The North Sea’s biggest producer has hit out at the windfall tax on oil and gas companies after claiming a near 700% surge in profits to $2.5bn (£2.1bn) was “all but wiped out” by the levy.
Harbour Energy said on Thursday its pre-tax profits had risen sharply from $315m in 2021 to $2.5bn in 2022, a 682% year-on-year increase. However, its after-tax profits fell from $101m in 2021 to just $8m in 2022.
Despite this, the company announced it would spend $200m buying back its shares and said shareholder returns since December 2021 had totalled $1bn.
Harbour said it has paid $205m in UK windfall tax since it was introduced last May.
However, its total tax expense increased to $2.5bn in 2022, up from $213m a year earlier. This included taxes of just over $700m, along with a one-off tax charge of $1.7bn related to the energy profits levy – effectively money set aside to cover likely windfall tax costs between now and 2028.
The chief executive, Linda Cook, said production rates, margins and safety had improved.
Cook added: “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.
“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.”
Harbour becomes the latest oil and gas company to report a huge increase in underlying profits, after the war in Ukraine pushed up wholesale gas prices and sent household bills soaring.
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Last month, BP and Shell reported record profits for 2022, prompting calls for the energy profits levy to be adjusted to capture a greater proportion of their profits.
However, Harbour has seen its shares slide since the windfall tax was toughened by the chancellor, Jeremy Hunt, in November and has been a vocal critic of the levy.
The Guardian revealed last year that Cook had told Rishi Sunak the windfall tax was “seriously flawed”, and the firm later blamed it for forcing it to make job cuts. The company said a review of its UK operations would conclude later this year.
Harbour, which pumps about 200,000 barrels of oil a day, was formed in 2021 from a merger of the private equity-backed North Sea operator Chrysaor and the heavily indebted peer Premier Oil. Cook is among the best-paid executives in the sector.
Harbour, which is valued at £2.4bn and also has operations in Vietnam, Mexico, Indonesia and Norway, saw its shares fall nearly 3% in early trading on Thursday.
