REG - Harbour Energy PLC - Trading and Operations Update

Harbour EnergyAnnouncement

18/01/2024 07:15

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RNS Number : 0783A  Harbour Energy PLC  18 January 2024

Harbour Energy plc

("Harbour" or the "Company")

Trading and Operations Update

18 January 2024

 

 

Harbour Energy plc provides the following unaudited Trading and Operations
Update for the year ending 31 December 2023, ahead of announcing its Full Year
Results on 7 March 2024.

 

2023 Business Highlights

 § Production averaged 186 kboepd (2022: 208 kboepd), split approximately 50%
 liquids / 50% gas, and within guidance
 § Operating costs averaged c.$16/boe (2022: $14/boe), in line with guidance
 § Improved safety performance with total recordable injury rate of 0.7 per
 million hours worked (2022: 0.8)
 § Successful start-up of Tolmount East in Q4; other material UK investments
 included the Talbot development and the successful appraisal of the Leverett
 discovery, supporting production from late 2024
 § Significant gas discovery at Layaran-1 (Harbour 20%), the first well
 drilled in the 2023-2024 multi-well exploration campaign targeting a major gas
 play across the Andaman Sea licences in Indonesia.  This follows the drilling
 of the Timpan gas discovery in 2022
 § In Mexico, approval by the regulator in July of the Zama Field Development
 Plan, and the Kan oil discovery on Block 30 in April
 § Significant momentum on Harbour's two UK CCS projects which were awarded
 Track 2 status by the UK government. For Harbour's operated Viking project,
 FEED has been awarded and the project secured its first potential CO(2)
 shipping customer
 § Announced transformational acquisition of the Wintershall Dea asset
 portfolio in December with completion expected in Q4 2024

 

2023 Financial Highlights

 § Revenue of c.$3.9 billion (2022: $5.4 billion) with realised post-hedging
 oil and UK gas prices of $78/bbl and 54 pence/therm (2022: $78/bbl, 86
 pence/therm)
 § Estimated total capex of c.$1.0 billion (2022: $0.9 billion), including
 c.$0.3 billion of decommissioning, in line with guidance
 § Estimated free cash flow of c.$1.0 billion (2022: $2.1 billion), after
 total cash tax payments of c.$0.4 billion and before shareholder
 distributions, in line with expectations
 § Shareholder distributions of $441 million (2022: $551 million), comprising
 c.$200 million of dividend payments and $241 million of share buybacks
 § Net debt reduced to $0.2 billion at year end 2023 (2022: $0.8 billion)

 

 

 

 

2024 Guidance and 2025 Outlook 1 

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

 

 § 2024 production of 150-165 kboepd, with an unusually high level of planned
 shutdowns at our operated hubs and the Beryl area, coinciding with planned
 pipeline outages. Guidance also reflects the impact of deferred
 partner-operated wells at Beryl and Elgin Franklin in the UK and the
 anticipated sale of the Vietnam business
 § 2024 unit operating cost of c.$18/boe 2 , higher than 2023 due to lower
 volumes with absolute operating costs broadly flat year-on-year
 § Increased total capital expenditure of c.$1.2 billion (including lower
 decommissioning spend of $0.2 billion), driven by higher investment in the UK
 and internationally:
 -     Increased UK drilling activity targeting high return, quick payback
 opportunities in our operated J-Area, Greater Britannia and AELE hubs, in
 addition to the Talbot development, all of which will add to production and
 support cash flow starting in late 2024
 -     Advancement of our UK CCS projects including FEED at Viking
 -     Increased investment in our international growth projects which have
 the potential to materially increase our reserve life. This includes the
 exploration campaign in Indonesia, where drilling of the Halwa and Gayo wells
 on the Andaman II license (Harbour 40%, operator) is underway; and, in Mexico,
 FEED for the Zama development and the drilling of the Kan appraisal well
 § At $85/bbl and 100p/therm, 2024 free cash flow of $0.2 billion. This is
 after estimated tax of c.$1.2 billion, reflecting the expected full
 utilisation of our UK corporation tax losses in H1 2024, and phasing of UK EPL
 payments
 § In line with our annual dividend policy, Harbour expects to pay $200
 million in dividends, comprising a $100 million final dividend for 2023 and a
 $100 million 2024 interim dividend
 § Harbour expects to be net debt free during H1 2024 but to close the year in
 a small net debt position, reflecting the second half weighting of UK tax
 payments. Harbour continues to expect to remain undrawn on its RBL facility.
 § Looking ahead to 2025, Harbour expects:
 -     Production to be similar to 2024, with less maintenance downtime and
 volumes from new wells and projects substantially offsetting natural decline
 -     Unit operating costs to be broadly flat with 2024 while capital
 expenditure is anticipated to be materially lower
 -     Significantly higher free cash flow compared to 2024, resulting in a
 sizeable net cash position by year end

 

Acquisition of Wintershall Dea Asset Portfolio

 § On 21 December 2023, Harbour announced the acquisition of substantially all
 of Wintershall Dea's upstream assets for $11.2 billion. The acquisition is
 subject to shareholder and regulatory approvals and is anticipated to complete
 in Q4 2024
 -     In Q2 2024, Harbour plans to publish a prospectus and shareholder
 circular which will include historical financial information and an
 independent valuation of 2P reserves for the Wintershall Dea assets. They will
 also set out the details of the shareholder meeting to approve the Acquisition
 -     As at 17 January 2024, Harbour had received irrevocable undertakings
 from shareholders currently representing more than 25% of its issued share
 capital to vote in favour of the acquisition

 

Linda Z Cook, Chief Executive Officer, commented:

"We made significant progress against our strategic goals in 2023. Our safety
performance improved.  We continued to maximise the value of our UK
production base while ensuring disciplined capital allocation, resulting in
significant free cash flow and shareholder returns over and above our base
dividend.  We also advanced our UK CCS projects and our international growth
opportunities in Indonesia and Mexico, delivering against key milestones. And,
at year end, we announced the transformational acquisition of the Wintershall
Dea portfolio.

 

"Looking ahead to 2024, our priorities are for the continued safe and
responsible operations of our existing portfolio and the successful completion
of the Wintershall Dea acquisition.  We are proud of our achievements over
the past year and excited about the future of the company."

 

Enquiries

Harbour Energy plc

Elizabeth Brooks, Head of Investor Relations

Tel: +44 203 833 2421

 

Brunswick

Patrick Handley, Will Medvei

Tel: +44 207 404 5959

 

 

Appendix 1: Group production

                              2023            2022

                              (net, kboepd)   (net, kboepd)
    Greater Britannia Area    27              31
    J-Area                    34              30
    AELE hub                  22              27
    Catcher                   16              19
 Tolmount                     13              14
 East Irish Sea               4               8
    Elgin Franklin            19              24
    Buzzard                   11              15
    Beryl                     14              11
    West of Shetlands(1)      14              14
    Other North Sea(2)        1               2
 North Sea                    175             195
 International                11              13
 Total Group                  186             208

(1) West of Shetlands comprises Clair, Schiehallion and Solan. (2)Other North
Sea includes Galleon, Ravenspurn North and Johnston.

                              2023                    2023

                              (net liquids, kboepd)   (net gas, kboepd)
    Greater Britannia Area    9                       18
    J-Area                    16                      18
    AELE hub                  5                       17
    Catcher                   15                      1
 Tolmount                     1                       12
 East Irish Sea               -                       4
    Elgin Franklin            7                       12
    Buzzard                   11                      -
    Beryl                     9                       5
    West of Shetlands(1)      13                      1
    Other North Sea(2)        1                       1
 North Sea                    86                      89
 International                4                       7
 Total Group                  90                      96

(1) West of Shetlands comprises Clair, Schiehallion and Solan. (2)Other North
Sea includes Galleon, Ravenspurn North, and Johnston.

 

Appendix 2: Hedging schedule(1)

          2023                      2024                      2025                      2026
          Volume    Av. price       Volume    Av. price                 Av. price       Volume    Av. price
          (mmboe)   (p/th, $/bbl)   (mmboe)   (p/th, $/bbl)
         (p/th, $/bbl)   (mmboe)   (p/th, $/bbl)

                                                              Volume
                                                              (mmboe)
 UK gas
 Swaps    21.5      40              10.1      54              5.7       87              1.2       106
 Collars  1.6       55-69           3.0       112-263         1.7       98-233          0.4       80-150
 Oil
 Swaps    11        74              7.3       84              4.4       77              0         0

(1) As at 31 December 2023

 

Appendix 3: 2023 actual and 2023 and 2024 guidance

                          2023 Guidance      2023 Actual  2024 Guidance

                          (as at Nov 2023)                (as at Jan 2024)
 Production (kboepd)      185-195            186          150-165
 Operating costs ($/boe)  c.16               c.16         c.18
 Total capex ($ billion)  c.1.0              c.1.0        c.1.2

 

 

 1  2024 guidance and 2025 outlook assumes that the sale of Harbour's Vietnam
business completes on 30 June 2024

 2  Assumes a US dollar to GBP sterling exchange rate of $1.25/£

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