Revenue, earnings fall as Harbour Energy integrates Premier Oil

Harbour Energy announced decreased reported production and earnings in its first half on Thursday, in a period in which Premier Oil’s portfolio was included in the company from the end of March.

The FTSE 250 company said the all-share merger between Premier Oil and Chrysaor Holdings was complete, with the integration and realisation of synergies progressing as planned.

Reported production totalled 151,000 barrels of oil equivalent per day for the six months ended 30 June, down from 187,000 barrels per day in the first half of 2020.

The board said production was impacted by planned maintenance programmes deferred from 2020 into 2021 due to the Covid-19 pandemic, as well as unplanned outages, partially offset by three months of contribution from the Premier Oil portfolio.

Operating costs totalled $15.60 per barrel of oil equivalent, rising from $10.20 per barrel a year earlier, reflecting the firm’s lower production, while total capital expenditure including decommissioning spend rose to $380m from $364m.

EBITDAX slipped to $843m from $920m, although Harbour swung to a profit after tax of $87m from a first half loss of $155m in 2020.

Free cash flow fell to $302m from $475m, after $206m of tax payments largely related to Chrysaor’s UK activities in 2020, compared to tax receipts of $7m in the same period last year.

Net debt, excluding unamortised fees, totalled $2.6bn at period end, with net debt-to-pro forma EBITDAX standing at 1.2x at the end of June, and “significant” available liquidity of more than $1bn reported.

During the period, the board said it had taken steps to align the combined portfolio with Harbour's strategy, including deciding to explore options to exit its Sea Lion project in the Falkland Islands.

Looking ahead, the directors reiterated their 2021 reported production guidance of between 170,000 and 180,000 barrels of oil equivalent per day, with higher expected production in the second half as maintenance programmes were completed, additional wells came on-stream and a full contribution was made from the Premier portfolio.

The company said it was ramping up drilling activity, including two rigs in the J-Area and other units at Tolmount, AELE, Elgin Franklin and Beryl in the UK, and Tuna and Natuna Sea Block A in Indonesia.

An inspection and repair campaign was progressing at the group's Tolmount gas development in the UK, with first production expected around the end of the year.

Forecast 2021 operating costs and total capital expenditure, including decommissioning spend, remained unchanged at $15 to $16 per barrel of oil equivalent and $1.1bn, respectively.

“The first half saw us deliver positive free cash flow and execute a significant transaction, whilst retaining a robust balance sheet,” said chief executive officer Linda Cook.

“The extended maintenance programmes which impacted our production have completed, drilling activity has returned to pre-Covid-19 levels and the merger integration is progressing well, all underpinning strong future cash flow generation.

“We remain committed to producing oil and gas safely and responsibly, including our aim to achieve net zero by 2035.”

Harbour said it would update the market on its strategy and capital allocation plans, including its dividend policy, at a capital markets day on 9 December.

At 0843 BST, shares in Harbour Energy were down 3.97% at 368.2p.