UK North Sea Producer Harbour Energy's Strategic Moves

By Ron Bousso
LONDON (Reuters) – Top British North Sea producer Harbour Energy is seeking to sell stakes in oilfields and revive plans for a U.S. listing amid an investment pullback due to upcoming tax increases.

The Labour government, elected in July, aims to channel oil and gas revenue into renewable energy projects. Finance Minister Rachel Reeves is set to announce tax hikes on October 30.

New environmental guidelines for oil and gas projects are also being prepared, with executives warning that these could deter further investment in the aging North Sea, which has seen production decline by about 75% since its late-1990s peak.

Harbour is revisiting plans to acquire a U.S.-listed company to facilitate a listing and headquarters move. This search was previously halted when Harbour acquired Wintershall Dea's non-Russian portfolio for $11 billion to diversify and boost production, completing the deal last month.

Additionally, Harbour is planning to sell stakes in several North Sea fields, including the Armada, Everest, Lomond, Catcher, and Tolmount areas, to decrease its North Sea exposure.

Harbour declined to comment on the sale, maintaining focus on integrating Wintershall Dea. A spokesperson noted that as a London-listed entity, relocation of the listing wouldn’t be practical given its European operational base.

Investment Concerns and Tax Implications

UK North Sea producers have flagged reduced investments post the Conservative government's introduction of a 25% Energy Profits Levy (EPL) amid rising energy prices following Russia's Ukraine invasion. The tax was later raised to 35% in November and extended to March 2024.

The Labour government is set to increase the windfall tax to 38% from November 1, bringing total headline taxation on oil and gas activities to 78%, one of the highest globally. Moreover, the existing investment allowance, which permits tax offsets from capital reinvestment, will be removed.

Serica Energy Chairman David Latin voiced strong criticism, stating that the UK North Sea has become “un-investible” without a more favorable fiscal regime.

The finance ministry defended its stance, proclaiming efforts to make the UK a clean energy superpower, with £24 billion raised for green industries and emphasizing the oil and gas sector's role in funding this transition.

TotalEnergies CEO Patrick Pouyanne indicated that exploration schedules in the North Sea would be halted due to the uncertain political landscape, further complicating development prospects.

Private-equity backed Neo Energy signaled a slowdown in investments, while Japan Petroleum Exploration (Japex) has initiated a sale of its interest in the BP-operated Seagull oil and gas field. Deltic Energy's CEO also communicated plans for reduced spending, reflecting investors' growing hesitance towards UK investments.

($1 = 0.7708 pounds)