Harbour Energy (LON:HBR) used its 2025 full-year results call to outline a year of record production and higher free cash flow, while emphasizing that recent portfolio moves—most notably the completion of the LLOG Exploration acquisition in the U.S. Gulf of Mexico—are intended to improve margins and cash generation through the end of the decade.
2025 highlights and portfolio changes
CEO Linda Cook framed the update against a backdrop of geopolitical disruption and commodity price volatility, saying the company is focused on controllables such as operational performance, capital discipline, risk management, and shareholder value. Cook said Harbour has grown “from zero to more than 450,000 barrels per day over the last decade,” driven by disciplined M&A and reinvestment in acquired assets.
Cook also highlighted progress on growth projects, including the transfer of operatorship of the Zama development in Mexico from Pemex to Harbour.
She pointed to three transactions announced in December that “materially” improve portfolio quality:
- Indonesia divestment: Sale of mature, higher-cost Indonesian producing assets and the Tuna development project for $215 million.
- Waldorf acquisition (UK): A $170 million acquisition that management said brings approximately $900 million of value through tax losses, and unlocked $350 million of trapped cash upon completion.
- LLOG acquisition (U.S. Gulf): Entry into U.S. deepwater via the purchase of LLOG Exploration, described as oil-weighted and fully operated. Cook said it helps secure production of 475,000–500,000 barrels per day to the end of the decade and should increase cash flow over time as U.K. declines are replaced with U.S. volumes under an “attractive fiscal framework.”
Operational performance and growth priorities
COO Nigel Hearne said the portfolio is now “more focused, competitive, and resilient,” with four priorities: safety and reliability, margin expansion through cost and capital efficiency, resource-to-reserve conversion, and sustainable free cash flow growth.
Hearne said Harbour saw a slight increase in its recordable injury rate in 2025 as it expanded into new countries, while process safety improved with fewer Tier 1 and Tier 2 loss-of-containment events, though the company recorded one Tier 1 event in Mexico. He also said Harbour delivered a “step change reduction” in greenhouse gas emissions intensity.
On execution, Hearne said 2025 production came in at the “very top” of guidance, driven by Wintershall Dea’s full-year contribution and strong delivery across the asset base. He cited reliability of greater than 90% and said unit OpEx fell 20%, helped by lower-cost barrels from Wintershall Dea, a 10% cost reduction effort in the U.K., exit of Vietnam volumes, and early synergies from scale.
By region, Hearne highlighted:
- Norway: Completion of the Harbour-operated Maria Phase Two project at the end of 2025, described as on time and within budget. Dvalin North remains on track for mid-2026 completion. Hearne also referenced the recently announced Omega Sør discovery (24.5% share), with estimated gross recoverable volumes of 25–89 million boe, which he said could extend the Snorre field’s life beyond 2040.
- United Kingdom: A strong 2025 performance “despite continued fiscal headwinds,” supported by production efficiency and turnaround execution. He cited rapid tiebacks such as Jocelyn South coming on stream three months after discovery, strong subsurface performance at Taggart, and intervention campaigns that lifted the J Area to rates “not seen for over a decade.”
- Argentina: Stable, low-cost production supported by conventional CMA-1, plus a large 2C resource position in Vaca Muerta. Hearne said Harbour expects a 16-well program at San Roque later in the year, and noted participation in the Southern Energy LNG project with export permits and incentives secured; 80% of the first vessel’s offtake is contracted and first LNG is targeted for end-2027.
- U.S. Gulf of Mexico: A 100% operated, oil-weighted portfolio centered on Who Dat, Buckskin, and Leon Castile. Hearne said production is expected to double by 2028, with about $400 million per year planned investment over the next three years and 10–15 wells. He cited development well IRRs “in excess of 40%” and low-risk, infrastructure-led exploration opportunities.
- Mexico: Zama and Khan positioned as long-term growth hubs, with a simplified Zama phase development plan submitted to lower breakevens and risk. At Khan, resource was upgraded by 50% to 150 million boe gross. Both projects are expected to enter FEED this year, with a target to be FID-ready within about 18 months, “possibly one project as early as year-end,” subject to partner alignment, FPSO availability, and regulatory approvals.
Hearne said Harbour expects to spend $2.0–$2.3 billion per year from 2027 and sustain production between 475,000 and 500,000 boe/d through the end of the decade, with operated CapEx rising to 60% over that period. For 2026, he said the company anticipates at least 150% reserves replacement supported by the LLOG and Waldorf additions.
Financial results, debt, and 2026 guidance
CFO Alexander Krane said Harbour generated $1.1 billion of free cash flow in 2025, above guidance, and reduced net debt. He also said declared shareholder distributions increased to approximately $0.5 billion in 2025.
Krane described Harbour’s portfolio mix as 40% Brent-linked and 40% European gas exposure, and reiterated the company’s approach to hedging two years forward, targeting 50% of economic exposure in year one and 30% in year two with a mix of swaps and collars. He said the company has continued hedging during recent volatility, highlighting “attractively structured collars,” particularly in European gas.
On the income statement, Krane said revenue and adjusted EBITDA rose 65% and 77%, respectively, driven by higher production and stronger gas realizations, partly offset by lower realized oil prices. Unit operating costs fell 22% to $12.8 per boe. Profit before tax rose to $2.8 billion (or $3.4 billion adjusted). Harbour reported a $0.2 billion loss after tax, which Krane attributed to a more than 100% effective tax rate, while adjusted profit after tax increased to $0.6 billion. He cited adjustments including $0.4 billion of impairments (license exits and write-offs in Mexico, North Africa, and CCS), $0.2 billion of intra-company FX losses, and $0.3 billion related to the U.K. EPL extension to 2030.
Cash flow from operations was $7.3 billion in 2025, with total capital expenditure of $2.3 billion and cash taxes of $3.5 billion, “substantially in the U.K. and Norway.” Net debt fell to $4.4 billion at year-end.
Krane said Harbour completed the $3.2 billion LLOG acquisition in February 2026, funded by $0.5 billion equity and $2.7 billion cash, including a $1 billion bridge facility and a $1 billion three-year term loan. Net debt increased to $7.2 billion on completion, and management said it aims to de-lever by repaying the term loan over the next three years.
Updated 2026 guidance reflects LLOG completion in February and expected closing of Waldorf and Indonesia transactions by end of Q2:
- Production: 475–500 kboe/d
- Unit OpEx: approximately $14.5 per boe (LLOG OpEx expected to be $19 per boe in 2026, declining to about $12 per boe by 2030)
- Total CapEx: $2.2–$2.4 billion (including about $0.1 billion related to Waldorf)
At $65 Brent and $11 European gas, Harbour expects approximately $0.6 billion of free cash flow in 2026. Krane also provided sensitivities, stating that a $5 per barrel move in annual oil prices impacts free cash flow by about $170 million, while a $1 change in European gas prices impacts free cash flow by about $150 million. Using “today’s curves” for the full year, he said free cash flow would be closer to $1.4 billion.
New distribution policy and outlook
Krane said Harbour is updating its shareholder returns framework to better align distributions with cash flows. The company now targets returning 45%–75% of annual free cash flow, including an initial base dividend of $0.161 per voting ordinary share, equivalent to approximately $300 million. When leverage is above 1x, payouts are expected toward the lower end of the range to prioritize debt reduction; when leverage is below 1x, distributions are expected toward the upper end.
The board proposed a final dividend of $0.0805 per share, equivalent to $150 million, representing a 45% free cash flow payout for 2025. For 2026, at $65 Brent and $11 European gas, management expects to distribute $300 million; Krane also illustrated that at $75 Brent and $14 European gas, a 45% minimum payout would equate to about $600 million.
Looking further out, Krane said Harbour expects free cash flow to rise to $1 billion in 2028, supported by increasing U.S. Gulf production and U.K. Waldorf financial synergies from 2027. He also said the effective tax rate is expected to fall as profitable production shifts toward lower-tax jurisdictions, noting a 23% tax rate in the U.S. Gulf and depreciation benefits tied to the LLOG purchase price.
Q&A: integration, hedging, U.K. fiscal regime
In Q&A, Cook said integration of LLOG was “going really well” and described it as less complex than Wintershall Dea due to the single-country footprint and lack of overlap. Krane said future distributions could be a mix of higher dividends and share buybacks, with the mix assessed “closer to time.”
On volatility and operational levers, Cook said production and CapEx for the current year are largely set by prior decisions, and Harbour is not making plans that assume elevated prices persist. On hedging, Krane said the company remains active and has increasingly used collar structures, highlighting unusual market “skew” that has created opportunities—particularly in gas—to lock in floors while retaining upside.
Asked about potential divestments beyond the five core countries, Cook said Germany and parts of MENA are outside the current core focus, but added those assets generate positive cash flow and “are certainly doing no harm” today. She said no additional disposals are built into the company’s current production or free cash flow forecasts, and that the free cash flow outlook presented excludes divestment proceeds.
On the U.K. Energy Profits Levy (EPL), Cook said Harbour welcomed engagement with the Chancellor and reiterated its view that the current fiscal environment has reduced investment and accelerated domestic production declines. Krane said the company has advocated for earlier implementation of a future fiscal regime currently expected to start in 2030 and said Harbour is hopeful for progress.
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.
