Harbour Energy Reports Loss as North Sea Windfall Tax Undercuts Profits

Harbour Energy, the UK’s largest oil and gas producer, has reported a post-tax loss for the past financial year, as higher taxes on North Sea operations offset a significant increase in pre-tax profits. The latest results highlight the challenges the company faces in navigating the country’s complex tax regime and its lasting impact on the sector’s profitability.

The company posted a pre-tax profit of $1.2 billion, up from $616 million in the previous year. This impressive growth was driven by a 39 per cent surge in production following Harbour’s acquisition of Wintershall Dea’s assets in September. Harbour also benefited from higher gas prices through favourable hedging activity. Despite such a strong performance before taxation, Harbour faced an overwhelming tax expense of $1.3 billion, more than double the $571 million paid the year prior. This pushed the company into a post-tax loss of $93 million compared to the $45 million post-tax profit it achieved in 2023.

The excessive tax burden has largely been attributed to the UK’s Energy Profits Levy (EPL), also known as the windfall tax, initially imposed in 2022. The levy, which started as a 25 per cent surcharge on profits, has not only been increased over time but also extended until 2030, now adding an additional 38 per cent on top of the 40 per cent standard rate of tax for North Sea producers. The combined effective tax rate for Harbour reached 108 per cent, drawing criticisms from the company’s leadership.

Linda Cook, Harbour Energy’s chief executive, expressed concerns over the future of the UK energy sector under such a regime. She said the tax was far from simply targeting excess profits and was instead absorbing all profits generated, including those stemming from long-term strategic investments. Cook underlined the urgency of revisiting the fiscal framework before 2030 to prevent irreversible damage to the industry.

Harbour’s shares fell 11.5 per cent following the results, closing at 189.5p. The company, which has significantly diversified since its reverse takeover of Premier Oil in 2021, now operates across the UK, Norway, and Germany, with further assets in Mexico, Argentina, and Libya. Despite speculation about relocating its listing from London to the more oil-friendly United States, Cook reaffirmed the company’s position to remain listed in London, calling it the most pragmatic choice given Harbour’s European-focused production base.

The EPL, introduced by then-chancellor Rishi Sunak following a sharp rise in energy prices after the Russian invasion of Ukraine, has been repeatedly criticised by industry leaders. Cook called for a fair and stable fiscal regime that balances the need for public revenues while fostering a competitive investment climate for oil and gas companies in the UK.

Harbour Energy continues to evaluate joint ventures, asset sales, and other strategic initiatives to maximise shareholder value amidst ongoing fiscal and regulatory pressures. However, the company remains vocal in its engagement with the government to address what it calls a challenging investment environment.