Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Harbour Energy PLC (HBRIY, Financial) maintained a strong operational performance with production, maintenance, and investments on track.
- The company ended the period with a positive net cash position and increased its dividend per share by 8%.
- Significant progress was made towards completing the Wintershall Dea acquisition, expected in early Q4.
- Harbour Energy PLC (HBRIY) achieved a strong safety performance, with a total recordable incident rate below the industry average.
- The company is making strides in reducing its environmental impact, with greenhouse gas emissions expected to be 15% lower in 2024 compared to two years ago.
Negative Points
- A Tier 2 process safety incident occurred in Indonesia, highlighting the importance of maintenance programs.
- The company faces ongoing inflationary pressures and a stronger British pound, impacting operating costs.
- The UK fiscal environment is evolving, creating uncertainty around future capital allocation and investment opportunities.
- Harbour Energy PLC (HBRIY) experienced a high effective tax rate, impacting profitability.
- The Vietnam asset sale process was terminated and relaunched, indicating challenges in completing the transaction.
Q & A Highlights
Q: Could you provide a long-term vision for Harbour Energy's UK assets, considering potential decline rates and capital expenditure levels?
A: Linda Cook, CEO: Natural decline rates in the UK North Sea are typically around 20% to 25%. With active reinvestment and reservoir management, we've managed to reduce this to about 10% annually. Future capital allocation will depend on the broader portfolio post-Wintershall Dea acquisition and potential changes in the UK fiscal environment. We expect to provide more detailed guidance by the end of the year.
Q: Was Wintershall Dea a specific target for acquisition, or were there other opportunities considered?
A: Linda Cook, CEO: Wintershall Dea was on our radar for some time, but we were also considering other opportunities. Large, complex transactions like this take time, and we continue to explore various options as part of our strategy.
Q: How is Harbour Energy planning to establish a long-term partnership with BASF as a major shareholder?
A: Linda Cook, CEO: We had extensive discussions with BASF about our strategy and vision before the transaction. Both parties are aligned on the future direction of Harbour Energy, and BASF will have two representatives on our Board, contributing to our strategic decisions.
Q: Does the UK government understand the impact of natural decline and the need for continuous investment in the oil and gas industry?
A: Alexander Krane, CFO: We are actively engaging with the government to explain the implications of tax changes on production decline, financials, and jobs. The industry is collectively working to ensure the government understands these impacts.
Q: What are the expected cash flows from the Wintershall Dea acquisition, and how will it affect tax payments in Q4?
A: Alexander Krane, CFO: The $2.15 billion cash payment for the acquisition will be partly funded by cash flows from the acquired assets since June 30 last year. In Norway, tax payments are typically concentrated in Q4, similar to the UK, which will impact cash flow.
Q: How will Harbour Energy manage capital allocation as it becomes a larger global E&P company?
A: Alexander Krane, CFO: Our capital allocation framework remains focused on maintaining an investment-grade balance sheet, investing in solid upstream opportunities, and returning value to shareholders. The global portfolio will require prioritization of projects based on opportunities and risks.
Q: How is Harbour Energy preparing for the integration of Wintershall Dea, and what are the initial steps post-acquisition?
A: Linda Cook, CEO: We are incorporating five intact business units from Wintershall Dea and expanding our corporate center to support the enlarged company. Key leadership additions include Alan Bruce for technical services and Dawn Summers as interim COO to ensure a smooth transition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
