Harbour Energy (LON:HBR) executives outlined plans to acquire privately held offshore operator LLOG Exploration Company for $3.2 billion, positioning the deal as a strategic entry into the deepwater U.S. Gulf of America and the company’s third transaction announced in December.
On a conference call held on short notice during the holiday period, Harbour said the acquisition would add a new core business unit alongside Norway, the U.K., Argentina, and Mexico. Management emphasized the Gulf’s established infrastructure and service ecosystem, supportive fiscal and regulatory regime, and “considerable running room” from a subsurface perspective as key reasons the basin has long been a target for the company.
Deal terms and timing
Upon completion, the sellers are expected to own 11% of Harbour’s ordinary voting shares, with 70% of those shares subject to a one-year lock-up. Harbour said the only third-party condition mentioned for closing is the expiration or termination of waiting periods under the U.S. Hart-Scott-Rodino Act.
Krane said Harbour expects to complete the transaction toward the end of Q1 2026. (Management later referenced completing “before the end of the first quarter,” describing that timeframe as “in less than three short months.”)
Portfolio rationale and operating outlook
Harbour CEO Linda Cook framed the acquisition as consistent with Harbour’s stated M&A approach: “recycling capital for reinvestment into cash flow accretive growth opportunities,” rather than pursuing “scale for scale’s sake.” She contrasted LLOG’s assets with other Gulf opportunities Harbour had evaluated and passed on due to “asset quality or valuation,” describing those prior candidates as more mature portfolios with shorter reserve lives and limited embedded growth.
According to Chief Operating Officer Nigel Hearne, LLOG’s portfolio is anchored in the Miocene and Lower Tertiary deepwater trends and is dominated by three long-life hubs with high-rate wells:
- Who Dat (Mississippi Canyon)
- Buckskin (Keathley Canyon)
- Leon-Castile (Keathley Canyon)
Hearne said LLOG currently runs one rig across the three hubs and Harbour plans to continue that approach into 2026, with potential for a second rig thereafter. At Who Dat, Harbour expects a focus on infill drilling and continued progress on the Who Dat East and South discoveries, with potential upside in deeper reservoirs.
Hearne highlighted Buckskin as an example of LLOG’s operational performance, stating the development was delivered with “half the planned wells and a quarter of the budgeted cost” and that only two initial wells were needed to reach targeted output. He said those wells ranked among the top 10 producing wells in the Gulf of Mexico in 2021 and 2022, adding that four wells have since been brought online and a fifth was being completed during the call.
Leon-Castile, which Hearne said started up in October, was described as a long-term development with significant drilling inventory. He said development was enabled by redeploying the Salamanca floating production system, which he characterized as the first of its kind in the Gulf and a platform for future tiebacks.
Reserves, growth targets, and partners
Management said the deal adds more than 270 million barrels of 2P reserves, an increase of 22%, and extends Harbour’s reserve life through LLOG’s 22-year reserves-to-production ratio. The acquisition also shifts Harbour’s 2P reserves mix back to roughly a 50/50 oil and gas weighting, according to Cook, and is expected to lower the company’s effective tax rate and improve free cash flow per barrel margins. Harbour said the deal is expected to be free cash flow per share accretive from 2027.
On production, Harbour said LLOG’s output is expected to double from 34,000 barrels per day (referenced as the first half of the year) by 2028, representing a 25% three-year compound annual growth rate, driven by Leon-Castile ramp-up and drilling opportunities near existing hubs. Hearne also said the portfolio includes about 500 million barrels of oil equivalent of prospective resource and noted LLOG’s exploration record, including drilling more than 300 wells since 2002 and being responsible for “roughly one in three” Gulf discoveries since 2014.
In response to a question on planned activity, Hearne said Harbour expects to see eight wells come online over the next 24–25 months as part of the production growth. He also provided working interests and partners across the hubs, stating Harbour’s interests are just over 33% in Buckskin, 45% in Who Dat, 33% in Leon, and around 48% in Castile. He cited partners including Repsol, Ridgewood, Navitas, Karoon, Talos, and Westlawn.
Funding, leverage, and shareholder returns
Krane said Harbour will add debt to finance the acquisition, with opening post-merger leverage expected to be “slightly higher” than the company’s through-the-cycle goal of staying below 1x. He said Harbour has a plan to deleverage over the next few years, supported by cash flow generation, and expects to refinance a bridge facility in “relatively short order” with new bond issuance, citing the benefits of Harbour’s investment-grade rating.
Cook and Krane repeatedly linked the LLOG deal to two other December transactions: the $215 million sale of mature Indonesian production and the stalled Tuna project, and the $170 million acquisition of Waldorf in the U.K., which management said brings $900 million in tax losses and unlocks $350 million of trapped cash. Harbour said the three transactions together are expected to materially increase free cash flow between 2026 and 2030.
Harbour also said it will move from a fixed dividend policy to a payout distribution policy incorporating a base dividend and share buybacks. Krane said the change is intended to align distributions more closely with cash flows and peer practice for commodity-exposed businesses, and stressed it “does not necessarily mean a lower dividend.” Management said additional details will be provided alongside full-year results in early March.
Addressing the seller base, Cook said LLOG is privately held by “a private family” originating in Louisiana, and that a majority of the Harbour shares received will be held in a private trust as part of a long-term investment portfolio.
Harbour executives repeatedly highlighted the importance of acquiring LLOG’s organization alongside the assets, describing the team as a key part of establishing a durable U.S. platform and noting cultural fit and seller priorities beyond price as factors in securing the deal.
About Harbour Energy (LON:HBR)
Harbour Energy is the largest London-listed independent oil and gas company with significant positions in Norway, the UK, Germany, Argentina, Mexico, North Africa and South East Asia.
