Operational highlights

• Production of 186 kboepd (2022: 208 kboepd), split 52% natural gas/48% liquids and within guidance
• Operating costs of $16/boe (2022: $14/boe), in line with guidance
• Total recordable injury rate reduced to 0.7 per million hours worked (2022: 0.8)
• Total 2P reserves and 2C resources increased to 880 mmboe (2022: 865 mmboe) reflecting reserve additions at our operated UK hubs and international exploration success, partially offset by production 
• Continued momentum on Harbour's UK CCS projects, Viking and Acorn, with both projects awarded Track 2 status; estimated independently verified net CO2 storage capacity in excess of 200 million tonnes
• Announced transformational acquisition of the Wintershall Dea asset portfolio

Financial highlights

• Realised, post hedging oil and UK gas prices of $78/bbl and 54p/therm (2022: $78/bbl and 86p/therm)
• Revenue of $3.7 billion (2022: $5.4 billion), reflecting lower natural gas prices and production
• Profit before tax of $0.6 billion (2022: $2.5 billion); profit after tax of $32 million (2022: $8 million) reflecting an effective tax rate of 95% (2022: 100%)
• Free cash flow (post-tax, pre-distributions) of $1.0 billion (2022: $2.1 billion)
• Returned $249 million through share buybacks in addition to the $200 million annual dividend, resulting in $1 billion of shareholder distributions since becoming a public company in April 2021
• Net debt reduced to $0.2 billion (2022: $0.8 billion) with $2.7 billion of net debt reduction since April 2021; leverage reduced to 0.1x (2022: 0.2x)
• Proposed final dividend of $100 million, in line with $200 million annual dividend policy and equating to 13 cents per share (2022: 12 cents), reflecting dividend per share growth for the full year 2023 of c.9%

2024 and 2025 outlook

• Production guidance of 150-165 kboepd reiterated; production to end February of c.172 kboepd
• 2024 unit operating cost guidance unchanged at c.$18/boe; total capital expenditure guidance reiterated at $1.2 billion
• Free cash flow is expected to be marginally positive in 2024, after estimated cash tax of $1.0 billion, assuming commodity prices of $85/bbl Brent and reduced UK gas prices of 70p/therm
• For 2025, production levels and operating costs are expected to be similar to 2024 while total capital expenditure is anticipated to be materially lower; Harbour continues to expect to generate significant free cash flow in 2025, resulting in a net cash position by year end
• Harbour has hedged c.50% and c.25% of its 2024 UK gas and liquids volumes at 67p/therm and $84/bbl and c.25% and c.15% of its 2025 UK gas and liquids volumes at 90p/therm and $77/bbl, respectively

Acquisition of Wintershall Dea Asset Portfolio on track to complete in Q4 2024

In December, Harbour announced the acquisition of substantially all of Wintershall Dea's upstream assets for $11.2 billion. The Acquisition will transform Harbour into one of the world's largest and most geographically diverse independent oil and gas companies, adding material positions in Norway, Germany, Argentina and Mexico.
Since the announcement, significant progress has been made on the various approvals and workstreams required for completion:

• Irrevocable undertakings from shareholders to vote in favour of the Acquisition increased, and currently represents c.35% of Harbour's issued share capital as at 6 March 2024
• Harbour is on track to publish the prospectus and shareholder circular and to hold the shareholder meeting to approve the Acquisition in Q2 2024
• Successful bondholder vote to amend certain terms and conditions of Wintershall Dea's c.$4.9 billion investment grade bonds and subordinated notes; over 80% of bondholders participated in the vote and the amendments were approved with significant bondholder support[6]
• Successful syndication of the proposed $3 billion RCF and $1.5 billion bridge facility with strong support from both existing relationship banks and new banks resulting in oversubscription for both facilities
• Submission of filings in the relevant jurisdictions for substantially all the regulatory, anti-trust and foreign direct investment approvals required for completion have been made and are progressing as expected
• Harbour continues to expect the Acquisition to complete in Q4 2024.

Linda Z Cook, Chief Executive Officer, commented:
"Harbour materially advanced its strategy during 2023. We improved our safety performance, generated material free cash flow, and progressed our international growth opportunities and CCS projects, while maintaining our capital discipline. This enabled continued shareholder returns over and above our base dividend while retaining the flexibility that allowed us to announce a transformational acquisition in December.

"We remain focused on the successful completion of the Wintershall Dea acquisition and the ongoing safe and efficient management of our existing portfolio. We are excited about our future as we look to continue to build a geographically diverse, large scale, independent oil and gas company focused on safe and responsible operations, value creation and shareholder returns."

Operational performance

Production averaged 186 kboepd (2022: 208 kboepd), split 52 per cent natural gas and 48 per cent liquids and in line with guidance. In the UK, Harbour delivered higher production from their operated J-Area hub, supported by new wells on-stream around the end of 2022, while their operated Greater Britannia Area (GBA) continued to outperform expectations. This was offset by the deferral of drilling at partner-operated hubs resulting in fewer wells on-stream later in the year. Production was also impacted by some extended shutdowns in the second half of the year, including at the company's operated AELE hub and the East Irish Sea assets.

Operating costs for the year were $1.1 billion (2022: $1.1 billion), reflecting active management of the company's cost structure, including a reduction of staff in their UK operations and the further development of strategic supply chain partnerships and consolidation of contracts. On a unit of production basis, operating costs were higher at $16/boe (2022: $14/boe) due to lower production. 2023 total capital expenditure was c.$1.0 billion (2022: $0.9 billion) reflecting higher international exploration activity offset in part by the deferral of certain UK opportunities in response to the Energy Profits Levy (EPL).

KeyFacts Energy: Harbour Energy UK country profile