Record output, rising cash flow and a new returns blueprint
Harbour Energy’s 2025 numbers are big. Production hit a record 474 kboepd (thousand barrels of oil equivalent per day), up 84% thanks to a full year from the Wintershall Dea assets and strong delivery across the portfolio. Unit operating costs fell 22% to $12.8/boe, which is exactly what you want to see when volumes are rising.
Free cash flow jumped to $1.1 billion, giving management the confidence to launch a new shareholder distributions policy tied directly to free cash flow. There is also a lot happening strategically: operator status at the Zama oil field in Mexico, progress on Argentina LNG, the sale of Indonesia producing assets, a pending UK deal with Waldorf, and, post year end, the $3.2 billion LLOG acquisition in the US Gulf of Mexico.
Headline numbers investors should know
| Metric (FY 2025) | Result |
|---|---|
| Production | 474 kboepd (2024: 258 kboepd) |
| Realised prices (post hedge) | Oil $69/bbl, European gas $13/mscf |
| Revenue and other income | $10.3 billion (2024: $6.2 billion) |
| Adjusted EBITDAX (profit pre interest, tax, DD&A and exploration) | $7.2 billion (2024: $4.1 billion) |
| Free cash flow | $1.1 billion (2024: $(0.1) billion) |
| Adjusted profit after tax | $0.6 billion |
| Reported loss after tax | $(0.2) billion (effective tax rate 106%) |
| Unit operating cost | $12.8/boe (2024: $16.5/boe) |
| Net debt (year end) | $4.3 billion, rising to $7.2 billion post LLOG |
Note the reported loss is driven by a heavy tax burden, including a $311 million deferred tax charge from the UK Energy Profits Levy extension, plus $0.7 billion of pre-tax impairments and exploration write offs across North Africa, Mexico and CCS.
New shareholder returns policy: what changes and why it matters
Harbour will now pay out 45-75% of annual free cash flow, anchored by an initial base dividend of 16.10 cents per voting ordinary share (total c.$300 million). While leverage is above 1.0x, expect payouts toward the lower end as they prioritise debt reduction. Below 1.0x, the payout should move up the range.
For 2025 specifically, the Board declared a final dividend of 8.05 cents per voting ordinary share (c.$150 million). Including the interim dividend and a $100 million buyback, total 2025 distributions were $478 million, roughly 45% of free cash flow.
My take: this is a cleaner framework that links your cash returns to actual cash generation, with sensible guardrails around the balance sheet. It should reduce the stop-start feel that commodity cycles can create.
2026 outlook: steady volumes, capex step up, and sensitivity to prices
- Production: 475-500 kboepd. Jan-Feb averaged 509 kboepd including a month of LLOG.
- Unit operating costs: c.$14.5/boe.
- Total capital expenditure: $2.2-2.4 billion (includes LLOG and Waldorf).
- Free cash flow: c.$0.6 billion at $65/bbl Brent and $11/mscf European gas, excluding c.$0.2 billion one off transaction costs.
Price sensitivity is clear: each $5/bbl change in Brent moves 2026 free cash flow by c.$170 million; each $1/mscf change in European gas shifts it by c.$150 million. About 50% of 2026 European gas and 40% of Brent exposure is hedged at $11/mscf and $71/bbl respectively, which helps dampen volatility.
Strategy in action: deals, growth projects and portfolio clean up
LLOG: US Gulf growth engine
Completed in February 2026 for $3.2 billion, LLOG brings an operated, oil weighted deepwater portfolio with long reserve life and a thick inventory of high return drilling opportunities. Expect this to support higher margin barrels and free cash flow growth into the back half of the decade.
Waldorf: improving UK resilience
The $170 million Waldorf purchase, slated to complete by end Q2 2026, is about improving UK competitiveness. Management highlights potential value from UK tax losses of c.$900 million and unlocking c.$350 million of trapped cash, both helpful against a tougher fiscal backdrop.
Exits and focus
Vietnam is done and the sale of Natuna Sea Block A and Tuna in Indonesia for $215 million is expected by Q2 2026. This trims higher cost or sub scale assets and recycles capital toward better returns.
Mexico and Argentina: material medium term catalysts
- Zama (Harbour 32%): Harbour is now operator and pursuing a more capital efficient phased FPSO development. FEED in 2026 ahead of FID.
- Kan (Harbour 70%): gross resource estimate up 50% to 150 mmboe; development options maturing ahead of FEED.
- Southern Energy (Argentina, Harbour 15%): a two vessel, 6 mtpa LNG project now under construction, with first gas liquefaction expected end 2027 and the second vessel end 2028.
Operational quality: costs down, reliability up, emissions intensity lower
Unit operating costs fell to $12.8/boe. Safety metrics were stable to slightly weaker with TRIR at 1.1 per million hours (2024: 1.0). Greenhouse gas intensity improved sharply to 13 kgCO2e/boe (2024: 18), helped by portfolio mix and decarbonisation efforts.
Reserves and resources remain substantial at 3.0 bnboe (2P plus 2C) at year end, though down from 3.2 bnboe due to production and portfolio high grading. 2P reserves were 1.12 bnboe and 2C resources 1.84 bnboe. Management expects more than 100% 2P reserves replacement over 2025-2028, supported by the US Gulf, Mexico, Norway and Argentina.
Balance sheet and tax: the rubs to watch
Year end net debt was $4.3 billion with leverage at a comfortable 0.6x, but post LLOG net debt moved to $7.2 billion. Guidance is for leverage to be slightly above the sub 1.0x target at year end 2026, trending back to 1.0x in 2028. Investment grade ratings remain in place, albeit with a negative outlook or credit watch at two agencies.
Taxes remain heavy. The effective tax rate was 106%, inflated by the UK Energy Profits Levy extension to March 2030, which drove a $311 million deferred tax charge. That, plus impairments and exploration write offs of $0.7 billion pre tax, explains why adjusted profit was positive while reported profit was negative.
Positives, pressures and my read across for investors
What looks good
- Operational beat: record volumes, lower costs, strong delivery in the UK and Norway.
- Cash generation: $1.1 billion free cash flow in a year of lower commodity prices.
- Clearer returns framework: 45-75% of free cash flow with a defined base dividend.
- Growth runway: LLOG, Zama, Kan and Argentina LNG support higher margin barrels and free cash flow later this decade.
- Risk management: meaningful 2026 hedging in place.
Where the strain shows
- Tax drag and impairments: reported loss and a 106% effective tax rate underline the UK fiscal headwind.
- Leverage: net debt rises to $7.2 billion post LLOG. The new policy wisely flexes payouts while deleveraging.
- Costs and capex: 2026 opex per barrel nudges up to c.$14.5 and capex rises to $2.2-2.4 billion as growth is funded.
- Reserves optics: 2P reserves eased to 1.12 bnboe with resource life supported by 2C and upcoming projects.
Overall, this is a solid set of results with a pragmatic capital framework. Near term, watch free cash flow against the $65/$11 pricing deck, the pace of deleveraging, and execution on LLOG. Medium term, FIDs and delivery at Zama and Argentina LNG are likely to be the main share price catalysts, alongside any UK fiscal developments.
Key dates and watchlist for 2026
- Completion milestones: Waldorf UK deal and Indonesia divestment expected by end Q2 2026.
- Project gates: Zama and Kan FEED during 2026; Dvalin North start up targeted mid 2026 in Norway.
- CCS progress: Viking FEED complete and next steps depend on emitter selection and UK licence economics.
- Dividends: 2025 final dividend of 8.05 cents per voting ordinary share subject to AGM approval, payable 20 May 2026.
