SHARES in Harbour Energy closed down nearly 9% after the North Sea giant warned that operating costs would be higher and production output lower in the year ahead.

Harbour, which operates some of the biggest oil and gas producing assets on the UK Continental Shelf, is guiding on producing 150,000-165,000 barrels of oil equivalent (boepd) per day in 2024, compared with an average of 186,000 boepd in 2023.

It cited an “unusually high level of planned shutdowns at our operated hubs and the Beryl area, coinciding with planned pipeline outages”.

“Guidance also reflects the impact of deferred partner-operated wells at Beryl and Elgin Franklin in the UK and the anticipated sale of the Vietnam business,” the company said.

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While production is forecast to fall, Harbour is expecting operating costs of $18 per barrel of oil equivalent in 2024, which it said would be higher than average costs of $16 boe in 2023 because of lower volumes, with absolute operating costs broadly flat year-on-year.

And it flagged that capital expenditure would increase this year to around $1.2bn, reflecting in part increased drilling activity in the UK as it targets “high return, quick payback opportunities” in its operated J-Area, Greater Britannia, and AELE hubs, as well as the Talbot development.

The company gave its assessment of the outlook as it reported that revenue had fallen to around $3.9 billion in the year to December 31 from $5.4bn in 2022, as gas prices fell from the high levels seen in the wake of Russia’s invasion of Ukraine.

Harbour said post-hedging UK oil prices had held steady at $78 per barrel last year, but gas prices dropped to 54p per therm from 86p per therm the year before.

The energy giant noted that the guidance it had provided for the current, and outlook for 2025 when it expects production to be similar to 2024, excludes the impact of its proposed “transformational” $11.2bn acquisition of the Wintershall Dea asset portfolio, which it announced on December 21.

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With the Wintershall Dea portfolio including all of its upstream assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt, Libya, and Algeria, as well as carbon capture and storage licences in Europe, Harbour said the deal is expected to transform it into one of the world’s largest and most geographically diverse independent oil and gas companies.

The deal is subject to shareholder and regulatory approval, and expected to complete in the fourth quarter of 2024.

Linda Z Cook, chief executive of Harbour Energy, said: "We made significant progress against our strategic goals in 2023. Our safety performance improved. We continued to maximise the value of our UK production base while ensuring disciplined capital allocation, resulting in significant free cash flow and shareholder returns over and above our base dividend.

"We also advanced our UK CCS (carbon capture and storage) projects and our international growth opportunities in Indonesia and Mexico, delivering against key milestones. And, at year end, we announced the transformational acquisition of the Wintershall Dea portfolio.

“Looking ahead to 2024, our priorities are for the continued safe and responsible operations of our existing portfolio and the successful completion of the Wintershall Dea acquisition. We are proud of our achievements over the past year and excited about the future of the company.”

Shares in Harbour closed down 8.78%, or 27.8p, or 289p.