Harbour Energy (LSE:HBR) PLC today predicted it will clear its US$2.3bn debt pile by next year, underlining the buoyant conditions currently for oil producers as the crude price surges ahead.
North Sea-focused Harbour was formed a year ago by a merger of debt-laden Premier Oil with privately-owned Chrysaor in what was seen by many as the last gasp attempt to save the listed business from failure.
Indeed, ahead of the merger’s completion Harbour was the most shorted stock in the market as professional investors bet the only way down for the merged group.
But that was at a time when oil was changing hands for US$55 a barrel, now it is US$100 and the mood in today’s statement was exuberant.
Linda Cook, a former Shell director and chief executive, said: “During 2021, we generated $678 million of free cash flow. As a result, net debt excluding unamortised fees stood at $2.3 billion at year-end, down from $2.9 billion at the time of completion of the Merger.
More than 90% of its output comes from the North Sea. Production in 2021 was 175,000 barrels a day on average, but this is expected to rise by 15% to between 195-210,000 a day in 2022.
Added to the higher crude price, Cook is predicting cash will flood into the business.
“We are generating material and resilient free cash flow, underpinned by our high quality, diverse UK asset base.
“At $100/bbl and 200 p/therm average prices for 2022, we expect to generate between US$1.5 and $1.7bn of free cash flow (after tax and the US$200mln dividend payment) with the potential to be debt-free in 2023.“
Cook also reported reserves had increased to 488mln barrels, or 157% of this time a year ago while announcing a dividend of 11c.
Revenue for the year was US$3.6bn while the group swung to a net profit of US$101mln from a loss of US$778mln.
Shares rose 4% to 412p.