Windfall tax forces Harbor Energy to cut 350 jobs as it seeks to save £40m a year from 2024
Oil and gas group Harbor Energy is cutting hundreds of jobs in the UK after the government’s profits were wiped out by the windfall tax.
The FTSE 100 company, the largest energy producer in the North Sea, said it expected to cut around 350 positions to save an estimated £40 million a year from 2024.
Most of the losses are expected to come from the onshore operation in Aberdeen. Harbor expected the redundancies in the first half of 2023 to create a one-off charge of £12 million.
Cuts: Harbor Energy, led by boss Linda Cook, said it expected to cut around 350 positions to deliver estimated savings of £40m a year from 2024
The company said the windfall tax had led to ‘reduced activity in the UK’ in parts of the sector, with its partners canceling programs in the Beryl and Elgin-Franklin oil fields in the North Sea. Shares fell 0.1 percent, or 0.2 pence, to 243.1 pence yesterday.
The decision to cut staff came after Harbour’s boss Linda Cook said in March that profits had been “virtually wiped out” by the windfall tax.
Rishi Sunak introduced a 25 percent profit tax on the industry when he was chancellor, when energy prices skyrocketed after the Russian invasion of Ukraine. This was later increased to 35 percent by his successor Jeremy Hunt.
Cook said the tax, which effectively imposes a 75 per cent corporate tax rate on North Sea profits, had a “disproportionate impact” on UK-focused oil and gas companies.
Harbor reported an after-tax profit of £6.7m last year, down from £85m in 2021, due to what she said was a £1.3bn levy related to the windfall levy.
It said the huge tax burden meant it had failed to bid for new projects in the North Sea and scaled back its UK business to focus elsewhere.
Harbor currently has more than 80 percent of its assets in UK waters, but is keen to diversify into other areas such as Mexico and Indonesia.
Plans to reduce headcount came as the company reported what Cook said was a “strong” update for the first three months of 2023 ahead of its annual general meeting with investors.
Harbor reported that production in the period averaged 202,000 barrels of oil per day, up from 215,000 in the year-ago quarter, but in line with guidance.
Revenues were estimated at £870 million, while the company’s debt was cut by £475 million to £158 million since the end of last year as it monetized higher global energy prices.