The North Sea’s biggest producer has complained that the windfall tax on oil and gas companies “all but wiped out” its profits last year, at the same time announcing new shareholder payouts that take the total to $1bn since the end of 2021.
Harbour Energy said on Thursday its pre-tax profits rose by nearly 700% in 2022 to $2.5bn (£2.1bn) on higher production and bigger margins making it 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.
Harbour said it had paid $205m in UK windfall tax since it was introduced last May.
Its total tax expense increased to $2.5bn in 2022, up from $213m a year earlier, including a one-off tax charge of $1.5bn related to the energy profits levy – effectively money set aside to cover likely windfall tax costs between now and 2028.
Despite this, the company announced it would spend $200m buying back its shares, announced a final dividend worth $100m and said shareholder returns since December 2021 had totalled $1bn.
However, Richard Murphy, professor of accounting practice at University of Sheffield Management School, said the $1.7bn charge relating to the windfall tax “is an estimate and won’t necessarily arise”.
“The profit hasn’t been wiped out. They won’t be paying all the tax this year – let’s not get out the violins and start feeling too sorry for them yet,” he said.
Announcing the annual results, Harbour’s chief executive, Linda Cook, said the company would seek to invest and expand internationally because of the backdrop in the UK.
She said: “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.”
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.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Harbour Energy is not a household name, but its impact on household energy bills can’t be understated. Left unchecked it would have been another firm to profiteer from the misery caused by the war in Ukraine.
“On this occasion, the windfall tax has started to achieve its purpose and has managed to rein in some of the excess profits of this energy firm. The chancellor can now more confidently ensure that the money raised goes to the households that are still struggling in cold damp homes this winter.”
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.
Shares in Harbour – which has a market value of £2.4bn and also has operations in Vietnam, Mexico, Indonesia and Norway – were up 1% on Thursday.
