HARBOUR Energy has vowed to ramp up drilling activity in the North Sea as it returned to profit in the first half – and said it expects to increase production during the remainder of the year.
The oil and gas giant, formed by the bumper merger of Premier Oil and Chrysaor last year, saw production fall in the first half as maintenance programmes were deferred because of Covid-19 and unplanned outages.
Production was recorded at 151,000 barrels of oil equivalent per day in the six months to June 30, down from 187,000 boepd in the first half of last year, with the decline partially offset by a three-month contribution from the Premier portfolio.
The company reported that operating costs per barrel of oil equivalent had risen to $15.6 from $10.2 in the first half of last year. It said this reflected lower production and a rise in total capital expenditure, including decommissioning spend, to $380m from $364m.
Shares in the company dropped by six per cent 358.6p.
However, the results for the first half show that the company had returned to the black, with Harbour reporting a pre-tax profit of $120m following a loss of $224m last year.
And the company said drilling across its operated assets had now returned to pre-Covid levels, noting that it will lead to increased capital expenditure in the second half. It generated $302m of free cash during the first half, down from $475m, after making $206m of tax payments. These related largely to Chrysaor’s UK activities last year. It recorded tax receipts of $7m.
Harbour was created from the all-share merger of private equity-backed Chrysaor and Premier Oil in a deal first announced in October last year. The reverse takeover of Premier by Chrysaor, which came as North Sea players grappled with the huge fall in demand arising from the coronavirus, created the largest independent oil and gas company on the London Stock Exchange. Harbour employs around 1,500 people in Scotland.
In half-year results published, yesterday the company that the merger of Chrysaor and Premier Oil was complete, with the “integration and realisation of synergies progressing as planned.”
While there has been considerable controversy lately over further development of North Sea oil and gas industry, as concerns over climate change grow, Harbour signalled its commitment to the area. It said it would ramp up drilling activity at two rigs in the J-Area in the central North Sea and at the AELE Hub east of Aberdeen, as well as at the mature Elgin/ Franklin and Beryl where it holds material non-operated stakes. The company said it would also increase activity on the Tolmount gas field in the UK southern North Sea.
Linda Cook, chief executive of Harbour Energy, said: “The first half saw us deliver positive free cash flow and execute a significant transaction, whilst retaining a robust balance sheet.
“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.”
The giant Catcher field in the North Sea, in which Harbour holds a 50 per cent equity stake, contributed to 12,000 boepd of the company’s production during the first half. The company said well delivery “remains in excess of the FPSO nameplate capacity and the gas reinjection trials are having a positive impact on oil production rates.”
Elsewhere, Harbour announced that it decided to exit the Sea Lion project in the Falkland Islands, in which it holds a 60% operated interest. It has also decided to exit exploration licence interests in the Ceara Basin in Brazil and the Burgos Basin Mexico.
Harbour said: “While the Sea Lion discovery has significant resource potential, development of the project is not deemed a strategic fit for Harbour. Therefore the group has decided to explore the options to exit the project and its other license interests in the Falkland Islands.
“Post period end, Harbour took the decision to exit its exploration licence interests in the Ceará Basin in Brazil and in the Burgos Basin in Mexico. This is in line with the group’s exploration strategy which is focused primarily on infrastructure led, lower risk opportunities in areas with an existing Harbour producing presence.”
Harbour reiterated its expectation of producing 170,000 to 180,000 boepd for the full year. Production is expected to higher in the second half with maintenance programmes completed, additional wells on stream and a full contribution from the Premier portfolio.