Harbour Energy reports solid revenue, production growth

(Sharecast News) - Harbour Energy reported a sharp rise in revenue and production in the first quarter on Thursday, supported by the full contribution from Wintershall Dea assets and strong commodity prices, while also delivering $0.7bn in free cash flow and a $0.5bn reduction in net debt. The FTSE 250 energy company said quarterly revenue rose to $2.8bn, up from $0.9bn a year earlier, driven by higher volumes and post-hedge realised prices of $74 per barrel for oil and $14 per thousand standard cubic feet for European gas.

It achieved production of 500,000 barrels of oil equivalent per day, nearly tripling output from the same period last year.

That included 180,000 barrels of oil equivalent per day from Norway, now Harbour's largest producing country.

Operating efficiency remained high, with production uptime at 90% and unit operating costs down to $13 per barrel of oil equivalent, from $18 per barrel in the first quarter of 2024.

Capital expenditure rose to $0.5bn, reflecting increased activity across the expanded portfolio.

Harbour generated $0.7bn in free cash flow during the quarter, supported by the timing of tax payments and capex phasing.

Net debt fell from $4.7bn at year-end to $4.2bn by 31 March, although currency movements partially offset gains by increasing the dollar value of euro-denominated bonds.

The company ended the quarter with $3.7bn in liquidity, including $1.3bn in cash.

Recent financing activity included the issue of $1.9bn in new debt, comprising $0.9bn in oversubscribed senior notes and €0.9bn in hybrid notes, which pre-funded all maturities through 2027.

Credit ratings of Baa2 and BBB- with stable outlooks were reaffirmed by Moody's and Fitch.

Operationally, new wells came online across the UK, Argentina, Egypt and Germany, while Harbour advanced multiple near-term growth projects.

Those included the imminent start-up of Maria phase two in Norway, and further drilling in the UK and Argentina.

The company also took a final investment decision on the six million tonnes per annum Southern Energy LNG project in Argentina, and reported an upgraded resource estimate at the Kan discovery in Mexico.

In Egypt and Norway, recent exploration yielded several oil and gas finds close to existing infrastructure.

Harbour added that in the UK, it had initiated a restructuring of its Aberdeen-based workforce, targeting at least a 25% reduction in headcount in response to persistently challenging financial and regulatory conditions.

Guidance for full-year production was raised slightly to between 455,000 and 475,000 barrels of oil equivalent per day, while capital expenditure was now forecast at $2.4bn to $2.5bn.

Free cash flow for the year was expected at around $0.9bn, based on commodity prices of $65 per barrel and $12 per thousand cubic feet for the rest of the year, down from a prior $1bn forecast.

The outlook incorporated accelerated cost-saving initiatives and programme high-grading to mitigate lower price assumptions.

Harbour reaffirmed its $455m annual dividend policy, with a final dividend of $227.5m to be paid on 21 May, and said it could consider share buybacks later in the year depending on market conditions.

"We had a strong start to the year - production averaged 500,000 barrels of oil equivalent in the first quarter, reflecting the addition of the high quality Wintershall Dea portfolio and excellent operational delivery," said chief executive officer Linda Z Cook.

"This, together with improved European gas price realisations and lower unit costs, drove significant free cash flow of $0.7bn.

"Recent market volatility reinforces the benefits of our diverse portfolio and our prudent approach to risk management."

In relation to that, Cook said that since early March, Harbour Energy had successfully issued $0.9bn of senior notes and €0.9bn of hybrids.

"In addition, we are taking mitigating actions which, together with our improved production outlook, largely offset the impact of lower commodity prices.

"Given this progress, we remain well positioned to deliver against our capital allocation priorities."

At 0821 BST, shares in Harbour Energy were up 8.27% at 170.1p.

Reporting by Josh White for Sharecast.com.