Harbour (HBRIY) Warns a Hit to 2023 Production, Shares Drop
Harbour Energy’s HBRIY shares dropped nearly 8% on Thursday after the company reported a decline in production and lower year-over-year revenues. The company reported full-year production of approximately 186,000 barrels of oil equivalent (boe) per day, with an equal split between oil and gas in 2023. While the figure was within guidance, it dropped from the year-ago level of 208,000 boe per day. The full-year revenues in 2023 were approximately $3.9 billion, down from $5.4 billion in 2022.
According to the company’s statement, the decline in production was due to planned shutdowns at operated hubs and the Beryl area, along with planned pipeline outages. The fall in production also stems from the effect of the deferred partner-operated wells at Beryl and Elgin Franklin in the U.K. and the probable sale of the Vietnam business. Due to lower volumes in production, unit operating costs have been updated to $18 per barrel equivalent for the current year, up from $16 per barrel equivalent in 2023.
The upstream player reported a substantial reduction in debt, closing the year at around $200 million, down from $800 million in the previous year and $2.3 billion in 2021. The company’s estimated total capital expenditure was $1 billion, inclusive of $300 million utilized for decommissioning (within guidance) and free cash flows of around $1 billion after tax and shareholder distributions. The total capital expenditure is set to rise to $1.2 billion in the current year, propelled by higher investment in the North Sea and elsewhere.
Harbour’s operational highlights include the successful start of the Tolmount East during the fourth quarter, the development of the Talbot gas field and the appraisal of the Leverett discovery in the United Kingdom.
Moreover, after the successful discovery of gas reserves in the Layaran-1 project, Harbour will continue exploration in the Gayo and Halwa wells in Indonesia. In Mexico, the company has made significant progress by obtaining regulatory approval for the Zama Development Plan. The drilling of the Kan oil discovery in Block 30 has also been initiated.
Harbour secured the Track 2 status from the U.K. government for its carbon capture and storage projects. The firm has also proceeded with the Viking project and earned front-end engineering design for the same. Additionally, the company has declared that it will complete the acquisition of the Wintershall Dea asset portfolio, announced in December 2023, in the fourth quarter of 2024.
This year, Harbour expects to pay $200 million in dividends. Commenting on its production outlook, Harbour has said that production volumes in 2025 will be similar to 2024. Total capital expenditure and operating expenses are expected to remain stable or go down, resulting in significantly higher free cash flows in 2025.
Zacks Rank and Key Picks
Harbour is one of the largest oil and gas companies in the United Kingdom. Currently, HBRIY carries a Zacks Rank #3 (Hold).
Investors might want to look at some better-ranked stocks in the energy sector, such as Oceaneering International OII, Vaalco Energy EGY and Western Midstream Partners, LP WES. While Oceaneering International and Vaalco Energy currently sport a Zacks Rank #1 (Strong Buy) each, Western Midstream Partners holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Oceaneering International is a market-leading supplier of offshore equipment and technology solutions to the energy industry. The company projected an increase in free cash flows for 2024. The bright outlook is supported by the growing market demand for its mobile robotic forklifts and underride vehicles.
Vaalco Energy is an independent energy company involved in upstream operation business with a diversified presence in Africa and Canada. The company’s production outlook appears bright, attributed to its large inventory of drilling locations in premium Canadian Acreage.
Western Midstream Partners has a profitable portfolio of midstream assets. The midstream operator completed its acquisition of Meritage Midstream Services II, LLC in the Powder River Basin, making WES the largest gathering and processing operator in the region. WES shows a noticeable increase in total throughput for natural gas, crude oil and NGLs, and produced water propelled by new productions coming online and effective operational efficiency in the Delaware Basin.
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