Taken at face value windfall taxes completely wiped out independent North Sea producer Harbour Energy’s profit for the year but take a closer look and the story is a bit more complicated.
Effectively the company is putting all the tax implied by the new levy out to 2028 through its books for 2022 – notably Harbour still generated free cash flow of more than $2 billion and managed to halve its net debt while paying out a decent level of dividends.
“This situation is unlikely to engender a great deal of sympathy, particularly for those who are struggling with the cost of heating their homes,” said AJ Bell’s Russ Mould.
“Whether cynical or not – amplifying what is essentially an accounting decision helps make Harbour’s case that UK oil and gas companies are being squeezed too hard.
“That doesn’t mean its argument should not be taken seriously. Tax on oil and gas in the UK is complex and has been subject to lots of changes over the years. This does make it difficult for companies to commit to long-term investment plans. Harbour is backing up its strong words with action, reducing its headcount in the UK and announcing plans to reduce domestic activity and ramp up overseas operations.
“Given businesses like Harbour Energy have the option of investing elsewhere, there is a risk of the UK’s energy security being undermined by understandable moves to tax profit which was indisputably boosted by the knock-on effects of the invasion of Ukraine.”