A LEADING North Sea oil and gas firm has underlined how much money international financiers are making in the area even as it revealed the windfall tax may have little impact on it.

Neptune Energy grew second quarter profits more than ten-fold to $268 million (£220m), from $22.4m in the same period last year. First half earnings rose to $762m from $100m.

The results announcement underlined the scale of the benefit that North Sea firms have enjoyed as a result of the surge in oil and gas prices fuelled by the war in Ukraine.

Neptune operates the giant Cygnus field, which it says supplies enough gas to meet six per cent of UK demand. It also has operations in Norway, Algeria and Indonesia.

The private equity-backed company released its results on the day that experts warned that average household bills could increase to more than £5,000 next year.

With Neptune expecting the market to remain strong, the outlook appears good for investors in the firm. These include the state-owned China Investment Corporation, which has a 49 per cent stake.

But Neptune’s results will heap pressure on Rishi Sunak to pledge to increase the windfall tax that he introduced in May, with apparent reluctance, while serving as Chancellor in Boris Johnson’s cabinet.

Labour leader Keir Starmer said yesterday that he would use the proceeds of an increased windfall tax to freeze the cap on energy bills at £1,971 a year for the typical household.

Mr Sunak’s rival for the Tory leadership, Liz Truss, last week ruled out an increase in the tax on the grounds that it would amount to business bashing and send the wrong message to international investors.

Her comments echoed claims by industry leaders that the windfall tax could frighten firms away from the North Sea, amid longstanding claims that fiscal and regulatory stability is essential.

Such arguments have looked increasingly threadbare following the massive profits achieved by oil and gas firms in recent months.

Shell and BP made $20bn second quarter profits between them, which they will use to fund huge payouts to investors.

Neptune last week warned the windfall tax could prompt it to shift investment to other areas.

However, Neptune also made clear the windfall tax will not cost it much for some time if at all.

“Due to existing planned investments at Seagull, Cygnus and the Isabella appraisal well, the impact on Neptune is expected to be limited in 2022 and 2023,” said the company.

It added: “ Longer term, the impact will be dependent upon future investment decisions.”

The comments highlight the fact that in addition to imposing an additional 25 per cent charge on profits from May, Mr Sunak introduced incentives for North Sea investment worth up to 91p for every 100p spent. These can significantly reduce the impact of the new levy.

When the windfall tax was introduced Mr Sunak said it would be targeted and temporary and held out the prospect it would be scrapped when prices returned to more normal levels, with a sunset clause expected to take effect at the end of 2025.

Neptune saw enough potential in the North Sea to encourage it to make significant investment in developing finds and looking for new ones well before the recent surge in prices boosted the appeal of the area.

The company grew operating profits in the UK North Sea at a faster rate than in most other areas in the second quarter, to $55.7m from $11.5m.

The results announcement made clear that Neptune expects market conditions to remain favourable for months.

“Despite potential risks from further Covid-19 restrictions and slower economic growth as inflationary pressures and the war in Ukraine impact the global economy, the outlook for commodity markets is expected to remain strong in the second half of the year,” said the firm, which is set to generate huge amounts of cash under current conditions.

This may put the shareholders in the company in line for big payouts.

In December the company said it would pay out $800m dividends for 2021, noting then that it had reduced debt faster than expected.

In the latest results announcement Neptune said no dividend has been declared in the first half.

That decision may reflect awareness of the current sensitivity of the payouts question.

In the case of Neptune the PR challenge may be complicated by the firm’s ownership structure.

BP and Shell have both cited the fact that many UK pension scheme members benefit from the dividends they pay to justify the huge distributions they have made.

Neptune is owned by international investment firms.

Besides CIC, other leading investors in the firm are funds controlled by US private equity giants Carlyle and CVC Capital Partners, which backed former Centrica boss Sam Laidlaw to set up Neptune in 2015.

The company used the firepower they provided to buy assets in the North Sea as a range of other firms retrenched in the area amid the long downturn that started in 2014, after growth in supplies ran ahead of demand. Opportunists decided the downturn created openings to acquire quality assets at attractive prices.

North Sea-focused Chysaor won support from the EIG Global Energy Partners investment business to buy big portfolios from Shell and US giant ConocoPhillips.

Defenders would say that investors such as Carlyle are now set to reap the just rewards for the willingness they showed to invest in the North Sea during difficult times.

Neptune has pursued an ambitious growth strategy in the area.

Chrysaor did likewise with the backing of EIG, which has headquarters in Washington and is set to reap rewards for its investment.

The firm was renamed Harbour Energy after it acquired North Sea stalwart Premier Oil in April last year.

In December Harbour announced it would introduce a $200m annual dividend.

It is notable that Neptune and Harbour made their dividend commitments before oil and gas prices surged in response to Russia’s assault on Ukraine.

Against that backdrop some will feel concern about firms using the cash generated from the exploitation of finite resources in the North Sea to fund further big payouts to investors outside the UK as the war in Ukraine leads to a renewed focus on energy security.