributions.
3 Non-IFRS measure - see Glossary for the definition.
Net cash from operating activities after tax amounted to $953 million (H1
2023: $1,487 million) after accounting for positive working capital movements
of $38 million (H1 2023: $173 million positive), net of movement in realised
but unsettled hedges of $51 million (H1 2023: $197 million).
Capital investment on a cash basis was $349 million (H1 2023: $337 million)
which included property, plant and equipment additions of $199 million (H1
2023: $276 million), exploration and evaluation additions of $113 million (H1
2023: $55 million), oil and gas intangible additions of $13 million (H1 2023:
$nil) and non-oil and gas intangible additions of $24 million (H1 2023: $6
million).
Cash outflow from financing activities totalled $241 million (H1 2023: $169
million) split between interest and bank charges of $87 million (H1 2023: $47
million), inclusive of costs associated with financing the acquisition of the
Wintershall Dea asset portfolio, and lease principal and interest payments of
$154 million (H1 2023: $122 million).
Shareholder distributions consist of dividends paid of $100 million (H1 2023:
$99 million). H1 2023 also included $148 million related to the repurchase of
Harbour's own shares under the share buyback scheme announced in March 2023,
which completed in late 2023.
The Group made net tax payments of $157 million in the period (H1 2023: $23
million net refunds) primarily in relation to the UK Energy Profits Levy.
Cash and cash equivalent balances were $539 million (H1 2023: $494 million) at
the end of the period.
Capital investment is defined as additions to property, plant and equipment,
fixtures and fittings and intangible exploration and evaluation assets,
excluding changes to decommissioning assets.
6 months ended 30 June 2024 6 months ended 30 June 2023
$ million Unaudited $ million Unaudited
Additions to oil and gas assets (314) (256)
Additions to fixtures and fittings, office equipment & IT software (27) (14)
Additions to exploration and evaluation assets (121) (56)
Total capital investment(1) (462) (326)
Movements in working capital 81 (20)
Capitalised interest 4 -
Capitalised lease payments 28 9
Cash capital investment per the cash flow statement (349) (337)
(1) Non-IFRS measure - see Glossary for the definition.
During the period, the Group incurred total capital expenditure of $587
million (H1 2023: $434 million), split by capital investment(1) $462 million
(H1 2023: $326 million) and decommissioning spend $125 million (H1 2023: $108
million).
The capital investment in the UK mainly consisted of, for operated assets,
project activity at Talbot (J-Area) and development drilling at J-Area,
Callanish F6 (GBA) and North West Seymour (AELE). For partner operated assets,
capital investment consisted primarily of drilling at Buzzard, Clair and
Schiehallion. In the International business units, exploration wells were
drilled at Halwa and Gayo in Indonesia and the Ametyst well in Norway.
Post balance sheet events
On 29 July 2024, the UK government announced changes to the Energy Profits
Levy (EPL) From 1 November 2024 the rate of EPL will be increased by 3 per
cent from 35 per cent to 38 per cent, the periods to which the EPL applies
will be extended to 31 March 2030, the main EPL investment allowance will be
abolished and the amount of relief available for capital expenditure in
calculating EPL profits will be reduced.
As the announced measures had not been enacted at the balance sheet date then
there is no impact on the balance sheet as presented. As the full details of
the announced measures are not yet known it is not currently possible to
calculate the potential impact on the balance sheet. The details of the
measures are expected to be finalised in the Budget scheduled to take place on
30 October 2024 and legislated thereafter.
Going concern
The results have been presented on a going concern basis. Detail of the
Group's assessment of going concern for the period can be found within note 2.
Business risks
Harbour faces various risks that could result in events or circumstances that
might negatively impact the Company's business model, its future performance,
liquidity, and reputation. Not all these risks are wholly within the Company's
control and the Company may also be affected by risks which have not yet
materialised or are not reasonably foreseeable.
The effective management of risk is critical if we are to continue to
successfully execute the strategy and to protect our personnel, assets, the
communities with whom we interact, and our reputation.
For known risks facing the business, the Company seeks to reduce the
likelihood and mitigate the impact of the risk to within the level of appetite
or tolerance set by the Board. According to the nature of the risk, the
Company can choose to take or tolerate risk, treat risk with mitigating
actions, transfer risk to third parties, or terminate risk by ceasing
particular activities or operations. In particular, the Company has a zero
tolerance stance to fraud, bribery, corruption, and the facilitation of tax
evasion. We also aim to manage health, safety, and environmental and security
risks to a level as low as reasonably practicable.
Principal risks at half-year 2024 and key changes since the 2023 Annual Report
The directors have reviewed the principal risks facing the Company and
concluded for the remaining six months of the financial year there are no
significant changes to the headline principal risks from those disclosed in
the 2023 Annual Report and Accounts. A full description of Harbour's principal
risks can be found on pages 60 to 65 of the 2023 Annual Report and Accounts.
To reach this conclusion, the directors considered the changes in the external
environment during the recent period that could threaten the Company's
business model, future performance, liquidity, and reputation. The directors
also considered management's view of the current risks facing the Company.
With respect to the Wintershall Dea transaction, the directors took account of
the implications of the transaction announcement, and the completion and
transition work to date. However, the directors excluded the risk environment
currently facing Wintershall Dea given Harbour will not take on those risks
until the completion of the transaction.
The principal risks are summarised as:
§ Execution of the strategy: failure to effectively implement the strategy
§ Health, safety and environment: risk of a major health, safety,
environmental or physical security incident
§ Organisation and talent: failure to create and maintain a cohesive
organisation with sufficient capability and capacity
§ Host government political and fiscal risks: exposure to adverse or
uncertain political, regulatory or fiscal developments in countries where the
company operates or maintains interests
§ Operational performance: failure to deliver competitive operational
performance
§ Capital programme and delivery: failure to define and deliver a capital
programme that optimises value
§ Third-party reliance: failure to adequately manage supply chain, joint
venture and other partners, and third-party infrastructure owners
§ Access to capital: failure to ensure sufficient access to capital to
implement the company's strategy
§ Commodity price exposure: failure to manage the impact of commodity price
fluctuations on the business
§ Cyber and information security: failure to maintain safe, secure and
reliable information systems
§ Legal and regulatory compliance: failure to maintain and demonstrate
effective legal and regulatory compliance
§ Climate change and energy transition: failure to adapt the strategy in the
context of external expectations
§ Integration of acquired businesses: failure to properly integrate acquired
businesses and realise anticipated synergies in a timely manner
Insurance
We have significant and appropriate insurance in place to minimise risk to our
operational and investment programmes. This includes business interruption
insurance.
Responsibility statement
The directors confirm that, to the best of their knowledge:
§ the condensed set of financial statements has been prepared in accordance
with UK-adopted IAS 34 'Interim Financial Reporting',
§ the half-yearly results statement includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year), and
§ the half-yearly results statement includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board,
Alexander Krane
Director
7 August 2024
Disclaimer
This statement contains certain forward-looking statements that are subject to
the usual risk factors and uncertainties associated with the oil and gas
exploration and production business. Whilst Harbour believes the expectations
reflected herein to be reasonable in light of the information available to
them at this time, the actual outcome may be materially different owing to
factors beyond Harbour's control or within Harbour's control where, for
example, Harbour decides on a change of plan or strategy. Accordingly, no
reliance may be placed on the figures contained in such forward-looking
statements.
Financial Statements
Condensed consolidated income statement
For the six months ended 30 June 2024
Note 2024 2023
Unaudited Unaudited
$ million $ million
Revenue 4 1,906 1,991
Other income 4 10 25
Revenue and other income 1,916 2,016
Cost of operations 5 (1,178) (1,224)
Impairment of property, plant, and equipment 5 (33) (19)
Impairment of right-of-use assets 5 (20) -
Exploration and evaluation expenses and new ventures 5 (22) (15)
Exploration costs written-off 9 (17) (13)
General and administrative costs 5 (104) (91)
Operating profit 5 542 654
Finance income 6 15 33
Finance expenses 6 (165) (258)
Profit before taxation 392 429
Income tax expense 7 (335) (437)
Profit/(loss) for the period 57 (8)
Profit/(loss) for the period attributable to:
Equity owners of the company 57 (8)
Earnings/(loss) per share Note $ cents $ cents
Basic 8 7 (1)
Diluted 8 7 (1)
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2024
2024 2023
Unaudited Unaudited
$ million $ million
Profit/(loss) for the period 57 (8)
Other comprehensive (loss)/profit
Items that may be subsequently reclassified to the income statement:
Fair value (losses)/gains on cash flow hedges (85) 2,185
Tax credit/(expense) on cash flow hedges 64 (1,639)
Exchange differences on translation (20) 91
Other comprehensive (loss)/profit for the period, net of tax (41) 637
Total comprehensive profit for the period, net of tax 16 629
Total comprehensive profit attributable to:
Equity owners of the company 16 629
Condensed consolidated balance sheet
As at 30 June 2024
Note 30 June 2024 Unaudited 31 Dec 2023 Audited
$ million As restated
$ million
Assets
Non-current assets
Goodwill 1,302 1,302
Other intangible assets 9 1,242 1,172
Property, plant and equipment 10 4,681 4,836
Right-of-use assets 11 648 632
Deferred tax assets 7 8 7
Other receivables 340 309
Other financial assets 14 26 112
Total non-current assets 8,247 8,370
Current assets
Inventories 167 217
Trade and other receivables 852 873
Other financial assets 14 90 170
Cash and cash equivalents 539 286
Total current assets 1,648 1,546
Total assets 9,895 9,916
Equity and liabilities
Equity
Share capital 171 171
Other reserves 248 289
Retained earnings 1,055 1,093
Total equity 1,474 1,553
Non-current liabilities
Borrowings 13 494 493
Provisions 12 3,927 3,905
Deferred tax 7 1,338 1,297
Trade and other payables 12 13
Lease creditor 11 568 552
Other financial liabilities 14 46 87
Total non-current liabilities 6,385 6,347
Current liabilities
Trade and other payables 855 915
Borrowings 13 7 16
Lease creditor 11 249 216
Provisions 12 200 230
Current tax liabilities 562 442
Other financial liabilities 14 163 197
Total current liabilities 2,036 2,016
Total liabilities 8,421 8,363
Total equity and liabilities 9,895 9,916
The notes 1 to 18 form an integral part of these condensed consolidated
half-year financial statements
Consolidated statement of changes in equity
For the six months ended 30 June 2024
Share capital Share premium Merger reserve Capital redemption reserve Cash flow hedge reserve(1) Costs of hedging reserve(1) Currency translation reserve Retained earnings Total
$ million $ million $ million $ million $ million $ million $ million $ million equity
$ million
At 1 January 2023 (Audited) 171 - 271 8 (776) (9) (100) 1,456 1,021
Loss for the period - - - - - - - (8) (8)
Other comprehensive income - - - - 542 4 91 - 637
Total comprehensive income - - - - 542 4 91 (8) 629
Purchase and cancellation of own shares - - - - - - - (151) (151)
Share-based payments - - - - - - - 24 24
Purchase of ESOP Trust Shares - - - - - - - (11) (11)
Dividend paid - - - - - (99) (99)
At 30 June 2023 (Unaudited) 171 - 271 8 (234) (5) (9) 1,211 1,413
At 1 January 2024 as reported (Audited) 171 - 271 8 3 4 3 1,080 1,540
Prior year adjustment (see note 2.2) - - - - - - - 13 13
At 1 January 2024 as restated 171 - 271 8 3 4 3 1,093 1,553
Profit for the period - - - - - - - 57 57
Other comprehensive loss - - - - (15) (6) (20) - (41)
Total comprehensive income - - - - (15) (6) (20) 57 16
Share-based payments - - - - - - - 25 25
Purchase of ESOP Trust Shares - - - - - - - (20) (20)
Dividend paid - - - - - - - (100) (100)
At 30 June 2024 (Unaudited) 171 - 271 8 (12) (2) (17) 1,055 1,474
(1) Disclosed net of deferred tax.
Condensed consolidated statement of cash flows
For the six months ended 30 June 2024
Note 30 June 2024 30 June 2023
Unaudited
Unaudited
$ million $ million
Net cash flows from operating activities 15 953 1,487
Investing activities
Expenditure on exploration and evaluation assets (113) (55)
Expenditure on property, plant and equipment (199) (276)
Expenditure on oil and gas intangible assets (13) -
Expenditure on non-oil and gas intangible assets (24) (6)
Receipts for sub-lease income 5 5
Finance income received 15 60
Net cash flows used in investing activities (329) (272)
Financing activities
Repurchase of shares - (148)
Proceeds from new borrowings - reserve based lending facility 178 275
Payments towards principal portion of lease liabilities (128) (96)
Interest paid on lease liabilities (26) (26)
Repayment of reserve based lending facility (178) (1,050)
Repayment of exploration finance facility - (11)
Repayment of financing arrangement (10) (14)
Purchase of ESOP Trust shares (20) (11)
Interest paid and bank charges (87) (47)
Dividends paid (100) (99)
Net cash flows from financing activities (371) (1,227)
Net increase/(decrease) in cash and cash equivalents 253 (12)
Net foreign exchange difference - 6
Cash and cash equivalents at 1 January 286 500
Cash and cash equivalents at 30 June 539 494
Notes to the half-year condensed consolidated financial statements
1. General information
Harbour Energy plc (Harbour or the company) is a limited liability company
incorporated in Scotland and listed on the London Stock Exchange. The address
of the registered office is 4th Floor, Saltire Court, 20 Castle Terrace,
Edinburgh, EH1 2EN, United Kingdom.
The condensed consolidated financial statements of the company and all its
subsidiaries (the Group) for the six months ended 30 June 2024 were authorised
for issuance by the board of directors on 7 August 2024.
The Group's principal activities are the acquisition, exploration, development
and production of oil and gas reserves on the UK and Norwegian Continental
Shelves, Indonesia, Vietnam and Mexico.
The condensed consolidated financial information contained in this report is
unaudited. The income statement, statement of comprehensive income, statement
of changes in equity and the cash flow statement for the six months to 30 June
2024, and the balance sheet as at 30 June 2024 and related notes, have been
reviewed by the auditors.
2. Basis of preparation and changes to the Group's accounting policies
2.1 Basis of preparation
The half-year condensed consolidated financial statements (the Financial
Statements) for the six months ended 30 June 2024 have been prepared in
accordance with UK-adopted IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority. These half-year condensed financial statements are to be
read in conjunction with Harbour's Annual Report and Accounts for the year
ended 31 December 2023, which contains additional accounting policy
disclosures and information as required in a set of annual financial
statements.
The Financial Statements do not include all the information required for a
full annual report and do not constitute statutory financial statements within
the meaning of section 434 of the Companies Act 2006. The financial
information for the year ended 31 December 2023 has been extracted from the
consolidated financial statements of Harbour Energy plc for the year ended 31
December 2023 which were approved by the directors on 6 March 2024 and were
delivered to the Registrar of Companies. The auditor's report on those
financial statements was unqualified and did not contain a statement under
section 498 of the Companies Act 2006.
The Financial Statements have been prepared on the historical-cost basis,
except for certain financial assets and liabilities (including derivative
financial instruments), which have been measured at fair value.
The presentation currency of the Group financial information is US Dollars and
all values in the Group financial information are presented in millions ($
million) and all values are to the nearest $1 million, except where otherwise
stated.
2.2 Prior year adjustment
In August 2023, Harbour announced that it had entered into a Sale and Purchase
Agreement to sell its business in Vietnam, which holds its 53.125 per cent
interest in Chim Sáo and Dua producing fields to Big Energy Joint Stock
Company for a consideration of $84 million. At 31 December 2023, the assets
and liabilities of Vietnam were classified as assets held for sale (AHFS). The
transaction, which had a long-stop date of 10 May 2024, could not be completed
within the required timeframe, and was subsequently terminated on 13 May 2024,
and as a result the Vietnam business is no longer classified as AHFS. The
relevant amounts presented as AHFS in the 31 December 2023 have been
reclassified. Each of the affected financial statement line items has been
restated and the impact is summarised in the following table.
Balance sheet at 31 December 2023
As previously Adjustments As restated
reported $ million $ million
$ million
Non-current assets
Property, plant and equipment 4,717 119 4,836
Right-of-use assets 587 45 632
Other receivables 184 125 309
Current assets
Inventories 200 17 217
Trade and other receivables 832 41 873
Cash and cash equivalents 280 6 286
Assets held for sale 334 (334) -
Equity
Retained earnings 1,080 13 1,093
Non-current liabilities
Provisions 3,818 87 3,905
Deferred tax 1,260 37 1,297
Lease creditor 474 78 552
Current liabilities
Trade and other payables 886 29 915
Lease creditor 199 17 216
Liabilities directly associated with the assets held for sale 242 (242) -
From the point of classification as AHFS in August 2023, no depreciation was
recorded, as permitted by IFRS 5 "Non-current Assets Held for Sale and
Discontinued Operations". In addition, at 31 December 2023, a pre-tax
impairment of $38 million was recognised as the fair value less cost to sell
was below the carrying amount of the disposal group. As a result of the
reclassification from AHFS, the impairment of $38 million has been reversed
and additional depreciation covering the period August 2023 to December 2023
has been recorded, on property, plant and equipment of $14 million and on
right-of-use assets of $5 million, with net deferred tax of $6 million
associated with the impairment reversal and depreciation. As a result of the
above adjustments, retained earnings increased by $13 million.
2.3 Going concern
The Directors consider the going concern assessment period to be up to 31
December 2025. The Group monitors and manages its capital position and its
liquidity risk regularly throughout the year to ensure that it has access to
sufficient funds to meet forecast cash requirements. Cash forecasts are
regularly produced, and sensitivities considered based on, but not limited to;
the Group's latest life of field production and expenditure forecasts,
management's best estimate of future commodity prices based on recent forward
curves, adjusted for the Group's hedging programme and the Group's borrowing
facilities.
The ongoing capital requirements are financed by the Group's $1.75 billion
reserve based lending (RBL) facility that has a borrowing base as at 1 July
2024 of $0.7 billion, and $0.5 billion bond which matures in October 2026. The
amount drawn down under these facilities at 30 June 2024 was nil and $0.5
billion respectively, which together with cash of $0.5 billion, gave a total
available liquidity of $1.2 billion. Further details can be found in note 13.
The RBL facility has a financial covenant relating to the ratio of
consolidated total net debt to consolidated EBITDAX on a historic and
forward-looking basis, which is tested semi-annually. The amount available
under the facility is redetermined annually based on a valuation of the
Group's borrowing base assets when applying certain forward-looking
assumptions, as defined in the borrowing agreements.
The Group's latest approved business plan underpins the base case going
concern assessment and is based upon management's best estimate of forward
commodity price curves, production in line with approved asset plans,
unavoidable committed fees in respect of the Wintershall Dea deal and the
ongoing capital requirements of the Group that will be financed by free cash
flow, the existing RBL and bond financing arrangements.
In December 2023 Harbour announced the Wintershall Dea acquisition
transaction, which is anticipated to complete early in the fourth quarter of
2024 and will be accretive to Harbour's free cash flow. Once complete, Harbour
is expected to receive investment grade credit ratings and to benefit from a
significantly lower cost of financing, including the porting of existing euro
denominated Wintershall Dea bonds with a nominal value of $4.9 billion. The
Group would also have access to a new $3.0 billion revolving credit facility
and $1.5 billion bridge facility. As part of the going concern assessment, a
base case, sensitivity and reverse stress tests have been run on the enlarged
group forecasts, which are supported by Harbour's acquisition due diligence
work, and show that the probability of a liquidity deficit or covenant breach
is remote. The base case and downside sensitivity scenarios indicate that the
Group can operate as a going concern with sufficient headroom and remain in
compliance with its loan covenants throughout the assessment period.
In line with the principal risks that have been identified to impact the
financial capability of the Group to operate as going concern, certain
downside sensitivity scenarios have been prepared reflecting a reduction in:
· Brent crude and UK natural gas prices by 20 per cent, and
· the Group's total production by 10 per cent
throughout the assessment period.
In these downside scenarios, when applied individually and in aggregate to the
base case, the Group is forecast to have sufficient liquidity headroom
throughout the assessment period and to remain in compliance with its
financial covenants.
Reverse stress tests have been prepared reflecting further reductions in
commodity price and production parameters, prior to any mitigation strategies,
to determine at what levels each would need to reach such that either the
lending covenant is breached, or liquidity headroom runs out. The results of
these reverse stress tests demonstrated the likelihood that a sustained
significant fall in commodity prices or a significant fall in production over
the assessment period that would be required to cause a risk of funds
shortfall, or a covenant breach is significantly below the sensitivity test
performed and hence remote.
Taking the above analysis into account, the Board was satisfied that, for the
assessment period, the Group can maintain adequate liquidity and comply with
its lending covenants up to 31 December 2025 and therefore has adopted the
going concern basis for preparing the half-year condensed consolidated
financial statements.
2.4 Accounting policies, new standards, interpretations and amendments
adopted by the Group
The accounting policies adopted in the preparation of the Financial Statements
are consistent with those adopted and disclosed in Harbour's 2023 Annual
Report and Accounts, except for the adoption of new standards effective as of
1 January 2024 in the UK. A few amendments to existing standards and
interpretations were effective from 1 January 2024 but had no impact on the
Financial Statements. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet effective.
The amendments to existing standards from 1 January 2024 are as follows, these
do not impact the half-year condensed financial statements but may have an
impact on the annual financial statements.
Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
In September 2022, the IASB issued amendments to IFRS 16 to specify the
requirements that a seller-lessee uses in measuring the lease liability
arising in a sale and leaseback transaction, to ensure the seller-lessee does
not recognise any amount of the gain or loss that relates to the right of use
it retains.
The amendments had no impact on the Group's half-year condensed consolidated
financial statements.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
Liabilities with Covenants
In January 2020 and October 2022, the IASB issued amendments to paragraphs 69
to 76 of IAS 1 to specify the requirements for classifying liabilities as
current or non-current. The amendments clarify:
§ What is meant by a right to defer settlement
§ That a right to defer must exist at the end of the reporting period
§ That classification is unaffected by the likelihood that an entity will
exercise its deferral right
§ That only if an embedded derivative in a convertible liability is itself an
equity instrument would the terms of a liability not impact its classification
In addition, a requirement has been introduced whereby an entity must disclose
when a liability arising from a loan agreement is classified as non-current
and the entity's right to defer settlement is contingent on compliance with
future covenants within twelve months.
The amendments had no impact on the Group's half-year condensed consolidated
financial statements.
Amendments to IFRS 7 and IAS 7: Supplier Finance Arrangements
In May 2023, the IASB issued amendments to IAS 7 and IFRS 7 to add disclosure
requirements, and 'signposts' within existing disclosure requirements, that
requires entities to provide qualitative and quantitative information about
supplier finance arrangements.
The amendments had no material impact on the Group's half-year condensed
consolidated financial statements.
2.5 Use of judgements and estimates
In preparing these Financial Statements, management has made judgements and
estimates that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. Actual results may
differ from these estimates.
The significant judgements made by management in applying the Group's
accounting policies, and the key sources of estimation uncertainty, were the
same as those described on page 137 of Harbour's 2023 Annual Report and
Accounts.
3. Segment information
The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the Group's business segments, has been
identified as the Chief Executive Officer.
The Group's activities consist of one class of business, being the
acquisition, exploration, development and production of oil and gas reserves
and related activities and are split geographically and managed in two
regions: namely North Sea and International. The North Sea segment includes
the UK and Norwegian continental shelves, and the International segment
includes Indonesia, Vietnam and Mexico.
Income Statement
6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
$ million $ million
Revenue
North Sea 1,782 1,893
International 124 98
Total Group sales revenue 1,906 1,991
Other income
North Sea 10 25
International - -
Total Group revenue and other income 1,916 2,016
Group operating profit
North Sea 517 627
International 25 27
Group operating profit 542 654
Finance income 15 33
Finance expenses (165) (258)
Profit before taxation 392 429
Income tax expense (335) (437)
Profit/(loss) for the period 57 (8)
Balance Sheet
30 June 2024 31 Dec 2023
Unaudited Audited
$ million As restated
$ million
Segment assets
North Sea 8,646 8,632
International 1,249 1,284
Total assets 9,895 9,916
Segment liabilities
North Sea (7,891) (7,818)
International (530) (545)
Total liabilities (8,421) (8,363)
Other information
6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
$ million $ million
Capital additions
North Sea 398 269
International 64 57
Total capital additions 462 326
Depreciation, depletion and amortisation
North Sea 544 691
International 38 37
Total depreciation, depletion and amortisation 582 728
Exploration and evaluation expenses and new ventures
North Sea 22 15
International - -
Total exploration and evaluation expenses and new ventures 22 15
Exploration costs written-off
North Sea 2 4
International 15 9
Total exploration costs written-off 17 13
4. Revenue from contracts with customers and other income
6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
$ million $ million
Type of goods
Crude oil sales(1) 1,114 1,115
Gas sales 692 759
Condensate sales 81 100
Total revenue from contracts with customers 1,887 1,974
Tariff income 16 14
Other revenue 3 3
Revenue from production activities(2) 1,906 1,991
Other income 10 25
Total revenue and other income 1,916 2,016
1 During the period, Harbour resolved a long-term Urals linked pricing
dispute with the buyer of the company's crude from two of its UK fields. This
resulted in the recognition of an additional $56 million of revenue for the
period of which $47 million related to crude sales in prior periods.
2 Revenues from contracts with customers of $1,942 million (H1 2023: $2,460
million) comprise crude oil sales of $1,113 million (H1 2023: $1,146 million)
and gas sales of $748 million (H1 2023: $1,214 million). This was prior to
realised hedging gains in the period of $1 million (H1 2023: losses of $31
million) on crude oil and realised hedging losses of $56 million (H1 2023:
$455 million) on gas sales.
5. Operating profit
Note 6 months ended 6 months ended
30 June 2024
30 June 2023
Unaudited
Unaudited
$ million
$ million
Cost of operations
Production, insurance and transportation costs 561 575
Gas purchases 5 6
Royalties 3 2
Depreciation of oil and gas assets 10 466 599
Depreciation of right-of-use oil and gas assets 11 137 122
Capitalisation of IFRS 16 lease depreciation on oil and gas assets 11 (38) (13)
Movement in over/(underlift) balances and hydrocarbon inventories 44 (67)
Total cost of operations 1,178 1,224
Impairment expense of property, plant and equipment 10 49 20
Net impairment gain due to net decrease in decommissioning provisions on oil (16)
and gas tangible assets
10,12 (1)
Impairment expense of right-of-use assets 11 20 -
Exploration costs written-off(1) 9 17 13
Exploration and evaluation expenditure and new ventures(2) 22 15
General and administrative expenses
Depreciation of right-of-use non-oil and gas assets 11 6 5
Depreciation of non-oil and gas assets 10 2 3
Amortisation of non-oil and gas intangible assets 9 9 12
Other administrative costs(4) 87 71
Total general and administrative expenses(3) 104 91
Operating profit 542 654
1 Exploration costs written-off of $17 million (H1 2023: $13 million)
includes $14 million related to the Halwa well in Indonesia (note 9).
2 Exploration and evaluation expenditure and new ventures of $22 million (H1
2023: $15 million) includes $17 million (H1 2023: $11 million) of early
project costs incurred mainly in respect of the Group's interest in carbon
capture and storage (CCS) and electrification projects in the UK plus $5
million of ongoing pre-licence costs.
3 Expenses related to both short-term and low value leases arrangements are
considered to be immaterial for reporting purposes.
4 Other administrative costs in H1 2024 include consultancy and business
development costs of $34 million mainly related to acquisition of the
Wintershall Dea asset portfolio which is expected to complete in Q4 2024. H1
2023 includes a redundancy provision of $16 million.
6. Finance income and finance expenses
Note 6 months ended 6 months ended
30 June 2024
30 June 2023
Unaudited
Unaudited
$ million
$ million
Finance income
Bank interest 8 10
Other interest and finance gains 7 14
Gains on derivatives(1) - 9
Total finance income 15 33
Finance expenses
Interest payable on reserve based lending and bond 15 25
Other interest and finance expenses 2 3
Lease interest 11 26 26
Losses on derivatives(1) 6 -
Foreign exchange losses 5 85
Bank and financing fees(2) 23 48
Unwinding of discount on decommissioning and other provisions 12 92 74
169 261
Finance costs capitalised during the period(3) (4) (3)
Total finance expense 165 258
1 Losses on derivatives in H1 2024 relate to changes in the fair value of an
embedded derivative within one of the Group's gas contracts of $2 million (H1
2023: $9 million gain), and mark to market losses on unrealised foreign
exchange derivatives of $4 million (H1 2023: $ nil).
2 Bank and financing fees include an amount $10 million (H1 2023: $23
million) relating to the amortisation of arrangement fees and related costs
capitalised against the Group's long-term borrowings (note 13).
3 The amount of finance costs capitalised was determined by applying the
weighted average rate of finance costs applicable to the borrowings of the
Group of 5.7 per cent to the expenditures on the qualifying assets (H1 2023:
6.3 per cent). Capitalised finance costs are included within property, plant
and equipment additions (note 10).
7. Income tax
The major components of income tax expense for the periods ended 30 June 2024
and 2023 are:
6 months ended 6 months ended
30 June 2024
30 June 2023
Unaudited
Unaudited
$ million
$ million
Current income tax expense:
UK corporation tax 229 393
Overseas tax (1) 8
Adjustment in respect of prior years (2) 12
Total current income tax expense 226 413
Deferred tax expense:
Origination and reversal of temporary differences 108 18
Overseas tax 4 3
Adjustment in respect of prior years (3) 3
Total deferred tax expense 109 24
Total tax expense reported in the income statement 335 437
The tax (expense)/credit in the statement of comprehensive income is as
follows:
Tax (expense)/credit on cash flow hedges 64 (1,639)
The effective tax rate for the six months ended 30 June 2024 was 85 per cent,
compared to 102 per cent for the same period in 2023. The lower effective tax
rate for the six months ended 30 June 2024 is primarily caused by change in
weighting of profits taxed and expenses deductible at rates below the 75 per
cent UK oil tax headline rate.
The tax expense has been computed by considering the estimated annual average
expected tax rate for the year for each jurisdiction based on enacted or
substantively enacted rates at the end of the half-year period.
Change in tax rates
The future effective tax rate is impacted by the mix of jurisdictions in which
the Group operates. The UK statutory tax rate for oil and gas production
operations is expected to remain a primary influence on the effective tax
rate. The Energy Profits Levy at the 35 per cent rate is currently in place
until 31 March 2028.
Since the balance sheet date there has been a change in UK Government which
has announced its intention to make further changes to the EPL regime which
are described in Note 18 Post Balance Sheet Events.
On 24 May 2024, Finance (No.2) Act 2024, enacted the Energy Security
Investment Mechanism (ESIM). The ESIM operates to remove EPL if both oil and
gas prices sit below $74.21 per bbl and 57 pence per therm (as adjusted for
CPI from 1 April 2024) for a period of six months. The measure is not expected
to have a material impact on the group.
Deferred tax
The principal components of deferred tax are set out in the following tables:
30 June 2024 31 Dec 2023
Unaudited Audited
$ million As restated
$ million
Deferred tax assets 8 7
Deferred tax liabilities (1,338) (1,297)
Net deferred tax liability (1,330) (1,290)
The origination of and reversal of temporary differences are, as shown in the
next table, related primarily to movements in the carrying amount and tax base
value of expenditure and the timing of when these items are changed and are
credited against accounting and taxable profit.
Accelerated capital Decom-missioning Losses Fair Other Overseas Net
value of derivatives
allowances $ million $ million
$ million $ million deferred tax asset/ (liability)
$ million
$ million $ million
As at 1 January 2023 (Audited) (3,396) 1,565 569 2,452 (3) (178) 1,009
Deferred tax credit/(expense) 546 (25) (388) (61) 22 18 112
Comprehensive expense - - - (2,376) 1 - (2,375)
Foreign exchange (51) 34 - (9) 1 (5) (30)
As at 31 December 2023 (Audited) (2,901) 1,574 181 6 21 (165) (1,284)
Restated - - - - - (6) (6)
At 1 Jan 2024 as restated (2,901) 1,574 181 6 21 (171) (1,290)
Deferred tax credit/(expense) 50 5 (168) 1 - 3 (109)
Comprehensive expense - - - 64 - - 64
Income statement reserves - - - - (1) - (1)
Foreign exchange 6 (5) - - - 5 6
As at 30 June 2024 (Unaudited) (2,845) 1,574 13 71 20 (163) (1,330)
The Group's deferred tax assets as at 30 June 2024 are recognised to the
extent that taxable profits are expected to arise against which the tax assets
can be utilised. The Group assessed the recoverability of its UK ring fenced
losses and allowances using corporate assumptions which are consistent with
the Group's impairment assessment.
Based on those assumptions, the Group expects to fully utilise its recognised
UK tax losses and allowances. The recovery of the Group's UK decommissioning
deferred tax asset is additionally supported by the ability to carry back
decommissioning tax losses and set these against ring fence taxable profits of
prior periods.
The EPL will currently be in place until 31 March 2028. Any temporary
differences subject to the EPL expected to reverse in the periods up to 31
March 2028 have consequently been remeasured to the higher rate. Ring fence
tax losses cannot be offset against profits subject to EPL nor are deductions
given for expenditure incurred on decommissioning. Consequently, the deferred
tax assets representing future decommissioning deductions and ring fence tax
losses are not impacted by EPL with the effect of EPL primarily being on the
deferred tax liability associated with accelerated capital allowances. The
closing deferred tax liability for the period of $1,338 million (31 Dec 2023:
$1,297 million) includes $936 million (31 Dec 2023: $1,014 million) of
deferred tax liabilities arising from the impact of EPL.
The Group has unrecognised UK tax losses and allowances as at 30 June 2024 of
approximately $166 million (31 Dec 2023: $181 million) in respect of ring
fence losses, $151 million (31 Dec 2023: $138 million) in respect of ring
fence investment allowance and $831 million (31 Dec 2023: $803 million) in
respect of non-ring fence losses and allowances. The ring fence losses and
allowances are currently unrecognised on the basis that they sit within legal
entities where the ability to access those losses and allowances are limited.
The non-ring fence losses are not recognised as it is not considered probable
that there will be future non-ring fence taxable profits against which these
losses could be used.
The Group also has unrecognised gross tax losses of approximately $161 million
(31 Dec 2023: $168 million) in respect of its international operations. These
losses include amounts of $25 million which will expire, primarily within 5
years and $20 million expiring within 10 years.
The overseas deferred tax relates mainly to temporary differences associated
with fixed asset balances.
No deferred tax liabilities have been provided on unremitted earnings of
overseas subsidiaries, because due to the application of withholding reliefs
under international double taxation treaties and dividend exemptions under UK
and Netherlands legislation no additional taxation is expected to arise on
future distribution.
The legislation implementing the Organisation for Economic Co-operation and
Development's ('OECD') proposals for a global minimum corporation tax rate
('Pillar 2') was substantively enacted into UK law on 20 June 2023. The rules
have effect from 1 January 2024.
The Group has applied the mandatory exception to recognising and disclosing
information about the deferred tax assets and liabilities related to Pillar 2
income taxes in accordance with the amendments to IAS 12 published by the IASB
on 23 May 2023.
The Group does not expect the Pillar 2 rules to have a material impact on the
Group. However, the Group continues to assess the detailed impact of the new
rules.
Uncertain tax positions
During 2023 an uncertain tax position was identified in certain UK
subsidiaries relating to the timing of the taxation of fair value movements
and realised gains and losses on hedges entered into in order to manage
commodity price risk. On the strength of independent advice, management
continues to consider that there is no expectation of a net additional outflow
of funds. As such no additional liability has been recognised in the
consolidated financial statements as at 30 June 2024. However, a contingent
liability exists as the UK Tax Authorities could take an alternative view on
whether the fair value movements on the hedged instruments are disregarded for
tax purposes. While not considered a likely outcome, if the UK Tax Authorities
were to disagree and successfully challenge the position, a possible liability
currently estimated not to exceed $120 million could arise because of the
differences in tax rates across the periods in question.
8. Earnings/(loss) per share
Basic EPS is calculated by dividing the profit after tax attributable to
ordinary shareholders of the Group by the weighted average number of ordinary
shares in issue during the year.
Diluted EPS is calculated by dividing the profit after tax attributable to
ordinary shareholders by the weighted average number of ordinary share in
issue during the year plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential ordinary shares
into ordinary shares.
The following table reflects the income and share data used in the basic and
diluted EPS calculations:
6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
Earnings/(loss) for the period ($ millions)
Earnings/(loss) for the purpose of basic earnings per share 57 (8)
Effect of dilutive potential ordinary shares - -
Earnings/(loss) for the purpose of diluted earnings per share 57 (8)
Number of shares (millions)
Weighted average number of ordinary shares for the purposes of basic earnings 770 829
per share
Dilutive potential ordinary shares 4 -
Weighted average number of ordinary shares for the purposes of diluted 774 829
earnings per share
Earnings/(loss) per share ($ cents)
Basic 7 (1)
Diluted 7 (1)
9. Other intangible assets
Oil and gas Non-oil and gas assets(3) Carbon allowances Total
$ million
assets $ million $ million
$ million
Cost
At 1 January 2024 1,016 172 86 1,274
Additions during the period 121 23 13 157
Utilised during the period - - (27) (27)
Reduction in decommissioning asset(1) (1) - - (1)
Exploration written-off(2) (17) - - (17)
Currency translation adjustment (32) (1) (1) (34)
At 30 June 2024 (Unaudited) 1,087 194 71 1,352
Amortisation
At 1 January 2024 - 102 - 102
Charge for the period - 9 - 9
Currency translation adjustment - (1) - (1)
At 30 June 2024 (Unaudited) - 110 - 110
Net book value
At 31 December 2023 (Audited) 1,016 70 86 1,172
At 30 June 2024 (Unaudited) 1,087 84 71 1,242
1 A reduction in decommissioning intangible assets of $1 million was made
during the period as a result of an update to decommissioning estimates (note
12).
2 The exploration write-off of $17 million includes $14 million related to
the Halwa well in Indonesia and also includes costs associated with licence
relinquishments and uncommercial well evaluations.
3 Non-oil and gas assets relate to Group IT software and the Viking carbon
capture and storage project in the UK.
10. Property, plant and equipment
Oil and gas Fixtures and fittings & office equipment Total
$ million
assets $ million
$ million
Cost
At 1 January 2024 11,857 42 11,899
Restated 198 - 198
At 1 January 2024 as restated 12,055 42 12,097
Additions 301 4 305
Increase in decommissioning asset(1) 49 - 49
Currency translation adjustment (22) - (22)
At 30 June 2024 (Unaudited) 12,383 46 12,429
Depreciation
At 1 January 2024 7,154 28 7,182
Restated 79 - 79
At 1 January 2024 as restated 7,233 28 7,261
Charge for the period 466 2 468
Net impairment charge 33 - 33
Currency translation adjustment (14) - (14)
At 30 June 2024 (Unaudited) 7,718 30 7,748
Net book value
At 31 December 2023 (Audited) 4,703 14 4,717
At 31 December 2023 as restated 4,822 14 4,836
At 30 June 2024 (Unaudited) 4,665 16 4,681
1 A net increase to decommissioning assets of $49 million (H1 2023: $99
million) was made during the period as a result of both new obligations and an
update to the decommissioning estimates (note 12).
The current period net impairment charge of $33 million includes a pre-tax
impairment charge of $49 million on one CGU in the UK North Sea driven
primarily by a reduction in the gas price outlook compared to the 2023
year-end view, and revised decommissioning cost profiles in respect the
Group's non-producing assets with no remaining net book value.
Impairment assessments
Assumptions involved in impairment measurement include estimates of commercial
reserves and production volumes, future oil and gas prices, discount rates and
the level and timing of expenditures, all of which are inherently uncertain.
For the purpose of its impairment assessments, the Group uses the fair value
less cost of disposal method (FVLCD) to calculate the recoverable amount of
the cash-generating units (CGU) consistent with a level 3 fair value
measurement (see note 14). In determining the recoverable value, appropriate
discounted-cash-flow valuation models are used, incorporating market-based
assumptions.
Management's commodity price curve assumptions used for the purposes of
management's impairment assessments are benchmarked against a range of
external forward price curves on a regular basis. Individual field price
differentials are then applied. The first two years reflect the market forward
price curves transitioning to a long-term price from 2026, thereafter inflated
at 2.5 per cent per annum. The long-term commodity prices used were $70 per
barrel for crude and 70 pence per therm for gas.
11. Leases
Balance sheet
Right-of-use assets Land and buildings Drilling FPSO Offshore facilities Equipment Total
rigs
$ million
$ million
$ million $ million $ million
$ million
Cost
At 1 January 2024 109 208 554 328 26 1,225
Restated 5 - 70 - - 75
At 1 January 2024 as restated 114 208 624 328 26 1,300
Additions(1) 2 166 - - - 168
Cost revisions/remeasurements - 11 - - - 11
Currency translation adjustment - (1) - - - (1)
At 30 June 2024 (Unaudited) 116 384 624 328 26 1,478
Accumulated depreciation
At 1 January 2024 30 159 280 150 19 638
Restated 2 - 28 - - 30
At 1 January 2024 as restated 32 159 308 150 19 668
Charge for the period 6 46 46 42 3 143
Impairment charge(2) 20 - - - - 20
Currency translation adjustment - (1) - - - (1)
At 30 June 2024 (Unaudited) 58 204 354 192 22 830
Net book value
At 31 December 2023 (Audited) 79 49 274 178 7 587
At 31 December 2023 as restated 82 49 316 178 7 632
At 30 June 2024 (Unaudited) 58 180 270 136 4 648
1 Additions of $168 million mainly relate to new lease arrangements for two
new drilling rigs, and a term extension on an existing drilling rig lease.
2 The impairment charge of $20 million relates to one of the Group's office
buildings.
The significant portion of the Group's lease liabilities represent lease
arrangements for FPSO vessels on the Catcher and Chim Sáo assets, drilling
rigs and offshore facilities on the Tolmount asset.
The lease liabilities and associated right-of-use-assets have been calculated
by reference to in-substance fixed lease payments in the underlying agreements
incurred throughout the non-cancellable period of the lease along with periods
covered by options to extend the lease where the Group is reasonably certain
that such options will be exercised. When assessing whether extension options
were likely to be exercised, assumptions are consistent with those applied
when testing for impairment.
Right-of-use liabilities Note 30 June 2024 Unaudited 31 Dec 2023
$ million As restated(1)
$ million
At 1 January as restated 768 825
Additions 168 28
Re-measurement 11 110
Finance costs charged to income statement 6 26 51
Finance costs charged to decommissioning provision - 1
Lease payments (155) (262)
Currency translation adjustment (1) 15
817 768
Classified as:
Current 249 216
Non-current 568 552
Total lease liabilities 817 768
1 The 31 December 2023 lease liabilities have been restated following the
reclassification from AHFS, see note 2.2.
Income statement
Depreciation charge on right-of-use assets Note 6 months ended 6 months ended
30 June 2024 30 June 2023
Unaudited Unaudited
$ million $ million
Land and buildings - non-oil and gas assets 6 5
Drilling rigs 46 20
FPSO 46 55
Offshore facilities 42 45
Equipment 3 2
Depreciation charge 5 143 127
Capitalisation of IFRS 16 lease depreciation(1)
Drilling rigs (37) (12)
Equipment (1) (1)
Total depreciation charge 105 114
Lease interest 6 26 26
1 Of the $38 million (H1 2023: $13 million) capitalised IFRS 16 lease
depreciation, $28 million (H1 2023: $9 million) has been capitalised within
property, plant and equipment and $10 million (H1 2023: $4 million) within
provisions (note 12).
The total cash outflow for leases in the first six-months of 2024 was $154
million (H1 2023: $122 million).
12. Provisions
Decommissioning Other Total
$ million
provision provisions
$ million $ million
At 31 December 2023 (Audited) 4,021 27 4,048
Restated 87 - 87
At 31 December 2023 as restated 4,108 27 4,135
Additions 6 - 6
Changes in estimates - increase to oil and gas tangible decommissioning assets 59 - 59
Changes in estimates - changes to income statement (16) 1 (15)
Changes in estimates - decrease to oil and gas intangible assets (1) - (1)
Amounts used (125) (1) (126)
Depreciation, depletion and amortisation on decommissioning right-of-use (10) - (10)
leased asset
Unwinding of discount 92 - 92
Currency translation adjustment (11) (2) (13)
At 30 June 2024 (Unaudited) 4,102 25 4,127
Classified within:
Current liabilities 200 - 200
Non-current liabilities 3,902 25 3,927
Total provisions 4,102 25 4,127
Decommissioning provision
The Group provides for the estimated future decommissioning costs on its oil
and gas assets at the balance sheet date. The payment dates of expected
decommissioning costs are uncertain and are based on economic assumptions of
the fields concerned. These estimated future decommissioning costs are
inflated at the Group's long term view of inflation of 2.5 per cent per annum
(H1 2023: 2.5 per cent per annum) and discounted at a risk-free rate of
between 4.3 per cent and 5.2 per cent (H1 2023: 3.6 per cent and 4.6 per cent)
reflecting a 6-month (H1 2023: 6-month) rolling average of market rates over
the varying lives of the assets to calculate the present value of the
decommissioning liabilities. The unwinding of the discount is presented within
finance costs.
Other provisions
Other provisions at 30 June 2024 mainly relate to a termination benefit
provision in Indonesia, where the Group operates a service, severance and
compensation pay scheme under a collective labour agreement with the local
workforce.
13. Borrowings and facilities
The Group's borrowings are carried at amortised cost:
30 June 2024 31 Dec 2023
Unaudited Audited
$ million $ million
Reserve based lending (RBL) facility - -
Bond 494 493
Other loans 7 16
Total borrowings 501 509
Classified within:
Current liabilities 7 16
Non-current liabilities 494 493
Total borrowings 501 509
The key terms of the RBL facility are:
§ Term matures 31 December 2029
§ Facility size of $1.75 billion, with a $1.75 billion letter of credit
sub-limit
§ Debt availability of $891 million effective 30 June 2024 which reduced to
$701 million from 1 July 2024
§ Debt availability redetermined on an annual basis. This has been deferred
to December 2024 following the recent Wintershall Dea deal announcement
§ Interest at compounded SOFR plus a margin of 3.2 per cent, rising to a
margin of 3.4 per cent from November 2025 and 3.6 per cent from November 2027
§ A margin adjustment linked to carbon-emission reductions
§ Straight line amortisation of Letter of Credit sublimit from Jan 2027 to 6
months before maturity. No material cash collateralisation required until 2028
§ Liquidity and leverage covenant tests
§ A syndication group of 15 banks
Certain fees are also payable, including fees on available commitments at 40
per cent of the applicable margin and commission on letters of credit issued
at 50 per cent of the applicable margin.
In October 2021, the Group issued a $500 million bond under Rule 144A and with
a tenor of five years to maturity. The coupon was set at 5.50 per cent and
interest is payable semi-annually.
During May 2024, the Group elected to cancel $1.0 billion of the RBL facility
to reduce fees. At the balance sheet date, the outstanding RBL balance
excluding incremental arrangement fees and related costs was $ nil (Dec 2023:
$ nil). As at 30 June 2024, $891 million remained available for drawdown under
the RBL facility (Dec 2023: $1,340 million).
The Group has facilities to issue up to $1,750 million of letters of credit,
of which $859 million was in issue as at 30 June 2024 (Dec 2023: $1,186
million), mainly in respect of future abandonment liabilities.
The Group also has facilities to issue up to $397 million of surety bonds in
respect of future abandonment liabilities, of which $397 million was in issue
as at 30 June 2024 (Dec 2023: $ nil).
A further $57 million of arrangement fees and related costs associated with
financing the acquisition of the Wintershall Dea asset portfolio were
capitalised during the period.
During the period $10 million (H1 2023: $23 million) of arrangement fees and
related costs have been amortised and were expensed within financing costs.
At 30 June 2024, $115 million of arrangement fees and related costs remain
capitalised on the balance sheet (Dec 2023: $68 million) of which $14 million
was classified within current assets, $95 million within non-current assets,
and $6 million netted against the bond liability.
This total consisted of:
§ $52 million of arrangement fees relating to the existing RBL facility,
§ $6 million of bond arrangement fees, and
§ $57 million of arrangement fees relating to financing new facilities for
the Wintershall Dea deal.
Bond interest payable of $6 million (Dec 2023: $6 million) had accrued by the
balance sheet date and has been classified within accruals.
14. Other financial assets and liabilities
The Group held the following financial instruments at fair value at 30 June
2024. The fair values of all derivative financial instruments are based on
estimates from observable inputs and are all level 2 in the IFRS 13 hierarchy,
except for the royalty valuation, which includes estimates based on
unobservable inputs and are level 3 in the IFRS 13 hierarchy.
All financial instruments that are initially recognised and subsequently
remeasured at fair value have been classified in accordance with the hierarchy
described in IFRS 13 Fair Value Measurement. The hierarchy groups fair-value
measurements into the following levels, based on the degree to which the fair
value is observable.
§ Level 1: fair value measurements are derived from unadjusted quoted prices
for identical assets or liabilities.
§ Level 2: fair value measurements include inputs, other than quoted prices
included within level 1, which are observable directly or indirectly.
§ Level 3: fair value measurements are derived from valuation techniques that
include significant inputs not based on observable data.
30 June 2024 31 Dec 2023
Unaudited
Audited
Current Assets Liabilities Assets Liabilities
$ million
$ million $ million $ million
Measured at fair value through profit and loss
Foreign exchange derivatives 3 (2) 6 -
Fair value of embedded derivative within gas contract 8 - 10 -
11 (2) 16 -
Measured at fair value through other comprehensive income
Commodity derivatives 79 (161) 154 (197)
Total current 90 (163) 170 (197)
Non-current
Measured at fair value through other comprehensive income
Commodity derivatives 26 (46) 112 (87)
Total non-current 26 (46) 112 (87)
Total current and non-current 116 (209) 282 (284)
Fair values of other financial instruments
The following financial instruments are measured at amortised cost and are
considered to have fair values different to their book values.
30 June 2024 31 Dec 2023
$ million $ million
Book value Fair value Book value Fair value
Bond (494) (477) (493) (487)
The fair value of the bond is within level 2 of the fair value hierarchy and
has been estimated by discounting future cash flows by the relevant market
yield curve at the balance sheet date. The fair values of other financial
instruments not measured at fair value including cash and short-term deposits,
trade receivables, trade payables and floating rate borrowings equate
approximately to their carrying amounts.
15. Notes to the statement of cash flows
Net cash flows from operating activities consist of:
30 June 2024 30 June 2023
Unaudited Unaudited
$ million $ million
Profit before taxation 392 429
Adjustments to reconcile profit before tax to net cash flows:
Finance cost, excluding foreign exchange 160 173
Finance income, excluding foreign exchange (15) (33)
Depreciation, depletion and amortisation 582 728
Net impairment of property, plant and equipment 33 19
Impairment of right-of-use assets 20 -
Exploration costs written-off 17 13
Share-based payments 26 11
Decommissioning expenditure (129) (111)
Movement in realised cash flow hedges not yet settled (51) (197)
Unrealised foreign exchange (gain)/loss (14) 61
Working capital adjustments:
Decrease/(increase) in inventories 47 (26)
Decrease in trade and other receivables 82 543
Decrease in trade and other payables (40) (146)
Net tax (157) 23
(payments)/refunds
Net cash inflow from operating activities 953 1,487
Reconciliation of net cash flow to movement in net borrowings
Year ended
30 June 2024 31 Dec 2023
Unaudited Audited
$ million As restated
$ million
Proceeds from drawdown of borrowing facilities (178) (660)
Repayment of RBL facility 178 1,435
Repayment of EFF loan - 11
Repayment of financing arrangement 10 21
Financing arrangement interest payable (1) (3)
Arrangement fees and related costs capitalised 57 34
Amortisation of arrangement fees and related costs capitalised (10) (48)
Movement in total borrowings 56 790
Movement in cash and cash equivalents 253 (214)
Decrease in net borrowings in the period 309 576
Opening net borrowings (162) (738)
Closing net cash/(borrowings) 147 (162)
Analysis of net borrowings
6 months ended Year ended
30 June 2024 31 Dec 2023
Unaudited Audited
$ million As restated
$ million
Cash and cash equivalents 539 286
RBL facility - -
Bond (494) (493)
Net cash/(debt) 45 (207)
Financing arrangement (7) (16)
Closing net cash/(borrowings) 38 (223)
Non-current assets(1) 95 42
Current assets(1) 14 19
Closing net cash/(borrowings) after total unamortised fees(1) 147 (162)
1 $52 million of fees associated with the RBL, and $57 million of costs
associated with financing the acquisition of the Wintershall Dea asset
portfolio are recognised in debtors (31 Dec 2023: $61 million)
The carrying values on the balance sheet are stated net of the unamortised
portion of issue costs and bank fees of $115 million of which $52 million
relates to the RBL, $57 million relates to costs associated with financing the
acquisition of the Wintershall Dea asset portfolio, both of which are
recognised in assets and $6 million is netted against the bond (Dec 2023: $68
million of which $61 million related to the RBL and was recognised in assets,
and $7 million related to the bond, which was netted off against the
borrowings).
16. Related Parties
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. There have been no significant changes to related party transactions
since 31 December 2023, refer to note 28 in the 2023 Annual Report and
Accounts for more information.
17. Distributions made and proposed
A dividend of 13 cents per ordinary share to be paid in pound sterling at the
spot rate prevailing on the record date was approved by shareholders on 9 May
2024 in relation to the year ended 31 December 2023.
30 June 2024 30 June 2023
Unaudited Unaudited
$ million $ million
Cash dividends on ordinary shares declared and paid:
Final dividend for 2023: 13 cents per share (2022: 12 cents per share) 100 99
Proposed dividends on ordinary shares:
Interim dividend for 2024: 13 cents per share (2023: 12 cents per share) 100 100
On 7 March 2024, a final dividend of $100 million was declared in respect of
the financial year ended 31 December 2023 and approved by shareholders on 9
May 2024 at the AGM and paid on 22 May 2024.
An interim dividend of $100 million was declared in respect of the financial
year ending 31 December 2024, to be paid on 25 September 2024. A dividend
re-investment plan (DRIP) is available to shareholders who would prefer to
invest their dividend in the shares of the company.
18. Post balance sheet events
On 29 July 2024, the UK government announced changes to the Energy Profits
Levy (EPL) to take effect from 1 November 2024. The announcement follows the
recent change of government in the UK and supersedes the previous government's
announcement on 6 March 2024 that EPL would be extended by a further 12 months
from 31 March 2028 to 31 March 2029. The details of the measures are expected
to be finalised in the Budget scheduled to take place on 30 October 2024 and
legislated thereafter in a Finance Bill.
From the 1 November 2024 the rate of EPL will be increased by 3 per cent from
35 per cent to 38 per cent, the periods to which the EPL applies will be
extended from 31 March 2028 to 31 March 2030, the main EPL investment
allowance will be abolished and the amount of relief available for capital
expenditure in calculating EPL profits will be reduced.
The government confirmed in the announcement that the Energy Security
Investment Mechanism (ESIM) would remain unchanged and that there were no
planned changes to the way tax relief for capital expenditure is applied in
the permanent ring fence regime.
As the announced measures had not been enacted at the balance sheet date then
there is no impact on the balance sheet as presented. As the full details of
the announced measures are not yet known it is not currently possible to
calculate the potential impact on the balance sheet.
Glossary
2C Best estimate of contingent resources
2P Proven and probable reserves
AGM Annual general meeting
AHFS Asset held for sale
Bbl Barrel
Boe Barrel of oil equivalent
CCS Carbon capture and storage
CGU Cash generating unit
CPI Consumer price index
DD&A Depreciation, depletion and amortisation
DRIP Dividend re-investment plan
EBITDAX Earnings before interest, tax, depreciation, amortisation and exploration
EFF Exploration financing facility
EPL Energy Profits Levy (UK)
EPS Earnings per share
ESIM Energy Security Investment Mechanism
ESOP Employee stock ownership plan
FDI Foreign direct investment
FEED Front End Engineering & Design
FPSO Floating production storage offtake vessel
FVLCD Fair value less cost of disposal
IAS International Accounting Standards
IASB International Accounting Standards Board
IFRSs International Financial Reporting Standards
Kboepd Thousand of barrels of oil equivalent per day
kgCO(2)e Kilograms of carbon dioxide equivalent
M&A Mergers and acquisitions
Mmboe Million barrels of oil equivalent
Mscf Thousand standard cubic feet
Mtpa Million tonnes per annum
NBP Natural gas prices
NSTA North Sea Transition Authority
PP&E Property, plant and equipment
RBL Reserve based lending
RCF Revolving credit facility
SOFR Secured Overnight Financing Rate
Tcf Trillion cubic feet
Therm Unit of UK natural gas
TRIR Total Recordable Injury Rate (The number of fatalities, lost time injuries,
substitute work, and other injuries requiring treatment by a medical
professional per million hours worked)
USD US dollar
Non-IFRS measures
Harbour uses certain measures of performance that are not specifically defined
under IFRS or other generally accepted accounting principles (GAAP). These
non-IFRS measures, which are presented within the Financial Review, are
defined below:
§ Capital investment: Depicts how much the Group has spent on purchasing
fixed assets in order to further its business goals and objectives. It is a
useful indicator of the Group's organic expenditure on oil and gas assets, and
exploration and appraisal assets, incurred during a period.
§ DD&A per barrel: Depreciation and amortisation of oil and gas
properties for the period divided by working interest production. This is a
useful indicator of ongoing rates of depreciation and amortisation of the
Group's producing assets.
§ EBITDAX: Earnings before interest, tax, depreciation and amortisation,
impairments, remeasurements, onerous contracts and exploration expenditure.
This is a useful indicator of underlying business performance.
§ Free cash flow: Operating cash flow less cash flow from investing
activities less interest and lease payments (principal and interest).
§ Leverage ratio: Net debt/ last twelve months EBITDAX.
§ Liquidity: The sum of cash and cash equivalents on the balance sheet and
the undrawn amounts available to the Group on our principal facilities. This
is a key measure of the Group's financial flexibility and ability to fund
day-to-day operations.
§ Net cash/debt: Total reserve based lending facility, bond and exploration
financing facility (net of the carrying value of unamortised fees) less cash
and cash equivalents recognised on the consolidated balance sheet. This is an
indicator of the Group's indebtedness and contribution to capital structure.
§ Operating cost per barrel: Direct operating costs (excluding
over/underlift) for the period, including tariff expense, insurance costs and
mark to market movements on emissions hedges, less tariff income, divided by
working interest production. This is a useful indicator of ongoing operating
costs from the Group's producing assets.
§ Shareholder returns paid: Dividends plus share buybacks completed in the
period are included in this metric which shows the overall value returned to
stakeholders in the period.
§ Total capital expenditure: Capital investment 'additions' per notes 9 and
10 plus decommissioning expenditure 'amounts used' per note 12
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