The largest London-listed independent oil and gas company revealed this morning that the controversial UK tax on North Sea producers had virtually wiped out its profits for the last year.
Profits after tax at Harbour Energy were less than £7million on turnover of more than £4.5billion.
Chief executive Linda Cook said: “In our first full year as a publicly listed company, Harbour delivered materially-higher production which, together with improved margins, enabled us to continue to de-leverage and make material shareholder distributions.
“We further developed our net zero strategy, setting ourselves an interim target, and built significant momentum in our flagship Viking carbon-capture and storage project.
“Most importantly, we achieved all of this while improving our safety record.
“However, the UK energy profits levy, which applies irrespective of actual or realised commodity prices, has disproportionately impacted the UK-focused independent oil and gas companies that are critical for domestic energy security.
Reductions
“For Harbour, the UK's largest oil and gas producer, it has all but wiped out our profit for the year. This has driven us to reduce our UK investment and staffing levels.
“Given the fiscal instability and outlook for investment in the country, it has also reinforced our strategic goal to grow and diversify internationally.
“Thanks to our robust balance sheet, we enter 2023 well-placed to deliver on our strategy of building a global diverse oil and gas company.
“We will continue to return any excess capital to shareholders while investing in our existing portfolio and maintaining capacity for meaningful but disciplined mergers and acquisitions.”
In January, Harbour said it was preparing to cut hundreds of jobs and shift attention outside of the UK in response to the windfall tax.
The company confirmed it had launched a review of its UK business "to align with lower future activity levels" after the tax rate on operators was increased from 40% to 75% following months of higher gas and oil prices.
Not in licensing round
The firm also confirmed that it has not taken part in the UK Government's 33rd offshore licensing round.
Meanwhile, the new boss of Shell said earlier this month he would “think twice”' about investing in the North Sea and that America is now significantly more attractive than Britain for energy investment.
Chief executive Wael Sawan said the UK Government should “take a page from some of the things that the US have done recently”, through the Inflation Reduction Act - a massive package of subsidies to spur green investment in America.
Windfall taxes, planning delays and uncertainty over subsidies were all making it harder for Shell to achieve its goal of investing up to £25billion in the UK this decade, he said.
By contrast, in America the Inflation Reduction Act was providing “10-year clarity and tangible, fixed incentives that people know to bank on”.
Asked how Britain ranked in terms of attractiveness for energy investments, he said the US was “ahead significantly” and that Europe was also ahead of Britain.
'Think twice'
The CEO said that he would “think twice” about investing in more oil in the UK” as there were more attractive locations right now, such as the US Gulf of Mexico.
The energy profits levy was “fundamentally disincentivising the investment in new supplies which are critical if you want to build energy security for the long term”.
Mr Sawan said that the UK had seen more windfall taxes and fiscal changes during his 25-years at Shell than most other countries, and this affected the wider investment climate.