Harbour Energy PLC

Harbour Energy plc

Annual Report & Accounts

2023

Harbour Energy’s aim is to build a large-scale,

geographically diverse, independent oil and gas

company, focused on safe and responsible

operations, and creating value for our stakeholders.

WHAT’S INSIDE?

Strategic report

1–65

2023 highlights

At a glance

Chair’s statement

Chief Executive Ofﬁcer’s statement

Market overview

Our strategy & business model

Engaging with our stakeholders

Key performance indicators

Operational review

Financial review

ESG review

Risk management

Principal risks

Governance

Financial statements

109

Additional information

177

TCFD index

178

Independent assurance statement

179

UK Government payment reporting

182

Group reserves and resources

183

Worldwide licence interests

185

Glossary

188

Shareholder information

109

Independent auditor’s report

118

Consolidated income statement

119

Consolidated statement of comprehensive income

120

Consolidated balance sheet

121

Consolidated statement of changes in equity

122

Consolidated statement of cash ﬂows

123

Notes to the consolidated ﬁnancial statements

172

Company balance sheet

173

Company statement of changes in equity

174

Notes to the company ﬁnancial statements

Governance at a glance

Chair’s introduction

Board of directors

Nomination Committee report

Audit and Risk Committee report

HSES Committee report

Directors’ remuneration report

104

Directors’ report

107

Non-ﬁnancial and sustainability

information statement

108

Statement of directors’ responsibilities

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HARBOURENERGY.COM

We made signiﬁcant progress in 2023. We

improved our safety performance, generated

material free cash ﬂow and maintained our

capital discipline. This enabled shareholder returns

over and above our base dividend while retaining

the ﬂexibility that allowed us to announce a

transformational acquisition in December.

LINDA Z. COOK

CHIEF EXECUTIVE OFFICER

CHIEF EXECUTIVE OFFICER’S STATEMENT

READ MORE ON PAGE 16

We report our safety and the environment metrics on a gross operated basis.

Total Recordable Injury Rate, measured on a per million hours worked basis.

EBITDAX is a non-IFRS measure calculated by taking earnings before tax, interest, depreciation and amortisation, impairments,

remeasurements, onerous contracts and exploration expenditure. This is a useful indicator of underlying business performance.

Comprising zero Tier 1 events and one Tier 2 event.

Free cash ﬂow is operating cash ﬂow less cash ﬂow from investing activities less interest and lease payments.

Leverage ratio is a non-IFRS measure calculated by net debt at year end/last twelve months of EBITDAX.

2.7

EBITDAX

(2022: $4.0bn)

1.0

Free cash ﬂow

(2022: $2.1bn)

0.1

Leverage ratio

(2022 year end: 0.2x)

400

Shareholder returns approved

(2022: $600m)

186

kboepd

Production

(2022: 208kboepd)

16.4

/boe

Operating costs

(2022: $13.9/boe)

880

mmboe

2P reserves + 2C resources at year end 2023

(2022 year end: 865mmboe)

0.7

/million hours

TRIR

(2022: 0.8/million hours)

Zero

Tier 1 & 2

Process safety events

(2022: One Tier 1 & 2)

kgCO

e/boe

GHG intensity

(2022: 21kgCO

e/boe)

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

At a glance

Creating stakeholder value...

Harbour’s global footprint

Harbour is building a

large-scale, geographically

diverse, independent oil

and gas company.

Today, Harbour is the UK’s largest oil

and gas producer and has assets and

growth opportunities in Indonesia and

Mexico. Harbour is also progressing

two UK carbon capture and storage

(CCS) projects. These include Viking,

one of the largest planned CCS

projects in the world.

In December 2023, we announced

an agreement to acquire substantially

all of Wintershall Dea’s upstream oil

and gas assets. Upon completion, the

transaction will transform Harbour’s

scale and diversity, adding material

positions in Norway, Germany,

Argentina and Mexico.

Net zero

By 2035

Our primary SDGs

We’re supporting the United

Nations’ Sustainable Development

Goals through our management

practices and performance.

Making a positive impact

We have committed to achieving

net zero across Scope 1 and 2

greenhouse gas (GHG) gross

operated emissions by 2035,

with an interim target of a

50 per cent reduction versus

a 2018 baseline by 2030.

Our purpose

is to play

a signiﬁcant role in

meeting the world’s

energy needs through

the safe, efﬁcient and

responsible production

of hydrocarbons, while

creating value for our

stakeholders.

OUR STRATEGY & BUSINESS MODEL

READ MORE ON PAGE 8

Harbour Energy plc

Annual Report & Accounts 2023

…safely and responsibly

VIETNAM

•

Divestment of our non-core

Vietnam business expected

to complete in 2024, resulting

in a country exit for Harbour

MEXICO

•

Signiﬁcant 2C oil resource

comprising Zama

and the Kan-1 discovery

•

Potential to materially add

to Harbour’s reserves,

increasing our reserve life

INDONESIA

•

Operated gas production

with material 2C gas

resource at Andaman

and Tuna

•

Andaman multi-TCF

exploration potential

NORWAY

•

Signiﬁcant exploration

acreage with two wells

planned for 2024

North Sea

•

The UK’s largest

oil and gas producer

•

Focus on converting

2P reserves and 2C

resource into production

and cash ﬂow

CCS

•

Interest in two Track 2 status UK

CCS projects (Viking and Acorn)

•

Potential to provide a long-term,

stable income stream for Harbour

Transparent ESG reporting and measurement

We report in accordance with GRI and in compliance with the TCFD

for UK companies. Additionally we report against the SASB indicators,

using the Oil & Gas Exploration and Production industry standard

demonstrating strong ESG practices.

A safe, efﬁcient and responsible operator

The role of Harbour is not just to help

meet global energy demand but to

do so safely and efﬁciently while

making the most of our resources

and reducing the environmental

impact of our operations.

We are also supporting broader,

global ambitions through

investing in CO

transportation

and storage opportunities.

The UK’s ambition is to capture

20-30 million tonnes of CO

per

year by 2030 via carbon capture

and storage (CCS). Harbour’s

Viking CCS project in the Humber

region has the potential to

deliver one third of this target.

Creating value for all our stakeholders

We strive to create value for

all our stakeholders. For our

employees and contractors, this

means offering a fulﬁlling career

and competitive rewards. For

investors, we aim to deliver

capital return including through

shareholder distributions.

Our business also supports

a large network of joint

venture (JV) partners,

suppliers and customers,

as well as contributing

materially to the prosperity

of our local communities

and host governments.

ESG REVIEW

READ MORE ON PAGE 12

We target full transparency of our environmental impact and

overall ESG reporting, disclosing through CDP, with a 2023

corporate ESG rating of ‘B’.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Chair’s statement

This was against an economic and

geopolitical backdrop which, while not as

volatile as in 2022, remained unpredictable.

In addition to Russia’s ongoing war in Ukraine,

a new conﬂict in the Middle East has created

additional instability. Economically, there has

been some respite from high inﬂation in the

developed world, although it remains elevated

compared with recent trends. Furthermore,

expectations around central banks’ policy

responses continue to create uncertainty

around future economic growth rates.

Another signiﬁcant factor impacting our

industry is the need to transition to lower

carbon energy sources to limit climate change.

This will be a complex transition, and one in

which oil and gas producers have a dual role

to play: ﬁrst, by providing vital energy supplies

with lower carbon intensity, and second, by

deploying their skills and infrastructure to

deliver the carbon capture and storage (CCS)

projects that will be critical for countries to

achieve their commitments. Another impact

of climate change on the sector has been the

general decline in lender and investor appetite

for oil and gas companies, a trend that is

particularly noticeable in Europe.

Energy remains the consummate global

industry, so all these trends impact Harbour.

As we look to build a resilient, sustainable

and successful business in an unpredictable

world, they are among the key considerations

weighed by Harbour’s Board in setting strategy

and in our decision-making.

It has become clearer than ever that, to

succeed, energy companies require scale and

diversiﬁcation, stronger balance sheets and

credit quality, as well as a meaningful energy

transition plan. These are essential to ensure

market relevance and access to low cost

sources of capital to fund our businesses.

Since Harbour Energy was created in 2014,

we have made no secret of our desire to build

a global, diversiﬁed, independent oil and gas

company. Having successfully completed

three acquisitions, and then listed in the UK

in 2021, we remained keen to continue to

grow and diversify further through M&A. This

ambition was reinforced after the introduction

of a punitive additional tax in the UK, where

our business is currently concentrated.

Dear fellow

shareholders,

I am pleased to report that 2023

was a year in which Harbour Energy

made signiﬁcant progress against

its strategic goals, culminating

with the announcement of a

transformational acquisition.

Harbour is well positioned for

future success as a large-scale,

global, diversiﬁed oil and gas

producer and is committed to

playing an essential role in the

energy transition.

R. BLAIR THOMAS

CHAIR

Harbour Energy plc

Annual Report & Accounts 2023

Integrity

Innovation

Responsibility

Collaboration

However, the disruption to energy markets in

2022 made deal-making all but impossible,

as buyers and sellers struggled to reach a

shared view on value. We were determined

to be patient, and to only transact where

we could see a value-creating transaction

aligned with our strategy.

As markets settled during 2023, we saw a

signiﬁcant increase in consolidation in the

sector, with a wave of multi-billion dollar

deals being announced. For our part, in

December, we reached agreement to acquire

substantially all of Wintershall Dea’s

upstream assets from its owners, in what is

a truly transformational deal for Harbour, as

Linda outlines in her statement on the next

page. This is an ambitious acquisition that

will transform Harbour into a global producer,

and demonstrates how focused the Board

and Leadership Team are on delivering our

growth strategy in a disciplined manner.

The acquisition is expected to be put to

shareholders at a General Meeting in Q2,

and your Board has no hesitation in

recommending it to you.

Integrity

We always aim to do the

right thing in a professional,

respectful and honest way.

Innovation

We encourage our people

to be creative to improve

our business.

Collaboration

By working together, we can

successfully execute our

business plans and achieve

our strategic goals.

Responsibility

We believe in personal responsibility

and accountability. Safety is a

shared responsibility, as is reducing

our impact on the environment.

That we were able to agree such a signiﬁcant

acquisition that more than doubles the size of

our business is a testament to the sustained

quality of our operational and ﬁnancial delivery

over time, and to our unwavering focus on

disciplined capital allocation. I would like to

thank our employees, Leadership Team and

Board for their continued hard work and

dedication, and our investors for their patience.

Looking ahead, 2024 promises to be another

unpredictable year, with around half of the

world’s population going to the polls in national

elections, including in the UK and the US.

Meanwhile, the landscape for oil and gas

producers continues to evolve, with sometimes

conﬂicting signals. On the one hand, climate

pressures continue to grow, while on the other,

energy demand is still increasing and concerns

for energy security remain high.

Against this backdrop, the Board remains

convinced there is a long-term role for safe

and responsible producers of oil and gas

through the energy transition.

Our purpose

is underpinned by four core values.

Our four values represent who we are and what we stand for. These are the

values that Harbour expects colleagues to abide by and demonstrate in all

their business dealings with internal and external stakeholders, and they are

reinforced through our reward and performance management processes.

We are conﬁdent that Harbour’s strategy

and purpose remain relevant and that

the company is well positioned for future

success as a large-scale, global, diversiﬁed

oil and gas producer.

For the remainder of 2024, we are focused

on completing the acquisition of the

Wintershall Dea asset portfolio, targeting

completion in Q4. We will also remain alert

to the still rich opportunity set for M&A

and retain the ﬂexibility to execute should

a value-creating opportunity arise.

Thank you for your support for Harbour

Energy in 2023, and please be assured

that the Board and Leadership Team are

resolutely focused on delivering our strategy

and creating value for our shareholders

and all our stakeholders.

R. Blair Thomas

Chair

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Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Chief Executive Ofﬁcer’s statement

These efforts continue to be supported

by active management of our cost base

and leveraging our scale in the UK through

strategic relationships with a smaller

number of suppliers.

Last year also saw us complete a review of

our UK organisation, which has streamlined

our structure and standardised operating

practices offshore. Meanwhile in our

corporate centre, we’ve made good progress

in systems integration and simpliﬁcation,

including the rollout of our enterprise

management system. Together, these

activities will help us realise cost savings

and create a business that is scalable

and ready for future growth.

We continued to invest in our international

growth opportunities in Mexico and in Indonesia,

which have the potential to add materially to our

reserves and to diversify our company over time.

Notably we made a signiﬁcant gas discovery at

the Layaran prospect on the South Andaman

licence in Indonesia, while in Mexico we

received regulatory approval for the Zama ﬁeld

development plan and made an oil discovery

at the Kan prospect south west of Zama. In

addition, we have seen good momentum on our

two UK CCS projects, the Harbour-led Viking

project and Acorn. These projects were awarded

Track 2 status by the UK Government in 2023,

allowing them to mature into the FEED phase

and closer to potential investment decisions.

Well

positioned

for value

creation

It is nearly three years since Harbour

Energy listed on the London Stock

Exchange. Since then, we have faced

numerous geopolitical, economic and

ﬁscal headwinds. Despite these, we

have stayed true to our purpose and

strategy: playing a signiﬁcant role in

meeting the world’s energy needs

safely and responsibly, and building

a global, diversiﬁed, independent oil

and gas company through M&A.

Critical to our success and ability to deliver our

strategy is safe and responsible operations.

Therefore I am proud to report an improved

safety performance in 2023, with our Total

Recordable Injury Rate reducing from 0.8 to

0.7 per million hours worked. In addition, we

achieved two ﬁrsts in 2023 for Harbour – zero

lost time injuries and no serious (Tier 1 or 2)

process safety events. However, we are never

complacent when it comes to safety and we

continue to strive for continuous improvement.

In reﬂection of that, for 2024 we’ve expanded

the process safety metric on our annual

scorecard – which determines the bonus

for all employees – to include Tier 3 Loss

of Containment process safety events.

In line with our strategy, we have continued

to maximise the value of our producing assets

by progressing high return, short cycle drilling

opportunities to help offset natural production

decline and underpin future cash ﬂow.

Harbour Energy plc

Annual Report & Accounts 2023

Underlying all of this is a strong ﬁnancial

position and a disciplined approach to

capital allocation. In total, we spent around

$1 billion in capex during 2023. Even with

this large amount of spend, we generated

free cash ﬂow of $1 billion which allowed us

to materially reduce our net debt to $0.2

billion and supported signiﬁcant shareholder

returns over and above our base dividend.

It is this sustained operational and ﬁnancial

delivery and capital allocation discipline that

also enabled us, over the three years since

our formation, to reduce our debt by c.$2.7

billion, return $1 billion to shareholders and

retain ﬂexibility to agree a transformational

$11.2 billion acquisition.

Since becoming a public company in 2021,

we have been clear about our aim to establish

material production outside the UK by

acquiring cash generative assets that improve

our reserve life, margins and GHG intensity.

We believed that this in turn would strengthen

our credit quality and support enhanced

shareholder returns over the longer run. We

maintained our disciplined approach for the

last three years and, at the end of 2023,

were excited to announce the acquisition of

substantially all of Wintershall Dea’s upstream

oil and gas assets. This transaction will

mark our fourth major acquisition since

our foundation in 2014 and the most

transformational step yet in our journey.

The transaction will transform our scale and

diversity by increasing production and adding

signiﬁcant positions in Norway, Germany,

Argentina and Mexico. Importantly, it will

lengthen our reserve life and is immediately

accretive to free cash ﬂow on a per share

basis, supporting a sustainable increase in

our dividend. In addition, the acquisition

furthers our energy transition goals by shifting

our portfolio towards natural gas, signiﬁcantly

lowering our greenhouse gas intensity and

expanding our already strong CCS position

into new European markets.

The quality of the portfolio together with the

creative way we’ve structured the transaction

mean that we expect to receive investment

grade credit ratings upon completion. This is

another important step in our journey, allowing

us access to broader and lower cost sources

of capital to support our future growth.

Our priorities for 2024 are very simple: the

safe and responsible operation of our existing

portfolio, and the successful completion of the

Wintershall Dea acquisition. Looking further

ahead, our ambition to continue to grow

through M&A remains unchanged and we

remain well-positioned for future opportunities.

However, we will maintain our disciplined

approach to capital allocation, balancing any

growth opportunities alongside a commitment

to competitive shareholder returns.

I am proud of what we achieved in 2023,

which is all the result of the skill, hard work

and commitment of our people. I am equally

excited about the opportunities we have in

front of us as we continue to build a uniquely

positioned, large-scale, geographically

diverse, independent oil and gas company

of the future.

Linda Z. Cook

Chief Executive Ofﬁcer

Our strong Leadership Team

is vital

to our growth and future success.

ALEXANDER KRANE

CHIEF FINANCIAL OFFICER

KEY RESPONSIBILITIES

Directing company-wide

controls, processes

and decision-making

frameworks for ﬁnancial

business planning, capital

allocation, ﬁnancing

activities and reporting.

SCOTT BARR

EVP NORTH SEA

KEY RESPONSIBILITIES

Leading Harbour’s largest

producing region, comprising

assets and people offshore,

supported by specialist

technical and business

support functions in Aberdeen.

STEVE COX

EVP SOUTHEAST ASIA

KEY RESPONSIBILITIES

Leading our organisations,

production operations

and future development

opportunities in Indonesia

and Vietnam.

ANDREW OSBORNE

EVP SPECIAL PROJECTS

KEY RESPONSIBILITIES

Leading M&A and ﬁnancing

activities including through

the debt and equity capital

markets. Andrew will be

stepping down from his role

in April 2024.

GILL RIGGS

CHIEF HUMAN

RESOURCES OFFICER

KEY RESPONSIBILITIES

Empowering Harbour’s people

to achieve their full potential,

through talent acquisition,

career development, reward

and making Harbour an

inclusive place to work.

PHILIP WHITTAKER

EVP GLOBAL SERVICES

KEY RESPONSIBILITIES

Delivering world-class

business and information

systems, and provision

of strategic corporate

HSES, supply chain,

corporate assurance and

integration capabilities.

GUSTAVO BAQUERO

EVP STRATEGY, BUSINESS

DEVELOPMENT &

ENERGY TRANSITION

KEY RESPONSIBILITIES

Developing Harbour’s strategy,

assessing and executing

new business development

opportunities, and enabling

the energy transition by

delivering CCS projects.

HOWARD LANDES

GENERAL COUNSEL

KEY RESPONSIBILITIES

Managing Harbour’s

legal, compliance and

governance matters

globally, underpinned

by our commitment to

ethical business conduct.

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Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Market overview

2023 saw a record year in upstream M&A activity

amid a more stable commodity price environment.

Equity markets around the world

recovered in 2023 with market volatility

abating. However, uncertainty around the

global economic outlook persisted and

geopolitical tensions heightened towards

the end of the year.

Geopolitical events, including the ongoing war

in Ukraine and the outbreak of conﬂict in the

Middle East, kept commodity prices in focus

during 2023 although prices were materially

less volatile than in the year before.

2023 also saw continued macroeconomic

uncertainty. Inﬂationary pressures persisted

and interest rates rose across developed

markets for much of the year as central banks

strove to bring inﬂation back to targeted levels.

Interest rates ﬁnally paused in the fourth

quarter, by which point they had increased

to levels not seen since before the Global

Financial Crisis.

UK equity markets closed the year broadly

ﬂat while European and US equity markets

recorded double digit growth. This difference

was driven in part by – in the UK – inﬂation

remaining higher for longer, continued

recessionary concerns, a strong sterling

and continued political uncertainty.

Against this uncertain backdrop, global M&A

activity declined compared to 2022. However,

M&A activity in the energy sector deﬁed this

trend, reaching record highs as commodity

prices stabilised and sector participants

leveraged their equity and improved balance

sheets to address investors’ desire for

growth and long-term cash returns.

Summary

2023 was a record year for upstream

oil and gas M&A activity, with more than

$300 billion of deals announced, more

than double that in 2022. Notably, the

second half of 2023 saw a massive and

rapid consolidation in the US oil and gas

industry, predominantly involving the

onshore shale players. This was driven by

companies looking to achieve economies

of scale, lengthen their reserve life and

maintain market relevance with investors

increasingly focused on the longevity and

sustainability of cash returns.

Along these themes, two US mega deals

were announced in 2023 – ExxonMobil

purchasing Pioneer Natural Resources and

Chevron acquiring Hess – with both buyers

taking advantage of premium rated equity to

fund all stock transactions. European energy

M&A also picked up towards the second

half of the year, albeit on a lower scale.

Mergers and acquisitions

The top 5 non-North American upstream M&A deals announced in 2023

$125

The value of the two largest

upstream oil and gas

transactions in 2023

Of oil and gas transactions

announced in 2023 involved

US-based companies

100

Increase in value of oil and

gas transactions announced

in 2023 versus 2022

Our response & opportunity

During 2023, we evaluated numerous material

M&A opportunities. We were disciplined in

our approach and, in December, agreed the

acquisition of substantially all of Wintershall

Dea’s upstream oil and gas portfolio for $11.2

billion, the largest announced upstream deal

outside North America.

Given the way we have been able to structure

this acquisition, we are well positioned for

further M&A and the opportunity set remains

rich: majors are expected to consolidate their

portfolios on the back of large acquisitions,

private companies are struggling for liquidity

and smaller companies are looking for scale

and relevance. However, our immediate

focus is on completing the Wintershall Dea

acquisition and the subsequent successful

integration of the portfolio into our business.

1 As per Dealogic.

2.6

Eni acquisition of

Neptune Energy’s

portfolio, excluding

Norway and Germany

2.3

Vår Energi

acquisition of

Neptune Energy’s

Norwegian portfolio

2.1

Repsol acquisition

of 49% in Repsol

Sinopec Resources

UK Ltd

2.0

bp acquisition

of 50% stake in

NewMed Energy,

in partnership

with ADNOC

11.2

Harbour Energy acquisition

of substantially all

of Wintershall Dea’s

upstream assets

FIND OUT MORE ONLINE

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ACQUISITION-OF-WINTERSHALL-DEA

-ASSET-PORTFOLIO

Harbour Energy plc

Annual Report & Accounts 2023

Brent oil price: summary

During 2023 Brent crude prices averaged

$83/bbl and were signiﬁcantly more stable

than in 2022, reﬂecting a broadly balanced

market. While geopolitical tensions and

concerns around crude oil demand resulted

in some price ﬂuctuations in the second

half of the year, Brent ended the year at

$78/bbl, $4/bbl below the start of 2023.

Global oil markets adjusted to new trade

dynamics, with crude oil from Russia ﬁnding

destinations outside the EU. In addition, 2023

saw strong production growth from non-OPEC

countries, primarily the US, Guyana and Brazil.

On the demand side, global crude oil demand

increased, but fell short of expectations. In

part, this was due to economic headwinds

continuing to weigh on global economic growth

while China’s economic recovery was also

slower than anticipated. These dynamics

offset the impacts of supply cuts by OPEC+,

mainly Saudi Arabia.

Commodity prices

Summary

UK independent oil and gas companies

continued to be materially impacted in 2023

by the ongoing ﬁscal and political uncertainty

in the UK. This follows the introduction and

subsequent increase and extension of the

Energy Proﬁts Levy (EPL) in 2022.

The Energy Security Investment Mechanism

(ESIM) – which was announced in June

2023 and would disapply the EPL if both

average oil and gas prices fall below

$71.40/bbl and 54 pence/therm for six

consecutive months – did little to restore

conﬁdence, given the level of the ESIM

threshold prices. While legislation for annual

licensing rounds in the UK has been

announced and the North Sea Transition

Authority (NSTA) granted its consent for

the development of the Rosebank ﬁeld

in September, the regulatory and ﬁscal

environment for oil and gas companies

remains uncertain, especially given the

expected UK General Election in 2024.

Oil and gas ﬁscal regime

Our response & opportunity

The EPL has continued to impact our

business, reducing our cash ﬂow and

impacting our availability of debt, as well

as weighing on our share price. It has also

caused us to scale back our activities in

certain areas and to undertake a review of

our UK organisation, which we completed

in 2023.

In addition, ﬁscal uncertainty in our largest

producing region has reinforced the

importance of our strategic goal to diversify

and establish a material base of production

in at least one other region outside the UK.

UK gas price: summary

After the unprecedented volatility of 2022,

2023 saw a return to a more predictable,

albeit still elevated, price environment for

UK natural gas with UK NBP averaging 99

pence/therm during the year.

UK NBP fell during the ﬁrst half of the year

reﬂecting a mild winter, demand destruction

and continuation of larger LNG supplies

into Europe resulting in high storage levels.

Uncertainty on the supply side due to

shutdowns and threatened strike action

at LNG facilities kept prices around 70

pence/therm during the summer. Prices

then spiked brieﬂy in the fourth quarter

with the outbreak of conﬂict in the Middle

East before paring back gains to close

the year at c.85 pence/therm.

Our response & opportunity

We have a good balance of oil and gas in

our portfolio with our production split broadly

evenly. We hedge to support more predictable

cash ﬂows which allows us to invest through

the commodity price cycle while protecting

the balance sheet and our commitment to

shareholder returns.

In 2023, we realised post-hedging oil and

gas prices of $78/bbl and 54 pence/therm,

reﬂecting that c.30 per cent of our liquids

production and c.65 per cent of our gas

production was hedged. For 2024, our

hedging reduces with c.25 per cent of our

estimated liquids production hedged at an

average price of $84/bbl and c.45 per cent

of our estimated gas production hedged

at an average price of 67 pence/therm.

OPERATIONAL REVIEW

READ MORE ON PAGE 18

Summary

The UK Emissions Trading Scheme (ETS) carbon

allowance price averaged £54/mt in 2023,

falling from £65/mt in January 2023 to £37/mt

in December 2023. The reduction in price was

mainly driven by an expectation of an increasing

surplus of allowances, including the planned

2024 auction of previously unallocated

allowances, amid a background of softening

industrial emissions through 2023. Government

policy developments remain a key driver of

pricing of the UK ETS carbon allowances.

Our response & opportunity

Harbour purchases UK ETS carbon

allowances, as required, over and above its

annual government issued allocation to meet

the compliance requirements of the scheme.

During 2023, Harbour’s operating cost

beneﬁtted from the lower cost of carbon.

We continue to look to actively manage our

exposure to UK ETS carbon allowance prices

through hedging and participation in auctions.

UK Emissions Trading Scheme prices

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Our strategy & business model

Delivering

value creation, cash ﬂow and shareholder distributions.

Strategically driven…

RESPONSIBILITY

Ensure safe, efﬁcient and environmentally

responsible operations

PROGRESS IN 2023

•

Improved safety record, with reduced TRIR, zero LTIR and zero

serious (Tier 1 and 2) process safety events

•

Completed UK organisation review and formed new strategic

supply chain partnerships

•

Embedded a new, scalable enterprise management system

into our business

•

Announced acquisition of Wintershall Dea asset portfolio

which will lower GHG intensity and expand CCS position

PRIORITIES FOR 2024

•

Continuous improvement in our safety and environmental performance

•

Maintain a competitive cost structure as assets mature

•

Top quartile operational performance, including safe and efﬁcient

execution of planned maintenance campaigns

DIVERSIFICATION

Leverage our full cycle capability

to diversify and grow

PROGRESS IN 2023

•

Regulatory approval for Zama ﬁeld development plan and oil discovery

at Kan-1 (Mexico)

•

Material offshore gas discovery at Layaran-1 in South Andaman

(Indonesia)

•

UK CCS projects awarded Track 2 status by the UK Government

•

Announced acquisition of Wintershall Dea asset portfolio adds

signiﬁcant positions in Norway, Germany, Argentina and Mexico

PRIORITIES FOR 2024

•

Complete acquisition of Wintershall Dea asset portfolio

•

Advance international growth opportunities in Mexico

and Indonesia including exploration and appraisal drilling

•

Agree terms of the economic licences for our CCS

projects with the UK Government

QUALITY

Maintain a high quality portfolio of reserves

and resources

PROGRESS IN 2023

•

Partial reserve replacement supported by additions at our

UK operated hubs

•

Progressed organic growth opportunities in the UK (Talbot, Leverett),

Mexico (Zama, Kan) and Indonesia (Layaran)

•

Agreed divestment of non-core Vietnam business

•

Announced acquisition of Wintershall Dea asset portfolio

which will improve reserve life and margins

PRIORITIES FOR 2024

•

Execution of capital programme, including successful production

start-up from Talbot around year end

•

Mature high quality infrastructure-led investment opportunities,

especially around J-Area (UK)

•

Complete the Wintershall Dea transaction and ensure a healthy pipeline of

longer-term organic and inorganic investment options to replace/grow reserves

DISCIPLINE

Ensure ﬁnancial strength through

the commodity price cycle

PROGRESS IN 2023

•

Net debt reduced to $0.2 billion; successful amendment

and extension of RBL facility to 31 December 2029

•

Signiﬁcant free cash ﬂow generation supported $0.4 billion

of shareholder distributions

•

Acquisition of Wintershall Dea asset portfolio is expected

to deliver investment grade credit ratings

PRIORITIES FOR 2024

•

Continued execution of hedging strategy

•

Deliver on commitment to shareholder distributions

•

Protect expected investment grade rating on completion

of the Wintershall Dea acquisition

OUR LONG-TERM STRATEGIC DRIVERS

FROM PLANNING TO DELIVERY, SUSTAINABILITY IS EMBEDDED

THROUGH EVERYTHING WE DO:

Safe

Responsible

Fair

Harbour Energy plc

Annual Report & Accounts 2023

EFFICIENT

OPERATIONS

Maximising value

and cash ﬂow from

existing assets

ORGANIC GROWTH

Progressing our growth

and diversiﬁcation

projects

SELECTIVE M&A

Evaluating

value-accretive

M&A opportunities

FINANCIAL

DISCIPLINE

Prudently allocating

capital to support

our strategy

MEETING THE WORLD’S

ENERGY NEEDS THROUGH

THE SAFE, EFFICIENT

AND RESPONSIBLE

PRODUCTION OF

HYDROCARBONS

ENGAGING WITH OUR STAKEHOLDERS

READ MORE ON PAGE 12

…to grow and diversify

HOW WE CREATE VALUE

WHO THAT VALUE BENEFITS

Our employees

Believe Harbour is truly committed

to the health and safety of our people

Government & regulators

0.4

Paid in taxes during 2023

Our investors & shareholders

0.4bn

Of shareholder returns announced in 2023

Our lenders

0.6

Reduction in net debt during 2023

Our JV partners,

suppliers & customers

2.0

Of spend across our supply chain in 2023

Wider society

3.9

Of economic value created

Our business model is driven by our purpose

and underpinned by a focus on capital

discipline and sustainability

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Engaging with our stakeholders

Working together to create shared value.

We engage with our stakeholders

in order to understand and

respond to the issues that

are important to them.

Section 172(1) statement

The disclosure on the following pages (12 to 15)

describes how the directors have had regard to

the matters set out in section 172(1) (a) to (f) and

forms the Directors’ statement required under

section 414CZA of the UK Companies Act 2006.

Information regarding our assessment

of environmental and community issues

associated with our operations, including

how we maximise our positive impacts

and minimise the negative impacts, can be

found in the ESG review on pages 32 to 55.

OUTCOMES

We had a high response to our 2023 survey,

which again showed a very strong safety

culture. Scores improved in the area of

career development reﬂecting programmes

implemented during the year. However, levels

of overall engagement declined somewhat

in the UK, likely reﬂecting uncertainty caused

by the organisation review, and in Vietnam,

where we announced a decision to exit. The

survey ﬁndings have been shared with our

staff forums. Action plans to address areas

of concern are being implemented in 2024.

OUTCOMES

We provided constructive policy inputs to the

UK Government, including on the regulatory

environment for CCS and the impact of

the EPL on energy security and the energy

transition. After the award of Track 2 status,

Viking CCS progressed to FEED. In Indonesia,

we secured changes to Production Sharing

Contracts (PSC) for Natuna Sea Block A and

Tuna, increasing their value. We gave input

on how to make Indonesia more competitive

for investment. New regulations on ﬁscal

terms for PSCs are under consideration.

OUTCOMES

We have continued to build trust with

the capital markets through proactive

engagement, delivering against guidance,

remaining true to our strategy and focusing

on the things we can control. We have

attracted new shareholders, enabling legacy

pre-Premier merger investors to reduce

their holdings. The announcement of a

transformational acquisition in December of

assets from Wintershall Dea, in line with our

strategy, resulted in a c.20 per cent rise in

our share price on the day of announcement.

OUR EMPLOYEES

GOVERNMENT

& REGULATORS

OUR INVESTORS

& SHAREHOLDERS

Why is it important to engage?

Harbour’s success depends upon our ability

to attract and retain talented employees who

engage in our purpose and strategy. In 2023,

a review of our UK organisation, triggered by

changes to the ﬁscal environment, created

uncertainty, making it even more crucial to

hear and respond to employee concerns.

How do we engage?

We engage through face-to-face and digital

channels. The CEO and senior leaders host

regular town halls, as well as smaller, informal

events. Our elected staff forums meet

frequently, including with the CEO and other

directors. Our employee-led networks, each

sponsored by a member of the Leadership

Team, provide peer support. We carried out our

second global engagement survey in 2023.

What issues are important to them?

•

Health, safety and wellbeing

•

Opportunities to engage with our leaders

•

Reward and recognition

•

Career development

How are we responding with clear actions?

Our 2023 priorities were shaped by feedback

from our 2022 global employee engagement

survey. First, we found employees rated very

highly our efforts related to safety, so we’ve

continued to focus and engage in that area.

Regarding leadership engagement, we created

new opportunities such as informal Let’s Chat

events and Huddles. We committed to open

and transparent communications during the

UK organisation review, with regular updates

throughout the process. We’ve also made some

improvements to our reward framework,

expanded training opportunities and initiated the

rollout of enhanced career development tools.

Why is it important to engage?

Key government and regulatory stakeholders

in countries where we operate or seek to

grow make decisions that materially impact

our business. In the UK, we engage with No.

10, HM Treasury, the Department for Energy

Security and Net Zero and the North Sea

Transition Authority. In Indonesia, we engage

with our regulator SKK Migas and the

Ministry of Energy and Mineral Resources.

How do we engage?

Harbour engages through direct meetings

with ministers, their advisers and ofﬁcials, by

contributing to government consultations and

via trade bodies, such as Offshore Energies UK

and the Indonesian Petroleum Association.

What issues are important to them?

•

Energy security and supply

•

Investment in the energy sector to drive trade

•

Accelerating the energy transition

•

Environmental responsibility

How are we responding with clear actions?

In 2023, Harbour delivered c.15 per cent of UK

oil and gas production. We progressed our Viking

CCS project which has the potential to meet one

third of the UK Government’s CO

storage target

by 2030, as well as the Acorn CCS project in

which we are a partner. We made submissions

to the UK Government on the investment

climate, the need for ﬁscal stability for energy

security and the energy transition, the impacts of

materially higher UK taxation, and the regulations

related to CCS deployment. We worked with key

stakeholders to progress opportunities in other

countries as well, including proposing new

ﬁscal terms for the development of marginal

ﬁelds in Indonesia, and the development of

the Zama project in Mexico.

Why is it important to engage?

Harbour seeks to develop an investor base

of long-term shareholders and debt providers

who are supportive of our strategy. By ensuring

our strategy and objectives are well understood

and by delivering against them, we maintain

access to long-term providers of capital.

How do we engage?

We engage regularly with our shareholders,

bondholders and potential investors through

meetings, conferences and investor events.

Over 300 investor meetings and calls

were held in 2023. The CEO, CFO, Investor

Relations and Group Treasurer are primarily

responsible for this engagement. Other Board

members engage on areas such as our

Remuneration Policy and they are also

available to shareholders at Harbour’s AGM.

What issues are important to them?

•

Financial and operational performance

•

Fiscal regime and political outlook in the UK

•

Capital allocation, including shareholder

returns

•

M&A strategy and progress

•

Our net zero commitment and CCS projects

How are we responding with clear actions?

We delivered operationally and ﬁnancially in

line with our 2023 guidance. We listened to

feedback on capital allocation, balancing our

commitment to our dividend policy and returning

excess capital to shareholders while retaining

the ﬂexibility for meaningful M&A opportunities.

Consultation and feedback from institutional

shareholders also shaped the evolution of

our Remuneration Policy.

Harbour Energy plc

Annual Report & Accounts 2023

Our success relies on strong relationships with key stakeholders,

including amongst our Harbour colleagues, shareholders, lenders,

JV partners, suppliers, host governments and society at large.

LINDA Z. COOK

CHIEF EXECUTIVE OFFICER

OUTCOMES

We maintained a supportive senior bank

lending group and completed a successful

redetermination, and subsequent amendment

and extension, of our reserve based lending

facility. We continue to have access to

signiﬁcant debt capacity, and ESG disclosure

agency CDP reafﬁrmed our corporate B rating

in 2023.

OUTCOMES

By implementing a more strategic and

long-term approach to supply chain

management, Harbour has deepened

relationships across its supply chain, joint

venture partners and customers, enabling

collaborative working relationships that

help us manage risk, improve our business

processes and minimise our environmental

impact, and this ultimately delivers better

value for Harbour.

OUTCOMES

Harbour produced c.15 per cent of the UK’s

oil and gas and generated c.$3.9 billion of

economic value in 2023, through employment,

payments to suppliers, tax payments to host

governments and social investment. Our

investment in CCS will help secure high-value

jobs in industrialised areas. Social investment

and sponsorship totalled $1 million. For

example, in Indonesia’s Anambas Islands,

over 20 years we’ve supported local business

growth, a new primary school, access to

electricity and online medical education.

OUR LENDERS

OUR JV PARTNERS,

SUPPLIERS & CUSTOMERS

WIDER SOCIETY

Why is it important to engage?

The upstream oil and gas industry is a

capital-intensive business. By maintaining

supportive relationships with our lenders, and

ensuring our strategy and objectives are well

understood, we can ensure access to long-term

debt ﬁnancing that enables us to invest in high

quality investment opportunities that generate

cash ﬂows and support shareholder returns.

How do we engage?

We undertake regular dialogue with the

syndicate banks, both bi-laterally and via an

annual bankers’ presentation. Members of the

Leadership Team give performance updates

at these sessions, followed by questions and

answers. Quarterly management reports are

shared with the reserve based lending (RBL)

syndicate banks. We also engage with debt

investors through meetings and conferences

hosted by banks in Europe and the US.

What issues are important to them?

•

Financial and operational performance

•

Fiscal stability

•

Safeguarding the balance sheet

•

Financial risk management,

including hedging

•

M&A strategy and progress

•

Sustainability and ESG considerations,

including the impact of our operations

How are we responding with clear actions?

We have a disciplined ﬁnancial framework and

capital allocation policy to ensure we maintain

signiﬁcant liquidity. This includes ensuring

that leverage remains below 1.5x on average

through the commodity price cycle and

hedging to protect against price volatility.

Why is it important to engage?

The upstream oil and gas industry relies

on joint venture (JV) partners and a complex

value chain of suppliers who enable us

to deliver oil and gas to our customers.

Maintaining strong relationships across

this value chain enables access to the

resources, labour and the specialist goods

and services we require to carry out our

business safely, responsibly and efﬁciently.

How do we engage?

We have structured engagement plans in place

for these key stakeholders. For example,

Operating Committee Meetings (OCMs) are the

forum for joint venture partner decision-making,

while we regularly engage with our contractors

through scheduled reviews and supplier audits.

Meanwhile, our in-house marketing and trading

team maintains an open dialogue with our

global customers.

What issues are important to them?

•

Asset stewardship and life of ﬁeld

programmes (JV partners)

•

Personal and process safety and

operational performance

•

Financial capability

•

Pre-award transparency and opportunity

(supply chain)

•

Quality and reliability of supply (customers)

How are we responding with clear actions?

During 2023, we began implementing

a strategic approach to supply chain

management. We identiﬁed and awarded

a number of long-term strategic supplier

partnerships, and signiﬁcantly reduced our

overall number of suppliers. We implemented

our new enterprise management system

in 2023, simplifying our supplier interface.

Why is it important to engage?

A company’s employees, customers and

suppliers are part of the communities and

wider society in which they operate. We aim

to be a good corporate citizen, offering high

quality jobs and a safe work environment,

supporting a large supplier network, reducing

our environmental impact and contributing

to the communities in which we operate.

How do we engage?

Harbour supports local communities through its

business activities, which contribute to economic

vitality, supported by philanthropic activities

and sponsorships. Where projects impact on

local communities, such as our Viking CCS

project in the Humber, we engage with them

to explain how they will share in the economic

value created. We support key industry bodies

and events to promote the economic wellbeing

of our communities and host countries.

We help disadvantaged communities

through local outreach and charitable giving.

What issues are important to them?

•

Creating a fair and shared economic value

•

Energy security and a just transition

•

Social investment

How are we responding with clear actions?

We continue to deliver energy safely and

responsibly, supporting energy security.

We made progress on our Net Zero 2035

commitment and are investing in CO

capture

and storage, a key enabler of the energy

transition. We support local communities

with social investment in projects that meet

our giving aims (education, affordable energy,

health, safety and the environment). Our

sponsorship budget supports the promotion

of a safe and responsible oil and gas industry.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Engaging with our stakeholders

continued

We aim to engage openly and honestly on issues of importance to

our stakeholders and to establish strong and enduring relationships

with the key stakeholders upon whom our business success relies.

The three case studies on these

pages demonstrate how our Board

considers stakeholders’ interests

in its decision-making.

The duty of our Board is to promote the success of

Harbour for our shareholders whilst having due regard

for the interests of other stakeholder groups. In

discharging this duty, the directors must consider the

likely consequences of their decisions in the long term

whilst maintaining our corporate reputation and

adhering to the highest standards of business conduct.

Our board of directors carries out its decision-making

with this key duty in mind. Central to this is ensuring

it understands the views of our stakeholders on key

issues and how those stakeholders will be impacted

by a particular course of action.

While the Board sets the parameters by which we

develop, maintain and enhance relationships with

our stakeholders, engagement cannot be undertaken

by the Board alone, and our Leadership Team also

engages and fosters positive relationships with our key

stakeholders. The Board considers stakeholder views

when making key decisions. For example, the information

is used in investment papers, strategy documents

and budget proposals, to ensure that decisions are

made with due consideration of all stakeholders.

Board discussions

In support of the company’s strategy to

grow and diversify through acquisitions,

the Board evaluated a number of

advanced M&A opportunities during

the year. Discussions speciﬁc to the

proposed acquisition of the Wintershall

Dea asset portfolio took place over the

course of eight Board meetings in 2023.

Board’s consideration of stakeholder

impacts in reaching its decision

The proposed acquisition of the

Wintershall Dea assets is a complex,

multi-jurisdictional transaction,

and the Board was sensitive to the

potential impact of this acquisition

on a wide range of stakeholders,

including shareholders and

investors, employees, governments

and regulators, and lenders.

In the early part of the process

the Board considered whether the

transaction would meet Harbour’s M&A

strategic criteria and provide tangible

value to Harbour’s shareholders. The

Board considered the complexities

related to Wintershall Dea’s ownership,

and how the transaction could be

structured to accommodate the sellers’

objectives while protecting Harbour’s

interests. A technical asset overview,

including an assessment of the

operators in light of the largely

non-operated portfolio, was presented

to the Board for discussion.

The Board concluded that the

transaction met Harbour’s key M&A

criteria: it would increase production

and reserve life, improve our

operating costs and lower our GHG

intensity. Further, the high quality

nature of the portfolio together

with the careful structuring of the

transaction would result in expected

investment grade credit ratings

for Harbour, delivering signiﬁcant

ﬁnancial synergies that would beneﬁt

shareholders and other stakeholders.

The Board discussed the impact of the

proposed transaction on stakeholders

including employees, shareholders,

lenders and governments, and made

plans to engage with them, including

by obtaining irrevocable undertakings

from certain shareholders to approve

the transaction.

Overall, the Board judged the

transaction would advance

Harbour’s stated strategy

materially, and strengthen the

company by providing scale

and geographic diversiﬁcation,

advancing our energy transition

goals, and enhancing ﬁnancial

strength, enabling us to create

value for all stakeholders. On the

back of this compelling strategic

and ﬁnancial rationale, the Board

approved the transaction.

To approve the acquisition

of an upstream portfolio

from Wintershall Dea

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

KEY STAKEHOLDER GROUPS IMPACTED:

Image copyright: Wintershall Dea/Thor Oliversen.

Harbour Energy plc

Annual Report & Accounts 2023

OUR KEY STAKEHOLDER GROUPS

Our employees

Government & regulators

Our investors & shareholders

Our lenders

Our JV partners, suppliers & customers

Wider society

Board discussions

In 2022, the UK Government

enacted the Energy Proﬁts Levy,

which increased the tax rate

on UK oil and gas producers

signiﬁcantly. This led to

reductions in Harbour’s activity

levels in the UK. The Board

discussed how to maintain

competitive unit operating costs

and margins in view of the

fundamentally changed outlook

for the UK business. The Board

approved the decision to carry

out a UK organisation review,

and subsequently reviewed

project progress during

several Board meetings,

with further oversight of

progress and outcomes

from two Board committees.

Board’s consideration of

stakeholder impacts in

reaching its decision

In reaching its decision to

endorse the UK organisation

review, the Board considered

the likely impact on a range of

stakeholders. It had to balance

the company’s responsibility

for providing high quality

employment opportunities to

employees on the one hand,

with the need to remain

competitive and sustainable for

the future in order to maintain

the conﬁdence of shareholders

and debt holders to enable

continued access to capital

to support the business.

The Board considered feedback

from our global engagement

survey, where colleagues pointed

to the complex systems and

processes that were a legacy

of previous mergers. It also

considered an external

benchmarking exercise

which suggested there were

opportunities to become more

efﬁcient in many areas of the

business. The Board concluded

that carrying out the UK

organisation review and

complementary Performance

Improvement projects focused

on rationalising systems and

simpliﬁcation, were necessary for

Harbour to remain competitive

and sustainable in the future.

The company committed to

carrying out the review fairly and

transparently, with care for all

those affected. It proactively

communicated with employees

and consulted with the staff

forums throughout. The process

was kept under review by the

Board until its conclusion in

September, with particular

attention paid to DE&I metrics

to ensure everyone was treated

fairly. Although the process

resulted in a reduction in some

400 roles in Harbour’s UK

operations, thanks to measures

such as closing vacancies

and a voluntary redundancy

programme, we were able to keep

the number of people who left

the business involuntarily to 109.

Board discussions

As a result of Harbour’s history

of growth by acquisition, the

company had an oversized

supply chain and a large

portfolio of contracts. The

volumes were difﬁcult and

resource-intensive to manage.

The Board agreed a project

to simplify the contract

portfolio, develop a category

management strategy and

form strategic partnerships,

in order to deliver better

value for the company.

Board’s consideration

of stakeholder impacts

in reaching its decision

The oil and gas industry

has a complex value chain.

Specialist suppliers and

contracts are required for

numerous activities that are

impractical or inefﬁcient to

manage in-house. Harbour

values the relationships

it has with suppliers and

contractors, which are

essential to the provision of

the services and equipment

needed to carry out much

of our business.

However, these suppliers

and contractors all require

management by the business

to ensure they operate to the

required standard and deliver

value for money. Operating in a

safety-critical sector, developing

strategic partnerships with fewer

providers was an opportunity

to create a more consistent and

stable operating environment.

Suppliers were invited to tender

for the provision of key services

– ranging from shorebase

and quayside, aviation, asset

integrity, subsea, engineering

and construction – on ﬁve-year

contracts with options to extend,

providing them and us with

stability and the opportunity to

build a long-term relationship.

As a result of this initiative, six

strategic partnerships were

formed in 2023, and the

number of contracts was

reduced by around 25 per cent.

In 2024, we are targeting 12

strategic partnerships and a

further reduction in contracts.

The programme should reduce

risks, improve efﬁciency and

deliver value for suppliers and

for Harbour.

To improve the efﬁciency

of our UK Business Unit

so it remains competitive

and sustainable

To endorse a strategic

approach to supply

chain, including contract

rationalisation

OUR STRATEGIC PILLARS

RESPONSIBILITY

Ensure safe, reliable and environmentally

responsible operations

QUALITY

Maintain a high quality portfolio

of reserves and resources

DIVERSIFICATION

Leverage our full cycle capability

to diversify and grow further

DISCIPLINE

Ensure ﬁnancial strength through

the commodity price cycle

KEY STAKEHOLDER GROUPS IMPACTED:

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

KEY STAKEHOLDER GROUPS IMPACTED:

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

2023

2022

2021

1.3

0.7

0.8

2023

2022

2021

2023

2022

2021

2023

2022

2021

175

186

208

2023

2022

2021

15.2

16.4

13.9

2023

2022

2021

2C: 460

2C: 519

2C: 455

2P: 488

2P: 361

2P: 410

Key performance indicators

Measuring our performance.

Safety and the

environment

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

Operational

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

0.7

per million

hours worked

Objective

Harbour is committed to ensuring our people are

kept safe and well, particularly colleagues working

in inherently hazardous locations offshore.

2023 progress

•

Our TRIR reduced to 0.7 (2022: 0.8), reﬂecting

a reduction in the frequency of injuries. For the

ﬁrst time in Harbour’s history, we recorded no

lost time injuries

•

The Anoa FPSO (Indonesia) surpassed 10 years

without a lost time injury while the Solan platform

(UK) surpassed 7 years

•

Following the introduction of our Back to Basics

campaign, high potential incidents materially

reduced to 3 (2022: 13)

Zero

Tier 1 & 2 events

Objective

Harbour aims to maintain the highest standards

of operational integrity to prevent any release of

hazardous material from primary containment.

2023 progress

•

No Tier 1 or Tier 2 process safety events, a ﬁrst

in Harbour’s history

•

Continued to embed Process Safety Fundamentals

across the company, including it as a theme for

our annual HSES day and holding an internal

major hazards awareness training programme

kgCO

e/boe

Objective

Harbour is committed to proactively addressing its

environmental impact and taking action to achieve

our Net Zero 2035 goal.

2023 progress

•

While our absolute emissions were broadly ﬂat

year on year at 1.3 mtCO

our GHG intensity

increased to 23 kgCO

e/boe, driven by lower

production volumes

•

Agreed sale of non-core Vietnam business, which

includes our most emissions-intensive asset

•

Continued momentum at our UK CCS projects,

including our operated Viking project which

is on track to store 10 mtpa of CO

by 2030

Objective

Harbour aims to add reserves as well as convert

reserves and resources into production via targeted

investment in its existing asset base. We seek to

replace reserves mainly through value accretive M&A.

2023 progress

•

2P reserve additions, including at GBA, AELE

and J-Area in the UK, partially offset the impact

of production

•

The addition of the Layaran gas discovery

(Indonesia) and the Kan oil discovery (Mexico)

to 2C resources was partially offset by revisions,

transfers to 2P and licence relinquishments

•

The acquisition of the Wintershall Dea asset

portfolio is expected to triple our combined

reserves and resources and increase our reserve

life to c.8 years

Objective

Harbour strives for competitive operating costs

without compromising on health, safety and the

environment, enabling robust margins through

the commodity price cycle.

2023 progress

•

Operating costs increased to $16.4/boe, reﬂecting

lower production volumes

•

Operating costs on an absolute basis were

broadly ﬂat year-on-year at $1.1 billion (2022:

$1.1 billion) with strong cost control and lower

UK ETS cost offsetting inﬂationary pressures

•

The acquisition of the Wintershall Dea asset

portfolio is expected to materially reduce the

company’s unit operating costs

880

mmboe

16.4

/boe

186

kboepd

Objective

Harbour aims to maximise value from its UK producing

asset base and grow and diversify internationally

including via acquisition of high quality, producing assets.

2023 progress

•

Production of 186 kboepd, reﬂecting natural

decline and fewer new wells on-stream, partly

due to the deferral of drilling at our partner

operated hubs

•

Continued strong performance at Greater Britannia

while Tolmount production was boosted by the

start-up of Tolmount East in the fourth quarter

•

The acquisition of Wintershall Dea asset

portfolio is expected to increase production

to c.500 kboepd

, adding signiﬁcant positions

in Norway, Germany and Argentina

Total Recordable Injury Rate (TRIR)

Process safety

GHG intensity (Scope 1 and 2)

Reserves and resources

Operating costs

Production

Harbour Energy plc

Annual Report & Accounts 2023

2023

2022

2021

0.7

1.0

2.1

2023

2022

2021

0.9x

0.1x

0.2x

2023

2022

2021

400

600

2023

2022

2021

2.4

2.7

4.0

We report our safety and the environment metrics on a gross operated basis.

Reported as per the IOGP’s Process Safety – Recommended Practice on Key Performance Indicators, report 456, 2018.

Our 2023 GHG intensity includes our Scope 1 and 2 emissions on a gross operated basis. For more details please see the ESG review on page 32.

Based on 2023 production numbers.

Volumes reﬂect management estimates. ERCE as a competent independent person have evaluated the Group’s working interest 2P reserves and

80 per cent of the Group’s 2C resources and consider Harbour’s estimates to be fair and reasonable.

Non-IFRS measure – see Glossary for the deﬁnition.

Harbour’s 2021 Annual Report disclosed a $100 million ﬁnal dividend for 2021, which was approved in 2022 and is included in the $600 million.

Financial

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

400

million

Objective

Harbour aims to deliver both growth and yield to its

shareholders. Shareholder returns are one of our three

capital allocation priorities, along with ensuring both

balance sheet strength and a robust and diverse portfolio.

2023 progress

•

We approved $400 million of shareholder returns,

comprising our $200 million annual dividend and

$200 million of share buybacks, resulting in

c.$1 billion of shareholder distributions since 2021

•

Our 2023 share buyback programme resulted in

us repurchasing 76.8 million shares during 2023,

equating to 9 per cent of our issued share capital,

and driving dividend per share growth of 9 per cent

0.1

at year end

Objective

Harbour aims to keep leverage below 1.5x on average

through the commodity price cycle supported by

prudent capital allocation and a disciplined hedging

programme. We seek to repay debt when prices are

high, ensuring capital discipline, ﬁnancial resilience

and capacity to take advantage of M&A opportunities.

2023 progress

•

Leverage reduced in 2023, with net debt reduction

more than offsetting lower EBITDAX

•

Net debt reduced by c.$0.6 billion to c.$0.2 billion

and, with our reserve based lending (RBL) facility

undrawn, we have signiﬁcant debt capacity

•

Successful outcome of RBL facility amendment

and extension on favourable terms

Objective

Harbour aims to deliver predictable and reliable cash

ﬂow, supported by prudent risk management, to enable

ﬁnancial strength, investment and shareholder returns

through the commodity price cycle.

2023 progress

•

Harbour generated $1.0 billion of free cash ﬂow,

lower than in 2022, reﬂecting lower production and

commodity prices offset by an improvement in our

hedge position

•

We continued to progress high return infrastructure-

led investment opportunities to support production

and cash ﬂow near term

•

The acquisition of the Wintershall Dea asset portfolio

is free cash ﬂow accretive in the short, medium and

long term, and will support enhanced and sustainable

shareholder returns

1.0

billion

Objective

Harbour aims to deliver strong earnings before interest,

tax, depreciation and amortisation, delivered by

proactive cost control and prudent risk management.

2023 progress

•

Revenue was lower in 2023, due to lower oil and

gas volumes and lower realised UK gas prices while

operating costs were broadly ﬂat year on year

•

A review of our UK organisation was completed

in October 2023 and is expected to deliver cost

savings from 2024

2.7

billion

INTRODUCING AN ADDITIONAL KPI

We have introduced EBITDAX

as a KPI to give investors an insight into the

proﬁtability potential of the business and the sustainability of its margins.

This is a useful indicator of underlying business performance.

OUR STRATEGIC PILLARS

RESPONSIBILITY

Ensure safe, reliable and environmentally

responsible operations

QUALITY

Maintain a high quality portfolio

of reserves and resources

DIVERSIFICATION

Leverage our full cycle capability

to diversify and grow further

DISCIPLINE

Ensure ﬁnancial strength through

the commodity price cycle

Free cash ﬂow

Leverage ratio

Shareholder returns approved

EBITDAX

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Oil

NGLs

UK gas

International gas

43%

48%

Operational review

186

kboepd

Asset/hub

2023

(kboepd)

2022

(kboepd)

J-Area

Greater Britannia Area

AELE

Catcher Area

Tolmount Area

Elgin Franklin

Buzzard

West of Shetland

Beryl Area

Other North Sea

North Sea

175

195

International

Total

186

208

West of Shetland comprises Clair, Schiehallion and Solan, which is operated.

Other North Sea includes East Irish Sea, Galleon, Ravenspurn North and Johnston.

Because of rounding, some totals may not agree exactly with the sum of their component parts.

Maximising the value of our

production base while advancing

our organic growth opportunities.

2023 GROUP PRODUCTION

We currently operate c.70 per cent of our production, including

ﬁve key hubs in the UK and our assets in Indonesia and Vietnam.

Our non-operated interests are in high quality, long life UK assets

such as Elgin Franklin and Clair where we are partnered with

well-established operators.

While more than 90 per cent of our production is currently from

the UK, we have a diversiﬁed asset base with no single hub

accounting for more than 20 per cent of our production or cash

ﬂow. We also have a balance of liquids and gas. Our material

organic growth opportunities are in Indonesia and Mexico.

Harbour Energy plc

Annual Report & Accounts 2023

Production averaged 186 kboepd

(2022: 208 kboepd), split 52 per

cent natural gas and 48 per cent

liquids and in line with guidance.

In the UK, we delivered higher production

from our operated J-Area hub, supported

by new wells on-stream around the end of

2022, while our operated Greater Britannia

Area (GBA) continued to outperform

expectations. This was offset by the

deferral of drilling at partner-operated hubs

resulting in fewer wells on-stream later in

the year. Production was also impacted by

some extended shutdowns in the second

half of the year, including at our operated

AELE hub and the East Irish Sea assets.

Operating costs for the year were $1.1

billion (2022: $1.1 billion), reﬂecting

active management of our cost structure,

including a reduction of staff in our UK

operations and the further development

of strategic supply chain partnerships and

consolidation of contracts. On a unit of

production basis, operating costs were

higher at c.$16/boe (2022: $14/boe)

due to lower production. 2023 total capital

expenditure was c.$1.0 billion (2022:

$0.9 billion) reﬂecting higher international

exploration activity offset in part by the

deferral of certain UK opportunities in

response to the Energy Proﬁts Levy (EPL).

Safe and responsible operations

In 2023, Harbour delivered an improved

safety performance, with our Total Recordable

Injury Rate reduced to 0.7 (2022: 0.8) per

million hours worked. In addition, we achieved

two ﬁrsts for Harbour: zero lost time injuries

and no serious (Tier 1 or 2) process safety

events. This improvement was supported

by the company-wide Back to Basics safety

campaign initiated in 2022 and now fully

embedded throughout our business.

In 2023, our gross operated greenhouse

gas emissions reduced to 1.3 million

tonnes, representing a c.30 per cent

reduction compared to 2018 while our

GHG intensity increased to 23 kgCO

e/boe

(2022: 21 kgCO

e/boe) due to lower

production. In January 2024, we signed

the United Nations Environment Programme

Oil and Gas Methane Partnership 2.0

memorandum of understanding.

During 2023, we successfully plugged and

abandoned seven wells bringing the total

that Harbour has decommissioned in the

UK since 2014 to 161.

Harbour also executed numerous seabed

clearance and remediation campaigns

during the year with onshore dismantlement

and processing of removed infrastructure

resulting in a recycling rate in excess of

97 per cent.

Maximising the value of our

UK producing assets

The majority of Harbour’s capital programme

is focused on infrastructure-led opportunities,

designed to optimise production and cash

ﬂow. These opportunities are typically low risk,

high return, short cycle investments with low

GHG intensity.

Within our operated portfolio, we delivered

ﬁrst gas from Tolmount East in November,

increasing production rates from Tolmount.

At J-Area we completed development drilling

at Talbot, a three-well subsea tie-back to the

Judy platform with ﬁrst oil on track for around

the end of 2024. We also approved plans to

drill a well and retroﬁt three producing wells

for gas lift, targeting improved recovery from

the Judy Chalk. At our AELE hub, we approved

an inﬁll well at North West Seymour which,

together with plant modiﬁcations, is expected

to extend producing life of the Armada ﬁeld

beyond 2030.

At our operated Greater Britannia Area,

Harbour progressed plans to return to drilling

at the satellite ﬁelds, including an inﬁll well at

Callanish, which spudded in February 2024,

and an appraisal well at Brodgar. In addition,

we successfully appraised the Leverett

gas discovery in 2023 with the potential

development via a subsea tie-back to the

Britannia platform now being evaluated.

In our partner-operated portfolio, Beryl

production was boosted by initial high rates

from two new wells online in the second

quarter. However, production on a full year

basis was impacted by the operator’s

decision to pause further subsea and

platform drilling in response to the EPL.

Production from our West of Shetland assets

was supported by four wells drilled across

Clair Phase One and Clair Ridge, and a further

three wells at Schiehallion. Further drilling

at both Clair and Schiehallion is planned for

2024. In addition, the operator continues

to optimise the Clair Phase 3 development,

which is expected to target Clair South.

As at 31 December 2023, Harbour’s

proven and probable (2P) reserves on a

working interest basis were 361 mmboe

(2022: 410 mmboe). This reﬂects the

impact of production (c.68 mmboe)

partially offset by over 20 mmboe of

additions across our UK operated J-Area,

AELE and GBA hubs following the

approval of several new wells.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Operational review

continued

Attractive international growth

projects with potential for

material reserves replacement

During 2023 we continued to invest in our

international growth opportunities in Mexico

and Indonesia. These have the potential to

materially add to our reserves and production

and diversify our company over time.

In Mexico, the unit development plan for

Zama was approved by the regulator in June

and the Zama unit partners have formed

an integrated project team to manage the

delivery of the development. Good progress

was also made on the various commercial

agreements. FEED is planned to begin in

2024. The Zama unit has the potential to

add reserves equivalent to a year’s worth of

Harbour’s current production. South west of

Zama, in Block 30, we made a signiﬁcant oil

discovery with the Kan-1 well in April. The

appraisal plan has been approved by the

regulator with drilling scheduled for the

second half of 2024. In parallel, early

engineering studies are being undertaken

on a potential Kan development.

In Indonesia, we made a signiﬁcant gas

discovery at Layaran-1 on the South

Andaman licence (Harbour 20 per cent

interest) in December following the

Timpan-1 gas discovery on the Andaman II

licence (Harbour 40 per cent operated

interest) in 2022. Post year end, the

rig moved to drill the Halwa and Gayo

prospects on Andaman II where operations

are nearing completion. The Halwa-1 well

encountered low gas saturations while a

small gas discovery has been made at

Gayo. Once the Gayo testing programme

is complete, the rig will return to South

Andaman to drill the shallower Tangkulo

prospect to the south of Layaran aiming to

prove up additional volumes. In addition,

Mubadala, operator of South Andaman,

intends to add a ﬁfth well to the campaign

to appraise the Layaran discovery.

Harbour’s 2C resource increased to 519

mmboe as at 31 December 2023 (2022:

455 mmboe), driven by the addition of

the Layaran gas discovery and the Kan oil

discovery. As a result, 2023 saw signiﬁcant

growth in our international (non-UK) resource

base which now accounts for over 60 per

cent of our 2C resources, underpinning

future potential reserve replacement and

diversiﬁcation of our company.

Strong ﬁnancial position and

disciplined capital allocation

During 2023, we generated signiﬁcant free

cash ﬂow of c.$1 billion, enabling Harbour to

reduce its net debt (excluding arrangement

fees and related costs) to $0.2 billion, from

c.$0.8 billion at the end of 2022. We also

successfully amended and extended on

favourable terms our RBL facility which was

undrawn as at year end. This strong ﬁnancial

position allowed our Board to return $249

million through share buybacks during the year,

in addition to our $200 million annual dividend.

The project allows for scalable transportation

and storage of CO

emissions from the

Humber, the UK’s most industrial emissions

intensive region, and also for shipped CO

emissions from emitters both in the UK

and in Europe.

Material progress on Viking during 2023

included: the Development Consent Order for

the 55 km onshore CO

transportation pipeline

being submitted and accepted for examination;

the award of two CCS licences adjacent to

Harbour’s existing Viking licences, potentially

increasing the project’s independently

veriﬁed 300 million tonnes of gross storage

capacity by more than 50 per cent; and the

project securing its ﬁrst potential CO

shipping customer. In addition, bp joined the

project as a partner in early 2023, with a 40

per cent interest. Post year end, in January, the

FEED contract was awarded, marking another

important milestone for Viking as it progresses

towards a ﬁnal investment decision.

2023 saw good momentum on our

two UK CCS projects – the Harbour-led

Viking CCS project (Harbour 60 per

cent interest) and Acorn (Harbour

30 per cent non-operated interest)

with both awarded Track 2 status

as part of the UK Government’s

regulatory process.

These projects have a critical role to play

in the UK’s transition to a lower carbon

economy and provide a potential long-term

stable income stream for Harbour.

The Harbour-led Viking project aims to

transport and store 10 million tonnes

of CO

emissions per annum by 2030

and up to 15 million tonnes per annum

by 2035, making it one of the largest

planned CCS projects in the world.

Investing in CCS to enable

the energy transition

Responsibly

reducing our impact

The Board has declared a ﬁnal dividend

of $100 million in respect of the 2023 ﬁnancial

year to be paid in May 2024, equating to

13 cents per share, subject to shareholder

approval. Given our share buyback programme,

this represents full year on year dividend per

share growth of 9 per cent.

Since becoming a public company in 2021, our

sustained operational and ﬁnancial delivery along

with our disciplined approach to capital allocation

has enabled us to reduce our net debt by $2.7

billion and return c.$1 billion to shareholders

while retaining the ﬂexibility to reach agreement

on a transformational acquisition.

Harbour Energy plc

Annual Report & Accounts 2023

Outlook

On a standalone basis and before

any contribution from the acquisition

and assuming a Brent oil price of

$85/bbl and a reduced UK gas price

of 70 pence/therm, we expect to be

marginally free cash ﬂow positive for

2024. This is after a higher capital

investment programme to support

future production and c.$1.0 billion

of cash tax payments, reﬂecting the

full utilisation of our available UK

corporate tax losses in the ﬁrst

half of 2024 and phasing of the

UK EPL payments.

Looking to 2025, we anticipate

production remaining broadly stable,

with increased volumes from new wells

and projects substantially offsetting

natural decline, and our total capital

expenditure to be materially lower.

As a result, we expect to generate

signiﬁcantly higher free cash ﬂow in

2025 compared to 2024 and to build

a net cash position by year end.

As we look to the future, we have

a strong balance sheet, our asset

base is generating robust cash ﬂow

and we have good momentum on our

organic growth opportunities and

UK CCS projects. At the same time,

we are on track to complete the

acquisition of the Wintershall Dea

asset portfolio in the fourth quarter

of 2024 which will transform our

scale and asset diversiﬁcation as

well as our capital structure.

Our ambition to grow through M&A

remains unchanged and we are well

positioned for future opportunities.

However, we will maintain our

disciplined approach to capital

allocation, balancing any future growth

opportunities alongside a commitment

to an investment grade balance sheet

and competitive shareholder returns.

A transformational acquisition

aligned with our strategy

On 21 December 2023, Harbour announced

the acquisition of substantially all of Wintershall

Dea’s upstream oil and gas assets for $11.2

billion. The acquisition will be funded through

porting of existing investment grade bonds from

Wintershall Dea, Harbour equity and cash.

The acquisition is expected to increase our

production to c.500 kboepd

and adds

signiﬁcant positions in Norway, Germany,

Argentina and Mexico.

Importantly, the acquisition will lengthen our

reserve life and is accretive across all key

metrics on a per share basis, supporting

enhanced and sustainable shareholder returns.

In addition, the acquisition advances our

energy transition goals, signiﬁcantly lowering

our GHG emissions intensity and expanding

our already strong CCS interests into new

European markets. Further, the acquisition is

expected to transform our capital structure

and deliver investment grade credit ratings

upon completion.

The acquisition is subject to Harbour

shareholder approval and we plan to publish

a prospectus and shareholder circular setting

out the details of the shareholder meeting to

approve the acquisition in the second quarter

of 2024. Harbour has received irrevocable

undertakings from shareholders which, as

at 6 March 2024, represented c.35 per cent

of our issued share capital to vote in favour

of the acquisition.

The acquisition is also subject to, amongst

other things, regulatory, anti-trust and foreign

direct investment approvals. Substantially all

necessary ﬁlings required for such approvals

have been submitted in the relevant

jurisdictions, including in the UK and

Germany, and are progressing as expected.

Regarding the ﬁnancing of the transaction,

in February 2024, Harbour and Wintershall

Dea’s ﬁnance subsidiaries successfully

completed a bondholder vote to amend

certain terms and conditions of Wintershall

Dea’s c.$4.9 billion investment grade

bonds and subordinated notes to reﬂect the

anticipated group structure. Over 80 per

cent of bondholders participated in the vote

and the amendments were approved with

signiﬁcant bondholder support across all

ﬁve bond tranches. The consent is subject

to ﬁnal technical implementation.

In March 2024, Harbour successfully

completed the syndication of the $3 billion

revolving credit facility (RCF) and $1.5 billion

bridge facility with strong support from both

existing relationship banks and new banks

resulting in oversubscription for both

facilities. This reﬂects strong lender support

for Harbour’s strategy going forward and is

testament to the high quality credit proﬁle

of the pro forma company.

Harbour continues to expect the acquisition

to complete in the fourth quarter of 2024.

The Acorn CCS project plans to transport

from emitters across Scotland to

storage reservoirs offshore, targeting at

least ﬁve million tonnes of CO

per year

by 2030. There is also the potential for

shipped CO

volumes via the Peterhead

port. In September 2023, the project was

awarded two further CCS licences, covering

the East Mey and Acorn East areas. FEED

on the Transportation and Storage System

is expected to commence in 2024 ahead

of a potential investment decision.

Based on 2023 production numbers.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Operational review

continued

Greater Britannia Area

AELE

Catcher Area

J-Area

Tolmount Area

Greater Britannia Area (GBA) was Harbour’s second largest producer

in 2023 at 27 kboepd (2022: 31 kboepd). Natural decline was

moderated by continued outperformance at satellite ﬁelds Callanish

and Brodgar, coupled with a high level of operational efﬁciency. The

successful appraisal of the Leverett discovery saw good ﬂow rates

achieved on test with the potential to be tied back to the Britannia

platform in the future. We will return to inﬁll drilling at Callanish and

Brodgar in 2024, with further exploration planned at Brodgar North

and Gilderoy all within tie-back distance of existing infrastructure.

Production from Armada, Everest, Lomond and Erskine (AELE)

averaged 22 kboepd (2022: 27 kboepd). Production efﬁciency was

lower in the second half due to extended shutdowns at Everest

and Lomond. Well intervention activities executed late in 2023 are

expected to help partially offset natural decline in 2024. Further,

Harbour plans to drill the North West Seymour well in 2024 which,

together with plant modiﬁcations, has the potential to extend

Armada’s producing life beyond 2030.

The Catcher Area averaged 16 kboepd net to Harbour (2022: 19

kboepd), reﬂecting natural decline partially offset by a full year of

production from the Catcher North and Burgman Far East wells which

came on-stream in 2022. Harbour, alongside its partners, is assessing

additional drilling opportunities at the Catcher Area with a view to

returning to drilling in 2025. A 4D seismic campaign is planned for 2024

to inform future reservoir management plans and identify and de-risk

potential future inﬁll opportunities. Post period end, Catcher completed

its 200th cargo ofﬂoad after producing c.100 mmboe, exceeding the

mid-point reserves case set out in the original ﬁeld development plan.

J-Area was Harbour’s largest producer in 2023 averaging 34 kboepd

(2022: 30 kboepd). This increase was driven by improved uptime and

the contribution from new wells on-stream at the end of 2022 and

early 2023. Drilling at the Talbot development, a multi-well subsea

tie-back to the Judy platform, was completed in 2023 with ﬁrst oil on

track for around the end of 2024. Other 2024 activities include the

Jocelyn South exploration well and, at Judy, two inﬁll wells and a

rig-based well intervention campaign. Planning for additional wells

to further increase recovery from J-Area is also underway.

The Tolmount Area averaged 13 kboepd net to Harbour (2022:

14 kboepd), reﬂecting better than anticipated underlying reservoir

performance after having come off production plateau early in 2022.

The Tolmount East development well, completed in late 2022, was

tied into production in December 2023, increasing rates from the

Tolmount Area. Other activity in the area included the Dana operated

Earn exploration well which made a small gas discovery, the potential

commerciality of which is now being evaluated.

kboepd

2023 production

kboepd

2023 production

kboepd

2023 production

kboepd

2023 production

kboepd

2023 production

NORTH SEA

OPERATED

Optimising

the value of our existing asset base.

We continue to maximise the value of our UK

North Sea assets. Active management of our cost

structure and disciplined capital allocation in 2023

enabled material free cash ﬂow generation. Projects

to improve recovery efﬁciency and investments in

short cycle, high return opportunities designed to

support future production were also progressed.

SCOTT BARR

EVP NORTH SEA

Harbour Energy plc

Annual Report & Accounts 2023

FIND OUT MORE ONLINE

HARBOURENERGY.COM/OPERATIONS/UK-NORTH-SEA

Elgin Franklin

West of Shetland

Production from Elgin Franklin averaged 19 kboepd in 2023

(2022: 24 kboepd). This reﬂected natural decline from the existing

well stock and a return to more normal levels of uptime compared to

the exceptionally high level achieved in 2022. Production was also

impacted by the operator’s decision to defer the EIH well, which was

originally expected online towards the end of the year, in response

to the introduction of the EPL.

Harbour’s West of Shetland assets which comprise our interests in

Clair, Schiehallion and Solan produced 14 kboepd (2022: 14 kboepd)

during 2023. Production was supported by four wells drilled

across Clair Phase One and Clair Ridge, and a further three wells

at Schiehallion. Drilling continues at Clair Ridge following the

completion of the ﬁve-yearly rig recertiﬁcation in Q3, with up

to four wells planned in 2024. Further wells are also planned

at Schiehallion this year.

kboepd

2023 production

Buzzard

Buzzard production averaged 11 kboepd net to Harbour (2022:

15 kboepd). Lower production was driven by natural decline

compounded by extended shutdowns within the year. In 2024,

natural decline will be partially offset by the two new North Terrace

manifold wells, expected online in the ﬁrst quarter of the year.

kboepd

2023 production

Beryl Area

Production from the Beryl Area averaged 14 kboepd during 2023

(2022: 11 kboepd). Higher production in 2023 was driven by

improved operational uptime and strong performance from two

new wells, Storr-3 and Buckland South West, online in the ﬁrst half

of the year. However, production on a full year basis was impacted

by the operator’s decision to defer the subsea and platform drilling

campaigns in response to the introduction of the EPL in the UK.

Discussions are ongoing with the operator and the regulator with

regards to future drilling and other investment opportunities to

maximise economic recovery from the area.

kboepd

2023 production

kboepd

2023 production

NORTH SEA

NON-OPERATED

Southeast Asia: operated

Indonesia: Natuna Sea Block A

The Natuna Sea Block A ﬁelds averaged 7 kboepd in 2023 (2022:

9 kboepd) reﬂecting natural decline partially offset by two inﬁll wells

that were completed in Q4 2022. Production was lower in the second

half of the year reﬂecting weak Singapore demand for our gas. This

followed the Singapore Government’s introduction of a temporary

price cap on power prices which resulted in the preferential utilisation

of LNG inventories over pipeline.

Vietnam: Chim Sáo

Our Chim Sáo ﬁelds in Vietnam averaged 4 kboepd in 2023

(2022: 4 kboepd), with additions from new wells online offsetting

natural decline. In August we announced the sale of our business

in Vietnam to Big Energy Stock Company for $84 million. The

divestment is expected to complete during 2024 and will result in a

country exit from Vietnam for Harbour, as we continue to ensure that

our capital and resources are deployed in line with our strategy.

kboepd

2023 production

kboepd

2023 production

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Operational review

continued

Growing and diversifying

through organic opportunities.

In Indonesia, we have built on last year’s

success at Timpan-1 with a signiﬁcant gas

discovery at Layaran-1 in late 2023, the ﬁrst

of a four-well campaign across our Andaman

Sea licences targeting a multi-TCF play.

STEVE COX

EVP SOUTHEAST ASIA

We have organic growth opportunities in

Mexico, with the potential development of

the giant Zama oil ﬁeld having the ability

to replace over a year’s worth of Harbour’s

current production, and the Kan-1 oil discovery

to the south west of Zama.

We also achieved good momentum in our UK

carbon capture and storage projects. These

have a key role to play in the UK’s transition

to a lower carbon economy and provide a

potential long-term, stable income stream

for Harbour.

GUSTAVO BAQUERO

EVP STRATEGY, BUSINESS DEVELOPMENT

& ENERGY TRANSITION

INDONESIA

Zama

The Zama unit development plan was submitted in March 2023 and approved by the

regulator in June. 2023 also saw good progress on several commercial workstreams,

while the initiation of FEED and a refresh of cost and schedule estimates are planned

for 2024. A ﬁnal investment decision for the project would result in c.75 mmboe of

2C resources moving into 2P reserves, replacing over a year’s worth of Harbour’s

current production. The completion of the acquisition of the Wintershall Dea asset

portfolio will increase our interest in Zama from c.12 per cent to c.32 per cent.

mmboe

Net 2C resource

MEXICO

NON-OPERATED

CCS PROJECTS

Working with a wide range of emitters, the Harbour-led Viking project is aiming to

transport and store 10 million tonnes of CO

emissions per annum by 2030 and up

to 15 million tonnes by 2035, making it one of the largest planned CCS projects in

the world. Viking made signiﬁcant progress in 2023 with the project being included in

Track 2 of the UK Government’s regulatory process enabling the award of FEED. In

addition, Viking secured its ﬁrst potential CO

shipping customer in December 2023.

Viking CCS

Andaman Sea licences

In late 2023 we announced a signiﬁcant gas discovery with the Layaran-1 well on our

non-operated South Andaman licence (Harbour 20 per cent interest). Layaran-1 is

the ﬁrst of a multi-well exploration campaign over 2023/24 targeting a major gas

play across our Andaman Sea licences. This follows the material gas discovery at

Timpan-1 in 2022. The Layaran gas discovery added 48 mmboe to our 2C resources

which, together with the Timpan discovery, takes our total booked 2C resources for

the area to 130 mmboe. Post year end, drilling at the Halwa and Gayo prospects on

Andaman II commenced with operations ongoing. Once completed the rig will return

to South Andaman to drill the shallower Tangkulo prospect to the South of Layaran

aiming to prove up additional volumes.

130

mmboe

Net 2C resource

180

Net CO

storage capacity (2C resource)

Harbour Energy plc

Annual Report & Accounts 2023

Tuna

The plan of development for our operated Tuna project was approved

by the Indonesian Government in December 2022. Planned 2023

progress was materially impacted by EU/UK sanctions which

prevented us, as operator, from undertaking certain further work on

the project, including FEED, whilst our Russian joint venture partner

is on the licence. We are working constructively with our partner and

the Indonesian Government to ﬁnd a path forward for the project.

mmboe

Net 2C resource

Block 30

Exploration acreage

Harbour has a 30 per cent non-operated interest in Block 30 to

the southwest of Zama. We completed two exploration wells in 2023,

targeting the Kan and Ix prospects. The Kan-1 well made an oil

discovery and resulted in the addition of 29 mmboe to our 2C resource

at year end. A plan to appraise the Kan discovery in 2024 has been

approved by the regulator. The second commitment well, Ix-1EXP, was

unsuccessful and has been plugged and abandoned. As a result of the

acquisition of the Wintershall Dea asset portfolio, Harbour will become

operator of Block 30 with a 70 per cent interest.

mmboe

Net 2C resource

NORWAY

Acorn

FIND OUT MORE ONLINE

HARBOURENERGY.COM/OPERATIONS

During 2023, we drilled one exploration well targeting the

JDE prospect on Equinor’s operated PL 1058. The well was

unsuccessful and was plugged and abandoned. Post year end,

in January 2024, we drilled the Harbour-operated Ametyst

exploration well which encountered gas in the secondary target.

The acquisition of the Wintershall Dea asset portfolio will transform

Harbour’s position in Norway, adding a large-scale, gas-weighted,

producing portfolio with low operating costs and GHG emissions.

Licences (including six that are operated)

Partner

ESG REVIEW

READ MORE ON PAGE 32

Harbour is a 30 per cent partner in the Acorn project which, along with

the Harbour led Viking project, was awarded Track 2 status by the UK

Government in July 2023. FEED on the Transportation and Storage

System is expected to commence in 2024.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

2023

2022

2021

439

552

2023

2022

2021

Financial review

Strong ﬁnancial position and disciplined capital allocation

•

Continued robust ﬁnancial performance including focus

on rigorous cost control

•

Signiﬁcant free cash ﬂow generation, enabling a reduction

in net debt in the period

•

Since becoming a listed company in 2021, Harbour has

reduced net debt by $2.7 billion and returned $1.0 billion

to shareholders

Shareholder distributions

439

Shareholder returns paid

$ million

% growth

Dividend per share

growth year on year

We ended the year in a

strong position supported

by a cash generative asset

base, a robust balance sheet,

disciplined capital allocation

and a prudent approach to

risk management.

ALEXANDER KRANE

CHIEF FINANCIAL OFFICER

2.7

EBITDAX

1.0

Free cash ﬂow

Non-IFRS measure – see Glossary for the deﬁnition.

Harbour Energy plc

Annual Report & Accounts 2023

Income statement

2023

$ million

2022

$ million

Revenue and other income

3,751

5,431

Cost of operations

(2,357)

(2,845)

EBITDAX

2,675

4,011

Operating proﬁt

913

2,541

Proﬁt before tax

597

2,462

Taxation

(565)

(2,454)

Proﬁt after tax

Cents/share

Basic earnings per share

Non-IFRS measure – see Glossary for the deﬁnition.

Revenue and other income

Total revenue and other income decreased to $3,751 million (2022:

$5,431 million). This was driven by lower commodity prices, especially

UK natural gas prices, and reduced production.

2023

$ million

2022

$ million

Revenue and other income

3,751

5,431

Crude oil

2,086

2,792

Gas

1,415

2,322

Condensate

179

238

Tariff income and other revenue

Other income

Revenue earned from hydrocarbon production activities decreased to

$3,680 million (2022: $5,352 million) after realised hedging losses of

$911 million (2022: $3,185 million). This decrease was mainly driven

by lower post-hedging realised UK natural gas prices and reduced

production volumes.

Crude oil sales decreased to $2,086 million (2022: $2,792 million)

after realised hedging losses of $93 million (2022: $753 million).

This was driven by lower production volumes, with our realised

post-hedging oil price stable at $78/bbl (2022: $78/bbl).

Gas revenue was $1,415 million (2022: $2,322 million), split

between UK natural gas revenue of $1,284 million (2022: $2,142

million) including realised hedging losses of $818 million and

international gas revenue of $131 million (2022: $180 million).

The realised post-hedging price for our UK and Indonesia gas

was 54 pence/therm (2022: 86 pence/therm) and $13/mscf

(2022: $14/mscf), respectively.

Other income amounted to $36 million (2022: $41 million) which

includes partner recovery on related lease obligations and a receipt

related to the Viking CCS Development Agreement entered into with

bp in March 2023.

Summary of ﬁnancial results

Units

2023

2022

Production and post-hedging realised

prices

Production

kboepd

186

208

Crude oil

$/boe

UK natural gas

p/therm

Indonesia natural gas

$/mscf

Income statement

Revenue and other income

$ million

3,751

5,431

EBITDAX

$ million

2,675

4,011

Proﬁt before taxation

$ million

597

2,462

Proﬁt after taxation

$ million

Basic earnings per share

cents/share

Other ﬁnancial key ﬁgures

Total capital expenditure

$ million

969

908

Operating cash ﬂow

$ million

2,144

3,130

Free cash ﬂow

$ million

1,042

2,105

Shareholder returns paid

$ million

439

552

Net debt

$ million

(213)

(704)

Leverage ratio

times

0.1

0.2

See Glossary for the deﬁnition of non-IFRS measures. Reconciliations between IFRS

and non-IFRS measures are provided within this review.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Financial review

continued

Cost of operations

Cost of operations decreased to $2,357 million (2022: $2,845

million) driven primarily by a positive movement in hydrocarbon

inventories and (over)/underlift balances.

2023

$ million

2022

$ million

Operating costs

Field operating costs

1,171

1,114

Non-cash depreciation on non-oil and gas assets

(26)

Tariff income

(30)

Total operating costs

1,115

1,058

Operating costs per barrel ($ per barrel)

16.4

13.9

Movement in (over)/underlift balances

and hydrocarbon inventories

(225)

181

Depreciation, depletion and amortisation (DD&A)

before impairment charges

Depreciation of oil and gas properties

(cost of operations only)

1,395

1,508

Depreciation of non-oil and gas properties

Amortisation of intangible assets

–

Total DD&A

1,430

1,546

DD&A before impairment charges ($ per barrel)

21.1

20.4

Non-IFRS measure – see Glossary for the deﬁnition.

Total operating costs were ﬂat year on year at $1,115 million

(2022: $1,058 million) driven by strong cost control in an inﬂationary

environment. Operating costs were higher on a unit of production basis

at $16.4/boe (2022: $13.9/boe) due to lower production volumes.

Depreciation, depletion and amortisation (DD&A) unit expense, which

reﬂects the capitalised costs of producing assets divided by produced

volumes, was $21.1/boe (2022: $20.4/boe).

EBITDAX

was $2,675 million (2022: $4,011 million), with the

reduction mainly driven by lower revenue.

2023

$ million

2022

$ million

Operating proﬁt

913

2,541

Depreciation, depletion and amortisation

1,430

1,546

Impairment/(impairment reversal) of property,

plant and equipment

214

(170)

Impairment of goodwill

–

Exploration and evaluation expenditure,

and new ventures

Exploration costs written-off

Gain on disposal

–

(12)

EBITDAX

2,675

4,011

Non-IFRS measure – see Glossary for the deﬁnition.

The Group has recognised a net pre-tax impairment charge on

property, plant and equipment of $214 million (2022: $170 million

net reversal). Approximately half of this is in respect of revisions to

decommissioning estimates on mainly non-producing assets with no

remaining net book value. The balance relates to the announced sale

of our Chim Sáo asset in Vietnam and an impairment on two UK North

Sea assets, one driven primarily by a signiﬁcant reduction in the gas

price outlook compared to the 2022 year-end view, and the other by a

revised decommissioning cost proﬁle. In addition there is a goodwill

impairment of $25 million in respect of the Vietnam assets.

During the year, the Group expensed $93 million (2022: $106 million)

for exploration and appraisal activities. This includes exploration

write-off expense of $57 million (2022: $64 million) mainly in

relation to the Ix-1EXP well in Mexico, the JDE well in Norway and

costs associated with licence relinquishments and uncommercial

well evaluations and a further $29 million (2022: $28 million) in

relation to our UK CCS projects.

Net ﬁnancing costs

Finance income amounted to $104 million (2022: $279 million),

including derivative gains of $68 million (2022: $48 million loss)

related to changes in the fair value of an embedded derivative within

one of the Group’s gas contracts. The reduction in ﬁnance income

compared to 2022 is mainly due to unrealised foreign exchange gains

of $202 million in 2022 which predominantly arose on the revaluation

of open sterling denominated gas hedges as a result of the weakening

of sterling against the US dollar in the period.

Finance expenses amounted to $420 million (2022: $358 million).

This included interest expense incurred on debt facilities of $42

million (2022: $98 million), the reduction reﬂecting the impact of

lower drawn down debt partially offset by higher interest rates.

Other ﬁnancing expenses include the unwinding of the discount

on decommissioning provisions of $156 million (2022: $65 million)

which increased due to higher cost estimates, bank and ﬁnancing

fees of $100 million (2022: $91 million) and $57 million of foreign

exchange losses as a result of the strengthening of sterling in the

year (2022: $202 million of foreign exchange gains).

Harbour Energy plc

Annual Report & Accounts 2023

Earnings and taxation

Proﬁt after tax amounted to $32 million (2022: $8 million proﬁt).

This resulted in earnings per share of 4 cents (2022: 1 cent) after

taking into account the weighted average number of ordinary shares

in issue of 804 million (2022: 900 million) following the share

buyback programme.

Harbour’s tax expense decreased in 2023 to $565 million (2022:

$2,454 million). The 2022 charge included a one-off non-cash charge

of $1,469 million as a result of the revaluation of the deferred tax

position on the balance sheet following the introduction of the EPL in

the UK. The tax expense is split between a current tax expense of

$677 million (2022: $706 million), which includes an EPL current tax

charge of $525 million (2022: $326 million) and a deferred tax credit

of $112 million (2022: $1,748 million expense including $1,469

million one-off non-cash deferred tax charge).

The effective tax rate is 95 per cent (2022: 100 per cent), materially

higher than the standard UK tax rate for the period of 75 per cent.

This is in part due to costs which are not fully deductible at the UK

statutory rates. If these items had not arisen then we would have

expected the effective tax rate for the period to be c.85 per cent.

Shareholder distributions

A ﬁnal dividend with respect to 2022 of 12 cents per ordinary share

was proposed on 9 March 2023 and approved by shareholders at

the AGM on 10 May 2023. The dividend was paid on 24 May 2023

to all shareholders on the register as at 14 April 2023, totalling $99

million

. An interim dividend was announced on 24 August 2023 at

12 cents per share and was paid on 18 October 2023 at a value

of $91 million

In addition to these dividend payments, Harbour completed on

15 February 2023 the remaining $43 million of a $100 million share

buyback approved by the Board in November 2022. The Board also

approved a further $200 million share buyback scheme on 9 March

2023, which concluded on 28 September 2023. The purpose of

these share buyback programmes was to reduce the company’s

share capital and all ordinary shares purchased as part of the

programmes were cancelled. During 2023, we repurchased and

cancelled 76.8 million of our own shares at a cost of $249 million

(2022: $361 million), equating to 9 per cent of our issued share

capital at 1 January 2023.

The Board is proposing a ﬁnal dividend with respect to 2023 of

13 cents per ordinary share to be paid in GBP at the spot rate

prevailing on the record date. This dividend is subject to shareholder

approval at the AGM, to be held on 9 May 2024. If approved, the

dividend will be paid on 22 May 2024 to shareholders on the

is available to shareholders who would prefer to invest their

dividends in the shares of the company. The last date to elect

for the DRIP in respect of this dividend is 26 April 2024.

Statement of ﬁnancial position

2023

$ million

2022

$ million

Assets

Non-current assets, excluding deferred taxes

8,074

9,033

Deferred tax assets

1,406

Current assets

1,482

2,127

Assets held for sale

334

–

Total assets

9,897

12,566

Liabilities and equity

Borrowings net of transaction fees

509

1,238

Decommissioning provisions

4,021

4,141

Deferred tax liabilities

1,260

397

Lease creditor

673

825

Derivative liabilities

284

3,450

Other liabilities

1,368

1,494

Liabilities directly associated with assets held for sale

242

–

Total liabilities

8,357

11,545

Equity

1,540

1,021

Total liabilities and equity

9,897

12,566

Net debt

(213)

(704)

Assets

The decrease in total assets of $2,669 million is mainly as a result

of the move from a net deferred tax asset position of $1,009 million

to a net deferred tax liability of $1,253 million primarily driven by the

realisation of the hedging position, reduction in property, plant and

equipment (PP&E) of $973 million, lower right-of-use assets, which

have reduced by $148 million, partially offset by an increase to

intangible assets of $292 million. Total assets included assets

held for sale in respect of the Vietnam disposal of $334 million.

Liabilities

The reduction in total liabilities of $3,188 million is mainly driven by

a reduction in derivative liabilities of $3,166 million following maturity

of contracts and lower commodity prices in the year, a reduction in

borrowings of $729 million mainly related to the repayment of the

reserve based lending (RBL) facility and the move to a net deferred tax

liability position mentioned above. The decommissioning provision

decrease of $120 million was due to changes in cost estimates mainly

driven by increased discount rates and spend in the year, partially

offset by the unwinding of the discount. Total liabilities included

liabilities directly associated with assets held for sale in respect

of the Vietnam disposal of $242 million.

The net deferred tax position on the balance sheet is a liability of

$1,253 million. This is primarily made up of a deferred tax liability in

respect of the future proﬁts which will ﬂow from our PP&E of $2,901

million offset by a deferred tax asset in respect of future tax relief on

decommissioning spend of $1,574 million. Whilst our future UK proﬁts

in the period to 31 March 2028 will be subject to 75 per cent taxation

due to the EPL, UK decommissioning spend is not deductible for EPL

and so relieved at 40 per cent.

Difference to the ﬁnal dividend value declared of $100 million is due to FX adjustments on sterling denominated shares at the date of payment.

Difference to the interim dividend declared of $100 million is due to foreign exchange adjustments on sterling denominated shares and reduced

share count in issue between the record date and the announcement driven by the repurchases of shares.

Total spend on share buybacks includes transaction fees and foreign exchange differences applied to the sterling denominated shares repurchased.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Financial review

continued

Equity and reserves

Total equity increased mainly due to the gains in comprehensive

income related to favourable fair market value movements on cash

ﬂow hedges of $3,168 million (2022: $269 million), gains on currency

translation of $103 million (2022: losses of $198 million), offset by

movements in tax on cash ﬂow hedges of $2,376 million (2022: gains

of $1,006 million), share buybacks of $249 million (2022: $361

million) and dividend payments of $190 million (2022: $191 million)

made in the year. Retained earnings increased by the proﬁt after tax.

Net debt

As at 31 December 2023, net debt of $213 million (2022: $704

million) consisted of cash balances of $280 million (2022: $500

million), net of the $500 million bond (2022: $500 million) adjusted

for unamortised fees of $7 million (2022: $9 million). Following net

repayments of the RBL facility of $775 million and settlement in full

of the exploration ﬁnance facility (EFF) of $11 million, the RBL facility

is $nil (2022: $775 million less unamortised fees of $73 million)

and the EFF is $nil (2022: $11 million). The remaining $61 million

unamortised fees for the RBL have been reclassiﬁed to debtors.

The RBL facility was amended and extended in November 2023

which resulted in the debt availability of $1.3 billion. Available

liquidity, being undrawn RBL facility plus cash balances of $0.3

billion, was $1.6 billion at the end of the year.

As at 31 December 2023, the leverage ratio

was 0.1x (2022: 0.2x)

which has reduced primarily as a result of repayments of the RBL

facility during the year resulting in nil drawdown at year end.

2023

$ million

2022

$ million

Leverage ratio

Net debt

213

704

EBITDAX

2,675

4,010

Leverage ratio

0.1x

0.2x

Non-IFRS measure – see Glossary for the deﬁnition.

Derivative ﬁnancial instruments

We carry out hedging activity to manage commodity price risk, to

ensure we comply with the requirements of the RBL facility and to

ensure there is sufﬁcient funding for future investments. We have

entered into a series of ﬁxed-price sales agreements and a ﬁnancial

hedging programme for both oil and gas, consisting of swap and

option instruments. Our future production volumes are hedged under

the physical and ﬁnancial arrangements in place at 31 December

2023. These are set out in the following table. Hedges realised to

date are in respect of both crude oil and natural gas.

The current hedging programme is shown below:

Hedge position

2024

2025

2026

Oil

Volume hedged (mmboe)

7.32

4.38

–

Average price hedged ($/bbl)

84.37

77.35

–

UK natural gas

Volume hedged (mmboe)

13.08

7.38

1.55

Average priced hedged (pence/therm)

67.19

89.68

99.28

At 31 December 2023, our ﬁnancial hedging programme on

commodity derivative instruments showed a pre-tax negative

mark-to-market fair value of $18 million (2022: $3,257 million),

with no ineffectiveness charge to the income statement.

Statement of cash ﬂows

2023

$ million

2022

$ million

Cash ﬂow from operating activities after tax

2,144

3,130

Cash ﬂow from investing activities – capital investment

(718)

(634)

Cash ﬂow from investing activities – other

Operating cash ﬂow after investing activities

1451

2,501

Cash ﬂow from ﬁnancing activities

(409)

(396)

Free cash ﬂow

1,042

2,105

Cash and cash equivalents

280

500

Table excludes ﬁnancing activities related to debt principal movements.

Interest and lease payments only, excludes shareholder distributions.

Non-IFRS measure – see Glossary for the deﬁnition.

Net cash from operating activities after tax amounted to $2,144

million (2022: $3,130 million) after accounting for positive working

capital movements of $199 million, including movements in realised

but unsettled hedges of $207 million (2022: $104 million). Capital

investment was $718 million (2022: $634 million) which included

property, plant and equipment additions of $496 million (2022:

$477 million) and exploration and evaluation additions of $202

million (2022: $127 million).

Cash outﬂow from ﬁnancing activities totalled $409 million (2022:

$396 million) split between interest payments of $150 million

(2022: $142 million) and lease payments of $259 million (2022:

$254 million).

Shareholder distributions consist of dividends paid of $190 million

(2022: $191 million) and $249 million (2022: $361 million) related

to the repurchase of Harbour’s own shares.

The Group made net tax payments of $438 million in the period

(2022: $552 million) primarily in relation to the UK Energy Proﬁts Levy.

Cash and cash equivalent balances were $280 million (2022: $500

million) at the end of the year.

Capital investment is deﬁned as additions to property, plant and

equipment, ﬁxtures and ﬁttings and intangible exploration and

evaluation assets, excluding changes to decommissioning assets.

2023

$ million

2022

$ million

Additions to oil and gas assets

(482)

(532)

Additions to ﬁxtures and ﬁttings, ofﬁce equipment

& IT software

(29)

(42)

Additions to exploration and evaluation assets

(210)

(111)

Total capital investment

(721)

(685)

Movements in working capital

(22)

Capitalised interest

Capitalised lease payments

Cash capital investment per the cash ﬂow statement

(718)

(634)

Non-IFRS measure – see Glossary for the deﬁnition.

Harbour Energy plc

Annual Report & Accounts 2023

During the year, the Group incurred total capital expenditure

$969 million (2022: $908 million), split by capital investment of

$721 million (2022: $685 million) and decommissioning spend

of $248 million (2022: $223 million) respectively.

The capital investment in the UK mainly consisted of, for operated

assets, development drilling in the J-Area, including at Talbot, the tie in

of Tolmount East to Tolmount, the appraisal of the Leverett discovery

which is close to the Britannia platform and long lead items for the

Callanish and North Seymour inﬁll wells at our GBA and AELE hubs

respectively. For partner operated assets, capital investment

consisted primarily of the tie in of two subsea wells at Beryl, and

drilling at Buzzard, Clair and Schiehallion. In International, exploration

wells were drilled at Layaran-1 in Indonesia, the JDE well in Norway

and the Kan and Ix-1EXP wells in Mexico.

Principal risks

There are no signiﬁcant changes to the headline principal risks

from those disclosed in the 2023 half-year results. A full description

of Harbour’s principal risks can be found on pages 60 to 65.

Post balance sheet events

On 5 March 2024 Harbour signed a new $3.0 billion fully unsecured

revolving credit facility (RCF) and $1.5 billion bridge facility which will

be available at completion to fund the acquisition of the Wintershall

Dea asset portfolio. The RCF has a $1.75 billion letter of credit

sublimit, a ﬁve-year term from signing and will replace the existing

RBL facility.

On 6 March 2024, the UK Government announced that the Energy

Proﬁts Levy (EPL) would be extended for a further 12 months to

31 March 2029 from the former end date of 31 March 2028. Harbour

is currently assessing the potential impact of this announcement.

Going concern

The directors consider the going concern assessment period to

be up to 30 June 2025. The Group monitors and manages its capital

position and its liquidity risk regularly throughout the year to ensure

that it has access to sufﬁcient funds to meet forecast cash

requirements. Cash forecasts are regularly produced and sensitivities

considered based on, but not limited to, the Group’s latest life of ﬁeld

production and expenditure forecasts, management’s best estimate of

future commodity prices based on recent forward curves, adjusted for

the Group’s hedging programme and the Group’s borrowing facilities.

The ongoing capital requirements are ﬁnanced by the Group’s

$2.75 billion reserve based lending (RBL) facility that has a current

borrowing base of $1.3 billion after the amendment and extension

that was completed in November 2023, and $0.5 billion bond which

matures in 2026. The amount drawn down under these facilities at

31 December 2023 was nil and $0.5 billion respectively, which

together with cash of $0.3 billion, gave a total available liquidity of

$1.6 billion. Further details can be found in note 21 on page 155.

The RBL facility has a ﬁnancial covenant relating to the ratio of

consolidated total net debt to consolidated EBITDAX on a historic

and forward-looking basis, which is tested semi-annually. The

amount available under the facility is redetermined annually

based on a valuation of the Group’s borrowing base assets when

applying certain forward-looking assumptions, as deﬁned in the

borrowing agreements.

The Group’s latest approved business plan underpins the base case

going concern assessment and is based upon management’s best

estimate of forward commodity price curves, production in line with

approved asset plans, unavoidable committed fees in respect of the

Wintershall Dea acquisition and the ongoing capital requirements

of the Group that will be ﬁnanced by free cash ﬂow, the existing RBL

and bond ﬁnancing arrangements.

In December 2023 Harbour announced the Wintershall Dea

acquisition transaction, which is anticipated to complete in Q4 2024

and will be accretive to Harbour’s free cash ﬂow. Once complete,

Harbour is expected to receive investment grade credit ratings and to

beneﬁt from a signiﬁcantly lower cost of ﬁnancing, including the porting

of existing euro denominated Wintershall Dea bonds with a nominal

value of approximately $4.9 billion and a weighted average coupon of

c.1.8 per cent. The Group would also have access to a new $3.0 billion

revolving credit facility and $1.5 billion bridge facility. As part of the

going concern assessment, a base case, sensitivities and reverse

stress tests have been run on the enlarged group forecasts, which are

supported by Harbour’s acquisition due diligence work, and show that

the probability of a liquidity deﬁcit or covenant breach is remote.

The base case indicates that the Group is able to operate as a going

concern with sufﬁcient headroom and remain in compliance with its

loan covenants throughout the assessment period.

In line with the principal risks that have been identiﬁed to impact the

ﬁnancial capability of the Group to operate as going concern, a single

downside sensitivity scenario has been prepared reﬂecting a reduction in:

•

Brent crude and UK natural gas prices of 20 per cent; and

•

the Group’s unhedged production of 10 per cent;

throughout the assessment period.

In this downside scenario when applied individually and in aggregate

to the base case forecast, the Group is forecast to have sufﬁcient

liquidity headroom throughout the assessment period and to remain

in compliance with its ﬁnancial covenants.

Reverse stress tests have been prepared reﬂecting further reductions

in commodity price and production parameters, prior to any mitigation

strategies, to determine at what levels each would need to reach such

that either the lending covenant is breached or liquidity headroom

runs out. The results of these reverse stress tests demonstrated the

likelihood that a sustained signiﬁcant fall in commodity prices or a

signiﬁcant fall in production over the assessment period that would

be required to cause a risk of funds shortfall or a covenant breach

is signiﬁcantly below the sensitivity test performed and hence remote.

Taking the above analysis into account and considering the ﬁndings

of the work performed to support the statement on the long-term

viability of the company and the Group, the Board was satisﬁed

that, for the going concern assessment period, the Group is able to

maintain adequate liquidity and comply with its lending covenants

up to 30 June 2025 and has therefore adopted the going concern

basis for preparing the ﬁnancial statements.

Alexander Krane

Chief Financial Ofﬁcer

Non-IFRS measure – see Glossary for the deﬁnition.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Creating a positive impact is crucial to the long-term success of our

company, as is supporting the responsible stewardship of our planet.

Our sustainability approach

SAFETY

PAGE 34

•

Process safety

•

Occupational health and safety

•

Emergency preparedness and crisis management

Responsible

Reducing our impact on the environment

Environmental sustainability underpins our

strategy and operating model

•

We are committed to net zero, and work actively

to achieve our emissions reduction goals

•

We are investing in carbon capture and storage,

and aim to be a leader in this area in the UK

•

We factor the environment – including biodiversity

– into our plans, procedures and decision-making

Fair

Supporting a fairer world

Respectful, transparent and supportive

of our people and communities

•

We uphold the highest ethical and

governance standards to maintain

the trust of our stakeholders

•

We promote diversity, equity and inclusion

in our business and communities

•

We help our people and communities prosper

Safe

Prioritising safety

Committed to the safety and wellbeing

of everyone who works with Harbour

•

We promote a culture of safety and

wellbeing across our operations

•

We have comprehensive health and safety

processes, and track and mitigate risks daily

•

We are focused on continuous improvement

and continue to work towards zero incidents

ESG review

SOCIAL

PAGE 48

•

Value generation and distribution

•

Employment practices

•

Diversity, equity and inclusion

•

Employee engagement

•

Learning and development

•

Local communities

•

Human rights

CLIMATE CHANGE

PAGE 39

•

Climate change and energy transition

•

Energy use and GHG emissions

ENVIRONMENT

PAGE 47

•

Discharges to air

•

Efﬂuents, spills and waste

GOVERNANCE

PAGE 53

•

Business ethics

•

Tax

•

Security

•

Decommissioning

•

Public policy and government relations

•

Responsible supply chain management

Our approach is aligned with the UN Sustainable Development Goals (SDGs), with our primary SDGs shown here:

OUR MATERIAL

ESG TOPICS

OUR ESG REPORTING FRAMEWORK

Harbour Energy plc

Annual Report & Accounts 2023

Materiality assessment

The materiality assessment contributes

to the development of Harbour’s sustainability

strategy and ESG reporting. It allows us

to identify and evaluate the current and

emerging opportunities and risks to our

business and also the impacts that are most

important to our external stakeholders. This

informs our sustainability approach and the

choice of appropriate metrics in our reporting.

Our 2023 materiality assessment conﬁrmed

that our stakeholders’ priorities remain largely

unchanged from the previous year, with

the most material topics being process

safety and asset integrity. Our material

sustainability topics are included in the ‘Our

ESG reporting framework’ graphic on page

32 and addressed throughout this section.

Further sustainability information is included

in our public ﬁnancial reports, as well as our

ESG data and reporting appendix available on

our website.

Materiality assessment process

With support from third-party ESG experts

and other stakeholders, we carried out a

detailed review using data and input from

a broad range of sources, as follows:

1. Review

of the current and future ESG

landscape with a focus on sustainability

regulation, climate change and net zero

transition plans. This included peer

benchmarking, reviewing industry trends,

ESG rating agency criteria, as well as current

and future ESG reporting frameworks

2. Internal engagement

including with

subject matter experts across operations,

management, health, safety, environment,

supply chain, investor relations, risk

management, security and human resources

3. External engagement

with our shareholders

and also with regulators, key suppliers and

contractors, plus industry associations

4. Finalisation and mapping

of material

topics in collaboration with senior leadership

Increasing material topics

Our stakeholders identiﬁed the following

topics as those likely to increase in

signiﬁcance in the future:

•Human rights:

reﬂecting growing investor

and other stakeholder focus on the issue,

as well as potential increased risk, as

Harbour looks to expand its portfolio in

higher risk jurisdictions, for example through

the announced Wintershall Dea acquisition

•Local communities:

reﬂecting our

continued commitment to engaging with

local communities, particularly in Indonesia

(carbon offsetting projects and local ﬁshing

communities) and with key stakeholders

involved in the developing CCS projects

in the UK

•Marine biodiversity and ecosystems:

recognising the importance of these topics

and increasing efforts to protect the variety

of life in our oceans

•Security:

reﬂecting the ongoing challenging

external dynamics over both energy security

and physical security of our assets

How we report

Harbour’s strategy is underpinned by the

responsible management of the impact we

have on our people, other stakeholders

including our investors and local communities,

and the environment. Therefore we believe

our performance should be viewed holistically,

incorporating these important dimensions.

Reﬂecting this, rather than producing a

standalone ESG report, we have integrated

our sustainability reporting into this year’s

Annual Report & Accounts. We believe this

integrated reporting will provide a better

understanding of how we manage the

impacts of our business to create value

for all of our stakeholders.

To ensure our sustainability disclosures

are transparent and appropriate, we align

our reporting with recognised international

reporting frameworks and sustainability

initiatives, including:

•

Global Reporting Initiative (GRI) 2021

and the Oil and Gas supplement

•

Task Force on Climate-related Financial

Disclosures (TCFD) recommendations

•

Sustainability Accounting Standards

Board (SASB) Oil & Gas Exploration and

Production industry standard

•

CDP (formerly the Carbon Disclosure Project)

•

UN Sustainable Development Goals (SDGs)

•

UN Global Compact (UNGC)

All environmental data in this report, unless noted

otherwise, relate to Harbour-operated assets.

FIND OUT MORE ONLINE

HARBOURENERGY.COM

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

2023

2022

2021

1.3

0.7

0.8

2023

2022

2021

Safety

Zero

Lost time injuries

(2022: Four)

Zero

Occupational illness incidents

(2022: Zero)

Nothing is more important than the health

and safety of our workforce – it’s our

top priority. In 2023 we increased our

front-line ﬁeld veriﬁcation programmes

to test and assure the implementation of

Harbour’s process safety fundamentals.

And we’re proud of a signiﬁcant reduction

in both the frequency and severity of

health and safety incidents in 2023

with, for the ﬁrst time in Harbour’s history,

no lost time injuries and no Tier 1 or 2

process safety events.

PHILIP WHITTAKER

EVP GLOBAL SERVICES

Ensuring our people are kept safe and

well, particularly colleagues working

in hazardous locations offshore, and

achieving process safety excellence

are our primary goals.

Total Recordable Injury Rate (TRIR)

per million hours worked

Process safety incidents Tier 1 and Tier 2

number of incidents

ESG review

continued

OTHER RELEVANT PAGES

HSES COMMITTEE REPORT

PAGE 80

CHIEF EXECUTIVE OFFICER’S STATEMENT

PAGE 6

Focus areas during 2023

• Embed process safety thinking into

our day-to-day activities

• Reduce risks and ensure the safety

of our personnel

• Maintain a trained and prepared

emergency response capability

• Track leading and lagging process

safety and asset integrity metrics

to drive continuous improvement

Harbour Energy plc

Annual Report & Accounts 2023

Harbour Energy plc

Annual Report & Accounts 2023

Approach

Our purpose at Harbour is to help meet

energy demand through safe, efﬁcient and

responsible operations. Given the potential

hazards associated with offshore oil and gas

operations, safety is one of the sustainability

topics that is most material to our business

and stakeholders. This is why the application

of rigorous process safety, asset integrity

and occupational health and safety practices

is essential in all that we do. This focus helps

us protect our employees and contractors;

it also enables us to maintain operational

continuity, regulatory compliance and our

corporate reputation.

Our health, safety, environment and

security (HSES) policy is implemented through

our business management system (BMS)

comprising a set of universal standards

and procedures. Additionally, the HSES

Management System Standard provides

a consistent global framework across 14

elements that aim to minimise the likelihood

and potential severity of process safety

events and occupational health and safety

incidents. Our HSES framework is aligned with

external standards and management system

models including ISO 14001, ISO 45001, the

Energy Institute Process Safety Management

Framework and the International Oil and Gas

Producers (IOGP) Report Number 510.

The Board and HSES Committee (see

pages 80 and 81) have oversight of HSES

risk management and are supported by

our CEO, other members of our Leadership

Team, and our Business Unit and HSES

leaders. Harbour’s Leadership Team

regularly reviews HSES performance via

weekly updates plus monthly and quarterly

meetings, the results of which inform our

action planning, resource allocation and

improvement efforts. Our corporate HSES

team oversees the implementation of

our HSES strategy and HSES policies,

standards and procedures. We engage with

our employees and contractors on HSES

on a continual basis and explore our safety

culture in our global engagement survey.

Safety metrics

2023

2022

2021

Recordable injuries^

Fatalities

Lost work day cases (LWDC)

Restricted work day cases (RWDC)

Medical treatment cases (MTC)

Recordable injury rate (TRIR)

0.7

0.8

1.3

High potential incidents (HiPo)

High potential incident rate (HiPoR)

0.3

1.1

0.7

Hours worked (million)^

10.2

12.0

11.8

Work-related occupational illness

Tier 1 process safety events^

Tier 2 process safety events^

Emergency response exercises

Incident management or emergency management team mobilisations

Total number of recordable work-related injuries divided by the number of hours worked (per million hours worked).

High potential incidents are work-related incidents with a high probability of causing a high-consequence injury.

Total number of high potential incidents divided by the number of hours worked (per million hours worked).

Indicates metrics that have undergone limited external assurance by our external auditor Ernst & Young LLP (EY).

Open to individuals or teams, employees

and contractors, the CEO Safety Award

recognises outstanding contributions

to health and safety across our global

operations. Anyone can nominate

individuals or teams for demonstrating

good safety behaviours – from extended

injury-free performance on an asset, to

personal interventions to stop work or raise

safety concerns, to the introduction of new

ways of working or a change in facility

design to reduce health and safety risks.

Harbour donates on behalf of the winner

and ﬁnalists to charities of their choice.

A total of 74 nominations were submitted

for the 2023 award compared to 35

in 2022.

While all were worthy of recognition,

the ﬁnalists were:

Category: Teams

• The winner was the Anomaly Integrity

Barge Campaign Team in Indonesia,

recognised for delivering excellent safety

results through a shared commitment

• The runners up were two teams in the

UK: the Tolmount East Team for safe

project delivery under complex and

harsh circumstances, and the Late

Life Operations Team for reducing

cumulative risk and addressing legacy

enforcement notices from the regulator

Category: Individual

• The winner was Mr. Pak Jumihadi in

Indonesia, recognised for making a safety

intervention that may have prevented

a major accident (ship collision)

• The runners up were Mr. Dang Ngoc Dam

in Vietnam for sustained exemplary

behaviour and being a true safety

champion, and Mr. Iain Brown in the

UK for his relentless focus and drive

to reduce major accident hazard risk

CEO Safety Award

Nominations were submitted

for the 2023 award (35 in 2022)

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Occupational health and safety

Approach

We continually work to ensure the health and

safety of everyone working for us by setting clear

leadership and performance expectations and

rigorously implementing our policies, standards

and procedures. We reinforce these through

frequent training and competency assessments,

raising awareness of occupational health and

safety initiatives and sharing information.

Occupational safety targets are an integral

part of Harbour’s company-wide performance

scorecard and affect the annual bonus

payments for all employees, including the

executive directors. Safety is also discussed

at every one of the CEO’s town halls, and

features regularly on the agendas of Business

Unit team meetings and other employee

events. We recognise exceptional individual

and team safety performance through our

annual company-wide competition for the CEO

Safety Award (see page 35). To promote the

development and career progression of our

HSES professional staff, an HSES technical

career ladder has been rolled out.

Performance

In 2023, we continued our highly successful

Back to Basics safety campaign covering

behaviours, hazard recognition, work pack

simpliﬁcation, lifting, dropped object

prevention, contractor engagement and

recognising weak signals. In our Southeast

Asia Business Unit we launched a health

management review – evaluating ourselves

against the IOGP health management

indicators to understand our strengths and

any critical gaps. We have addressed gaps

identiﬁed, including the update of the health

risk assessment, improving water quality

on offshore platforms and performing the

appropriate amount of ﬁtness to work

assessments. We held mental health

awareness workshops in Indonesia during

which medical professionals provided training

and education on managing mental health.

In order to assess the effectiveness of our

controls and risk mitigation measures we

carried out 69 second line of defence audits

across our operational sites. These audits are

driven by our audit schedule which is based

on a rolling three-year, risk based HSES audit

strategy covering the range of key barriers/

controls for each Major Accident Hazard (MAH)

over a three to ﬁve-year cycle. In addition over

6,000 ﬁrst line of defence (self monitoring)

audits and ﬁeld veriﬁcations were undertaken.

ESG review

continued

Process safety

Approach

Process safety and asset integrity were conﬁrmed

as our most material ESG risk by our internal and

external stakeholders, given the potential harms

that could arise from a major incident to people,

property and/or the environment. In addition,

a serious incident could signiﬁcantly impact

production, impair ﬁnancial performance, and

damage the reputation of the company.

We strive to achieve process safety excellence

and work continually to reduce the likelihood and

potential severity of process safety events. This

involves applying good practices in the design,

commissioning, operation and maintenance of

our equipment, and planning every stage of our

operations with safety risks and the hierarchy of

control in mind. We have documented processes

to assess and manage risks which include

implementing a preferred risk reduction hierarchy

to ensure the most effective risk reduction

controls are implemented (for example, removal

of the hazard, engineered risk controls, reliance

on processes and people to control the risk).

We base our process safety requirements on

industry good practice including the Framework

for Process Safety Management developed

by the Energy Institute. Our process safety

commitments and requirements are set out in

our Corporate Major Accident Prevention Policy.

We classify all process safety events in line

with the IOGP’s Tier 1 and Tier 2 deﬁnitions

and investigate and identify ways to prevent

recurrence. To underline our commitment to

process safety, we include the frequency of

Tier 1 and Tier 2 events as a metric in our

scorecard, which determines the level of bonus

awarded annually. From 2024, we will also

include some Tier 3 events in the scorecard,

further emphasising our dedication to

continuous safety improvement.

Knowledge-sharing is an important

component in building a proactive process

safety culture. We investigate incidents and

near misses meticulously, and share and

learn from the ﬁndings. For example, we

systematically distribute Knowledge Share

bulletins and host monthly global Safety and

Learning Team meetings attended by onshore

and offshore personnel representing all our

operating assets. We give particular focus to

ensuring we learn from high potential events.

Performance

Throughout 2023, we continued to embed

our Process Safety Fundamentals (PSFs) into

procedures across our business. Our annual

Global HSES Day focused on PSFs and on the

foundational principle that ‘HSES starts with me’.

Additionally, we held an internal major hazards

awareness training programme, delivered via

both site-based and virtual reality modules.

We introduced updated safety case booklets and

training to our Southeast Asia Business Unit,

ensuring our standard approach to asset safety

cases (derived from UK regulation) is extended

throughout our global locations. We continued

to conduct ﬁeld veriﬁcation as a key supervisory

assurance process, focused on high-risk

activities across our global operations. Each

ﬁeld veriﬁcation is a discussion between an

experienced veriﬁer and the work team and

includes the requirements of the Life-Saving

Rules and PSFs. Field veriﬁcations are key daily

assurance tasks for offshore leaders and it

is expected that this process is examined by

onshore senior leaders during offshore visits.

Asset integrity learnings from our North Sea

Business Unit were shared with our Southeast

Asia business through visits from experienced

North Sea personnel. The visits focused on

replicating processes and procedures to

establish a common integrity management

approach. Shared procedures included those for

anomaly identiﬁcation and prioritisation to assist

our front-line inspection teams in categorising

integrity anomalies on a consistent basis across

all our global assets. We also supported the

short-term secondment of the Indonesia

Technical Authority to the North Sea business.

We had no Tier 1 and Tier 2 loss of primary

containment events in 2023.

Looking ahead

We will continue to emphasise process safety

and major accident prevention in 2024 by:

•

Introducing a revised global scorecard to

also include some Tier 3 Process Safety

Events (PSE); in addition to continued

tracking of Tier 1 and Tier 2 PSEs

•

Continued progression of our process safety

culture, application of risk management

systems and wider use of metrics globally

•

Carrying out an HSES culture survey and

actioning outcomes and updating safety

case manuals in Indonesia

•

Continuing the on-site major accident

hazards awareness programme and the

virtual reality modules for both onshore

and offshore personnel

•

Adopting and rolling out a process safety

competence matrix globally, while embedding

the PSFs into key procedures and

emphasising contractor HSES management

Reported as per the IOGP’s Process Safety – Recommended Practice on Key Performance Indicators, report 456, 2018. Release Tiers are based on the realisation of speciﬁc deﬁned

consequences or threshold release quantities, where Tier 1 is the highest tier with the greatest potential consequences.

High potential events – where failure of one or more protective measure could have resulted in a fatality outcome.

Internal, independent audits carried out to check risk management and compliance functions, ensuring ﬁrst line of defence control measures are properly designed, in place and operating as intended.

Harbour Energy plc

Annual Report & Accounts 2023

This year we recorded 10.2 million hours

worked, zero lost-time injuries, and seven

recordable injuries, resulting in a TRIR of 0.7.

This is an improvement on the 2022 TRIR of

0.8. However, we had a number of lower level

injuries, underscoring the need to remain

focused on ensuring the safety of all those

working on our sites. Regardless of severity, all

injuries are investigated based on potential

reasonable worst-case outcomes with the

aim of determining root causes, sharing

learnings and preventing similar events.

Looking ahead

In 2024 we plan to:

•

Develop a global health and welfare standard

that will ensure consistent standards

are in place for health and wellbeing,

including mental health awareness and

support, across the Harbour portfolio

•

Continue to set common policies and

strategies, oversee HSES functional

resourcing and skills

•

Align and update the standards and

procedures in our BMS to formalise

good practice and knowledge sharing

•

Continue to deliver a risk-based, three-year

rolling audit programme, taking a ‘beyond-

compliance’ approach that adds value by

seeking out improvements to our systems

and processes, in addition to assuring

compliance with rules and requirements

•

Continue to address gaps identiﬁed in

the health management review in our

Southeast Asia Business Unit, including

developing local capacity to address health

issues in a culturally sensitive manner

•

Expand our HSES programmes to

improve safety practices and behaviours

and promote greater safety awareness

amongst our contractors

Emergency preparedness

and crisis management

Approach

We operate a complex, global asset base

that requires us to maintain emergency-

preparedness processes and procedures,

effective response equipment and competent

personnel available to respond when needed.

Harbour operates an industry-standard,

three-tier incident management system of

operational (local), tactical (country) and

strategic (global) responses. Each level has

a dedicated team of responders available

continuously to support the full range of

emergency and crisis events that could impact

the company. Teams are further supported by

a comprehensive suite of Crisis Management,

Emergency Response, Oil Spill, Security and

Business Continuity Standards and Procedures,

which meet regulatory requirements and

industry good practice. Our Crisis Management

Team (CMT) comprises members of our

Leadership Team, and is ready to manage

incidents and emerging risks to protect

our people, assets and the environment.

Performance

In 2023, there were two events that resulted in

the mobilisation of the onshore Emergency

Management support teams. These included a

partial mobilisation of the CMT to support an

incident on a contractor mobile drilling unit and

an IMT (Incident Management Team) mobilisation

to support a UK asset short-term power outage.

Other actions in 2023 included:

•

Completion of over 42 emergency

response exercises across all Business

Units and the CMT

•

Development of a responder competency

process for all global Incident Management

Teams and Emergency Management

Teams which was embedded in Harbour’s

competency management system

•

Successfully developing the capability to

issue mass notiﬁcations to the Harbour

Leadership Group (c.50 of the most senior

leaders in the company) using our Crisis and

Emergency Response software application,

which will improve our ability to communicate

effectively during crisis events

•

Further preparation within CMT against

a range of major accident hazards and

other business scenarios

•

Responding to the increasing threat of

cyber security with exercises across the

business and the CMT to ensure we have

an integrated response structure and

processes in place

•

Reviewing our counter pollution response

arrangements in Indonesia and Vietnam

leading to signiﬁcant improvements in the

delivery of our response. All Business Units

conducted dedicated oil spill response

exercises to verify arrangements and

consolidate responder knowledge in

processes and systems

Looking ahead

Looking ahead to 2024, we will:

•

Continue to enhance, simplify and embed

our global crisis and emergency response

systems, supporting our core principles

and standards with robust procedures,

suitable facilities, appropriate equipment

and competent personnel

•

Review and update business

continuity recovery arrangements

and the associated Business Impact

Assessments for all functions

•

Expand our mass notiﬁcation system

to enable global communications with

all personnel

•

Extend the competency-based training

system to include the CMT and all

response roles across the Group

In Indonesia, we completed two oil spill

simulated emergency response exercises

designed to test the effectiveness of

offshore and shoreline oil spill response

capability. These drills, planned over nine

months, were carried out on Matak island,

the location of Harbour’s remote marine

and aviation base in the Natuna Sea.

Mandated and observed by SKKMigas,

the Indonesian Government’s task force

for upstream oil and gas business

activities, the exercises veriﬁed the

effectiveness of the offshore booming

system and also provided a valuable

opportunity for reﬁning our response

systems. A total of 180 individuals from

various organisations came together to

participate in the exercises. The events

provided the opportunity to enhance

response systems and highlighted the

importance of establishing a close working

relationship with stakeholders.

Indonesia oil spill exercises

180

Individuals participated in the exercises

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

2023

2022

2021

0.8

0.01

2023

2022

2021

20.7

22.5

21.2

2023

2022

2021

1.2

1.3

1.4

GHG intensity

kgCO

e/boe

Hydrocarbon releases to sea

tonnes

ESG review

continued

Conducting environmentally responsible

operations and playing a leading role

in the energy transition are fundamental

elements of our strategy. We are

supporting the Paris Agreement climate

goals through our Net Zero 2035

commitment and alignment to the

Oil & Gas Methane Partnership 2.0.

We are focused on reducing our gross

operated emissions and investing in our

flagship CCS projects in the UK to enable

others to reduce their carbon footprint.

GUSTAVO BAQUERO

EVP STRATEGY, BUSINESS DEVELOPMENT

& ENERGY TRANSITION

OTHER RELEVANT PAGES

HSES COMMITTEE REPORT

PAGE 80

OUR STRATEGY & BUSINESS MODEL

PAGE 10

Environment

Committed to addressing the

environmental impact of our operations

and playing a role in the energy transition.

Million tCO

e Viking planned annual storage

by 2030

0.03

Methane emissions intensity TCH

/T gas

produced %

Scope 1 and 2 emissions

mtCO

Focus areas during 2023

• Investing in our operations

to reduce emissions

• Energy efﬁciency and

methane studies

• Viking and Acorn CCS projects

• Decommissioning life cycle

waste management

Harbour Energy plc

Annual Report & Accounts 2023

Climate change and

the energy transition

Harbour has committed to achieving net zero

across our gross operated Scope 1 and 2 CO

equivalent (CO

e) emissions by 2035, with an

interim target of a 50 per cent reduction by

2030 against our 2018 baseline.

To achieve this, we will continue reducing

our own emissions and mitigate the impact

of any remaining emissions by acquiring

independently veriﬁed carbon credits. We

are also investing in CCS projects to enable

the transportation and storage of captured

emissions safely underground.

Task Force on Climate-related

Financial Disclosures (TCFD)

requirements

As an oil and gas company, we support the

need for more consistent and comparable

disclosure around climate-related risks and

opportunities. The following pages of this

report align with the recommendations issued

by the Financial Stability Board’s TCFD, which

is aligned to the FCA Listing Rule LR 9.8.6(8).

Following the completion of climate scenario

analysis in 2022, we have further analysed

the impact of transition risks of climate

change on our portfolio. We have also

analysed the impact of physical risks of

climate change by geography – reviewing

the risks by assets and individual Business

Units. For more information on our scenario

analysis, see pages 41 to 43. For ease of

reference, we have included a TCFD index

on page 177.

1. Climate governance

The board of directors is accountable for

our climate strategy and ensuring Harbour

maintains effective climate risk management

and internal control systems, including the

setting and monitoring of the company’s

greenhouse gas (GHG) emissions reduction

targets. It has oversight of climate-related

risks and opportunities and ensures

climate-related considerations are embedded

in our decision-making. This includes the

application of strict ﬁnancial criteria, such

as our internal carbon price, across all key

investment decisions.

The HSES Committee of the Board evaluates

our policies and systems, the quality and

integrity of our reporting, and the suitability

of our management system to manage

current and emerging HSES risks, including

climate-related risks. The Committee provides

advice and recommendations on setting key

performance indicators (KPIs) and targets,

and on opportunities to collaborate with

industry peers. The HSES Committee reviews

progress against our net zero strategy and

updates the Board at least annually. Further

details on the remit of the HSES Committee

can be found on pages 80 and 81.

Through the Remuneration Committee, the

Board ensures climate performance, including

progress towards our Net Zero 2035 goal,

is embedded in the corporate scorecard’s

performance KPIs which determine the

annual bonus for all employees.

Climate change management structure

The 2023 scorecard includes a 15 per cent weighting for GHG emissions.

The skills and experience of the directors serving on the HSES Committee are set out on pages 70 to 71.

The Board

Oversight of climate change risk management

Audit and Risk

Committee

Non-executive directors

appointed by the Board to

oversee the effectiveness

of the system of risk

management and

internal control.

Remuneration

Committee

Non-executive directors

appointed by the Board to

set remuneration policy in

alignment with strategy.

Nomination

Committee

Non-executive directors

appointed by the Board

to review and advise on

Board structure, organisation

and succession.

HSES Committee

Non-executive directors

appointed by the Board

to review and advise

on sustainability policies

and practices including

climate change.

CEO and Leadership Team

Most senior individuals with accountability for climate change risk management

Businesses and functions

Line management supported by functional teams, with responsibility for

implementing Harbour’s GHG strategy with functional support and assurance

EVP Strategy, Business

Development & Energy Transition

Energy transition

Strategy and CCS

EVP Global

Services

Licence to operate

Policies and procedures, and tracking of performance

The Audit and Risk Committee further

supports the Board through consideration

of the impacts of the energy transition on

Harbour, in particular on the scale and

timing of such impacts and implications

for the long-term resilience of the business

and as well as the impact on the ﬁnancial

statements (for further information refer

to note 2 in the ﬁnancial statements on

pages 124 to 127). Further detail on the

work undertaken by the Audit and Risk

Committee can be found on pages 76 to 79.

Our CEO has executive responsibility for

Harbour’s climate change and sustainability

policies and how they are implemented

across the company. Our EVP Global

Services is responsible for our HSES

policies, standards and procedures, and

for driving forward delivery of our net zero

strategy. CCS strategy and projects are

the responsibility of our EVP Strategy,

Business Development & Energy Transition.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

2018

2025

2030

2. Climate strategy

With respect to delivery of our net zero goal,

the priority is on reducing our emissions

through our emissions reduction action

plans as well as safely and responsibly

decommissioning assets as they reach the

end of their commercial life. To offset our

residual, hard-to-abate, gross operated

Scope 1 and 2 emissions, we invest in

independently veriﬁed carbon credits.

We also led an industry study to assess the

potential for electriﬁcation of UK offshore

producing assets in the Central North Sea.

Completed in 2023, the results of that study

demonstrated that region-wide electriﬁcation

was not economically viable as a result of the

large, upfront investment required and the

timeframe for implementation when compared

to the limited remaining producing life of

Harbour’s assets in the area. However, we

continue to explore the potential for other

electriﬁcation opportunities and, in March

2023, were awarded two 15 MW project lease

options for Offshore Wind Innovation and

Targeted Oil and Gas (INTOG) by the Crown

Estate Scotland, which are located near our

J-Area hub and Greater Britannia Area. We

have since progressed the J-Area hub project

by securing an exclusivity agreement.

We have also entered into a Net Zero

Technology Centre ‘Renewables for Subsea

Power’ (RSP) project which aims to utilise

wave-generated electricity to power offshore

subsea communications and equipment in

the UK. This support for renewable energy

projects to drive lower carbon emissions in

oil and gas production remains an important

part of our net zero pathway.

In addition, we are also increasing levels of

funding to our CCS projects which have the

potential to store multiples of our own Scope

1 and 2 emissions (see page 45).

In 2023, we spent

$311 million across

our energy transition activities which we

consider to include the cost of properly

decommissioning oil and gas infrastructure

as it reaches the end of its useful life; this

compares to $292 million in 2022. This

2023 expenditure includes $255 million

for decommissioning; the balance of $56

million was split between $39 million on

our CCS projects, $11 million on emissions

reduction projects and $6 million for the

acquisition of carbon offsets.

Decarbonisation projects

We continued to use our Group

Decarbonisation Hopper process in 2023

to identify and assess decarbonisation

opportunities. The hopper is a system

which captures opportunities for emissions

reduction across our Business Units

centrally and assesses each against criteria

that include potential positive impact,

implementation cost and timeframe. The

successful opportunities are then taken

to development and embedded within

the Business Unit and asset emissions

reduction action plans.

Spend on energy transition activities includes both capital expenditure and general and administration expenses. Refer to the notes to the ﬁnancial statements for further detail on the allocation.

Consequence severity is deﬁned by the scale of the risk/opportunity posed by a hazard/indicator on Harbour’s business and assets.

Our pathway to net zero

2023 achievements

Conducted Energy Efﬁciency & Methane surveys on our

Southeast Asia offshore assets

Expanded our Scope 3 emissions disclosures to include

use of sold products

Implementing Zero Routine Flaring engineering study work

Reduced operational emissions by 54 ktCO

e through

emissions reduction projects completed in 2023

Emissions baseline

Using 2018 as our baseline year in

line with UK Government targets

Gross operated emissions Scope 1 & 2

Interim target in our net zero journey

Gross operated emissions reduction vs 2018

Flaring

Harbour is a signatory to the World Bank’s

‘Zero Routine Flaring by 2030’ initiative

Zero

Routine ﬂaring by 2030

2024 plans

Roll out the corporate ESG Reporting Database and launch

a energy and emissions performance data platform for our

North Sea Business Unit

Expand our Emissions Reduction Action Plans to include

speciﬁc methane reduction activities

Join the Oil & Gas Methane Partnership (OGMP 2.0)

Progress the Zero Routine Flaring engineering study work

for all relevant assets

Methane emissions

Ensure methane intensity is less

than 0.2 per cent across our

operated sites by reducing ﬂaring

and venting activities through

our emissions reduction plans

0.2

Methane emissions intensity

ESG review

continued

Harbour Energy plc

Annual Report & Accounts 2023

2035

Climate-related risks and opportunities

We continued to reﬁne our analysis of potential

climate-related risks and opportunities

(CRROs) in 2023, as well as to review our

risk management processes. This included

reviewing the outputs of our 2022 scenario

analysis and revising our sensitivity analysis in

line with best practice. Scenario analysis has

enabled Harbour to assess the impact of

possible shifts in the macroeconomic outlook,

technology developments, policy and legal

implications, and the projected future demand

for our products. We identiﬁed our top CRROs

and considered the resilience of Harbour’s

assets over the longer term; in 2023, we

looked at how to further assess and manage

selected emerging CRROs within the individual

Business Units. The CRROs process is guided

by the company’s Climate Change Policy and

is aligned with our Risk Management Policy.

An overview of our scenario analysis process and

outcomes, including top risks and opportunities,

is presented on pages 42 and 43.

Assessing our climate-related impacts

The TCFD recommends that organisations use

a scenario in which global warming is kept to

well below a 2°C increase during this century,

compared with pre-industrial levels, to test

portfolio resilience. Such scenarios usually

feature a reduction in demand for fossil

fuels and a growth in clean technologies.

In line with TCFD’s recommendations we

assessed our climate-related risks and

opportunities against the ﬁve scenarios

shown above, including three transition

scenarios and two physical risk scenarios.

Timeframe selection

Recognising that the manifestation of

transitional risks and opportunities will happen

over a shorter time horizon than for physical

risks, the selected climate scenarios were

assessed across three timeframes. The

timeframes selected take into consideration the

expected remaining operational life of our asset

portfolio as well as our Net Zero 2035 goal.

These timeframes are: short term (2030),

medium to long term (2040) and long term

(2050). Physical risks were assessed over two

timeframes, short term (2030) and long term

(2050), due to the similarity of potential impacts

in the medium (2040) and long term (2050).

Scenario analysis

To consider the climate resilience of Harbour’s

portfolio, we identiﬁed a shortlist of both

physical and transitional CRROs, taking into

account our principal risks, and the range of

CRROs noted by the International Petroleum

Industry Environmental Conservation

Association (IPIECA), the World Bank, IEA and

other common sources for our industry. We

reﬁned the shortlisted CRROs through a risk

assessment process that used a consistent

methodology to gauge the ‘consequence

severity’

of each risk/opportunity if it was to

materialise, and the ‘likelihood’ of that risk/

opportunity materialising under the scenarios

and timeframes outlined above.

Reaching net zero

Our goal is to achieve net zero for our

gross operated Scope 1 & 2 emissions

by 2035

Net zero

Gross operated Scope 1 & 2

Harbour offsetting strategy

Continue to selectively acquire high quality

carbon credits, certiﬁed to globally accepted

standards such as VERRA.

Balancing investment between emissions

removal projects, which ensure that

atmospheric carbon is being captured

and removed, and carbon avoidance

projects which have societal beneﬁts.

Transition scenarios

In 2023, we updated our transition risk analysis

to include three scenarios from the International

Energy Agency (IEA). The IEA scenarios are

aligned to best practice and are widely used

across the oil and gas industry to assess

transition risks. The IEA scenarios are:

•

Net Zero Emissions (NZE) by 2050 scenario

: which is consistent with

limiting the global temperature rise to 1.5ºC and is commonly used by

oil and gas companies

•

The Stated Policies Scenario (STEPS)

: which reﬂects current policy

commitments based on sector-by-sector and country-by-country assessments

•

Announced Pledges (APS)

: which assumes that all climate commitments

made by government and industries, including Nationally Determined

Contributions, will be met in full and on time

Physical scenarios

Two Shared Socioeconomic Pathways (SSP)

scenarios, as deﬁned by the Intergovernmental

Panel on Climate Change, were selected to

assess potential physical risks on our portfolio

up to 2050. Only two physical risk scenarios

have been selected due to the lack of variation

in the impacts of the scenarios up to 2050.

We have used the following scenarios:

•

SSP1-2.6 (also known as the Sustainable development scenario)

with a temperature outcome of +1.7ºC by 2050, and +1.8ºC by 2100

•

SSP5-8.5 (also known as the Fossil fuel-driven development scenario)

with a temperature outcome of +2.4ºC by 2050, and +4.4ºC by 2100

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

We considered transitional CRROs on a

regional basis and, where relevant, on a

global level to reﬂect wider socioeconomic

drivers. Physical CRROs were assessed on

a region-by-region basis reﬂecting the

localised effects of long-term physical risks.

The ‘consequence severity’ and ‘likelihood’

ratings enabled us to gauge the most

signiﬁcant CRROs using a consistent

methodology. The three following tables

highlight our highest-rated 1) transitional

risks, 2) transitional opportunities, and

3) physical risks, and a description of

how these are managed.

For further details on our oil and gas price

sensitivity analysis conducted in 2023 please

refer to note 2 to the ﬁnancial statements on

pages 124 to 127.

Transition risks

In 2023, we undertook an oil, gas and carbon

price sensitivity analysis for all three transition

scenarios to assess the resilience of the

business to the prospective impact of these

transition scenarios. These scenarios have

then been compared to the company’s

long-range plan, which is approved by the

Harbour Board.

The scenarios consider the unmitigated effect

of the key transition risks below. While the

analysis is inherently uncertain, due to the

lack of material impairment noted in the price

sensitivity analysis our portfolio appears to

be generally robust to all scenarios analysed.

For further information on the potential

ﬁnancial impacts of these transition risks,

refer to note 2 to the ﬁnancial statements

on pages 124 to 127.

POLICY & LEGAL

MARKET

FINANCIAL

Risk

Carbon pricing mechanisms

applied to direct operations

Policy incentives and emerging

regulation curtailing future fossil

fuel demand

Reduced customer demand

for fossil fuels

Limitations on our access to

capital or increase in our cost

of capital

Timeframe

Description

Carbon pricing is expected to be an

important instrument to deliver a

decarbonised economy. Operational

costs are expected to increase

as the weight and scope of these

mechanisms widen.

As governments globally implement

the Paris Agreement targets, new

or more stringent policies and

regulations are being proposed and

put in place that may curtail future

fossil fuel demand from many end-

use sectors (electricity generation,

buildings, transportation).

The risk of a reduction in customer

demand for fossil fuel products

arising from new or more stringent

demand-side regulations and

changes in consumer preferences.

Increasing stakeholder concern

could impede Harbour’s access

to capital or add conditions

to ﬁnancing.

Impact on

business,

strategy and

planning

Potential for material impact on balance sheet, however sensitivity

analysis using a carbon price of $100/tonne indicates that material

impairments would not arise.

The company may face more demanding regulatory requirements

or lose some sources of funding if it is unable to meet such evolving

regulatory, investor, lender and societal expectations.

Material and sustained decrease in the

price of our products, in particular oil,

as a result of the decrease in demand.

This would impact cash ﬂows, the

remaining producing life of our assets,

and our ability to deliver competitive

shareholder returns. Due to the

relatively short remaining producing

life of our assets, our business

appears generally robust to the various

scenarios given that a material decline

in oil and gas prices is not anticipated

in the short to mid term.

The company may face increased

cost of capital, and reduced

or more conditional access to

capital, if it is unable to meet

evolving investor, societal and

regulatory expectations. As a

result, the company may not have

sufﬁcient funds to reinvest in its

existing assets or to fund growth

through capital investments and

M&A as outlined in the strategy.

How the risk

is managed

•

Credible emissions reduction plans in place to support the Net Zero

2035 goal, including an interim 2030 emissions reduction target,

zero routine ﬂaring commitment, alignment with the regulatory

requirements, and emissions offset purchase plans, all reﬂected

in our long range business plans

•

Working with JV partners to implement emissions reduction plans

across portfolio

•

Emissions reduction targets feature in incentive compensation

for all employees and are incorporated into our main debt facility

•

Energy transition scenarios and risks, including the cost of carbon,

considered in key judgements and estimates within the ﬁnancial

statements, investment decisions, corporate planning and M&A

analysis. See pages 124 to 127 for more information

•

Constructive engagement maintained with relevant government and

regulatory stakeholders including in the UK regarding consultation

on the government’s draft plan to reduce UK GHG emissions from

oil and gas production

•

New and emerging ESG reporting regulatory requirements closely

monitored to ensure compliance, including independent veriﬁcation

•

Carbon hedging conducted to actively manage the company’s exposure

to carbon pricing in the UK market and meet regulatory requirements

•

Periodic review of corporate

strategy and business model

in the context of the energy

transition, including the impact

of a wide range of future oil and

gas pricing scenarios

•

Contribution to industry

representation on the role of oil

and gas in the energy transition

and in promoting energy security

in the UK

•

Investment in gas, or gas-rich

projects such as Andaman and

Tolmount or M&A opportunities are

prioritised over oil-only projects

•

Investing in CCS, in particular

where reuse of idle oil and gas

infrastructure can contribute to

lower development costs

•

Clear commitment made to the

safe, reliable and responsible

production of oil and gas

•

Credible emissions reduction

plan in place to meet Net Zero

2035 goal, including interim

2030 emissions reduction

target, zero routine ﬂaring

commitment, alignment with

the regulatory requirements and

emissions offset purchase plans

•

Emissions reduction

targets feature in incentive

compensation and are

incorporated into the main

debt facility

•

Continued monitoring of investor

appetite, debt market volatility

and bank lending capacity in

light of the energy transition

RISK CATEGORY

ESG review

continued

Short-term (2030)

Medium to long-term (2040)

Long-term (2050)

Harbour Energy plc

Annual Report & Accounts 2023

Transitional opportunities

An important aspect of mitigating our climate

change risks includes evaluating opportunities

to apply technological innovation and efﬁciency to

decrease energy use and GHG emissions across

our operations, and working with partners to

Physical risks

Through scenario analysis, we assessed a number

of acute hazard (storms and high winds, extreme

cold, river ﬂooding, extreme rainfall ﬂooding,

coastal ﬂooding, wildﬁres, landslides) and chronic

hazard (extreme heat and water stress/drought)

risks. The table below summarises the key

physical risks identiﬁed for the company and

how they are managed. The majority of the risks

assessed were not material nor relevant to the

company’s operations and geographic footprint.

Given our understanding of the physical risks we

do not expect any one individual risk identiﬁed

below to be material to the business in the short

term (2030), taking into account the geographical

diversity of our asset base with the current

portfolio predominantly being in the UK North Sea.

Due to our organic growth opportunities in

Southeast Asia and Mexico, we will continue to

assess our CRROs and update our physical-related

risks as appropriate.

ACCESS TO NEW MARKETS

USE OF LOWER-EMISSION

SOURCES OF ENERGY

Opportunity

CCS

Hydrogen

Electriﬁcation

Timeframe

Description

CCS is an essential technology for the

UK Government and other jurisdictions

to achieve their net zero goals.

Hydrogen is a highly versatile energy source

and is expected to play an important role in

the decarbonisation of hard-to-abate sectors.

Decarbonisation efforts at our offshore facilities

through using lower-emission sources of energy

including electriﬁcation.

Impact on

business,

strategy and

planning

CCS is expected to rapidly grow under multiple

scenarios. Coupled with increased carbon

prices, deploying CCS at scale could develop

into a signiﬁcant opportunity to generate

long-term revenue while safeguarding jobs.

An opportunity for Harbour may arise as the

demand for low-emission hydrogen grows,

produced either by water electrolysis or by

fossil fuels in combination with CCS.

Increased use of lower-emissions sources coupled

with increased carbon prices expected under

multiple scenarios could result in an opportunity

for carbon tax savings.

How the

opportunity

is managed

Harbour is investing in two early-stage

CCS projects (Viking CCS and Acorn) that

could make a signiﬁcant contribution to the

UK’s CO

emissions reduction and storage

targets. See page 45 for more information

on 2023 progress.

Harbour’s natural gas business combined

with its CCS activities would place the company

in a good position to enter the market for

low-emissions hydrogen. A hydrogen module

is present in the Acorn project in which

Harbour is a partner.

Harbour continues to assess the opportunity

for electriﬁcation in the UK Central North Sea.

Preliminary results indicate a large-scale project

is unlikely to be viable given the large upfront

investment and the relatively short remaining

producing life of the assets, but smaller-scale,

facility-speciﬁc projects may be possible.

ACUTE

CHRONIC

Risk

Storms and high winds

Extreme heat

Geography

(per cent of assets

(2P reserves)

potentially at risk)

Southeast Asia

10% assets

UK North Sea

90% assets

Southeast Asia

10% assets

Timeframe

Description

Storms and high winds and coastal/extreme rainfall ﬂooding in relation to our

UK North Sea assets, with additional hazards noted in Southeast Asia relating

to the presence of intense cyclone and storm activity within this region.

Episodes of extreme heat are encountered in Southeast Asia

today, and projections indicate an increase in the intensity/

frequency of extreme heat events.

Impact on

business,

strategy and

planning

•

Risks to the health and safety of personnel

•

Damage to assets (with the most signiﬁcant and impactful damage being

associated with offshore platforms)

•

Disruption to operations and development activity

•

While there would be an increase in operating expenses

related to cooling, these are not expected to be material

for our business

How the risk

is managed

•

All of our operated assets are designed to withstand heavy weather events and comply with the relevant and emerging regulatory requirements

•

Meteorological and oceanographic studies undertaken for offshore developments include modelling that incorporates assumptions from the

latest climate science

•

Mitigations that address changing storm magnitude are incorporated into the design of our facilities, where appropriate

•

We maintain severe weather and business continuity plans

•

We maintain asset and company-level emergency response teams and conduct training and exercises against our plans

•

We assess how climate change may impact water availability and water stress in areas where we operate

•

We periodically review the long-term physical risk proﬁle across core geographies

For Harbour’s scenario analysis of physical risks, ‘assets’ have been deﬁned as 2P reserves for currently operated assets. Harbour believes this provides the most insight into the

potential effects and exposure to climate change of our current asset base. The extent of assets and geographies vulnerable to risks has only been deﬁned for physical risk categories;

this is calculated by dividing the number of assets potentially affected by a given risk by the total number of Harbour assets. It is not possible to deﬁne transitional risks and opportunities

by speciﬁc assets and geographies due to the interconnected nature of the energy transition.

RISK CATEGORY

OPPORTUNITY

CATEGORY

develop a range of low GHG emissions pathways.

The table below outlines the focus areas of our

key climate-related opportunities.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

ESG review

continued

% ANNUAL BONUS LINKED TO GHG TARGETS

2023

2022

INTERNAL CARBON PRICING SENSITIVITY

100

/tonne

2023

100

/tonne

2022

PERCENTAGE OPERATIONAL SPEND ON

CLIMATE-RELATED RISK MITIGATION

2023

2022

NUMBER OF DAYS LOGISTICS WERE DISTURBED AT

OPERATED SITES RELATED TO ADVERSE WEATHER

days

2023

N/A

days

2022

VIKING CCS CARBON STORAGE PER YEAR BY 2030

mtCO

2023

mtCO

2022

TOTAL CAPITAL SPEND ON DECOMMISSIONING

OIL AND GAS INFRASTRUCTURE

255

2023

223

2022

PRODUCTION DOWNTIME RELATED

TO ADVERSE WEATHER

days

2023

days

2022

SCOPE 1 & 2 EMISSIONS

1.3

mtCO

2023

1.4

mtCO

2022

SCOPE 3 EMISSIONS

12.8

mtCO

2023

0.3

mtCO

2022

SPEND ON ENERGY TRANSITION

ACTIVITIES (EXCL. DECOMMISSIONING)

2023

2022

PERCENTAGE TOTAL CASH FLOW SPEND ON ENERGY

TRANSITION ACTIVITIES

2023

2022

VERIFIED NET STORAGE CAPACITY FROM

HARBOUR’S UK CCS LICENCES

252

mtCO

2023

300

mtCO

2022

Scope 3 emissions expanded to include ‘use of sold product’ in 2023.

2 Global operated assets.

Includes carbon credits $6 million (2022: $20 million), emissions reduction projects $11 million

(2022: $21 million) and CCS $39 million (2022: $28 million).

Total energy transition spend ($311 million) divided by pre-tax free cash ﬂow ($1 billion).

Total energy transition spend ($311 million) divided by operating costs ($1.1 billion).

Veriﬁed storage through ERCE process for Harbour share of Viking and Acorn CCS projects.

New metric for 2023.

Climate change risk-related metrics

3. Climate risk management

Climate change and the energy transition is

recognised by the Board as a principal risk

facing the company. As such, the transition

risks and physical risks identiﬁed on pages 42

and 43 are considered and managed in line

with Harbour’s risk management framework

and policy, which is aligned with the ISO 31000

risk management standard. We record

substantive short, medium and long-term

climate-related risks and mitigations, and

these are reported to the CEO, Leadership

Team and ultimately the Board.

The framework comprises:

•

A risk management process through which

we set our context for risk, including deﬁning

our appetite (or tolerance) for risk, and

identify, assess, mitigate, monitor and

communicate risk in the business (see ‘Risk

management process’ diagram page 57)

•

An internal control system to enable risks to be

managed in line with our deﬁned risk appetite

•

An assurance model to check that the

controls in place are appropriate and

effective given our deﬁned risk appetite

For more information on our risk management

processes, see pages 56 to 59.

4. Climate metrics and targets

In 2023, we expanded our Scope 3

disclosures to include GHG emissions

associated with the use of sold products.

Harbour now reports six of the ﬁfteen Scope 3

categories outlined by the Greenhouse Gas

(GHG) protocol. While many of the remaining

Scope 3 categories are not relevant to the

company, we will continue to assess our

Scope 3 GHG emissions reporting boundary.

Our Scope 1 and 2 emissions boundary,

which focuses on the activities which Harbour

has operational control over, has remained

the same in 2023, with our baseline year

set at 2018. We will continue to review this

on an annual basis or whenever there is a

signiﬁcant change in the operational footprint

of Harbour. When calculating our emissions,

we follow guidance from the GHG protocol,

the IPIECA Sustainability Reporting Guidance

Edition (2020) as revised (2023), the

American Petroleum Institute guidance,

and the UK Environmental and Emissions

Monitoring System guidance. For more

information on our energy and GHG emissions

data, see pages 46 and 47.

The metrics, shown on the left, reﬂect the

ongoing investments relating to the energy

transition. The metrics include capital and

operating expenditures related to reducing

or offsetting emissions, mitigating potential

risks, or for opportunities such as CCS.

We also identify the amount spent to

decommission oil and gas infrastructure

that has reached the end of its useful life,

an expense that is expected to increase

sector-wide in line with any decrease in

demand for oil and gas in the future.

Delivering against the company’s emissions

targets are part of employee remuneration

through the annual bonus scheme; in 2023,

GHG emissions performance accounted for

15 per cent of the scorecard on which the

bonus is calculated. For more information on

the company scorecard, see the Directors’

remuneration report on pages 82 to 103.

Additionally, the cost of borrowing is tied to

our gross-operated emissions performance,

with static CO

metrics being linked to our

reserve based lending interest expense,

further incentivising our emissions

reduction efforts.

GHG INTENSITY

22.5

kgCO

e/boe

2023

21.2

kgCO

e/boe

2022

TOTAL UK ETS SPEND, SUPPORTING THE UK

ENERGY TRANSITION

5.8

2023

4.2

2022

Harbour Energy plc

Annual Report & Accounts 2023

Viking CCS Cluster

emissions are captured from

high-emission industries at Immingham

and surrounding area Cluster members

or imported by ship.

Viking CCS pipeline

The Viking CCS pipeline safely

transports captured CO

for 55 km

to join an existing subsea pipeline.

Carbon storage

Carbon dioxide is stored in depleted

gas reservoirs under the North Sea,

2.7 km beneath the seabed and

140 km from the Lincolnshire coast.

Capture

Our Cluster members will capture

over 90 per cent of the CO

emitted by

their industrial processes, removing it

at source by adsorption and separation,

so it can be directly routed to a pipeline

for transporting to secure storage.

Transport

We will transport the CO

through

onshore and o

ﬀ

shore pipelines

designed to handle high volumes.

The CO

will be transported safely

from where it is captured to where

it will be stored.

Store

The CO

will be stored safely

beneath a world-class superseal

of high-strength salt layers.

Figure 1:

Indicative map of Viking CCS

Viking CCS Cluster member (port)

Viking CCS Cluster member (emitter)

Key:

Storage site

Hull

Proposed Viking

CCS pipeline

Lincoln

RWE CCGT

Grimsby

Scunthorpe

RWE Staythorpe

Gainsborough

West Burton

River Humber

Theddlethorpe

ABP

VPI

Phillips 66

Limited

Immingham

industrial

cluster

Existing

pipeline

Acorn

Harbour has a 30 per cent non-operated

interest in the Acorn project, alongside

Storegga, Shell and North Sea Midstream

Partners. Acorn is developing projects to

capture and store CO

emissions and

establish hydrogen infrastructure in Scotland.

emissions will be captured from a

range of emitters including the St Fergus

gas terminals, Peterhead power station

and a National Grid owned feeder pipeline

which will transport emissions from the

Grangemouth and Mossmorran industrial

areas. Acorn is expected to store at least

5 million tonnes of CO

per year by 2030,

and is designed to service multiple emitters

around Scotland, the UK and Europe.

The transport and storage system will use

the Goldeneye pipeline to transport CO

for

sequestration in depleted reservoirs initially.

During 2023, alongside the Viking CCS

project, the Acorn project was also awarded

Track 2 status in July as part of the UK

Government’s CCS regulatory process.

Following its ﬁrst storage licence award in

2018, Acorn was also granted licences

from the UK North Sea Transition Authority

in 2023. The licences were awarded for

the Acorn East and East Mey CO

stores,

expanding its transport and storage

system’s capacity deep beneath the

North Sea.

252

mtCO

Veriﬁed net total storage

capacity from CCS projects

Carbon capture and storage

In September, we were awarded two additional

licences located adjacent and to the west

of the existing Viking CCS licence. Early

estimates indicate the additional licences

have the potential to increase the total

storage capacity of Viking by over 50 per cent.

In November, Harbour submitted for

examination its application to build the Viking

CCS onshore CO

transportation pipeline,

following a comprehensive programme of

consultation with stakeholders. The 55 km

onshore pipeline will transport captured CO

from the Immingham industrial area to the

former Theddlethorpe Gas Terminal site on

the Lincolnshire coast. From Theddlethorpe,

the CO

will be transported 140 km to the

depleted Viking gas ﬁelds, 2.7 km beneath

the seabed, for secure permanent storage.

In December, Harbour and non-operated partner

bp, Associated British Ports and Cory Group, a

leading UK recycling and waste management

company, entered into an exclusive commercial

relationship to collaborate on transport and

storage of shipped CO

emissions from Cory’s

energy from waste facilities.

Viking

Located in the UK’s most industrial and

emissions intensive region, the

ﬂagship Harbour-operated Viking CCS

project (Harbour interest 60 per cent) plans

to store 10 million tonnes of CO

(mtCO

)

a year by 2030 and 15 mtCO

a year by

2035, meeting up to one third of the UK’s

CCS target. The gross storage capacity

of 300 million tonnes of CO

across the

depleted Viking gas ﬁelds was independently

veriﬁed in 2023, we believe one of the ﬁrst

CCS projects in the northern hemisphere

to go through this formal process.

To ﬁnd out more, see ‘Viking CCS, transforming

the Humber into a net zero SuperPlace’.

2023 achievements

Track 2 status was awarded in July as

part of the UK Government’s CCS cluster

sequencing process, allowing the project

to move into the front-end engineering and

design (FEED) phase and triggering the

start of discussions with the government

over the terms of the economic licences.

1 vikingccs.co.uk/assets/images/Viking-CCS-Transforming-the-Humber-into-a-net-zero-SuperPlace-web.pdf.

What is carbon capture and storage (CCS)?

Looking ahead

The FEED contract is another important

milestone for the project as it progresses its

design, costs and schedule towards a ﬁnal

investment decision, subject to meeting

internal investment guidelines and approvals

by project partner and regulators.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Energy use and

GHG emissions

Greenhouse gas emissions

Through 2023, our Scope 1 and 2 emissions

boundary deﬁnitions have remained consistent

and we continue to focus on activities over

which Harbour has operational control. Our GHG

boundaries are reviewed annually to align to

industry best practice. We expanded our Scope 3

disclosures in 2023 to include GHG emissions

associated with the use of sold products.

ESG review

continued

All Scope 3 emissions reported are as a consequence of Harbour’s operational activities apart from investment emissions that take into account static emissions,

as a portion of ownership, from Harbour’s non-operated assets.

Scope 1 & 2 net zero commitment

Scope 3

DIRECT EMISSIONS

Scope 1 & 2 net zero commitment

Our Scope 1 (direct) emissions

are those from static combustion

activities (ie fuel, ﬂare and other

production-related emissions).

In 2023, Scope 1 emissions

amounted to 1.3 mtCO

a 7 per cent decrease from

2022. The decrease was largely

driven by the decarbonisation

projects implemented and lower

production rates. Our Scope 2

(indirect) emissions (from

consumption of purchased

electricity, heat or steam)

of 3.4 kt CO

e account for

only a small percentage

of our carbon footprint.

Production operations

accounted for 99.2 per cent

of all Scope 1 and Scope 2

emissions, with drilling and

decommissioning accounting

for the remaining 0.8 per cent.

Only 3.9 per cent of our

emissions were a result of

safety-related, routine and

non-routine ﬂaring (accounted

for within our production and

well testing activities).

For more information on our

emissions and environmental

data, including relevant

Streamlined Energy and Carbon

(SECR) requirements set out by

the UK Government, please see

the table on page 47 and our

2023 ESG data and reporting

appendix on our website.

INDIRECT EMISSIONS

Scope 3

Our reported 2023 Scope 3

emissions from sources

not owned or operated by the

company but as a consequence

of our activities were 12.8

mtCO

e. These include:

• Emissions associated

with goods and services

from drilling projects

and appointed operator

activities: 202 ktCO

• Upstream transportation

and distribution from

logistics: 103 ktCO

• Waste generated in

operations: 1 ktCO

• Harbour employee

business travel: 2.5 ktCO

• The static emissions (as a

portion of ownership) from

our non-operated assets:

497 ktCO

• Use of sold products:

11.9 mtCO

Following the expansion of Scope

3 reporting in 2023, we now report

on all the signiﬁcant Scope 3

categories in our GHG value chain.

To enhance transparency and

understanding of emissions

along our entire value chain

we are now reporting the

emissions as a consequence

of the end use of our products

Our reported 2023 Scope 3

emissions of 12.8 mtCO

e are

considerably higher than our

reported level of 383.9 ktCO

in 2022, due to the expansion

of our Scope 3 emissions

categories this year to include

emissions associated with the

end-use of the products we

sell. Emissions from Scope 3

categories excluding those

associated with the use of sold

products were 806 ktCO

an increase in emissions due

to greater logistics emissions

and emissions related to

business travel.

Indirect emissions: Scope 3

SCOPE 3 DOWNSTREAM

Indirect emissions not within

our operational control. They are

signiﬁcantly higher than all other

scope emissions for Harbour. This

includes emissions associated with

use of Harbour’s sold products.

SCOPE 1

Direct emissions that result

from our operating activities:

• Fuel

• Flaring

• Other production related

emissions

SCOPE 2

Indirect emissions that result

from our operating activities

from purchased:

• Electricity

• Heat

• Steam

SCOPE 3 UPSTREAM

Indirect emissions not owned

or operated by the company,

but associated with the

operation of our assets:

• Transportation and

distribution

• Waste generation

• Employee business travel

• Outsourced drilling activities

• Non-operated static emissions

12.8 mtCO

1.3 mtCO

0.8 mtCO

Harbour Energy plc

Annual Report & Accounts 2023

Discharges to air

In 2023, ﬂaring amounted to 47 k tonnes

compared to 51 k tonnes in 2022, showing a

reduction of 7 per cent through improved

production efﬁciencies. This was made up of

routine ﬂaring (49 per cent) and non-routine

ﬂaring (comprising ﬂaring during operational

upset conditions, 11 per cent).

Emissions reduction

We continued to mature and deliver our

emissions reduction action plans (ERAPs) and

explore new technologies to drive performance

improvements. These projects included:

•

Implementation of single power generator

operation on North Everest

•

Eliminating ﬂare purge gas on North Everest

•

Removing the requirement to ﬂow the

wells to ﬂare prior to start up on Britannia

to minimise ﬂaring

•

Eliminating routine ﬂaring on our

Vietnamese Chim Sáo asset

•

Collaborating with logistics partners

in the North Sea to encourage use of

sustainable aviation fuel blends for

some of our transportation helicopters

Looking ahead

For 2024, we have identiﬁed a number

of priorities to reduce our emissions and

improve our reporting:

•

Continuing to mature and seek

efﬁciencies across the ERAP governance

cycle, including the decarbonisation

and emissions reduction opportunities

hopper and screening tool

•

Validating opportunities for improving

GHG emissions scenario modelling

and forecasting

•

Completing the Greater Britannia Area

(GBA) and J-Area zero routine ﬂaring

concept select studies and Armada,

Everest, Lomond and Erskine (AELE)

appraise phase studies, all in the UK,

as we strengthen and deﬁne our zero

routine ﬂaring pathway

•

Launching energy and emissions

performance data platform to

enhance reporting

•

Responding to the planned publication

of a regulator plan to reduce UK

continental shelf GHG emissions

•

Working with partners to optimise

operations of a hybrid battery-powered

vessel we have chartered to ensure

maximum safe fuel efﬁciency

GHG and energy metrics (including relevant SECR

indicators)

GHG and energy metrics

2023

2022

2021

Emissions

Scope 1 GHG emissions (k tonnes CO

e)^

1,289.9

1,384.7

1,210.8

UK (North Sea) SECR

938.1

997.7

1,199.7

Scope 2 GHG emissions (k tonnes CO

e)^

3.4

4.4

3.9

Scope 3 GHG emissions (k tonnes CO

e)^

12,753.5

383.9

0.4

Scope 3 GHG emissions – excluding use of sold products

(k tonnes CO

e)^

805.5

383.9

0.4

GHG intensity (kgCO

e/boe)^

22.5

21.2

20.7

Flaring

Methane (tonnes)

2,797

3,308

2,361

Flaring (tonnes)

47,491

51,047

49,668

Venting (tonnes)

1,965

3,171

207

Energy

Energy consumption (million GJ)^

18.1

22.8

18.0

UK (North Sea) SECR

13.0

22.4

15.9

Fuel gas (million GJ)

17.3

20.9

16.0

Energy intensity (GJ/tonne production)^

1.9

2.14

2.03

Efﬂuents, spills and waste

Approach

We work hard to avoid pollution and

continually assess the risks associated with

our production and other activities. These

risks mainly relate to planned and unplanned

discharges, and the production of waste.

All our operated and non-operated assets

extract oil and/or gas and formation water

from offshore reservoirs. We separate the oil,

gas and water using our on-site processing

plant. We take a range of precautions to

reduce the risk of spills, and continually

evaluate spill risks across our operations.

We design, operate and maintain our facilities

to protect the environment and reduce

our negative impacts to as low as reasonably

practicable. Some waste streams are

non-hazardous and others potentially harmful,

so we use a wide range of technologies to

treat and manage them effectively. In terms

of decommissioning our operations, a very

high proportion of materials are reused or

recycled, often in other industries.

We also focus on strengthening our oil spill

response capability through our comprehensive

approach to emergency preparedness and

crisis management (see page 37).

All our operations maintain comprehensive

spill contingency plans. We also have

ongoing contracts with spill-response

specialists to provide emergency support

in the unlikely event of a major incident.

We focus on reducing waste on a day-to-day

basis and have robust management

programmes in place for the residual wastes

generated from our operations and activities.

Performance

For a summary of our planned and unplanned

discharges please see the below table including

our key metrics. We delivered signiﬁcant

improvement in most areas, including the

number and volume of releases.

Waste generation

Our waste includes oil-derived substances,

inorganic chemicals, steel, domestic and other

materials, including packaging. Some waste is

non-hazardous, and some is potentially harmful,

so we use a wide range of technologies to treat

and manage it effectively. In 2023, we collected

a total of 11 k tonnes of waste materials from

our drilling and production operations (2022:

25 k tonnes) and returned it to shore for

treatment and disposal. This waste includes

hazardous waste, mainly in the form of sludges

and liquids; non-hazardous waste, mostly in

the form of tank washings; and the remaining

waste is recycled waste.

Efﬂuents, spills and waste metrics

Metrics

2023

2022

2021

Discharge of produced water (million tonnes)^

2.6

2.5

2.1

Number of hydrocarbon spill incidents

Quantity of hydrocarbon released to the sea (tonnes)

0.01

0.8

Number of chemical spill incidents

Quantity of chemicals released to the sea (tonnes)

6.2

208.6

26.7

Oil in produced water (ppm-wt)

11.2

15.4

17.8

Oil in produced water (tonnes)

29.7

39.2

37.9

Total waste (tonnes)^

11,137

25,328

25,708

Hazardous waste material produced (tonnes)

7,304

14,564

10,255

Non-hazardous waste material produced (tonnes)

3,832

10,764

15,453

Recycled/reused waste (tonnes)

3,139

20,461

5,709

Environmental sanctions or ﬁnes ($)

Streamlined Energy and Carbon Reporting – The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and

Carbon Report) Regulations 2018 requires the disclosure of metrics related to energy and emissions for UK listed organisations.

Indicates metrics that have undergone limited external assurance by our external auditor Ernst & Young LLP (EY).

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

2023

2022

2021

1.1

1.0

1.5

2023

2022

2021

3.7

3.9

5.5

ESG review

continued

Economic value generated

$ billion

Centring our efforts on employee

engagement, the approach not

only cultivates a positive and

inclusive culture but also places a

high priority on the wellbeing and

ongoing professional development

of every member of Harbour Energy.

GILL RIGGS

CHIEF HUMAN RESOURCES OFFICER

OTHER RELEVANT PAGES

ENGAGING WITH OUR STAKEHOLDERS

PAGE 12

OUR STRATEGY & BUSINESS MODEL

PAGE 10

Social

We recognise that by building supportive

relationships and engaging openly with

our colleagues, suppliers, customers and

communities, we can create long-lasting

beneﬁts for all our stakeholders.

Town hall meetings held globally

(2022: 13)

1,180

Number of graduate applications

(2022: 880)

Charitable donations

$ million

Focus areas during 2023

• Generating and distributing value

across our stakeholders, local

communities and supply chain

• Improving our employee

engagement, in particular in

relation to career development

• Promoting a diverse and inclusive

working environment

• Protecting worker welfare across

our supply chain

Charitable donations includes sponsorships as well as donations.

Harbour Energy plc

Annual Report & Accounts 2023

Harbour Energy plc

Annual Report & Accounts 2023

Value generation

and distribution

Approach

Our ability to create long-term sustainable

value for our shareholders rests on our

ability to deliver tangible and lasting

economic and other beneﬁts to all

stakeholders. This supports our social

licence to operate and underpins the

long-term success of our business.

Our stakeholders include:

•

Host governments, which grant us oil and

gas licences and regulate our activities

•

Local communities, which grant us our

social licence to operate

•

Employees, whose skills and efforts

underpin our ability to create value

Much of the value we create directly

supports long-term socio-economic

development in our host communities for:

•

Suppliers and contractors, including

locally based companies

•

Our employees, including high quality

employment, salaries and beneﬁts,

and career development

•

The capital markets, including

shareholder dividends, buybacks

and interest on debt

•

Local communities, including social

investment and indirect economic impact

•

Host governments, including corporate

income taxes, royalties and other

payments (see page 54 for details on

our tax governance and pages 179 to 181

for UK Government payment reporting)

Performance

See pages 12 to 15 for information on

stakeholder engagement.

Community investments

Approach

We provide social investment contributions and

charitable support to organisations and other

good causes in line with our strategy and core

values, as set out in our Social Investment

and Charitable Donations Standard.

In our local communities, we focus our

support in the areas of education, affordable

energy, health and safety, and the

including additional courses, hiring qualiﬁed

teachers, new tutors and online lessons.

These initiatives aim to make students more

competitive for entrance to higher education

with a view to coming back to serve the

community as medical professionals, as

there is currently limited capacity due to

the area’s inaccessibility.

Senior management also engaged the

local community on Harbour’s support

of cultivating local biodiversity including

a visit to Pulau Pahat where nearly

200 turtle eggs were gathered and 50

hatchlings were released into the sea.

Additionally, the managers visited the

mangroves in Pantai Senggalang. Harbour

has been supporting the development

of these carbon sinks for several years;

not only do they sequester CO

from

the atmosphere but they also improve

biodiversity and inland storm protection.

environment. We encourage our employees to

contribute to their local communities including

through volunteering. Wherever possible, our

social investment contributions are consistent

with our charitable giving aims.

Performance

See our website for details on our community

investments for 2023.

Community development: Anambas Islands

Senior management in Indonesia

travelled to the remote Anambas Islands

to observe the impact that Harbour’s

social investment has had on the local

community, particularly in their priority

areas of education, access to

healthcare and biodiversity.

The managers visited a new building

funded by Harbour at a primary school

to observe the educational initiatives

implemented to upskill the next generation

Social metrics

Metrics

2023

2022

2021

Global engagement survey staff participation (per cent)

N/A

Workforce

2,082

2,221

2,211

Number of employees

•

At end of year^

1,716

1,824

1,771

•

Turnover during the year (per cent)

Gender balance of employees^

•

Male (per cent)

•

Female (per cent)

Gender balance at senior management level

•

Male (per cent)

•

Female (per cent)

Gender balance at Board level^

•

Male (per cent)

•

Female (per cent)

Global town hall meetings

Hours spent on employee development training

89,790

75,689

43,589

Employees covered by a collective bargaining agreement (per cent)

Employees receiving performance reviews (per cent)

100

New employees recruited externally

228

Number of graduate applications

1,180

880

130

Reported human rights abuses/violations of our Human Rights Statement

Number of signiﬁcant negative human rights or labour rights impacts

identiﬁed in our supply chain

Charitable donations ($ million)

1.0

1.5

1.1

Economic value generated ($ billion)

3.9

5.5

3.7

Economic value distributed ($ billion)

2.6

3.3

2.1

Metrics reﬂect year end data.

Deﬁnition of employee: direct contracted global staff.

Deﬁnition of senior management level: employee grade 31 and above.

Charitable donations include sponsorships and donations.

Indicates metrics that have undergone limited external assurance by our external auditor Ernst & Young LLP (EY).

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

ESG review

continued

Global engagement

survey

We will now create action plans on areas

where engagement was lower, including a

focus for our leaders in 2024 to deepen our

employees’ and contractors’ understanding

of our wider strategy, how this relates to

our Business Units and the importance of

our employees’ contributions to our future.

Although we made some progress in

simpliﬁcation of systems and processes, the

survey results suggest there is more to do.

Our leaders of staff forums and the

diversity council will select key actions

to be addressed locally that will make a

difference for our people. In addition, our

Leadership Team will identify opportunities

where company-wide initiatives may offer

the potential for progress. We plan to run

another survey in Q4 2024, allowing us

to track progress and sentiment.

In October, Harbour conducted its

second global engagement survey to

gather feedback from our employees

and contractors on their experience

working at Harbour in 2023 and to

gauge progress on the outcomes

from the previous year’s survey.

For the second year, safety was the

highest-scoring area for both employees

and contractors, where over 90 per cent

surveyed indicated they were conﬁdent in

challenging unsafe practices. Each of the

six safety scores showed improvement

from the 2022 survey. This continued high

score for safety reﬂects a strong safety

culture that was reinforced through 2023

with initiatives such as ‘Back to Basics’,

our ‘HSES starts with me’ campaign as

well as ongoing messaging around the

importance of safety.

During 2023, we implemented nine corporate

initiatives to address the lower-scoring areas

of the 2022 engagement survey including:

•

Improved and simpliﬁed systems,

processes and delegation authority

•

Enhanced career opportunities through

individual development plans; launching a

talent management platform, management

skills modules and a smart skills series

•

Improved and expanded employee reward

and recognition programme

In 2023, we conducted our second global

engagement survey for employees and

contractors, with a response rate of 85 per cent

for employees and 57 per cent for contractors.

We had high overall scores in the areas of our

safety culture and improved scores in questions

related to career development. Lower scores

were found in particular in our Aberdeen and

Vietnam locations, related to employees’ view

on the long-term strategy and future of the

business, likely heavily impacted by the UK

Business Unit staff reductions and our

announced plans to exit Vietnam.

Human resources

Employee engagement

Approach

We need to attract and retain talented

employees who are engaged by Harbour’s

purpose and strategy if we are to continue

to be successful. It is crucial we listen to our

colleagues, understand their views and that

they in turn know their contribution is valued

and appreciated.

We engage our colleagues in a variety of

ways, including face-to-face meetings, virtual

events and digital channels. The CEO, joined

by other senior leaders, hosts monthly town

halls globally which includes a live Q&A

section from colleagues. Individual functions

and Business Units run their own tailored

events including Huddles, village halls and

‘lunch and learns’. Members of our board of

directors joined several events in both London

and Aberdeen, giving them the opportunity

to engage directly with employees.

Furthermore, we encourage our employees

to engage on issues and topics that matter

most to them through our 13 employee-led

networks, comprising eight DE&I networks,

four Business Unit level staff forums and

one Global Staff Forum, each of which has

a leadership sponsor and budget.

We survey the company on a wide variety

of areas including communications, safety

culture, collaboration and career development

annually. The survey is a key tool for

understanding what is working well and where

we need to focus our efforts for the future.

Performance

Following the 2022 survey, we engaged with

our employees globally via our staff forums to

consider actions to address the lower-scoring

areas. Global and Business Unit action plans

were created and tailored to each Business

Unit, and these are owned and developed by

members of the Leadership Team. The action

plans were rolled out with regular progress

updates provided throughout the year.

Response rate to the global engagement survey

Harbour Energy plc

Annual Report & Accounts 2023

Harbour Energy plc

Annual Report & Accounts 2023

Looking ahead

In 2024 we will again work with our

employee forums to create action plans to

address areas of concern from the 2023

engagement survey which was completed

in December. We will continue to share

updates through our town halls, Business

Unit leadership sessions, our intranet and

through our staff forums.

Employment practices

Approach

We want to attract and retain a high calibre and

diverse workforce at all stages of their careers

so our recruitment and employment practices

are designed to engage, develop, retain and

reward our employees, including providing a

diverse and inclusive working environment.

We have streamlined our recruitment process

to meet best practice timelines for recruitment,

from role approval to offer acceptance, for both

permanent and contract recruitment. We

have simpliﬁed our recruitment processes

using tools from LinkedIn, and automated

where appropriate.

Our focus on graduate recruitment helps

build a pipeline of talent for the future. We

increased our presence at university career

fairs, leading to a higher volume of applicants

for our graduate roles.

In 2023, we were proud that a Harbour

Energy employee was awarded Offshore

Energy UK’s Apprentice of the Year Award.

This recognises talented apprentices making

their mark in the UK energy industry. We have

an employee-led Early Careers Network (ECN)

which is open to all employees who are in the

early stages of their career, and this provides

an opportunity for members to connect for

personal and professional development. The

ECN also creates networking opportunities

across Harbour, including between network

members and senior management.

We continued to increase the visibility of our

employee value proposition in the external

market. We aim to be an inclusive employer,

with DE&I principles woven into the selection

process, including gender-balanced

shortlists, interview question templates and

scoring metrics that ensure consistency

during the process.

Our remuneration strategy allows us to pay

competitively for performance, rewarding

corporate and individual achievement linked

to our core values. Our reward framework

ensures that pay and beneﬁts for all

employees are appropriate for the markets

in which we operate, and regular global

benchmarking maintains our competitive

edge. We take into account diversity and

inclusion within our reward package to

ensure fairness and transparency.

Performance

In 2023, we undertook a review and

restructuring of our UK Business Unit, largely

as a result of a reassessment of our future UK

activity level following the introduction of the

Energy Proﬁts Levy in 2022. The restructuring

resulted in some 400 fewer roles. Our key

principles during the review were to keep

colleagues informed throughout with formal

and informal communications, including

working closely with our staff forums, and to

minimise involuntary job losses. We did this

by closing vacancies, not replacing people

who left and allowing colleagues to express

an interest in redundancy. As a result, we

were able to reduce the number of colleagues

leaving the company involuntarily to 109.

Throughout the process we offered affected

employees career transition support, ﬁnancial

counselling and/or additional training, and an

enhanced redundancy payment that exceeds

statutory requirements.

In August, Harbour announced the sale of our

Vietnamese assets, having concluded that the

business was no longer a strong strategic ﬁt

for Harbour. We are working with the relevant

stakeholders to ensure a smooth transition

including clear communication to staff. This

transaction is due to complete in 2024.

Looking ahead

We will continue to modernise our recruiting

processes and focus on DE&I to ensure we are

recruiting from the widest possible talent pool.

Successful initiatives in the UK are being

shared with our overseas ofﬁces to ensure

best practice and alignment. The framework

for graduate recruitment will be rolled out

to help attract and hire young professionals

within these locations.

We will continue to benchmark our beneﬁt

incentive programmes to ensure we remain

in the upper quartile for our total reward

package. We also focus our beneﬁts and

employee wellbeing to help support our

employees, along with their families.

Diversity, equity and inclusion (DE&I)

Approach

A diverse and inclusive working environment

supports our ability to recruit, retain and

promote staff based on competence and

regardless of age, sex, disability, gender,

marital status, maternity, race, religion and

belief, and sexual orientation.

At Harbour, we work hard to create a culture

where everyone can thrive and succeed. Our

commitment to building a diverse, equitable and

inclusive environment is underpinned by our

values and behaviours, and by our Global Code of

Conduct, People Policy, and Diversity Equity and

Inclusion Policy. Our Global Head of DE&I leads

the development and supports the execution

of a comprehensive, long-term DE&I strategy.

We have integrated DE&I metrics into multiple

management systems and approaches.

An evidence-led approach supports our drive

to embed processes and procedures that

ensure fair recruitment, advancement and

reward for all in Harbour. Questions related

to diversity were included in our annual

engagement survey. The survey was designed

so that results can be analysed by age, gender,

country, and by job level, providing insights

into how our culture is experienced by

different employee groups. Where disparities

or issues are identiﬁed, action plans can be

put into place. We have developed higher

visibility and reporting of our diversity statistics

across the business through the collection

of DE&I-related metrics and have

incorporated this information into newly

created DE&I management dashboards.

To demonstrate our commitment to DE&I,

by 2030 we are aiming for:

•

40 per cent of our Leadership Team

from diverse backgrounds (gender

and/or ethnicity)

•

30 per cent of women in senior

management roles/across the workforce

•

40 per cent of our graduates being female

In support of these goals, we also aim to

increase the percentage of our new recruits

that are women.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

Offshore Energy UK Awards 2023: Equity,

Diversity and Inclusion Award 2023 winner

Our winning of the award reﬂects our

successful journey to become a leading

employer for equality, diversity and

inclusion. Leading from the top, our

CEO and executive Leadership Team all

have a DE&I objective as part of their

performance management. We have set

clear aspirations for gender and ethnic

diversity amongst our company workforce

in line with international best practice.

While the award recognises our

achievements in DE&I, there is always

more to do, and we will continue to

develop our approach in the years ahead.

The Offshore Energy UK (OEUK) Awards

recognise and celebrate businesses

and individuals from the UK’s offshore

energy industries across a variety of

awards. In 2023, Harbour won the

OEUK Equality, Diversity and Inclusion

Award from a shortlist of four ﬁnalists.

ESG review

continued

All our operated assets are located offshore.

The proﬁle of our human rights risks and impact

is therefore different from that of onshore

operators. However, we maintain enhanced due

diligence processes and procedures to manage

our human rights risk including training, a

third-party platform for identifying inherent

risk, conducting audits and engaging with

contractors and suppliers on this topic.

Overall, we consider there to be a relatively

low risk of modern slavery taking place in our

business and supply chain. This is mainly

due to the sector we operate in, and because

most of our suppliers are staffed with both

skilled workers and technical specialists and

have advanced compliance systems.

Performance

In 2023, we continued to raise awareness of

potential modern slavery and worker welfare

risks that we could face in our business and

the supply chain. We continued a programme

of engagement with key contractors to

encourage them to improve their engagement

with sub-contractors and to seek to identify

whether any of our business activities they

support pose enhanced risks in our supply

chain. For human rights-related metrics see our

ESG Data and Reporting Index on our website.

For more information, see our 2023 Modern

Slavery and Human Trafﬁcking Statement on

our website.

Performance

In 2023, we made progress towards our

global DE&I ambitions, achieving:

•

An increase in the diversity of our

Leadership Team to 33 per cent

(22 per cent in 2022)

•

Maintained 37 per cent female gender

diversity in graduate roles

Our drive to increase inclusive recruitment

over the year included training for the HR

team and mandatory diverse candidate

selection panels and shortlists. We sought

diverse candidates by offering job sharing

roles, hiring individuals with extended career

breaks as part of our STEM Returners

programme, and utilising a range of diversity

job boards (including veterans, gender

groups, ethnically diverse communities and

non-league table universities). A DE&I

representative also participated in the 2023

UK reorganisation selection panels.

As a result of the UK restructuring, there was

a notable increase in the attrition rate of 11

per cent in 2023 compared to 7 per cent in

2022. Moreover, the turnover rate was

higher for women (15 per cent) than men

(10 per cent) as the job reductions were

predominantly in onshore roles.

However, in spite of this, our median gender

pay gap was reduced by almost 8 percentage

points to 26.7 per cent from the previous

year. For more information please see our

2023 Gender Pay Gap report on our website.

Furthermore, in 2023, we earned several DE&I

accreditations, including being recognised as

a Living Wage Employer by the UK Living Wage

Foundation as well as a Level 1 accreditation

as a disability conﬁdence employer by the

UK Government.

We collaborate with external organisations

such as the Women’s Engineering Society,

STEM Learning UK, Institute of Neurodiversity

and AFBE-UK. We are involved in steering

committees, such as the Offshore Petroleum

Industry Training Organisation and Offshore

Energy UK’s D&I Task Group. We have awarded

scholarships to two female engineering

students in Indonesia and in 2024 two

engineering undergraduates in Aberdeen.

These scholarships will include tuition,

living expenses and work experience.

For more information on the composition

of our Board, please see pages 70 and 71.

Looking ahead

In 2024, our drive to improve diversity, equity

and inclusion will continue. Our priorities for

the year include:

•

An inclusive recruitment approach with an

emphasis on gender balanced shortlists

and diverse recruiting panels

•

Continuing to mature, populate and

establish regular tracking mechanisms

for the DE&I dashboard

•

Provide targeted support to address

underrepresentation by gender and ethnicity

at mid to senior management levels

Human rights

Approach

Harbour’s activities have the potential to affect

human rights and worker welfare directly

through our operations, and indirectly through

our supply chain and relationships with joint

venture partners and third parties. We work

hard to protect worker welfare across our

supply chain including supplier declarations

covering human rights expectations and

veriﬁcation. Our Code of Conduct, core values

and related policies, including our Human

Rights Statement, Supply Chain Policy,

Sustainability Policy and People Policy, reﬂect

our commitment to upholding human rights,

protecting worker welfare standards and

preventing modern slavery from taking place

in either our business or our supply chain.

Harbour Energy plc

Annual Report & Accounts 2023

2023

2022

2021

280

438

551

2023

2022

2021

Our core values are fundamental pillars

of our business. In 2023, we further

embedded our strong ethics and

compliance culture through company-

wide training and the adoption of

new risk management processes,

demonstrating our unwavering

commitment to upholding the highest

standards of business conduct.

We are clear on the standards and

expectations we have of ourselves

and of those we do business with.

HOWARD LANDES

GENERAL COUNSEL

OTHER RELEVANT PAGES

GOVERNANCE

PAGE 66

RISK MANAGEMENT

PAGE 56

Governance

Zero

Negative environmental, human rights or labour

rights impacts in our supply chain (2022: Zero)

Number of investigations closed

(2022: 9 investigations)

% of new contracts made

with local suppliers

Tax payments

$ million

Focus areas during 2023

• Maintaining the trust of our stakeholders and

the highest standards of business ethics

• Monitoring our Group-wide controls

• Decommissioning our assets the right way

• Nurturing contractor relationships to

ensure ongoing business resilience

Our Board is collectively responsible for the

governance of Harbour Energy on behalf of

shareholders, and is accountable to them

for the long-term success of the company.

This starts with the adherence to the

highest standards of corporate governance.

For details on our approach to corporate

governance, please see pages 66 to 108.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

Business ethics

Approach

Harbour has zero tolerance for bribery,

corruption or fraud and is committed to

conducting its activities to the highest

ethical standards and in compliance with

all applicable laws and regulations. This is

consistent with our Code of Conduct and

core values and is critical in maintaining

the trust of our stakeholders and underpins

our current and future success.

Our Board and Leadership Team are

responsible for monitoring and managing

ethics and compliance activities across

Harbour. In 2023, we appointed a Chief

Ethics and Compliance Ofﬁcer to demonstrate

our commitment to embedding this topic

into the business. To further ensure our

compliance programme was underpinned by

best practice, we undertook a benchmarking

exercise and had our compliance programme

independently reviewed by a leading business

ethics consultancy.

Performance

In 2023, we identiﬁed zero substantiated

allegations of wrongdoing as set out in the

Code of Conduct and the Whistleblowing

Procedure. All alleged breaches of process

were investigated, and appropriate corrective

action was taken in response to the ﬁndings

where relevant. We did not terminate or fail

to renew any external business relationships

due to breaches of the Code of Conduct. In

addition, we were not subject to any signiﬁcant

ﬁnes or non-monetary sanctions for legal or

regulatory breaches. Finally, we were not

subject to any legal actions relating to business

ethics, corruption or anti-competitive behaviour.

Tax

Approach

Our Tax Policy applies to all taxes we are

subject to and helps us to maintain cooperative

relations with the tax administrations in the

countries in which we operate. It covers,

among other things: framework, planning, risk

management, governance, relationship with

authorities and external communications.

Throughout the year, we review and monitor our

Group-wide controls to prevent the facilitation

of tax evasion in our wider supply chain.

We are committed to transparency with

regard to all tax matters. We comply with

best practices of tax governance through

adherence to the requirements of the globally

recognised guidelines such as the Reports on

Payments to Governments Regulations, the

Extractives Industries Transparency Initiative,

the Country-by-Country Reporting framework

developed by the Organisation for Economic

Co-operation and Development (OECD) and

the OECD’s Base Erosion and Proﬁt Shifting

Pillar 2.0 initiative.

In addition, we participate in the UK Oil

Industry Taxation Committee, the Association

of British Independent Exploration Companies

and Offshore Energy UK’s Fiscal Forum.

These groups regularly discuss with tax

authorities the technical aspects of taxation

relating to the oil and gas industry.

Performance

In 2023, we made tax payments totalling

$438 million, a decrease

of 21 per cent

compared to 2022.

Security

Approach

Cyber-security risks and physical security

risks at facility or asset level across the oil

and gas industry are increasingly complex

and a growing material risk. Our cyber-security

services enable us to quickly identify and

address emerging threats. In addition,

procedures to assist us in recovering from a

cyber event are embedded in our business

continuity plans. Though our security

assessments covering both our workforce

and our assets indicate low risk for a direct

security event, ongoing vigilance remains

crucial for safe operations.

Performance

In 2023, we had zero signiﬁcant cyber-attacks

or data breaches and zero direct security

incidents. Further detail on how cyber and

information security risk is managed is

explained on page 64 in Principal risks. The

framework continues to mature through

structured activities and projects including

regular testing of our cyber defences.

Decommissioning

Approach

Decommissioning oil and gas infrastructure no

longer in use is a key element of our business

activities and plans and a natural part of

the energy transition. We decommission our

operated assets in a sequential, cost-effective

and efﬁcient manner. In doing so, we focus on

ensuring the safety of our workforce, protecting

the environment and minimising the impact

on communities during and after closure.

Our UK decommissioning activities are aligned

with the North Sea Transition Authority’s

Decommissioning Strategy and Stewardship

Expectations and comply with the

decommissioning guidance notes prepared

by the UK Department for Energy Security

and Net Zero. As part of this, Environmental

Appraisals have been submitted in conjunction

with the ﬁeld Decommissioning Programmes

to assess the potential environmental

impacts that may result from undertaking

the decommissioning activities at each ﬁeld.

We undertake decommissioning activities

outside the UK in full compliance with national

statutory requirements or, in circumstances

where these are not in place, we apply the

same high standards we follow in the UK.

Performance

In 2023, we removed a signiﬁcant amount of

subsea infrastructure from several ﬁelds within

the UK continental shelf and completed topside

activities in preparation for the removal of further

assets in the Southern North Sea. During the year,

plug and abandon programmes have continued

on Southern North Sea and East Irish Sea wells.

We achieved over a 90 per cent recycle/reuse

rate from the dismantlement of our structures.

ESG review

continued

2023 decommissioning journey

The deconstruction resulted in a 95 per

cent recycle and reuse rate of the 19,981

tonnes (gross) of vessel materials.

Furthermore, we completed the

dismantlement of the Murdoch platform and

jacket structures. The campaign comprised

dismantling three separate structures and

resulted in over a 99 per cent recycling

and reuse rate for 10,495 tonnes (gross)

of materials. Additionally, the living quarters

of the Murdoch platform will be refurbished

and reused as the ofﬁce and welfare space

for use in a recycling yard.

Throughout 2023, our decommissioning

team continued to deliver strong safety

and environmental performance.

In the Southern North Sea and East

Irish Sea, we successfully plugged and

abandoned a number of wells, while

in the Central North Sea we continued

an extensive subsea campaign in the

MacCulloch, Huntington and B-Block areas.

Through our vessel decommissioning

activities, we successfully completed

the dismantlement of the Balmoral

Floating Production Vessel structure.

Lower tax payable in 2023 driven by changes in year-on-year business performance and timing of Energy Proﬁts Levy payments.

Harbour Energy plc

Annual Report & Accounts 2023

Harbour Energy plc

Annual Report & Accounts 2023

Responsible supply chain

management

Approach

A signiﬁcant proportion of business activity

is outsourced to contractors. Effective

management of these outsourced activities

and the contractors who manage them is

a critical activity in safeguarding business

continuity and operational excellence.

There is an increasing supply constraint

as some of our contractors have refocused

their services away from solely upstream

hydrocarbon extraction towards energy

transition activities or moving to other

geographies. This has reduced supply,

particularly in the UK continental shelf. Our

non-North Sea businesses have a different

demand proﬁle and do not face the same

challenges, given the level of growth in these

regions, particularly in Mexico.

We have a two-year programme to rationalise the

number of our suppliers given the acquisitions

over the past ﬁve years – the plan being to

reduce the number in order to streamline and

enable robust contractor partnerships. We

delivered on our target for 2023, having reduced

the number of contracts by 35 per cent (2022

baseline). Not only will this increase efﬁciencies,

but it also will make Harbour more resilient

to future business needs while identifying

risks and opportunities within supplier

categories. Furthermore, this will shift from

a transactional process to development of

long-term strategic partnerships (ﬁve+ years

or life of ﬁeld contracts), improving security

of supply for our more critical categories.

This will help mitigate our cost exposure and

help us to be seen as a ‘client of choice’.

We subject new contractors to an initial

risk-based HSES assessment via either

pre-qualiﬁcation, bidding or review and then

again during contract commencement. The

standard seven key performance indicators

used to manage our contractors are HSES,

cost, schedule, quality, greenhouse gas

emissions management, value-add and

relationships. Many of our contractors will

also be subject to relevant contract audits,

with a focus on quality and HSES issues,

throughout the contract management period.

Our Contractor Due Diligence Process also

screens all new contracting entities for human

rights, labour rights, corruption, and ﬁnancial

and business ethics risks. This screening

activity is a precursor to ongoing monitoring

for all third parties. This initial screening is

followed up by a risk-based questionnaire

process that enables the contract teams

to focus on materially high-risk contracts.

Performance

In 2023, we identiﬁed zero negative

environmental, human rights or labour

rights impacts in our supply chain.

During 2023, 37 per cent of our new supplier

contracts were with locally-owned and operated

entities. An additional 48 per cent of new

contracts were signed with local entities owned

by foreign parent companies while the remaining

15 per cent were with foreign companies.

Looking ahead

In 2024, we will ﬁnalise our Sustainable

Procurement strategy.

We plan to implement a GHG questionnaire

to gather Scope 3 data among our supplier

base in 2024. The model we have developed

to incorporate Scope 3 data will be used as

the standard for incorporating other ESG

reporting activity. For instance, we will develop

a Diversity, Equity and Inclusion questionnaire

as a part of our tendering process in line with

the GHG questionnaire. We leverage a UK oil

and gas industry pre-qualiﬁcation supplier

system and we are looking to pilot our GHG

and DE&I questionnaires within this system

in order to create a standard approach across

the industry while reducing the reporting

burden on suppliers.

We will use a third-party risk platform in 2024

to review our contracting entities and their

performance across a range of ESG issues.

Auditing of our key contractors will also

continue, applying a risk-based approach.

Public policy and government

relations

Approach

As a leading oil and gas company, we

participate in working groups, taskforces and

consultations on public policy and legislation

in the countries in which we operate. We do so

directly and through our membership of trade,

industry and other professional associations.

We carry out all such engagements in

accordance with our applicable policies.

These policies do not permit the use of

our funds or resources as contributions to

any political campaign, party or candidate,

or any such afﬁliated organisations.

Performance

During 2023, we focused on and engaged

with several key public policy development

issues in the UK, including but not limited to

the Energy Proﬁts Levy, the government’s

Energy Security Strategy and the energy

transition. We also engaged in climate-speciﬁc

public policy developments including the

introduction of a new climate compatibility

checkpoint for the North Sea basin, the UK

Government’s Track 2 process to support CO

capture and storage, electriﬁcation and the

North Sea Transition Deal.

In Harbour’s Southeast Asian businesses, we

routinely take part in industry working groups

dedicated to waste management, oil spill

response planning and emissions monitoring

and abatement. This also extends to working

with local regulators to consult and support

on changes to environmental law.

Furthermore, in Indonesia we received the

‘green’ classiﬁcation, for a fourth year in a

row, through the Program for Pollution Control,

Evaluation and Rating. In Mexico, we work

closely with Mexican national oil company,

Petroleos Mexicanos (Pemex), to develop

the Zama ﬁeld including the undertaking of

Environmental Impact Assessments and

developing Social Impact Assessments.

In 2023, Pemex, as operator, submitted

the Field Development Plan for the Zama

ﬁeld to Mexico’s National Commission of

Hydrocarbons for regulatory approval.

We also signed a production sharing

contract (PSC) amendment with the

Indonesian upstream regulator SKKMigas,

in collaboration with our joint venture

partners (Kufpec, Petronas, Pertamina and

PTTEP). The PSC amendment includes

signiﬁcantly improved ﬁscal terms and the

drilling of additional inﬁll and exploration

wells in the area, giving the potential to

extend economic ﬁeld life until 2036.

916

In total spending on fees paid for memberships

in trade, industry and other professional

associations globally (2022: $604k)

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Risk management

The Board is responsible for

determining the nature and extent

of the principal risks the company

is willing to take to achieve its

long-term strategic objectives.

ALAN FERGUSON

CHAIR OF THE AUDIT AND RISK COMMITTEE

Risk management framework

We believe the effective management of risk

remains critical to us continuing to execute

our strategy. It also underpins how we

safeguard and protect our people, assets,

the communities with whom we interact,

the environment and our reputation. We

further believe it supports our purpose

and helps us stay true to our values.

The risk management framework at Harbour

is designed to determine the nature and

extent of the risks that the company is willing

to take, or consciously accept, to achieve its

strategic objectives. It is also designed to

provide an appropriate level of assurance as

to whether the company is managing these

risks appropriately and whether it has an

effective system of internal control.

The framework comprises:

•

A risk management process through which

we deﬁne our appetite (or tolerance) for

risk, and identify, assess, mitigate, monitor

and communicate risk in the business

(see ‘Risk management process’ section).

•

An internal control system to assist in the

management of risk given our deﬁned

appetite (see ‘Internal control’ section).

•

An assurance model to check whether

the controls in place are appropriate

and effective given our deﬁned appetite

(see ‘Reasonable assurance’ section).

The framework is designed to manage and

communicate the risks we face. The framework

can provide only reasonable, and not absolute,

assurance that the risks facing the business

are being appropriately managed.

Risk governance

The Board is responsible for determining

the nature and extent of the principal risks

the company is willing to take to achieve

its long-term strategic objectives, and for

monitoring the effectiveness of the risk

management framework. To facilitate this,

the Board has assigned the oversight of

certain principal risks to the most relevant

Board committees. For example, the HSES

Committee monitors the management of

health, safety, environmental and physical

security risks and the Audit and Risk

Committee monitors the management

of cyber and information security risk.

The Audit and Risk Committee is also

responsible for monitoring the effectiveness

of the risk management framework on

behalf of the Board.

The Leadership Team sets the tone for

Harbour’s risk management culture and

is responsible for ensuring that the most

signiﬁcant risks facing the business are

identiﬁed and are managed in line with the risk

appetite or tolerance agreed with the Board.

Harbour Energy plc

Annual Report & Accounts 2023

Top-down

Oversight and monitoring by the Board and its committees

CONTINUOUS LEARNING

AND IMPROVEMENT

Individual members of the Leadership Team

are responsible for overseeing the risks that

fall within their business area, with the most

signiﬁcant management risks recorded in

our Leadership Team risk register. Individual

Business Unit and functional managers

own and manage risk on a day-to-day basis,

undertaking activities in compliance with

company standards and procedures.

Internal Audit undertakes a risk-based audit

programme on behalf of the Board to assure

the effectiveness of risk mitigation activities,

as described in the ‘Reasonable assurance’

section on page 58. The Group Risk

Manager is responsible for embedding and

maturing the risk management framework.

Risk management process

We face various risks that could result in

events or circumstances that negatively

impact the company’s business model, future

performance, liquidity and reputation. Not all

of these risks are wholly within the company’s

control and the company may also be affected

by risks which have not yet materialised or

are not reasonably foreseeable.

For known risks facing the business, the

company seeks to reduce the likelihood and

mitigate the impact of the risk to within the

level of appetite or tolerance set by the Board.

According to the nature of the risk, Harbour

can choose to accept or tolerate risk, treat

risk with mitigating actions, transfer risk to

third parties, or remove risk by ceasing

certain activities. In particular, the company

has a zero tolerance stance to fraud, bribery,

corruption and the facilitation of tax evasion.

We also aim to manage health, safety,

environmental and security risks to a level

as low as reasonably practicable.

This risk management process is illustrated

in the panel below.

Principal and emerging risks

The Board carries out an assessment of the

principal risks facing the company twice during

the year. In deciding which risks are principal

risks, the Board considers Harbour’s stated

strategy together with events or circumstances

that might threaten the strategy and business

model, its future performance, position and

liquidity, and its reputation.

In doing so, the Board considers the most

signiﬁcant risks identiﬁed by the Leadership

Team. A description of the principal risks,

together with an overview of how each risk

is being managed, is provided on pages 60

to 65. The Board also reviews the emerging

risks facing the business and the procedures

in place to identify them. The Board deﬁnes

an emerging risk as a risk not currently

included as (or fully reﬂected within) one

of the identiﬁed principal risks, and where

the scope, impact and likelihood are still

uncertain, but which could have a material

effect on the company if it was to occur in

the short or medium term. The procedures to

identify emerging risks include consideration

of the most signiﬁcant management risks

and independent perspectives on the global

risk environment.

The Board’s review of emerging risks noted, for

example, an increasing risk of non-malicious

sharing of data through third-party tools and

institutions (including AI) and it was agreed

to reﬂect this aspect in the relevant principal

risk description.

Risk management process

The company follows a structured process to identify, assess, mitigate, monitor and

communicate the risks which may prevent it from achieving its strategic objectives.

Bottom-up

Ongoing identiﬁcation, assessment and mitigation of risk across the business

Context

The strategic objectives, purpose and

values of the company and the appetite

or tolerance for risk set by the Board

contribute to the overall context.

Risk mitigation

Depending on the nature of the risk, the company

may choose to accept or tolerate risk, treat risk with

mitigating actions, transfer risk to third parties,

or remove risk by ceasing certain activities.

Risk assessment

Risks are identiﬁed and analysed across

the company as part of ongoing business

reviews. Risks are evaluated based on the

likelihood of the risk materialising and the

impact of the risk if it was to materialise.

Monitor and review

Risks and risk mitigation measures are monitored

through regular business reviews, audits and other

sources of assurance. These reviews are used

to identify changes in the level of the identiﬁed

risks, to identify emerging risks, and to assess the

effectiveness of control measures in the context of

the agreed appetite or tolerance for each risk.

Communicate and consult

Risks and measures taken to mitigate them are

communicated through regular business reviews,

including review of the Leadership Team risk register

and assurance map.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Risk management

continued

Throughout the year, the Board committees

conducted a series of reviews with management

to ensure alignment with the Board on their

appetite to accept or tolerate the principal

risks facing the business, including the

metrics in place or under development

to monitor exposure related to appetite.

Internal control

Harbour’s internal controls are intended

to assist in the management of risk given

our deﬁned appetite for risk. The internal

controls consist of the company’s policies,

standards, procedures and guidelines that

together comprise the company’s business

management system and govern all

business activity. The internal controls are

underpinned and implemented through

knowledgeable and experienced people

supported by our information systems.

During the year, the company continued to

establish common ‘Harbour ways of working’

across key control areas. Areas of focus

included the continued maturation of

the internal ﬁnancial controls framework,

optimisation of the enterprise management

system implemented in 2022, a redesign of

the UK organisation to align to current activity

levels and facilitate the integration of future

acquisitions, and the launch of several

corporate initiatives to promote simpliﬁcation

and efﬁciency. These measures should also

help position Harbour to be able to comply

with the recent revisions to the UK Corporate

Governance Code when they take effect.

Reasonable assurance

The adequacy of the internal controls depends

on their design and operating effectiveness.

During the year, the company continued to

embed its integrated ‘three line’ assurance

model. The model is designed to provide senior

management and the Board with reasonable

assurance that the most signiﬁcant risks

facing the business are being appropriately

managed and that the internal control

environment is effective.

First line assurance is provided by line

managers who are responsible for designing,

implementing and operating controls.

Second line assurance areas monitor

the effectiveness of controls for certain

key risk areas, such as HSES and cyber

and information security, supported by a

programme of audits agreed with senior

management. Signiﬁcant ﬁndings from

these audits are reported to management.

Third line assurance is provided by the

Internal Audit function, the external statutory

auditors and certain other independent

assurance providers. Internal Audit is led by

the VP Internal Audit and Risk Management,

who reports directly to the chair of the Audit

and Risk Committee and to the CFO on a

day-to-day basis. The function undertakes a

programme of audits agreed and reviewed by

the Audit and Risk Committee. A summary of

ﬁndings from each internal audit is reported

to the Audit and Risk Committee, and to other

Board committees where appropriate. Internal

Audit then monitors the implementation of

agreed actions and reports these to the Audit

and Risk Committee for awareness of how

risks identiﬁed by Internal Audit have been

mitigated. Harbour maintains an ‘assurance

map’ that sets out the internal and external

sources of assurance in place against each

principal risk. This map allows management

and the Board to judge the adequacy of

the assurance measures in place for each

principal risk and to strengthen them if

required. The external auditors report to the

Audit and Risk Committee on internal controls

based on the audit work observations.

Where deﬁciencies have been identiﬁed,

improvement recommendations are also

provided to management for consideration.

Areas of focus for Internal Audit during the year

included the redesign of the UK organisation

which clariﬁed the ﬁrst and second line

assurance of key operational risk areas,

continued formalisation of the integrated

nature of the ‘three line’ assurance model

including how assurance outcomes are

communicated, and the implementation

of an internal audit action tracking tool

to facilitate remediation oversight.

During the year the Board committees

commissioned a programme of management-

led presentations to enhance understanding

and alignment on risk matters assigned to

them, examine the levels of assurance

provided, and consider key outcomes from

assurance activity from across the three

lines. These presentations are summarised

in the relevant committee chair reports

back to the Board.

GOVERNANCE

READ MORE ON PAGE 66

Monitoring and effectiveness

of the risk management framework

The Board is responsible for monitoring

the company’s overall risk management

framework and for reviewing its effectiveness.

The annual review of the overall effectiveness

of Harbour’s risk management and internal

control environment has been carried out by

the Audit and Risk Committee on behalf of the

Board. In conducting its review, the Committee

sought perspectives and assurances from

members of the Leadership Team which take

the form of conﬁrmation statements from the

Leadership Team to the Board. The Committee

considered the design of the risk management

framework across Harbour and the most

signiﬁcant risks to achieving our strategic

objectives. The Committee considered how

each of these risks is managed in the context

of the agreed risk appetite or tolerance, also

considering management-led presentations

received during the year. The review also

considered any signiﬁcant control deﬁciencies,

themes emerging from Internal Audit ﬁndings

and other key sources of assurance to date,

and the status of remedial actions taken.

The review noted the continued maturation

of the internal ﬁnancial control framework

and the controls to prevent material fraud.

Taking into account their assessment of the

management of the risks faced or materialised

during the year, the remediation status of

control failures or assurance ﬁndings and the

nature of the Leadership Team assurances

received, the Board concluded that the risk

management and internal control environment

is effective.

Alan Ferguson

Chair of the Audit and Risk Committee

Harbour Energy plc

Annual Report & Accounts 2023

Viability statement

In accordance with the provisions of the UK

Corporate Governance Code, the Board has

assessed the prospects and the viability of the

Group and the company over a longer period

than the 12 months required by the going

concern provision. For the assessment period,

the base case used is consistent with the

forecast as used for our going concern

assessment as disclosed on page 31. As part

of this assessment, we considered the principal

risks faced by the Group, relevant ﬁnancial

forecasts and sensitivities, and the availability

of adequate funding particularly in relation

to energy transition and climate change.

Assessment period

The review covered a period of three years to

31 March 2027 (the forecast period), which

was selected for the following reasons:

•

at least annually, the Board considers the

Group’s corporate operating cycles, business

plan projections (the projections) and debt

facility structures over a three-year period;

•

within the three-year period, market forward

price forecasts are used in the forecast.

Given the lack of forward liquidity in oil

and gas markets after this initial three-

year period, we rely on our own internal

estimates of oil and gas prices without

reference to liquid forward curves; and

•

the Group is not currently committed to

any major capital expenditures beyond

the three-year period.

Review of principal risks

The Group’s principal risks and uncertainties,

set out in detail on pages 60 to 65, have been

considered over the period. Whilst all the risks

identiﬁed could have an impact on the Group’s

performance, the speciﬁc risks which could

materially impact the Group’s ﬁnancial position

have been determined to be:

•

commodity price exposure;

•

operational performance;

•

capital programme and delivery; and

•

access to capital.

To assess, either directly or by proxy, the

potential impact of these principal risks

over the forecast period, the Group has run

downside scenarios, where Brent crude and

UK NBP gas prices are reduced by 20 per

cent, and total production volumes by 10

per cent, throughout the forecast period.

These downside scenarios were performed

individually and in combination alongside

a reverse stress test to determine if the

Group is forecast to have sufﬁcient liquidity

and covenant compliance headroom.

The potential impact of each of the Group’s

other principal risks on the viability of the

Group during the forecast period, should that

risk arise in its unmitigated form, has been

assessed. The Board has considered the

risk mitigation strategy for each of the other

principal risks and believes they are sufﬁcient

to reduce the impact of each risk such

that it would be unlikely to jeopardise the

Group’s viability during the forecast period.

Speciﬁcally, the risk associated with energy

transition and climate change that could have

a potential impact on viability outside the

assessment period is reported in note 2 to

the ﬁnancial statements (pages 124 to 127).

Review of ﬁnancial forecasts for the

forecast period

The projections for the viability of the Group

over the forecast period are based on:

Base case assumptions

•

Production and expenditure forecasts

on an asset-by-asset basis

•

Brent crude prices and UK NBP gas prices

that are used for impairment testing adjusted

for the company’s hedging programme

position at year end 2023. Refer to note 2

to the ﬁnancial statements (page 124)

•

The ﬁnancial covenant and liquidity tests

for both the going concern and viability

statement periods associated with the

Group’s borrowing facilities

•

Committed costs associated with the

announced Wintershall Dea acquisition in

relation to ﬁnancing and advisory services

Sensitivity analyses

•

In line with the principal risks identiﬁed that

could impact the ﬁnancial viability of the

Group, we have prepared sensitivity analyses

to reﬂect the combined impact of reductions

in Brent crude and UK NBP gas prices of 20

per cent, and in the Group’s production of

10 per cent, throughout the forecast period

Reverse stress tests

•

Reverse stress tests were undertaken but

due to a breach in the base case, the results

of these tests showed the levels of production

and price would need to increase to mitigate

the covenant breach at the end of H2 2026

Results and mitigating actions

•

The base case shows a potential breach

in the second half of 2026, due to the

reﬁnancing of the $500 million bond

•

The sensitivity test demonstrated a

possible risk of covenant breaches

because of reductions in price and

production parameters. Subsequently

management identiﬁed sufﬁcient

remediations required to mitigate

the breach in the base case

•

As a result, the Board considered the

availability of mitigating actions in the event

of having to respond to potential material

changes in covenant tests or liquidity. These

included the ability to control uncommitted

capital programmes, shareholder returns,

additional hedging and the assumption

of replacing the existing bond upon its

maturity. On this basis it was concluded that

these were sufﬁcient potential mitigations

available to respond to the base case and

sensitivity test scenarios

Under these mitigated projections, the Group

is expected to have sufﬁcient liquidity over the

forecast period and to be able to operate within

the requirements of the ﬁnancial covenants.

Wintershall Dea transaction

In December 2023 Harbour announced

the Wintershall Dea acquisition transaction,

which is anticipated to complete in Q4 2024

and will be accretive to Harbour’s free cash

ﬂow. Once complete, Harbour is expected to

receive investment grade credit ratings and

to beneﬁt from a signiﬁcantly lower cost of

ﬁnancing, including the porting of existing

euro denominated Wintershall Dea bonds

with a nominal value of approximately $4.9

billion and a weighted average coupon of

c.1.8 per cent. The Group would also have

access to a new $3.0 billion revolving credit

facility and $1.5 billion bridge facility. As part

of the viability statement assessment, a

base case, sensitivities and reverse stress

tests have been run on the enlarged group

forecasts, which are supported by Harbour’s

acquisition due diligence work, and show

that the probability of a liquidity deﬁcit or

covenant breach is remote.

Conclusion

The directors’ assessment has been made

with reference to the Group’s current position

and prospects, the Group’s strategy and

availability of funding, the Board’s risk

appetite and the Group’s principal risks and

how these are managed, as detailed in the

Strategic Report (pages 60 to 65). The

directors have also considered the mitigating

actions within their control in the event of

these downside scenarios. Therefore, the

directors conﬁrm that they have a reasonable

expectation that the Group will continue to

operate and meet its liabilities, as they fall

due, throughout the three-year viability

assessment period ending 31 March 2027.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Principal risks

The principal risks which may prevent the company

achieving its strategic objectives.

Risk description

The company’s strategy is to create value by

continuing to build a global and diverse oil and gas

company, principally via M&A and underpinned by

a clear purpose and strong values. There is a risk

the company could fail to effectively execute this

strategy. Factors such as the economic downturn,

continued regional conﬂicts, political instability and/

or the energy transition could lead to a protracted

decline or volatility in commodity prices and impede

access to capital. The company may fail to maintain

sufﬁcient leadership and organisational capability

to continue to effectively manage the business.

The company may be unable to identify or execute

attractive organic or M&A growth opportunities. The

delivery of our net zero commitments may impact

the execution of other aspects of the strategy or

vice versa. The company may be slow to respond

to changes in the external environment that could

merit a change to the strategy, for example with

respect to climate change and the energy transition.

The unmitigated risk level remains broadly

unchanged. While the political environment in some

regions remains challenging and stakeholder

expectations continue to evolve, market conditions for

M&A are improving, as evidenced by our announced

acquisition of the Wintershall Dea asset portfolio.

Execution of the strategy:

failure to effectively implement the strategy

With respect to this acquisition, the company

may be unable to fully satisfy the transaction

conditions on a timely basis and in its current

form. Not all the transaction conditions are wholly

within the company’s control and adverse events

may impact the completion timeline and ﬁnal

form of the transaction.

How the risk is managed

•

Regular Board review of the company

strategy and its execution, including market

developments, and the capability and

capacity of the senior Leadership Team

•

Organisation designed and resourced to

deliver the strategy and incentivised with

a competitive reward and beneﬁts package

and supportive culture and values

•

Capital deployment, growth, ﬁnancial and

other key performance metrics agreed with the

Board and feature in incentive compensation

•

Scalable organisation model and enterprise

management system in place to facilitate

future growth

•

Corporate planning and M&A analyses

evaluated across a range of scenarios including

consideration of long-term resilience of the

strategy and portfolio with respect to commodity

prices, climate change and the energy transition

•

Detailed due diligence of acquisition

opportunities undertaken, with support from

external expert advisers as needed, including

for the Wintershall Dea asset acquisition

•

Leadership Team with a proven track

record of completing large-scale M&A

transactions maintained

•

Detailed planning to manage completion

of announced Wintershall Dea asset

acquisition that includes engagement

with relevant government and regulatory

stakeholders and support from expert

external advisers as needed

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Risk description

The company may face a major accident or physical

security incident resulting in personal injury, physical

property damage and/or environmental harm.

A serious incident could also signiﬁcantly impact

production, impair ﬁnancial performance, and

tarnish the company’s reputation. The business

might be subject to punitive ﬁnes and individual

directors could face sanctions.

The unmitigated risk level remains broadly

unchanged. The installed asset base continues

to age and requires continuous inspection and

maintenance. The recruitment of new personnel

to replace retiring offshore personnel remains

challenging, in particular in the UK. The risk is

actively managed to ensure the mitigated risk

level is stable or reduced.

How the risk is managed

•

Strong safety leadership culture maintained

with an emphasis on process safety, as

evidenced by the successful outcome of the

UK Health & Safety Executive audit during 2023

•

Board and senior management

commitment to HSES demonstrated

through various engagement activities

Health, safety and environment:

risk of a major health, safety, environmental or physical security incident

including Harbour’s Global HSE Day, the

CEO Safety Award, town halls, internal

communications, meetings with offshore

managers and safety representatives,

operated facility visits and active event

sponsorship and participation

•

Experienced HSES Committee in place that

provides oversight and challenge

•

Organisation structured and resourced to

support the effective management of the risk

•

Corporate major accident prevention policy

(CMAPP) and HSES policy established that

direct company activities, including contract

work, supported by a deﬁned HSES strategy,

management system and plan, and relevant

training and competency management

•

Safety cases and active risk assessment

process and management of change in place

for operated assets

•

Safety-critical maintenance built into work

programme and budget

•

Performance closely monitored, including

investigation of incidents and serious near

misses, sharing of learnings, and targeted

campaigns to address thematic issues

•

Performance metrics agreed with Board

and integrated into business performance

tracking and incentive compensation

•

Process Safety Fundamentals embedded

across onshore and offshore operations

•

Internal independent HSES auditing and

technical assurance in place with a focus

on major accident hazards (MAH). Regular

Board and HSES Committee reporting

•

Incident learnings and best practices

shared among JV partners

•

Internally managed crisis management and

emergency response plans in place, with

regular exercises to ensure preparedness

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Harbour Energy plc

Annual Report & Accounts 2023

OUR STRATEGIC PILLARS

RESPONSIBILITY

Ensure safe, reliable and environmentally

responsible operations

QUALITY

Maintain a high quality portfolio

of reserves and resources

DIVERSIFICATION

Leverage our full cycle capability

to diversify and grow further

DISCIPLINE

Ensure ﬁnancial strength through

the commodity price cycle

BOARD ASSESSMENT OF CHANGE IN UNMITIGATED RISK LEVEL SINCE 2022

Risk level has increased

Risk level remains stable

Risk level has decreased

Risk description

The company may fail to maintain an

organisation structure that aligns with business

needs. The company may also fail to attract,

develop and retain talent or to maintain a

cohesive and engaged culture that aligns with

the company’s values. Consequently, the

organisation may lack the capability, capacity

and culture to effectively execute the strategy

and business plans.

The unmitigated risk level remains broadly

unchanged though is beginning to increase

due to the additional work required to prepare

for the transition and integration of the

acquired Wintershall Dea asset portfolio. Many

experienced employees and contractors are

approaching retirement while attracting talent

into the sector in the UK remains challenging

in some areas.

Organisation and talent:

failure to create and maintain a cohesive organisation with sufﬁcient

capability and capacity

How the risk is managed

•

New UK organisation implemented to align

with reduced UK activity and that is designed

to scale in line with the company’s strategy

•

Competitive reward and beneﬁts package

provided with hybrid working options

•

Culture and values programme with clear

linkage to stated purpose and strategy

•

Staff performance management process

aligned with target culture and values and

with linkage to reward

•

In-house training and development programmes

offered to support skill development

•

Succession planning model established

to maintain executive bench strength

•

Regular staff communications, surveys and forums

to support understanding and engagement

•

Staff counselling and grievance arrangements

in place

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Risk description

The company operates or maintains interests in

several countries, some of which are undergoing

political, economic or social transition, or

experiencing sovereignty disputes. The political

and security situation and the regulatory and

ﬁscal framework in any of these countries may

change. Adverse changes in any of these factors

could have a disproportionate impact on the

operations and proﬁtability of the business. In

addition, uncertainty regarding future changes

could reduce the attractiveness of prospective

new investments in those jurisdictions. Such

changes may include adverse tax measures,

heightened regulatory demands, price controls,

limits on production or cost recovery, import

and export restrictions, cancellation of contract

rights and expropriation of property.

Host government political and ﬁscal risks:

exposure to adverse or uncertain political, regulatory

or ﬁscal developments in countries where the company operates or maintains interests

The risk level remains broadly unchanged

following the introduction of the EPL in the UK

during 2022, and with general elections

expected in key countries (UK, Indonesia and

Mexico) during 2024.

How the risk is managed

•

Active monitoring of the local political,

economic, social and security situations

in regions where the company does

business or is proposing to enter

•

Constructive engagement with relevant

government and regulatory stakeholders

•

Contribution to industry representation on

key issues, including the role of oil and gas in

the energy transition, CCS and energy security

•

Continuing to work towards further

diversiﬁcation of country exposure through

organic growth and strategic M&A

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Principal risks

continued

Risk description

The company may fail to maintain reliable

and cost-effective production operations.

Forecasting future production and operating

costs is inherently uncertain, and actual

performance may deviate from expectations.

Substantial expenditures and outages may be

required to maintain the operability and integrity

of the asset base as it ages and replacement

parts may not be readily available. Opportunities

to add production or increase throughput may

be limited. Consequently, the company may fail

to deliver forecast production levels, maintain

competitive operating costs, meet guidance or

fulﬁl contractual obligations, any of which would

impact the company’s ﬁnancial performance,

position and liquidity.

Despite these challenges, the unmitigated risk

level remains broadly unchanged. The installed

asset base demands continual attention to

ensure performance is maintained.

Operational performance:

failure to deliver competitive operational performance

How the risk is managed

•

Clearly stated purpose to ensure safe, reliable

and responsible production of hydrocarbons with

demonstrable track record of meeting guidance

•

Organisation designed and resourced to

manage current operational activity

•

Operational performance metrics agreed with the

Board and integrated into business performance

monitoring and incentive compensation

•

Rigorous cost control in place with resources

allocated to maintain asset integrity and reliability

•

Inventory of near-ﬁeld drilling and other oil

and gas recovery enhancement opportunities

maintained to increase recovery and help

offset natural decline

•

Performance reviewed regularly by management

and the Board

•

Proactive risk-based oversight maintained on

non-operated assets

•

Performance benchmarked to understand

relative performance and identify improvement

opportunities

•

Emerging technology monitored for

opportunities to improve future performance

•

Solicitation of third-party volumes to improve

utilisation of existing infrastructure

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Risk description

The company undertakes drilling operations and

capital projects to explore and develop oil and

gas resources and to decommission assets at

the end of their economic life. These projects

are often complex in nature and may face

delays, cost overruns, unsatisfactory quality or

poor HSES performance. The volume and future

productivity of targeted resources are inherently

uncertain and the outcomes may differ from

expectation. As a result, the company may

struggle to replace reserves in a value accretive

manner, leading to a decline in future production

and performance. In addition, the company may

fail to accurately estimate the cost of projects

including decommissioning which would lead

to inadequate provision for future liabilities.

The unmitigated risk level remains broadly

unchanged. While the company’s UK oil and

gas resources are becoming increasingly

mature, the company’s resources in Mexico

and Indonesia have the potential to materially

increase reserve life and diversify exposure

over time. In addition, the company continues

to deepen its expertise in decommissioning

assets at the end of their economic life.

Capital programme and delivery:

failure to deﬁne and deliver a capital programme that optimises value

How the risk is managed

•

Organisation designed and resourced to deliver

the current capital programme, including a

dedicated UK late-life asset operations team

•

Capital deployment and growth metrics

agreed with the Board and integrated into

business performance monitoring and

incentive compensation

•

Processes in place to support the maturation

of resources and drive efﬁcient deployment

of capital including risk-based technical and

economic evaluation processes with deﬁned

stage-gate reviews

•

Innovative processes and technologies to

improve recovery considered where competitive

•

Investment metrics agreed with the Board to

ensure consistent evaluation of opportunities

•

Independent value assurance team in place to

drive effective governance of capital investment

activities and promote transfer of learnings

•

Major project delivery regularly reviewed by

management and monitored by the Board

•

Project performance benchmarked to

understand relative performance with

systematic lookbacks undertaken to inform

future performance improvements

•

Independent review undertaken of the

company’s reserves and resources

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Harbour Energy plc

Annual Report & Accounts 2023

Risk description

The company relies on a range of third parties,

including suppliers of products and services, joint

venture (JV) partners, downstream partners

and trading counterparties. The company may

be unable to procure certain products or services

on a timely and cost-effective basis. JV partners

may not manage assets in line with Harbour’s

values and business objectives, and the ability

of Harbour to inﬂuence may be limited. The

company may lose or be unable to secure access

to transport for its products, or may not be able

to realise full market value from products.

The unmitigated JV and downstream partner

risk level has increased over the period. In the

UK, the effects of the EPL, coupled with rising

interest rates and inﬂation, have impacted the

resilience and reliability of some JV partners

and their appetite to invest in the UK alongside

Harbour. Such misalignment could impact

Harbour’s performance, increase HSES risk and

create reputational exposure. Financial stress

among some UK partners may increase the

risk of default on UK decommissioning security

obligations. In Mexico and Indonesia, the

company has new partners as part of its

organic growth programme.

Third-party reliance:

failure to adequately manage supply chain, joint venture and other partners,

and third-party infrastructure owners

The unmitigated supplier risk level remains elevated

with continued competing demand from renewable

energy and infrastructure projects as well as from

international markets. It is also impacted by

the general decline in UK oil and gas activity and

geopolitical risks. These conditions, alongside rising

interest rates and inﬂation, have impacted the ability

and/or willingness of contractors to invest in assets

and service provision, in particular in the UK. These

conditions could also create a context for default,

unsafe practices or unethical behaviours, including

fraud or human rights violations.

How the risk is managed

•

Well established relationships in place

with most JV and downstream partners

including regular risk-based engagement

and performance monitoring

•

Category management and contract strategy

processes designed to identify and monitor

supply chain risks, secure products and

services and optimise usage

•

Strategic partnerships being created in speciﬁc

high risk or value categories to ensure security of

supply and facilitate longer-term value creation

•

Proactive development, oversight, governance

and enforcement of commercial agreements

•

New and existing suppliers and partners carefully

assessed and regularly monitored, supported

by additional security arrangements as required

•

Formal budgeting and tendering processes

in place to govern material spend

•

Transportation for produced oil and gas

supported by industry codes of practice

and contractual agreements

•

Insurance programmes in place include

contingent business interruption insurance

for loss of revenue following loss or damage

to third-party facilities

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Supply chain

JV and downstream partners

Risk description

The company aims to maintain a robust balance

sheet by ensuring sufﬁcient access to capital

through the commodity price cycle. Failure to

achieve this may hinder the company’s ability to

invest in our existing asset base, fund organic

and/or M&A growth, or return capital to

shareholders as outlined in the strategy.

The overall unmitigated risk level is broadly

unchanged. Although there has been a general

decline in lender appetite for the oil and gas

sector, Harbour was able to successfully amend

and extend its existing RBL facility in late 2023.

Further, Harbour is expected to receive

investment grade credit ratings on completion

of the acquisition of the Wintershall Dea asset

portfolio as a result of the high quality portfolio

being acquired together with the proposed

funding structure. This will improve our cost

of capital and enable access to broader and

lower cost sources of funding in the future.

Access to capital:

failure to ensure sufﬁcient access to capital to implement the company’s strategy

How the risk is managed

•

Robust ﬁnancial framework and prudent

capital allocation priorities agreed with the

Board and rigorously implemented

•

Diversiﬁed capital structure in place, including

a reserve based lending (RBL) facility with

maturity recently extended to 2029 and an

unsecured bond

•

Annual RBL redetermination programme

to ensure available liquidity is known for

the forthcoming period

•

Decommissioning liabilities and ﬁnancial

headroom on security postings closely

monitored. Recent facilities agreed for

utilising unsecured surety bonds

•

Disciplined hedging programme in place to

maintain acceptable exposure to commodity

prices and foreign exchange ﬂuctuations

•

Annual capital budgets and long range plan

approved by the Board. These consider

near-term commodity prices and cash ﬂow

expectations. Plans and spending levels

stress-tested against adverse scenarios

•

Commitment made to the energy transition,

supported by compliant disclosures and

ongoing review (refer to Viability statement

on page 59)

•

Investment grade credit ratings expected

on completion of announced acquisition

of Wintershall Dea asset portfolio

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Principal risks

continued

Risk description

The price of oil and gas is impacted by changes

in global and regional supply and demand, and

expectations of future supply and demand. This

makes it difﬁcult to accurately predict future

prices, and prices may decline for an extended

period or become more volatile. A sustained

decline in prices could undermine our ability to

deliver on our strategy by reducing cash ﬂow

available to fund growth and shareholder

distributions and impairing access to capital.

Excessive price volatility could also impede

business planning and ﬁnancial decision-

making. Harbour seeks to actively manage

commodity price exposure to realise sufﬁcient

revenue to fund the company’s strategy

through the cycle while protecting the business

from excessive volatility.

Commodity price exposure:

failure to manage the impact of commodity price ﬂuctuations on the business

The unmitigated risk level remains broadly

unchanged. Commodity price volatility moderated

during the year, however the price outlook remains

uncertain due to several factors including ongoing

conﬂicts and political instability.

How the risk is managed

•

Board approved commodity hedging

programme in place, including minimum and

maximum hedging limits and utilising a range

of instruments, aligned to agreed risk appetite

and designed to underpin the implementation

of the ﬁnancial framework

•

Strong control framework in place that covers

the entire hedging life cycle, including monitoring

and assurance activities to ensure the hedging

programme is applied consistent with risk appetite

•

Carbon hedging conducted to actively

manage the company’s exposure to

carbon pricing in the UK market and

meet regulatory requirements

•

Regular position reporting to the Board

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Risk description

The company may fail to implement adequate

cyber and information security measures

making it vulnerable to a serious cyber-security

incident or slow to recover in the event of an

incident. A failure to adequately manage this

risk would result in business or operational

interruption, impact the conﬁdentiality,

integrity, availability and regulatory compliance

of company information, and potentially lead

to heightened safety or environmental risk.

Such outcomes may lead to regulatory ﬁnes,

impact business performance and damage

the company’s reputation.

Cyber and information security:

failure to maintain safe, secure and reliable information systems

The risk level has increased over the period as the

nature of the malicious threat continues to evolve

while increasing non-malicious sharing of data

through third-party tools and institutions (including

AI) presents a new risk exposure.

How the risk is managed

•

Experienced and resourced cyber and

information security organisation in place

•

Provision of threat intelligence services in place

with UK Government and specialist partners

•

Defensive and preventative controls

maintained to an industry standard that

include supply chain monitoring and staff/

director training to raise awareness

•

Disaster recovery and business continuity

plans in place and regularly tested

•

Resilience independently tested and

assured including through simulation

of incidents

•

Regular review of controls in line with the

evolving threat landscape and regulatory

requirements

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Risk description

The company, its employees and contractors

are subject to various laws and regulations

governing corporate and personal conduct and

disclosure, including areas such as human

rights, fraud, bribery, corruption and tax evasion.

Should a major compliance breach occur, a

failure to demonstrate adequate legal and

regulatory compliance processes could lead

to ﬁnancial penalties, erode our value-based

culture, and tarnish our reputation among

employees and external stakeholders. Individual

directors could also face personal sanctions.

While the scope and nature of applicable

laws and regulations continues to evolve,

the unmitigated level of the risk has remained

broadly unchanged.

Legal and regulatory compliance:

failure to maintain and demonstrate effective legal

and regulatory compliance

How the risk is managed

•

Zero tolerance stance towards fraud, bribery,

corruption and the facilitation of tax evasion

in any form that could be deemed unlawful or

potentially harm the company’s reputation or

ﬁnancial standing

•

Global compliance framework in place with

relevant induction and training to enhance

awareness of the risks, set clear expectations,

prevent material fraud and promote a

‘speak up’ culture. This framework includes

well-deﬁned and reinforced values, secure

whistleblowing arrangements and relevant

Board-approved policies and statements

covering matters such as Code of Conduct,

sustainability, ethics, human rights and tax

•

Corporate governance structure maintained that

complies with the UK Listing Rules, UK Corporate

Governance Code and UK Companies Act

•

Emerging laws and regulations closely

monitored to ensure timely compliance

•

Board and Audit and Risk Committee

monitoring of whistleblowing activity and

enforcement of the Code of Conduct

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Harbour Energy plc

Annual Report & Accounts 2023

Risk description

The transition towards a low carbon economy

poses a range of ﬁnancial, legal, market,

regulation, technology and reputation risks to the

company. For example, the transition is impacting

the supply and demand for oil and gas and

this could lead to long-term price volatility.

The company may face increased stakeholder

scrutiny and expectations relating to our energy

transition and ESG commitments, the resilience

of the strategy and portfolio, and the

extensiveness of disclosures. Access to capital

may be impacted if it is unable to meet the

evolving expectations of investors, creditors and

lending banks. The company may be subject to

negative NGO or shareholder activism, impacting

our societal ‘licence to operate’, including civil

legal action. Long-term physical changes in

weather patterns and ocean currents and more

frequent extreme weather events related to

climate change could potentially disrupt business

activities, increase business costs and raise

insurance premiums. The delivery of our net zero

commitments may impact the execution of other

aspects of the strategy or vice versa.

Overall, the long-term viability of the business

may be in question if the company is unable

to maintain a strategy and portfolio that is

Climate change and energy transition:

failure to adapt the strategy in the context

of external expectations

demonstrably resilient to evolving market

conditions, requirements and expectations related

to climate change and the energy transition.

The unmitigated level of this risk remains broadly

unchanged. Stakeholder expectations continue

to evolve, tempered by continued concerns over

energy supply security.

How the risk is managed

•

Clear commitment made to the safe, reliable

and responsible production of oil and gas

•

Credible emissions reduction plans in place to

contribute to Net Zero 2035 goal, including an

interim 2030 emissions reduction target, zero

routine ﬂaring commitment, alignment with the

regulatory requirements and emissions offset

purchase plans

•

Emissions reduction targets feature in

incentive compensation and incorporated into

the main reserve based lending debt facility

•

Climate strategy and delivery, including within the

context of the resilience of the company strategy,

monitored by the Board and HSES Committee

•

Material participation in Acorn and Viking

CCS projects which could make a signiﬁcant

contribution to the UK’s emissions reduction

and storage targets

•

Energy transition scenarios and risks,

including the cost of carbon, considered in

key judgements and estimates within the

ﬁnancial statements, investment decisions,

corporate planning and M&A analysis.

Periodic review of the long-term physical

risks undertaken across core geographies

•

New and emerging ESG reporting

requirements closely monitored to ensure

compliance, including independent veriﬁcation

•

Reporting in full alignment with the TCFD

requirements maintained as mandated

by the FCA to align to external stakeholder

expectations

•

For additional information on the company’s

climate strategy and related risks refer

to the TCFD section on pages 39 to 44

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

Risk description

Harbour’s strategy includes growth through M&A.

Successful execution of acquisitions includes

properly planning and executing the transition

of the acquired businesses and organisations.

With respect to the announced acquisition of

the Wintershall Dea asset portfolio or future

acquisitions, the company may fail to adequately

prepare for the safe and efﬁcient transition of the

acquired assets on completion or, subsequently,

to effectively manage the pace, scope and cost

of integration. Integration synergies may not be

realised in a timely manner. Integration

activities could initially result in increased

complexity, job security concerns, increased

workloads, disengagement or the loss of key

staff. The company may be unable to maintain a

scalable operating model to support the efﬁcient

integration of further acquisitions.

Integration of acquired businesses:

failure to properly integrate acquired businesses and realise

anticipated synergies in a timely manner

While the integration of the company’s prior

major acquisitions is now largely complete, the

unmitigated risk level has increased to reﬂect

the forthcoming transition and integration of the

announced Wintershall Dea asset acquisition.

How the risk is managed

•

Leadership has a proven track record of

integrating large-scale M&A transactions

and creating value from acquired assets

•

Harbour organisation model, controls and

systems designed to scale with business growth

•

Transition governance framework established

for Wintershall Dea asset acquisition that

includes a transition management ofﬁce, a

detailed transition plan, and a joint transition

and integration committee staffed with senior

leaders from Harbour and Wintershall Dea

•

Transition and integration playbook in place

to facilitate learnings from past integrations

•

Transition and integration delivery monitored

by the Leadership Team and Board

LINK TO STRATEGIC PILLARS:

RESPONSIBILITY

QUALITY

DIVERSIFICATION

DISCIPLINE

UNMITIGATED CHANGE SINCE 2022:

To consolidate our reporting requirements under sections 414CA and 414CB of the Companies Act 2006, the table on page 107 sets

out our non-ﬁnancial and sustainability information statement and shows where in this Annual Report to ﬁnd each of the disclosure

requirements. The Strategic Report, comprising pages 1 to 65, including the non-ﬁnancial and sustainability information statement, has been

prepared in accordance with the requirements of the Companies Act 2006 and has been approved and signed on behalf of the Board.

Linda Z. Cook

Chief Executive Ofﬁcer

6 March 2024

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Governance at a glance

The Leadership Team supports the CEO

with the development and implementation of

Group strategy, management of the operations

of the company including growth opportunities,

ﬁnancial planning, risk management, internal

control, people strategy, diversity, HSES and

corporate responsibility.

UK CORPORATE GOVERNANCE CODE

PRINCIPLES:

The Board promotes the long-term

success of the company

The company’s purpose, values

and strategy align with its culture

Resources are in place to meet

objectives and measure performance

The Board engages effectively with

shareholders and stakeholders

Workforce policies and practices

are aligned with company values

The UK Corporate Governance Code

2018 is the corporate governance code

to which we referred during the ﬁnancial

year to 31 December 2023 and can be

found at frc.org.uk.

Harbour was fully compliant with the provisions

of the Code throughout 2023, except for

Provision 9, which states that ‘the chair should

be independent on appointment when assessed

against the circumstances set out in Provision

10’. R. Blair Thomas, the Chair, was appointed

pursuant to EIG’s right to appoint up to two

directors to the Board under the relationship

agreement detailed on page 105, and did not

meet the independence criteria of Provision 10

of the Code.

Notwithstanding this, the Board is comprised of a

majority of independent non-executive directors,

and the industry experience and knowledge

R. Blair Thomas brings to his chairmanship

is invaluable. The Board therefore continues

to believe that there is sufﬁcient independent

challenge and judgement in the boardroom.

Meeting attendance

Ten Board meetings were held during the year,

seven of which were scheduled meetings

covering a full agenda of strategic, performance

and governance items.

Three additional meetings were called during

the year to discuss speciﬁc topics.

All directors attended every meeting. A full

attendance table detailing Board joiners and

leavers is available in the directors’ report

on page 104.

The Board is collectively responsible for the governance of the

company on behalf of Harbour’s shareholders and is accountable

to them for the long-term sustainable success of the company.

CHAIR’S INTRODUCTION

PAGE 68

Supporting the Board

on all governance matters

Rachel Rickard

Company Secretary

Rachel is a Fellow of the Chartered

Governance Institute with more than 20

years’ experience gained across a variety

of industries and sectors in FTSE 100 and

FTSE 250 listed companies, including three

years within the ﬁnancial services sector.

Rachel ensures that the Board has the

policies, processes, information, time and

resources it needs to function effectively

and efﬁciently.

Nomination Committee

R. BLAIR THOMAS

COMMITTEE CHAIR

PAGE 72

Responsibilities

•

Board composition

•

Succession planning

and Board appointments

•

Leads Board

performance review

process

•

Monitors Harbour’s

culture

BOARD OVERSIGHT

Board of directors

Board leadership

& company purpose

UK CORPORATE GOVERNANCE CODE

PRINCIPLES:

The Board is led by the Chair who

is responsible for its effectiveness

Clear division of responsibilities and

balance of independence on the Board

Non-executive directors challenge,

guide and hold management to account

The Board has the information, time

and resources to function effectively

BOARD OF DIRECTORS

PAGE 70

Division of

responsibilities

The Board has established

committees which assist the

Board in discharging its duties

in certain areas.

Each of the committees has

formal terms of reference,

copies of which can be found

on the company’s website.

Board committees

The Board and its committees

are supported by an experienced

Leadership Team, reporting

into the CEO.

Leadership Team

Harbour Energy plc

Annual Report & Accounts 2023

The Board governs the company in accordance with the authority

set out in the company’s articles of association and in compliance

with the UK Corporate Governance Code (the Code):

Audit and Risk Committee

ALAN FERGUSON

COMMITTEE CHAIR

Responsibilities

•

Integrity of

reporting

•

Effectiveness of

internal and

external audit

•

Internal control and

risk management

framework

MANAGEMENT ACCOUNTABILITY

UK CORPORATE GOVERNANCE CODE

PRINCIPLES:

Appointments are based on merit

and objective criteria including diversity

There is a combination of skills, experience

and tenure on the Board and committees

Board performance reviews are

conducted annually

NOMINATION COMMITTEE REPORT

PAGE 72

Composition, succession

& evaluation

UK CORPORATE GOVERNANCE CODE

PRINCIPLES:

The Board ensures the integrity of reporting

and effectiveness of audit functions

Reporting is fair, balanced and

understandable

Procedures are in place to manage risk,

oversee the internal control framework

and determine principal risks and appetite

AUDIT AND RISK COMMITTEE REPORT

PAGE 76

Audit, risk

& internal control

UK CORPORATE GOVERNANCE CODE

PRINCIPLES:

Remuneration design supports strategy

and aligns to company purpose and values

There is a formal and transparent

procedure for director and senior

management remuneration

Independent judgement and discretion

are exercised when authorising

remuneration outcomes

DIRECTORS’ REMUNERATION REPORT

PAGE 82

Remuneration

PAGE 76

HSES Committee

MARGARETH ØVRUM

COMMITTEE CHAIR

Responsibilities

•

Effectiveness of

HSES strategy

•

HSES risk including

tolerance and

mitigation

•

HSES assurance

•

Integrity of HSES

reporting

PAGE 80

Remuneration Committee

ANNE L. STEVENS

COMMITTEE CHAIR

Responsibilities

•

Remuneration

Policy

•

Remuneration

arrangements for

senior management

•

Oversight of pay

and conditions

across Harbour

PAGE 82

FIND OUT MORE ONLINE

HARBOURENERGY.COM/ABOUT-US/OUR-SENIOR-TEAM

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Chair’s introduction

Dear shareholder,

I am delighted to be

writing to you on behalf

of the Board in this,

Harbour Energy’s 2023

Annual Report.

During 2023, the economic and geopolitical

backdrop remained unpredictable, and

there is continued uncertainty around future

economic growth rates. Our purpose, to

play a signiﬁcant role in meeting the world’s

energy needs through the safe, efﬁcient

and responsible production of hydrocarbons,

remains relevant, and our strategy is clear:

to continue to build a global, diverse,

independent oil and gas company.

The Board continues to aspire to the highest

standards of corporate governance by steering

our strategy and ensuring its relevance in the

changing market environment. Growth and

international diversiﬁcation are core to our

strategy, and in assessing potential growth

opportunities, we remain disciplined and

focused on strategic ﬁt and value creation.

This means considering the right things, at the

right time, with the right people and insights.

Our corporate governance structure

supports this objective, and a summary of

the framework can be found on page 66.

Board activities during 2023

Capital allocation, safety, sustainability and

consideration of growth opportunities have

remained high on the Board’s agenda throughout

2023. Oil and gas will continue to play a key role

in meeting the world’s energy needs, and it

is important that we invest to deliver reliable

supplies in a responsible manner.

Fundamental to our purpose is ensuring

safe operations for our workforce – providing

an environment where our people can

undertake their duties without being put in

harm’s way. Safety performance in 2023

has been strong, with a Total Recordable

Injury Rate of 0.7, and a noticeable reduction

in high potential incidents when compared

with 2022. Notwithstanding the

improvement, we must never rest where

safety is concerned. Supported by the

HSES Committee, the Board will continue

to carefully monitor performance and

ensure that actions are taken to address

weak signals across the organisation.

UK Corporate Governance Code Principle

How does the Board apply this Principle?

Further information

A successful company is led by

an effective and entrepreneurial

board, whose role is to promote

the long-term sustainable success

of the company, generating value

for shareholders and contributing

to wider society.

The directors provide leadership

and ensure the company and its

management focus on the delivery of

long-term sustainable success for all

stakeholders, including shareholders

and wider society.

•

Governance at a glance:

P66

•

Board activities during

2023:

P68

The board should establish the

company’s purpose, values and

strategy, and satisfy itself that

these and its culture are aligned.

All directors must act with integrity,

lead by example and promote the

desired culture.

The Board has approved the company’s

purpose, values and strategy and is

satisﬁed they are aligned with the

culture that has been embedded

throughout the company, regularly

meeting with a wide cross section

of staff to gain the required insight.

•

At a glance:

•

Our purpose is underpinned

by four core values:

•

Harbour culture:

P69

The board should ensure that the

necessary resources are in place for

the company to meet its objectives

and measure performance against

them. The board should also

establish a framework of prudent

and effective controls, which enable

risk to be assessed and managed.

The Board ensures that a robust

ﬁnancial framework is in place,

underpinned by prudent capital

allocation, to ensure the necessary

resources are in place to meet

Harbour’s objectives and measure

performance within an effective

risk management framework.

•

Financial review:

P26

•

Key performance indicators:

P16

•

Risk management

framework:

P56

•

Risk management and

internal control:

P79

In order for the company to meet

its responsibilities to shareholders

and stakeholders, the board should

ensure effective engagement with,

and encourage participation from,

these parties.

The Board seeks to engage actively

with its stakeholders, including

major shareholders, employees,

governments, regulators, partners

and suppliers. Feedback from

stakeholders is considered in the

Board’s decision-making processes.

•

Engaging with our

stakeholders:

P12

•

Employee engagement:

P50

•

Workforce engagement:

P74

The board should ensure that

workforce policies and practices are

consistent with the company’s values

and support its long-term sustainable

success. The workforce should be

able to raise any matters of concern.

Our workforce policies and practices

are aligned with our values, with

annual employee engagement surveys

resulting in improvement initiatives

throughout the business. Speak Up,

the company’s whistleblowing service,

is available to all employees and

contractors and is regularly publicised

through the company’s communication

channels including town hall meetings.

•

Audit and Risk Committee

activities during the year:

P77

•

Employment practices:

P51

•

Global engagement survey:

P50

Board leadership & company purpose

THE UK CORPORATE GOVERNANCE CODE IN ACTION

GOVERNANCE AT A GLANCE

PAGE 66

NEXT SECTION OF THE CODE

PAGE 71

Harbour Energy plc

Annual Report & Accounts 2023

As part of the continuing drive for

ever higher standards of safety and

environmental performance, the Board

endorsed an amendment to the 2024

scorecard to extend the process safety

metric to include Tier 3 events.

The Board is supportive of the progress

being made on our energy transition

journey as we continue to reduce our own

emissions and focus on achieving our target

of net zero by 2035. Signiﬁcant progress

has been made on our CCS projects during

the year, with both Viking and Acorn CCS

projects being awarded Track 2 status as

part of the UK Government’s CCS regulatory

process. Through its CCS projects, Harbour

aspires to play a vital role in contributing

materially to the UK goal of net zero by

2050, whilst creating thousands of skilled

British jobs.

In response to the UK Energy Proﬁts Levy,

the Board supported the decision to scale

back our UK activities in certain areas. This

resulted in a review of our UK organisation,

the objective of which was to design a

simpler, appropriately sized UK business

with clearer accountabilities. In parallel,

and in response to the results of the 2022

global engagement survey, nine corporate

initiatives were launched to create more

efﬁcient, consistent ways of working across

the organisation including simpler systems,

reporting and approvals.

The UK organisation review has resulted in

a ﬂatter organisational structure, bringing

front-line operating staff closer to senior

decision-makers, as well as delivering cost

savings. Of course another key area of focus

for the Board during 2023 was the review

of a range of M&A opportunities, culminating

in Board approval for the company’s $11.2

billion acquisition of a portfolio of assets

from Wintershall Dea. The transaction is

fully aligned with the corporate strategy and

will be transformational for our company.

Board performance and composition

I was pleased to welcome Louise Hough and

Belgacem Chariag to the Board in May, and

value the contributions they already bring to

Board and committee discussions. During

2023 the Board executed the third year of the

Board and committee performance review

programme, concluding that the composition

of the Board remains optimal following the

recruitment of Louise and Belgacem and the

departure of Steve Farris earlier in the year.

An overview of the Board performance review

process, actions taken, key ﬁndings and

next steps is included in the Nomination

Committee report on page 74.

Board priorities for 2024

For the Board and Leadership Team, our

focus during 2024 will be on continuing to

deliver against our operational and safety

targets and capital allocation programme,

and growing the business, including through

the completion of the acquisition and

integration of the Wintershall Dea assets.

The macroeconomic and geopolitical

environment remains challenging and

uncertain, but I am conﬁdent that we

have the right team and strategy in place

to create value for all our stakeholders.

Finally, I would like to thank all of our

employees and contractors, shareholders,

partners, suppliers and customers for their

continued support of Harbour Energy.

R. Blair Thomas

Chair

The Board has maintained its oversight of the company’s culture.

During the year we have met with staff from all levels of the

organisation, including asset managers, safety representatives

and offshore installation managers.

In June we spent an afternoon at Aberdeen Port for a tour of an

Emergency Response and Rescue Vessel, and also visited the

company’s incident response centre. Directors were also pleased

to have the opportunity to meet with various employee networks

including the Early Careers Network, local employee diversity

network representatives and the Global Staff Forum. After Board

and committee meetings we are invited to attend informal

receptions with staff who have presented during meetings, allowing

time for informal discussion and providing the Board with an

opportunity to get to know more staff below Leadership Team level.

Together, these interactions have provided all directors with the

opportunity to meet in person with a wide cross section of our

staff and gain a deeper sense of Harbour’s culture.

Harbour culture

The Board has reviewed the results of the 2023 global engagement

survey and will, through the Nomination Committee, continue to

monitor the outcomes of initiatives launched to address issues

raised. Further detail on the engagement survey outcomes is

provided in the ESG review on page 50.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Board of directors

R. Blair Thomas

Chair

Appointed 31 March 2021

Skills and experience

Blair was appointed as Non-Executive Chair

of the company pursuant to the relationship

agreement with EIG (described on page 105).

Blair has more than 30 years’ experience in the

investment management business, with a focus

on energy and energy-related infrastructure.

Blair’s industry experience and knowledge of

Harbour is invaluable and his leadership of the

Board is of signiﬁcant beneﬁt to the company

and shareholders as a whole.

External appointments with public companies

None

Committee membership

– Nomination (Chair)

Belgacem Chariag

Independent Non-Executive Director

Appointed 1 May 2023

Skills and experience

Belgacem has extensive experience in the

energy, materials and chemicals industries,

having held a variety of leadership positions

within oil ﬁeld services companies, including

Baker Hughes and Schlumberger. Most recently

Belgacem was Chairman and CEO of Ecovyst Inc,

a leading global provider of speciality catalysts,

materials, chemicals and services. Belgacem

brings extensive global industry expertise to

Harbour, including in the area of health and

safety, which enhances the Board’s ability to

support and oversee the delivery of the strategy.

External appointments with public companies

– Helmerich & Payne, Inc: Non-Executive Director

Committee membership

– HSES

– Nomination

Linda Z. Cook

Chief Executive Ofﬁcer

Appointed 31 March 2021

Skills and experience

Linda has signiﬁcant experience in building and

managing large-scale, global energy businesses

at both Royal Dutch Shell where she worked for almost

30 years and subsequently in private equity at

EIG. She has a track record of successful strategic

execution and growth, including through M&A, major

project delivery and raising capital. Linda’s experience

in international oil and gas and in disciplined capital

allocation within the sector is of great value to Harbour

as the company works to implement its strategy.

External appointments with public companies

– BNY Mellon: Non-Executive Director

and Chair of the Audit Committee

Committee membership

N/A

Louise Hough

Independent Non-Executive Director

Appointed 1 May 2023

Skills and experience

Louise has a wealth of experience and deep

understanding of both ﬁnancial and energy

markets. Following 25 years at UBS, Louise

played a lead role in preparing Saudi Aramco for

its ﬁrst public bond issuance and IPO as Head of

International Investor Relations. At Saudi Aramco

Louise was also a member of the Sustainability

Steering Committee, working extensively on all

aspects of ESG reporting. Louise’s experience

advising investors, boards and executive

management teams on capital markets-related

activity, sustainability and governance issues is

of great value to the Board and its committees.

External appointments with public companies

None

Committee membership

– Audit and Risk

– Remuneration

Alexander Krane

Chief Financial Ofﬁcer

Appointed 15 April 2021

Skills and experience

Having spent a large portion of his career as

CFO of Aker BP, including during the merger of

Det Norske Oljeselskap and BP Norge, Alexander

has experience leading a large ﬁnance function

through integration processes. His listed company

experience and understanding of debt and equity

capital markets are invaluable in ensuring that

the company has the balance sheet strength to

be able to deliver its growth and investment plans

through the commodity price cycle.

External appointments with public companies

None

Committee membership

N/A

Alan Ferguson

Independent Non-Executive Director

Appointed 31 March 2021

Skills and experience

Alan is a chartered accountant and brings current and

relevant ﬁnancial experience to the Board and Audit and

Risk Committee following his executive career in ﬁnance

roles including being CFO of three FTSE 100/250

companies. Alan has over a decade of experience

leading audit committees of listed companies including

the Weir Group, Croda International and Johnson Matthey

plc. The Audit and Risk Committee also beneﬁts from

Alan’s insight from his position as a Board member of

the Audit Committee Chairs’ Independent Forum, and his

expertise in corporate governance, audit and accounting

is of great value to the Board and the company.

External appointments with public companies

– Anglo Gold Ashanti plc: Non-Executive Director

and Chair of the Audit and Risk Committee

Committee membership

– Audit and Risk (Chair)

– Remuneration

Board representative to the Global Staff Forum

Harbour Energy plc

Annual Report & Accounts 2023

Simon Henry

Senior Independent Non-Executive Director

Appointed 31 March 2021

Skills and experience

Simon’s position as Senior Independent Director

ensures that the highest standards of corporate

governance are maintained. He plays a pivotal role in

managing the relationship with the company’s major

shareholder, EIG, and ensuring the company is able

to operate independently and in accordance with its

obligations as a listed company. In addition, Simon

brings signiﬁcant experience in both the oil and

gas sector, including a focus on health, safety and

sustainability, and public markets having spent his

entire career working with large-scale companies,

including as CFO for Royal Dutch Shell plc.

External appointments with public companies

– Rio Tinto plc: Non-Executive Director

and Chair of the Audit & Risk Committee

Committee membership

– Audit and Risk

– HSES

Margareth Øvrum

Independent Non-Executive Director

Appointed 1 April 2021

Skills and experience

Margareth has extensive experience of international oil

and gas operations, having worked for almost 40 years

at Equinor and its predecessor companies. At Equinor,

Margareth spent almost 17 years on the executive

committee with global responsibility for HSES, project

development, drilling, procurement, technology

and new energy. Margareth’s extensive leadership

experience of major projects, health and safety,

sustainability and the role of digital technology in

engineering are valuable to the Board. As Chair of the

HSES Committee, Margareth has a passion for safety

and the environment which is essential to her role.

External appointments with public companies

– FMC Corporation: Non-Executive Director

– Technip FMC plc: Non-Executive Director

– Transocean Ltd: Non-Executive Director

Committee membership

– HSES (Chair)

– Audit and Risk

Anne L. Stevens

Independent Non-Executive Director

Appointed 31 March 2021

Skills and experience

Anne brings a wealth of experience built up over

a long career in engineering and executive roles

in large global companies. In recent years, she has

served on remuneration committees, including as

Chair, in a number of large organisations, including

Anglo American plc, expertise that she brings to

her role as Remuneration Committee Chair. Anne

also has signiﬁcant experience engaging with

investors to deliver remuneration outcomes that

are of beneﬁt to all stakeholders.

External appointments with public companies

– Aston Martin Lagonda Global Holdings plc:

Non-Executive Director, and Chair of the Remuneration

Committee and the Sustainability Committee

Committee membership

– Remuneration (Chair)

– Nomination

Andy Hopwood

Independent Non-Executive Director

Appointed 31 March 2021

Skills and experience

Andy has over 40 years’ experience in the global

oil and gas industry gained during his long career

with bp. He brings a strong understanding of the

technical, operational and commercial issues

associated with developing and managing large-scale,

complex energy assets around the world, from

exploration through to decommissioning, including

in the areas of safety and the environment. Andy’s

technical, operational and leadership expertise in the

oil and gas sector are invaluable to the Board and

its committees in overseeing the existing portfolio

and assessing opportunities for investment.

External appointments with public companies

None

Committee membership

– Nomination

– Remuneration

Board representative to the Global Staff Forum

UK Corporate Governance Code Principle

How does the Board apply this Principle?

Further information

The chair leads the board and is

responsible for its overall effectiveness

in directing the company. They should

demonstrate objective judgement

throughout their tenure and promote

a culture of openness and debate. In

addition, the chair facilitates constructive

board relations and the effective

contribution of all non-executive directors,

and ensures that directors receive

accurate, timely and clear information.

The Chair leads the Board and ensures its

effectiveness. He brings signiﬁcant industry

experience, demonstrating objective

judgement despite not being independent on

appointment. The Chair promotes an active

culture of openness and debate, facilitating

constructive Board relations and the effective

contribution of all non-executive directors,

ensuring that directors receive accurate,

timely and clear information.

•

Chair’s introduction:

P68

•

UK Corporate

Governance Code

explanation:

P66

•

Board and

Committee

performance

review:

P74

The board should include an

appropriate combination of executive

and non-executive (and, in particular,

independent non-executive) directors,

such that no one individual or small group

of individuals dominates the board’s

decision-making. There should be a clear

division of responsibilities between the

leadership of the board and the executive

leadership of the company’s business.

The Board is comprised of a majority of

independent directors, with a clear division

of responsibilities between the leadership

of the Board and the executive leadership

and management of the business. Given

the Chair’s position as an EIG executive,

there is a relationship agreement with EIG

to ensure the company is able to operate

independently and to the highest standards

of corporate governance.

•

Relationship

agreement:

P105

•

Governance at a

glance:

P66

Non-executive directors should have

sufﬁcient time to meet their board

responsibilities. They should provide

constructive challenge, strategic

guidance, offer specialist advice and

hold management to account.

Non-executive directors constructively

challenge, help develop the company’s

strategy and hold management to account

for the company’s performance. No

director holds directorships at more than

three public companies.

•

Meeting attendance:

P66

•

Board of directors:

P70

The board, supported by the company

secretary, should ensure that it has the

policies, processes, information, time

and resources it needs in order to

function effectively and efﬁciently.

All directors have access to the Company

Secretary who is responsible for advising

the Board and its committees on all

governance matters.

•

2022-2023

performance

review:

P74

•

Governance at a

glance:

P66

Division of responsibilities

THE UK CORPORATE GOVERNANCE CODE IN ACTION

GOVERNANCE AT A GLANCE

PAGE 66

NEXT SECTION OF THE CODE

PAGE 72

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Executive director and senior

management succession

Talent management

and development

Non-executive

director recruitment

Board performance review

Workforce engagement

and culture

Corporate governance

and compliance

Nomination Committee report

Meeting attendance

R. Blair Thomas (Committee Chair)

Belgacem Chariag

Andy Hopwood

Anne L. Stevens

Attended

Not attended

Belgacem Chariag joined the Board and was appointed

a member of the Nomination Committee on 1 May 2023.

Role of the Committee

•

To plan director succession and oversee plans for senior

management succession and talent development, taking

into account the strategy of the company and the skills,

knowledge, diversity and experience required to deliver the

strategy; and to oversee the development of a diverse pipeline

for succession to Board and senior management positions.

•

To keep under review the structure, size and composition

of the Board and its committees.

•

To lead the process for the annual Board and committee

performance review and oversee the results and actions.

•

To lead the process for Board appointments, ensuring that the

procedure is formal, rigorous and transparent, and identifying

and nominating candidates for the Board’s approval.

•

To lead Board-level engagement with Harbour’s workforce,

ensuring effective engagement and enabling them to raise

matters of concern.

•

To assess and monitor Harbour’s culture, to ensure that it

is aligned with the company’s purpose, values and strategy.

How the Committee spent its time during the year (%)

During 2023, the Committee focused

its attention on optimising Board

and committee composition; talent

development and succession planning;

diversity, equity and inclusion initiatives;

and workforce engagement

R. BLAIR THOMAS

COMMITTEE CHAIR

UK Corporate Governance Code Principle

How does the Board apply this Principle?

Further information

Appointments to the board should be subject

to a formal, rigorous and transparent procedure,

and an effective succession plan should be

maintained for board and senior management.

Both appointments and succession plans

should be based on merit and objective

criteria and, within this context, should

promote diversity of gender, social

and ethnic backgrounds, cognitive and

personal strengths.

The Nomination Committee is responsible for ensuring that plans are in place

for orderly succession to the Board and senior management positions.

Appointments are subject to a formal, rigorous and transparent procedure,

supported by the use of external search agencies to ensure review of a diverse

range of candidates, including consideration of gender, ethnicity, social and cultural

backgrounds alongside career experience, technical and professional skills.

Board and committee succession plans are based on a wide range of criteria

taking into account the need to maintain a diverse Board as well as considering

short, medium and long-term composition requirements alongside the expected

needs of the business.

•

Succession planning:

P73

•

Appointment of non-executive

directors:

P73

The board and its committees should

have a combination of skills, experience and

knowledge. Consideration should be given to

the length of service of the board as a whole

and membership regularly refreshed.

The Board and its committees are comprised of non-executive directors

with a balance of skills, experience, knowledge and diversity.

The Nomination Committee reviews the skills matrix and tenure of each

director on an annual basis to ensure that the Board’s plans for succession

are aligned with the needs of the business.

•

Skills matrix:

P73

•

Non-executive director

succession planning:

P73

•

Board of directors:

P70

Annual evaluation of the board should consider

its composition, diversity and how effectively

members work together to achieve objectives.

Individual evaluation should demonstrate whether

each director continues to contribute effectively.

The Board undertakes annual performance reviews, supported by Lintstock.

Having conducted an in-depth external review in 2022, the 2023 review was

based on individual questionnaires, the results of which were compiled into

reports used as a basis for discussion and evaluation of the Board, committee

and individual performance of each director.

•

Externally facilitated Board

and committee performance

review process:

P74

Composition, succession & evaluation

THE UK CORPORATE GOVERNANCE CODE IN ACTION

GOVERNANCE AT A GLANCE

PAGE 66

NEXT SECTION OF THE CODE

PAGE 76

Harbour Energy plc

Annual Report & Accounts 2023

Dear shareholder,

During 2023, the Nomination Committee

focused its attention on optimising

Board and committee composition;

talent development and succession

planning; diversity, equity and inclusion

initiatives; and workforce engagement.

The Committee held ﬁve meetings during the

year. We were pleased to welcome Belgacem

Chariag to the Committee in May following

his appointment to the Board.

Succession planning

The Committee’s remit includes

responsibility for reviewing the needs of

Harbour’s leadership, both at the executive

and non-executive levels, to ensure the

company can continue to compete effectively

in the marketplace, including contingency

planning for any sudden or unforeseen

circumstances. During 2023, a signiﬁcant

proportion of the Committee’s time was

spent ensuring that the organisation has a

sufﬁciently talented and diverse workforce

with the right organisational structure to

ensure that management is enabled to

pursue the strategy.

Executive director succession

and talent development

The Committee continues to oversee the

evolution of the Leadership Team. During

2022 the Committee conducted a review of

the leadership potential of senior executives

below Board level, which identiﬁed the

key skills and attributes required of the

Leadership Team. This review enabled the

strengthening of the Leadership Team during

2023, deepening the experience level in the

areas of M&A integration and international

business development through the addition of

Philip Whittaker as EVP Global Services and

Gustavo Baquero as EVP Strategy, Business

Development & Energy Transition. An outcome

of this process was the development of a

more robust CEO succession plan, with the

organisational design of the new Leadership

Team which supports the development of

multiple internal CEO candidates.

The Committee monitors talent development

at safety and business critical levels,

including the Leadership Team and its direct

reports, and during 2023 has overseen

the implementation of the Future Senior

Leaders programme. This programme is

a development plan designed to support

a diverse range of potential successors to

the Leadership Team. Elements of the plan

include psychometric assessment, business

simulation activity, personal coaching, and

small group workshops to address learning

needs and identify trends. Role success

proﬁles are developed for all safety and

business critical roles, to inform risk mitigation

actions and retention considerations. Talent

pools are being developed for these critical

roles to ensure a robust talent pipeline to

support strategic resource planning.

The Committee also oversaw the

implementation of new talent processes

across the wider organisation during 2023,

to strengthen the focus on developing and

retaining talent at all levels. This included

the introduction of the Harbour Management

Programme, which trained almost 200

managers across the organisation. Following

receipt of feedback from the global

engagement survey, learning opportunities

for all employees have been introduced

through the launch of a smart skills series

and self-service learning software.

Non-executive director succession planning

In November, the Committee conducted a

review of the structure, size and composition

of the Board, as well as the membership and

diversity of the Board’s committees and the

balance between executive and non-executive,

independent and non-independent directors.

The Committee concluded that, following the

recruitment of Louise Hough and Belgacem

Chariag, the structure and composition of the

Board and its committees was suitable for the

company at present.

The Committee will continue to monitor

the composition of the Board alongside

the tenure of directors to ensure the

Board retains a suitable balance of skills,

experience and diversity.

Appointment of non-executive directors

Two independent non-executive directors,

Louise Hough and Belgacem Chariag, were

appointed on 1 May 2023 and elected by

shareholders at the AGM shortly afterwards.

The appointments followed a thorough search

process undertaken by the Committee,

facilitated by MWM Consulting and a Search

Committee comprised of the Chair, CEO,

Anne L. Stevens and Simon Henry. MWM

had no other connection to the company

or its directors during the year.

The objective of the search was to seek new

independent non-executive directors with

technical and professional skills to complement

the existing mix of skills and experience on

the Board, whilst continuing to build a diverse

Board in terms of gender, ethnicity and

background. Following development of the

candidate brief with MWM, structured research

was undertaken by MWM to identify an initial

list of potential candidates. The list included

a diverse range of candidates, taking into

consideration gender, ethnicity, social and

cultural backgrounds alongside career

experience, technical and professional skills.

Interviews were arranged with four shortlisted

candidates, and following receipt of feedback

from the Search Committee, the Committee

conducted a ﬁnal review of the four candidates

in the context of the two available Board roles.

The Committee agreed that Louise and

Belgacem were the most suitable candidates

for the available roles, possessed the skills

and experience sought to refresh the balance

of knowledge and capabilities of the Board

and its committees and recommended their

appointment to the Board.

Board skills and experience

Non-executive

director

Oil and gas

Financial

International

Listed

Mergers &

acquisitions

Sustainability

& safety

Operational

excellence

R. Blair Thomas

Simon Henry

Belgacem Chariag

Alan Ferguson

Andy Hopwood

Louise Hough

Margareth Øvrum

Anne L. Stevens

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Nomination Committee report

continued

Induction and training

On joining the Board, each director completes

a bespoke induction programme designed

by the Company Secretary, approved by the

CEO and overseen by the Committee. As part

of their induction programmes, Louise and

Belgacem met with each of the Leadership

Team and Business Unit managers as well as

key representatives of corporate functions and

the company’s external auditors. The induction

programme began before they joined the

Board and ran for several consecutive weeks,

also including meetings with each of the Board

committee Chairs to provide a comprehensive

introduction to the activities of each of

the committees and their priorities. The

programme of meetings was supported

by bespoke induction materials providing

key background information across a wide

spectrum of topics. Shortly after Louise and

Belgacem joined the Board, the Board and

committee meetings were held in Aberdeen

alongside a series of staff events, including

meetings with safety representatives,

members of several employee-led networks,

the Global Staff Forum and Offshore

Installation Managers. This provided all

directors with the opportunity to meet in

person with a wide cross section of our

staff and gain a greater understanding

of our UK North Sea operations and a

deeper sense of Harbour’s culture.

Throughout the year directors are provided

with access to a varied programme of training

opportunities, as well as in-depth sessions

on material topics relevant to the business.

The directors are also required to complete

various training programmes undertaken

by all employees, including ethics and

compliance, share dealing and management

of inside information, and cyber security.

Externally facilitated Board and committee

performance review process

The Board monitors and improves its

performance by reﬂecting on the continuing

effectiveness of its activities, the quality of its

decisions and by considering the contributions

made by Board members. The Committee has

completed its ﬁnal year of the three-year Board

performance evaluation plan put in place

in 2021, facilitated by Lintstock. There is

no connection between Lintstock and either

Harbour Energy plc or the directors.

Following the completion of the in-depth

externally facilitated review in 2022, this

year’s review was conducted through the

completion of online surveys used to evaluate

the performance of the Board, its committees,

and individuals throughout the year.

The 2023 surveys were consistent with those

used in previous years to enable comparison

of the results, with the addition of speciﬁc

questions to consider work completed during

the year. The resultant reports were prepared by

Lintstock and used by the Board, its committees

and individual directors to discuss ﬁndings and

agree areas to focus on in the year ahead in

terms of Board and committee performance.

Overall, the results of the 2023 review

were positive, with signiﬁcant improvements

shown where actions had been taken in

response to the outcome of the previous

year’s review. Areas which scored well,

relative to an external benchmark, included:

the clarity of strategic purpose; the diversity

of the balance of skills, background and

experience on the Board; the structure

at senior levels and visibility of potential

successors as well as succession at the

layer below the Board; risk appetite and

mitigation; and monitoring of culture.

Areas identiﬁed for continued focus in

2024 include:

•

succession planning and talent

development;

•

growth opportunities; and

•

deepening stakeholder engagement.

The Committee considered the ﬁndings of the

evaluation and concluded that each director

continues to contribute effectively and has

sufﬁcient time to devote to their role. The outcome

of the annual independence assessment for

the non-executive directors concluded that

each independent director continues to be

independent. The Committee and the Board

are therefore unanimous in recommending

for re-appointment all directors who will be

standing for re-election at the 2024 AGM.

Workforce engagement

The Board has a variety of means to engage

directly with employees throughout the year,

including a combination of the Provision 5

mechanisms set out in the UK Corporate

Governance Code, namely a workforce advisory

panel and designated non-executive directors.

Staff forums, both local and global, are made

up of volunteers from the workforce and have

a mandate to enable the two-way ﬂow of

information, feedback and ideas between the

workforce and management. Local staff forums

meet regularly each year and report into the

Global Staff Forum, which meets with the CEO

and members of the Leadership Team four

times a year. Two designated non-executive

directors, Andy Hopwood and Louise Hough,

act as Board representatives to the Global

Staff Forum and are invited to join two of these

meetings annually. The Committee receives

regular updates on the actions arising from

Global Staff Forum feedback. During 2023,

forum members selected a range of topics

for discussion, with themes including clarity

of communications across the organisation,

embedding the culture and values across all

Business Units, and addressing matters raised

from the 2022 global engagement survey.

Harbour also has a comprehensive group of

employee networks to ensure engagement

across the company. At a local level, supported

by the DE&I team, there are voluntary

employee-led networks, including ability, early

careers, cultural, gender balance, neurodiversity,

pride, menopause support and science,

technology, engineering and maths (STEM)

ambassadors. The aim of these networks is

to improve engagement and to foster a diverse,

inclusive workplace, offering a safe space

for employees to raise awareness of relevant

issues, often linked to identity.

2022-23 performance review

Key ﬁndings from the previous year and actions taken

to address the ﬁndings are shown in the table below:

Finding

Action taken

2023 vs 2022

Improve

quality of

meeting

materials

Board and committee report templates were updated

following consultation with management. Templates ensure

consistency across meeting papers and ensure clarity

of materials and purpose. Board paper and presentation

training sessions were held for all authors.

Board packs

Clarity of purpose

Length

Improve

balance of

presentation

vs discussion

at meetings

Presentation style formed part of the Board paper and

presentation training sessions including ensuring ample

time for discussion. Poster sessions were introduced

for more detailed topics enabling more dynamic Board

discussion with senior management and project owners

in revolving breakout groups.

Presentations

Level of detail

Quality

Succession

planning

Following completion of the UK organisation review, the

Nomination Committee received an update on global

succession planning and talent management activities

across the organisation. This work will continue into 2024,

and further information is available on P73.

Succession

CEO

CFO

Improved

Stable

Harbour Energy plc

Annual Report & Accounts 2023

Feedback from the employee networks is

taken to the Global Diversity Council which

includes the various network chairs and works

with management to implement improvement

initiatives. The Board receives updates from

the Global Diversity Council through the

Global Staff Forum. Further information on

employee engagement initiatives is available

in the ESG review on page 50.

The Committee was pleased to see the strong

company-wide participation in the global

engagement survey, which had a global

employee response rate of 85 per cent. The

Committee has reviewed the results of the

survey and management are meeting with their

teams, staff forums and employee networks

to review the data and develop both local

and global initiatives to address key ﬁndings.

The Committee considers that the

workforce engagement mechanisms remain

suitable for the organisation at this time

due to the wide range of insights received

from employees representing all levels of

the organisation.

R. Blair Thomas

Committee Chair

Gender

Number of

Board members

Percentage of

the Board

Number of

senior positions

on the Board

Number in

executive

management

Percentage

of executive

management

Man

60%

70%

Woman

40%

30%

Not speciﬁed/prefer not to say

–

Ethnicity

Number of

Board members

Percentage of

the Board

Number of

senior positions

on the Board

Number in

executive

management

Percentage

of executive

management

White British or other white

(including minority white groups)

90%

Mixed/multiple ethnic groups

10%

–

10%

Asian/Asian British

–

Black/African/Caribbean/

Black British

–

Other ethnic group, including

Arab

–

Not speciﬁed/prefer not to say

–

Deﬁnition of senior Board position: Chair, CEO, CFO, Senior Independent Non-Executive Director.

Deﬁnition of executive management: the executive committee or more senior executive or managerial body below the

Board, including the Company Secretary but excluding administrative and support staff.

Diversity, equity and inclusion

All Board appointments are made based

on merit, experience and performance and

whilst actively seeking diversity of skills,

gender, social and ethnic backgrounds,

cognitive and personal strengths. The

Committee’s oversight role includes ensuring

that diversity, equity and inclusion are

integrated into our business management

system, HR standards and recruitment

processes, and remain front of mind as

we continue to build Harbour’s corporate

culture and work to execute the strategy.

The policy with respect to Board diversity

is reviewed annually by the Committee and

aims to ensure the optimal composition

of the Board and its committees for

successfully delivering Harbour’s strategy,

with a goal to meet the targets contained

in the FCA Listing Rules on diversity:

•

that at least 40 per cent of the

directors are women;

•

that at least one of the roles of

Chair, Chief Executive Ofﬁcer, Senior

Independent Director or Chief Financial

Ofﬁcer is held by a woman; and

•

that at least one Board director is

from a minority ethnic background.

As at the company’s chosen reference

date, 31 December 2023, Harbour is fully

compliant with the FCA Listing Rule targets,

with 40 per cent of the Board being female,

including our Chief Executive Ofﬁcer, and one

of our Board members identifying as being

from multiple ethnic groups. In relation to

diversity of the Board’s committees, it is

recognised that it is not always practical to set

meaningful diversity targets for the committees

due to the notably smaller membership of

each. Accordingly, the Committee adopts a

principles-based approach which endorses

the approach of bringing diverse perspectives

to all areas of work conducted by the Board

and its committees. The review of committee

membership following the appointment of

new directors shows the outcome of this

approach, with diversity represented on

each of the Board committees.

Among senior management, women and

ethnic minorities represented 33 per cent and

29 per cent respectively of the Leadership

Team and its direct reports, excluding

executive directors, as at 31 December

2023. As Harbour moves forward into 2024,

our drive to improve diversity, equity and

inclusion will continue to ensure that we have

the right people in place to deliver strong

performance and growth in line with the

company’s ongoing strategy.

The company’s gender and ethnic

diversity data is collected through the HR

management system, where employees

are invited to voluntarily answer questions

related to ethnic group, national identity

and religious afﬁliation.

Further details of the Board’s composition

are outlined on pages 70 and 71 and

the disclosure required under Listing Rule

9.8.6R(10), as at the reference date of

31 December 2023, is set out below:

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Financial reporting and audit

Risk management and

internal control

Special topics

Governance

Audit and Risk Committee report

Meeting attendance

Alan Ferguson (Committee Chair)

Simon Henry

Louise Hough

Margareth Øvrum

Attended

Not attended

Louise Hough joined the Board and was appointed a member

of the Audit and Risk Committee on 1 May 2023.

Role of the Committee

•

Monitors the integrity of the company’s ﬁnancial statements and any

formal announcements relating to the company’s ﬁnancial performance

and the signiﬁcant ﬁnancial reporting judgements they contain.

•

Reviews the external auditor’s independence, objectivity and

the effectiveness and quality of the audit process.

•

Monitors and reviews the effectiveness of the company’s

risk management and internal control systems including the

identiﬁcation of emerging risks together with the results of the

programme of reviews of these systems and management’s

response to the review ﬁndings.

•

Monitors and reviews the effectiveness of the process for ensuring

actions are taken to mitigate the risks which are considered by

the Board to be the principal risks facing the company.

•

Monitors and reviews the effectiveness and objectivity of the

company’s Internal Audit function, the appropriateness of its

work plan, the results of reviews undertaken, and the adequacy

of management’s response to matters raised.

•

Develops and implements policy on the engagement of the

external auditors to supply non-audit services.

•

Monitors the enforcement of the company’s Global Code

of Conduct and the adequacy and appropriateness of its

whistleblowing procedure.

How the Committee spent its time during the year (%)

This year was an important one for

the Committee in operating through

its second full cycle.

ALAN FERGUSON

COMMITTEE CHAIR

UK Corporate Governance Code Principle

How does the Board apply this Principle?

Further information

The board should establish formal and

transparent policies and procedures to ensure the

independence and effectiveness of internal and

external audit functions and satisfy itself on the

integrity of ﬁnancial and narrative statements.

The Board, supported by the Audit and Risk Committee, has

established formal and transparent policies and procedures which

ensure that Internal Audit and the external auditors are independent

and effective. These procedures enable it to satisfy itself as to the

integrity of ﬁnancial and narrative statements in external reporting.

•

Role of the Committee:

P76

•

Independence and objectivity

of external auditors:

P78

•

Quality of the external audit process:

P78

•

Internal Audit:

P79

The board should present a fair, balanced and

understandable assessment of the company’s

position and prospects.

The Board, supported by the Audit and Risk Committee, considers

the 2023 Annual Report and ﬁnancial statements to present a fair,

balanced and understandable assessment of the company’s position

and prospects, conﬁrming that it provides the information necessary

for shareholders to assess the company’s position, performance,

business, business model and strategy.

During the year, the Board has also considered the same in relation

to public reporting including trading and operations updates and the

half-year results and ﬁnancial statements.

•

Key activities during the year:

P77

•

Financial reporting judgements

and estimates:

P77

•

Statement of directors’

responsibilities:

P108

The board should establish procedures

to manage risk, oversee the internal control

framework, and determine the nature and extent of

the principal risks the company is willing to take in

order to achieve its long-term strategic objectives.

The Audit and Risk Committee supports the Board in establishing

procedures to manage risk, oversee the internal control framework

and determine the nature and extent of the principal risks the

company is willing to take in order to achieve its strategic objectives.

•

Risk management:

P56

•

Monitoring and effectiveness of the

risk management framework:

P58

•

Risk management and internal

control:

P79

Audit, risk & internal control

THE UK CORPORATE GOVERNANCE CODE IN ACTION

GOVERNANCE AT A GLANCE

PAGE 66

NEXT SECTION OF THE CODE

PAGE 82

Harbour Energy plc

Annual Report & Accounts 2023

Dear shareholder,

I am pleased to present the Audit and

Risk Committee’s report for 2023. The

objective of this report is to provide a

summary of the Committee’s work to

ensure the interests of the company’s

stakeholders are protected through a

robust system of risk management

and transparent ﬁnancial reporting.

I held the position of Chair of the Audit and

Risk Committee throughout 2023. I would like

to welcome Louise Hough to the Committee

following her appointment to the Board on

1 May 2023.

Key activities during the year

The Committee held seven scheduled meetings

during 2023. A further two meetings were held

in 2024, prior to the publication of this Annual

Report & Accounts. In addition to the members

of the Committee listed on the previous page,

meetings were normally also attended by the

Chief Executive Ofﬁcer, the Chief Financial

Ofﬁcer, the Financial Controller, the VP Internal

Audit and Risk Management, the General

Counsel and the company’s external auditors.

Other senior managers are required to attend

when signiﬁcant audit and risk management

matters relating to their area of responsibility

are considered by the Committee.

During the year, the Committee met privately

with the Chief Financial Ofﬁcer, the VP

Internal Audit and Risk Management and

the external auditors without management

present. In addition, I met privately with each

of these individuals and the external auditors

in between certain Committee meetings.

The Committee invested extensive time during

the year reviewing the processes in place and

judgements required to prepare the company’s

full and half-year results. These included

signiﬁcant ﬁnancial reporting judgements,

key accounting estimates, climate change

disclosures and important internal control

matters. In particular, the Committee reviewed

signiﬁcant ﬁnancial reporting judgements and

estimates that have occurred in the year and

the clarity and completeness of disclosures

in the ﬁnancial statements. In this work, we

considered the impact of the energy transition,

in particular the uncertainty of the scale and

timing of such impacts and the implications on

asset valuations and the long-term resilience

of the business.

More detail about the work of the Committee

in relation to these ﬁnancial reporting

judgements and estimates can be found

in the panel opposite.

Financial reporting judgements and estimates

Impairment and reversals of

tangible and intangible properties

In assessing indicators of impairment or reversals

of previous impairments of oil and gas properties,

the Committee:

•

reviewed and challenged management’s

key assumptions for oil and gas properties,

including the long-term planning assumptions

and future oil and gas prices; and

•

taking account of available market

data, approved management’s pricing

assumptions for crude oil and UK NBP that

are used for impairment testing (refer to

note 2 to the ﬁnancial statements for more

detail on page 124).

The Committee was satisﬁed that the

most signiﬁcant assumptions on which the

impairment charges and reversals are based

are: future commodity prices, the discount rate

applied to the forecast future cash ﬂows and

decommissioning provisions. The Committee

judged the sensitivity of the impairment charges

to changes in the commodity prices, as set out

in note 12 to the ﬁnancial statements on page

148, to be appropriate. The Committee also

considered the impact of climate change and

carbon pricing on the ﬁnancial statements and

concluded there was unlikely to be a material

impact on the ﬁnancial statements. Further

information can be found in note 2 to the

ﬁnancial statements on page 124.

The Committee assessed the carrying values

of exploration and evaluation assets (E&E)

and whether any indicators of impairment exist

in relation to these assets. The Committee

reviewed the oil and gas resources estimates

and maturation reports provided by management

and is satisﬁed that the resource movements

in the year, and balances at year end, were

appropriately prepared and supported, and that

the corresponding E&E asset carrying balances

and income statement charges were aligned

with the resources reports.

Details of the company’s intangible E&E

assets are provided in note 11 to the ﬁnancial

statements on page 146.

Oil and gas reserves and resources

The Committee considered reports from

management on the process used to determine

the oil and gas reserves and resources estimates,

looking in particular at whether the methodology

was generally accepted industry practice and

consistent with prior years, and the experience

and expertise of the managers who prepared

and reviewed the estimates. The Committee

noted that estimates of the company’s proven

and probable oil and gas reserves prepared by

independent reservoir engineers were within

1 per cent of management’s estimates.

The Committee discussed with management

the main reasons for the difference between

the two estimates and was satisﬁed that it was

appropriate to apply management’s estimates for

the purpose of preparing the ﬁnancial statements.

Provisions for decommissioning

The Committee discussed with management the

process and principal assumptions underpinning

the cost estimates for future decommissioning

activity. In particular, the Committee reviewed

the range of risk-free discount rates applied

compared to the prior year. The Committee

was satisﬁed that the approach applied was

reasonable and that the combination of discount

and contracted rig rates used was appropriate.

Further information on decommissioning

provisions is provided in note 20 to the ﬁnancial

statements on page 154.

Taxation

The Committee reviewed and discussed reports

from management associated with calculating

the Group tax provision for the period. Key areas

of review were judgements in relation to tax risk

with respect to commodity derivatives, and the

reported effective tax rate for the period. The

Committee noted that while it was considered

more likely than not that the position adopted

in respect of commodity derivatives for tax

purposes was appropriate, there was a potential

for the UK Tax Authorities to take an alternative

view and, while not considered a likely outcome,

a contingent liability has been disclosed of

$120 million. Refer to note 8 to the ﬁnancial

statements for further detail on page 144.

The Committee noted that the net deferred

tax position on the balance sheet has moved

from an asset position to a liability position as

a result of the ongoing utilisation of tax losses

and the reduction in hedging liabilities. Further

details of the deferred tax asset are provided in

note 8 to the ﬁnancial statements on page 144.

Going concern

The directors are required to consider the

appropriateness of adopting the going concern

basis of accounting. The Committee reviewed

management’s projections of the company’s

liquidity position. Key assumptions in the

projections included those related to oil and gas

prices and production during the period. The

Committee is satisﬁed that the judgements

applied in making the assumptions and estimates

that underpin the forecasts and projections

are appropriate. The going concern statement

included on page 31 is fair and balanced.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Audit and Risk Committee report

continued

The Committee monitored the continued

independence and objectivity of the

external auditors and reviewed the quality

and effectiveness of the audit process, as

described in the auditor’s independence

and quality sections below.

The Committee monitored and reviewed

the risk management and internal control

systems in support of its duty to monitor

and review the overall effectiveness of

the system on behalf of the Board and to

oversee the management of speciﬁc risks

assigned to the Committee, as described

in the Risk management and internal

control section below.

The Committee received reports on the

outcome of internal audits conducted during

the period, reviewed and approved the

Internal Audit plan for 2024 and reviewed

the transition of the Internal Audit function

from an out-source model to a co-source

model, as described in the Internal Audit

section below.

The Committee received reports on

whistleblowing incidents and reviewed a

summary of the outcomes of an independent

third-party review of the company’s broader

compliance programme.

The Committee attended to several governance

matters. These comprised the review of several

company policies as part of an agreed Board

schedule to ensure all the company’s policies

and statements remain appropriate; proposed

revisions to the company delegated authorities;

and the status of emerging requirements

related to audit and corporate reform, including

reviewing the company’s response to the

UK Financial Reporting Council’s (FRC) 2023

consultation on this matter.

In October, the Chair of the Board received a

letter from the FRC stating that the 2022 Annual

Report & Accounts had been reviewed by the

FRC’s Corporate Reporting Review (CRR) team.

Whilst acknowledging the limitations inherent

in the scope of their review, we were pleased to

learn that the FRC did not raise any questions or

queries for the company. We note that an FRC

review provides no assurance that Harbour’s

Annual Report & Accounts for 2022 was correct

in all material respects. Some observations were

made which the FRC believed could enhance

existing disclosures, and those were addressed

in the preparation of the 2023 Annual Report

& Accounts, where considered appropriate.

At year end, the Committee conducted an

externally facilitated review of its own effectiveness

and ensured that the actions it identiﬁed

were integrated into its planning for 2024.

This review was facilitated by Lintstock

and is further described in the Nomination

Committee report on page 74.

Quality of the external audit process

The Committee is responsible for assessing

the quality and effectiveness of the external

audit process. At the start of the audit cycle,

the Committee takes an appropriate amount

of time to review the auditor’s work plan and

their assessment of the signiﬁcant areas of

risk in the ﬁnancial statements, as this is the

foundation of a high quality audit. For 2023,

the signiﬁcant areas of risk corresponded

with the ﬁnancial reporting judgements and

estimates identiﬁed by the Committee as

detailed on page 77. Having considered the

scope and matters arising through the year,

the Committee was satisﬁed that it did not

require the auditors to consider any new audit

matters. Following the audit, we discussed

the ﬁndings with the auditors, including the

challenges made around the key accounting

judgements and estimates, the level of

adjusted and unadjusted errors identiﬁed

during the audit, the recommendations

made to management by the auditors and

management’s response.

In assessing the quality of the external audit

process, the Committee focused on:

•

the experience and expertise of the

audit team;

•

the rigour and focus applied to preparing

the audit plan;

•

the fulﬁlment of the agreed audit plan by

the auditors and any variations from the

work plan;

•

the challenge and professional scepticism

shown by the auditors in their handling of

the key accounting and audit judgements;

•

the quality of the recommendations made

by the auditors for ﬁnancial reporting

process and control improvements;

•

the interactions of the audit team with

the Committee in and outside the formal

meetings; and

•

delivery against commitments made in

the original audit tender presentations.

In addition, the Committee invited input from

management and senior ﬁnance staff utilising

a questionnaire, which the Committee had

approved, and reviewed the Ernst & Young LLP

(EY) UK 2023 audit quality report.

Following this work the Committee judged

that a quality audit had been delivered.

Independence and objectivity

of the external auditors

The Committee is responsible for overseeing the

Board’s relationship with the external auditors

and assuring their continued independence

and objectivity. EY were appointed in 2021

for a period of up to ﬁve years following the

completion of a limited competitive tender

process as part of the merger as described in

my 2022 report. Our intention remains that

the company will run a full competitive tender

process in 2025. The company is fully compliant

with the requirements of the Statutory Audit

Services Order 2014.

The Committee reviews the independence

and objectivity of the auditors on an ongoing

basis and takes into account the overall

relationship between the auditors and the

company. In conducting this review, the

Committee considered:

•

feedback from the company’s ﬁnance

function and the auditors;

•

the nature, extent and cost of non-audit

services provided by the auditors;

•

any recruitment of former employees of

the auditors; and

•

the safeguards the auditors have in place

to prevent loss of audit independence,

including the rotation of the audit

engagement partner which is required

every ﬁve years.

Our private meetings with the auditors

throughout the year, and my private meetings

with the lead audit partner in between certain

meetings, provide an opportunity for open

discussion with the auditors on a variety

of topics. Matters discussed included: the

auditor’s assessment of signiﬁcant ﬁnancial

risks and the performance of management

in addressing these risks, how they have

exercised challenge of management, the

auditor’s observations on management’s role

in fulﬁlling obligations to maintain internal

controls, the transparency and responsiveness

of management and conﬁrmation that no

restrictions have been placed on them by

management, maintaining the independence

of the audit.

The Committee approves the fees for the

full-year audit and half-yearly review after

reviewing the scope of work, and reviews the

fees for non-audit assignments to satisfy itself

that the assignments concerned do not give rise

to threats to the auditor’s independence and

objectivity. The Committee believes that certain

pre-deﬁned non-audit work may be carried out

by the external auditors without compromising

their independence. Non-audit work is allocated

in line with the company’s policy on the provision

of non-audit services by the external auditors

and is approved by the Committee.

Harbour Energy plc

Annual Report & Accounts 2023

In 2023, this comprised services relating

to the review of interim ﬁnancial statements

of £0.2 million, transaction related services

including reporting accountant services

of £0.4 million, and certain agreed-upon-

procedure engagements and assurance

over ESG metrics of £0.1 million. The global

audit fee for the 2023 external audit work

amounted to £2.7 million. Further details

of the fees paid are set out in note 5 to the

ﬁnancial statements on page 140.

The external auditors are required to conﬁrm

to the Committee that they have both the

appropriate independence and objectivity to

allow them to continue to serve the company.

The Committee also requires the external

auditors to conﬁrm that in providing non-audit

services, they comply with the Ethical

Standard (2019) issued by the FRC.

This conﬁrmation was received for 2023.

Based on these reviews, the Committee

concluded that the independence of the auditors

has not been impaired and that the audit

process operated effectively during the period,

and it has reported accordingly to the Board.

Risk management and internal control

The Committee is responsible for monitoring

and reviewing the effectiveness of the

company’s risk management and internal

control systems (its risk management

framework) on behalf of the Board. The risk

framework is described on pages 56 to 58.

During the year, the Committee reviewed the

processes in place to assess the principal and

emerging risks facing the business, in support of

the Board’s assessment of these risks during

the year. We also reviewed the model governing

the Board and its committees’ oversight of the

management of risk. This model is designed

to ensure all principal risks, and the Board’s

appetite (or tolerance) for these risks, are given

appropriate consideration by the Board and its

committees. We also oversaw the management

of speciﬁc principal risks assigned to the

Committee by the Board. Topics included

management-led presentations on the

continued development of the risk-focused

ﬁnancial reporting internal controls framework

for both business and IT general controls;

optimisation of the newly implemented

enterprise management system (EMS);

information and cyber security; legal and

regulatory compliance; a review of several

company policies; proposed revisions to the

company delegated authorities; and an update

on human rights processes and controls to

support the Board in approving its modern

slavery and human rights trafﬁcking statement.

The risk management framework includes

speciﬁc internal controls governing the

ﬁnancial reporting process and preparation of

ﬁnancial statements. We have clear policies,

standards and procedures for ensuring we

comply with relevant regulatory reporting

requirements and that these are applied

consistently across our ﬁnance reporting

teams and business areas involved in

preparing the ﬁnancial statements. The

Committee seeks representations from

management regarding compliance with

relevant policies and the accuracy of ﬁnancial

information on a biannual basis. Detailed

management accounts for each reporting

Business Unit are prepared monthly and

subject to management review. These reports

detail the performance and cash ﬂows of the

business and support our external ﬁnancial

reporting processes.

The Committee completed its annual review

of the effectiveness of the company’s risk

management and internal control systems

during the period in support of the Board

approved statements on the risk management

framework on page 56, including the basis for

our conclusion that the risk management and

internal control systems remain effective. The

Committee has also completed its annual review

of the processes in place to prepare the 2023

Annual Report & Accounts and to ensure

they are fair, balanced and understandable

in order to support the Statement of

directors’ responsibilities on page 108.

Internal Audit

The company’s Internal Audit function provides

third-line assurance, as part of its assurance

model described on page 58.

During the year, the Committee received

reports on internal audit ﬁndings, noting any

signiﬁcant ﬁndings and monitoring the

close-out of any actions agreed as a result of

these audits. During 2023, these comprised

audits related to decommissioning security

agreements, global assurance, internal

reserves reporting, corporate modelling,

contracting and procurement in our Indonesia

business, and commodity hedging. The

Committee also received a summary of other

internal audits conducted over the period

which were reported to the other Board

committees that oversee those risk areas.

The Committee also reviewed the outcomes

of other key sources of assurance conducted

over the period. This included independent

third-party reviews of the EMS, the company’s

compliance programme, reserves reporting

and cyber-security testing.

The Committee reviewed progress on the

transition of the Internal Audit function from

a primarily outsourced delivery model towards

a co-source model, as approved by the

Committee during 2022, and the outcomes

of an effectiveness self-assessment which

will help inform this change process.

The Committee reviewed and approved the

Internal Audit plan for 2024 including its budget

and resource requirements. This plan is targeted

at providing assurance on the effectiveness

of the management of the company’s most

signiﬁcant risks and takes account of other

sources of assurance to avoid duplication. The

Committee also reviewed a draft of a document

that formalises the integrated ‘three line’

assurance model the company has established.

Committee evaluation

As part of the externally facilitated Board and

committee evaluation, the Committee discussed

the assessment of its own performance and

agreed actions for the coming year, one of which

was to ensure that non-executive directors took

part in the company’s cyber-security training

programmes. More detail on the evaluation

process and outcomes are provided in the

Nomination Committee report on page 74.

In conclusion

This year was an important one for the

Committee in operating through its second full

cycle and in which the company established

several key new company controls in place

of legacy arrangements including the

implementation of a new EMS system. We also

continued to mature the risk management

and internal control framework over ﬁnancial

reporting and reviewed several key risk areas.

Areas of focus for 2024 will include further

oversight of key risk areas such as the continued

development of our ﬁnancial reporting internal

controls framework, information security,

energy transition reporting, as well as ensuring

the company is well positioned to comply with

the new future requirements related to UK

Corporate Governance Code reform. In addition

we have a signiﬁcant workload ahead of us

as the company prepares to complete the

acquisition of Wintershall Dea’s asset portfolio.

In that regard we will focus on ensuring the

Group’s processes and controls are robust

such that we can plan for an effective integration

of reporting requirements as well as dealing with

matters such as purchase price allocation

and the planning for internal and external

audit capacity to cover the enlarged portfolio.

Alan Ferguson

Committee Chair

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Safety performance

Environmental and net zero

External reporting/KPIs

HSES strategy and management

system development

Audit findings

HSES Committee report

Meeting attendance

Current members

Margareth Øvrum (Committee Chair)

Belgacem Chariag

Simon Henry

Former members

G. Steven Farris

Attended

Not attended

Belgacem Chariag joined the Board and was appointed a member

of the HSES Committee on 1 May 2023.

G. Steven Farris stepped down from the Committee on 10 May 2023.

Role of the Committee

•

To monitor and review the effectiveness of the implementation

of Harbour’s HSES strategy including the implementation of

Harbour’s Net Zero 2035 commitment.

•

To evaluate the effectiveness of Harbour’s policies and

systems for delivering its HSES strategy, maintaining regulatory

compliance and managing HSES risk, including review of

mitigating actions, determination of HSES risk appetite

and tolerance, and monitoring the assurance programme.

•

To monitor the quality and integrity of Harbour’s internal and

external reporting of HSES performance and issues.

•

To assess the policies and systems within Harbour for ensuring

compliance with HSES regulatory requirements.

How the Committee spent its time during the year (%)

Safety is a fundamental element of Harbour’s

culture. This was evident in the improvement

seen in safety performance during 2023

and the continued strong results from the

company’s employee engagement survey.

MARGARETH ØVRUM

COMMITTEE CHAIR

HSES culture

Harbour’s commitment to safe, reliable and environmentally

responsible operations is embedded in Harbour’s purpose

statement and is one of the four pillars that make up our company

strategy. Deepening HSES culture across the organisation is key to

drive the move from good to excellent and ultimately incident free

operations. The company undertook its ﬁrst ever global workforce

engagement survey in 2022 and implemented a number of cultural

initiatives, including increasing leadership visibility, as a result.

Visible HSES leadership remains key to maintaining and

deepening our HSES culture. During 2023 I was pleased to see

Harbour expand the senior leadership engagement and HSES

leadership visit programmes in all areas of the world where we

operate. These programmes help reinforce that nothing is more

important than the safety of our employees and worksites.

Alongside health and safety, the importance of environmental

management, and the wider aspects of climate change, energy

transition and biodiversity, is signiﬁcant. We believe that

hydrocarbons will play a material part in the energy mix for decades

to come and are committed to playing a signiﬁcant role in their

responsible production. The focus on upstream oil and gas

producers and their role in combating climate change and the energy

transition is only increasing, and our environmental performance is

crucial to Harbour’s licence to operate and employee satisfaction.

Harbour undertook a signiﬁcant organisational review in 2023 and

implemented a number of changes. The Committee was particularly

pleased to see that Harbour prioritised the safety and wellbeing of

the workforce throughout the reorganisation and did not lose focus

on the need to ensure proper resources are allocated to these

important areas.

In 2023 the company repeated a global engagement survey,

which had an employee response rate of 85 per cent. The

Committee was very pleased that 88 per cent of our employees

and 89 per cent of our contractors agree that Harbour Energy

has a strong safety culture.

Harbour Energy plc

Annual Report & Accounts 2023

Dear shareholder,

A focus on health, safety, environment

and security (HSES) is fundamental

to the success of our business. I am

pleased to be able to report on the

activities of the Committee in 2023.

The Committee held ﬁve scheduled meetings

during the year. Steve Farris stepped down

from the Committee in May and has been

replaced by Belgacem Chariag. I am grateful to

Steve for his contribution to the Committee’s

work and am pleased to welcome Belgacem,

who brings signiﬁcant HSES and sustainability

experience to our discussions.

GHG emissions and net zero

Global and country-level emission targets

and reporting standards are being frequently

updated. Harbour’s own commitment is to

achieve net zero greenhouse gas emissions

by 2035 for Scope 1 and 2 on a gross basis

across Harbour operated assets. The

Committee has spent signiﬁcant time in

2023 reviewing emission forecasts and

the effectiveness of our decarbonisation

programmes. Meeting our net zero target

is challenging. However, the Committee

is pleased with progress towards our

interim targets and with the integrity and

responsibility that Harbour is showing

regarding decarbonising and developing

a high quality offsetting programme. The

Committee supported the expansion of

Scope 3 emissions reporting and is pleased

that we are now disclosing Scope 3 emissions

associated with use of sold product.

Personal safety

At each meeting, the Committee reviews

Harbour’s HSES performance against our

key performance indicators. The Committee

was pleased that there were zero lost-time

injuries during the year and that the Total

Recordable Injury Rate (TRIR) of 0.7 injuries

per million work hours for 2023 was an

improvement over 2022. This suggests that

the signiﬁcant improvements seen in 2022

have been embedded and are effective. The

performance is also near to top quartile as

measured against peers by the International

Association of Oil and Gas Producers (IOGP),

and the Committee was pleased to see that

the severity of incidents in 2023 was much

reduced over 2022.

Process safety

Effective management of our major accident

hazards is fundamental to the safety of

our colleagues and our future success. The

Committee fully supports the company’s goal

to be recognised for excellence in process

safety. In 2023 I am pleased to see that

for the ﬁrst time since the company was

established, we recorded no Tier 1 or Tier 2

process safety events (PSEs). This represents

an improvement on our performance in 2022

(2022: one PSE). For 2024 we will introduce

a subset of Tier 3 loss of primary containment

PSEs to our company scorecard to hold

ourselves to account for smaller releases.

Throughout 2023 the Committee has been

kept abreast of the progress made to raise

process safety awareness across the

company. Harbour has continued to roll out

and embed the Process Safety Fundamentals

across our onshore and offshore operations;

and continued to provide site based and our

IChemE award winning multi-language virtual

awareness process safety training, in

partnership with DNV Spadeadam. We also

rolled out ‘I am a process safety leader’

which helps managers and supervisors plan,

execute and monitor work that has process

safety hazard exposures. The degree to which

we have embedded the Process Safety

Fundamentals in our workﬂows was the topic

of our Global HSES Day in 2023.

High potential events

At each Committee meeting we spend

time receiving updates on serious and high

potential events from across the Harbour

portfolio. In 2023 we had three high potential

events, which is a signiﬁcant improvement

from the 13 reported in 2022. The Committee

was encouraged to see this signiﬁcant

improvement to which the company-wide

‘Back to Basics’ campaign contributed.

The Back to Basics campaign focuses on

the key contributory causes identiﬁed in

historic events including the management

of contracted work; hazard awareness and

risk assessment; simpliﬁcation of control of

work processes; and procedural compliance.

Environmental spill performance

Our environmental performance is reﬂected

in the number of unplanned discharges we

have to the marine environment from our

offshore operations. In 2023 the Committee

noted zero hydrocarbon spills released to the

environment (2022: four). There were nine

hydrocarbon spills recorded which did not

enter the marine environment.

Additional HSES activities

In June 2023, all Board members attended

a meeting with the Offshore Installation

Managers and the UK safety representatives

which were excellent opportunities to

understand the issues faced by Harbour’s

offshore employees and contractors.

In late 2023, the Committee reviewed the

HSES principal risks, mitigating actions,

assurance programme, risk appetite and

tolerance levels. The Committee spent time in

early 2024 reviewing the performance against

safety and environment measures on the

2023 scorecard to make its recommendation

to the Remuneration Committee. The

Committee also reviewed the content of this

Annual Report, which includes disclosures

made in line with the TCFD framework, set

out on pages 39 to 44.

Emergency response

During the year, Harbour undertook 42

emergency and crisis management exercises,

which included two full deployment oil spill

response exercises in Indonesia. The

Indonesian exercises were designed to test the

response to an oil pollution event at sea and

involved over 100 participants from Harbour

and local marine agencies. Maintaining a

competent and effective emergency response

organisation is critical and the Committee was

pleased to hear the very positive feedback

from multiple sources on the quality and

effectiveness of the exercises.

HSES audit plan and management system

The Harbour management system has

been updated in 2023 to align with the

new organisation. We have expanded the

corporate HSES organisation, which is

responsible for Harbour’s HSES standards

and global procedures. The Committee

regularly reviews HSES audit plans and

progress on HSES plan delivery.

Further information on the importance of

HSES to Harbour’s culture can be found

on pages 34 to 37.

Margareth Øvrum

Committee Chair

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Senior executive remuneration

Wider workforce pay

and conditions

Market environment

Employee engagement

Remuneration reporting

and governance

Directors’ remuneration report

Meeting attendance

Anne L. Stevens (Committee Chair)

Alan Ferguson

Andy Hopwood

Louise Hough

Attended

Not attended

Louise Hough joined the Board and was appointed a member

of the Remuneration Committee on 1 May 2023.

Role of the Committee

•

Develop and maintain a Remuneration Policy that rewards

fairly and responsibly, and attracts, retains and motivates

employees to enable the company to meet its objectives,

taking into account the long-term interests of employees,

shareholders and other long-term stakeholders.

•

Consider and approve the remuneration arrangements

for the Chair, the executive directors and other senior

executives as determined by the Committee.

•

Exercise oversight of the pay and performance

conditions across Harbour.

Compliance statement

This report has been prepared in accordance with Schedule 8 of

the Large and Medium-sized Companies and Groups (Accounts

and Reports) (Amendment) Regulations 2013. The Companies Act

2006 requires the auditors to report to the shareholders on certain

parts of the directors’ remuneration report and to state whether,

in the auditor’s opinion, those parts of the report have been

properly prepared in accordance with the above regulations.

The Chair’s annual statement and the Remuneration Policy report

are not subject to audit. The sections of the Annual Report on

Remuneration that are subject to audit are indicated accordingly.

How the Committee spent its time during the year (%)

The Committee believes that the

remuneration outcomes for 2023 fairly

reﬂect performance, and our intended

operation of the new Remuneration Policy

in 2024 will support the delivery of our

short-term and long-term objectives.

ANNE L. STEVENS

COMMITTEE CHAIR

UK Corporate Governance Code Principle

How does the Board apply this Principle?

Further information

Remuneration policies and practices should be

designed to support strategy and promote long-term

sustainable success. Executive remuneration should

be aligned to company purpose and values, and

be clearly linked to the successful delivery of the

company’s long-term strategy.

Through long-term and short-term incentives, the 2024

Remuneration Policy to be put to shareholders at the

2024 AGM is designed to drive a performance culture that

incentivises executives to deliver the company’s strategic

objectives and promote long-term sustainable success.

•

Directors’ Remuneration Policy:

P85

•

Chair’s annual statement:

P83

•

Annual Report on Remuneration:

P94

A formal and transparent procedure for developing

policy on executive remuneration and determining

director and senior management remuneration

should be established. No director should be involved

in deciding their own remuneration outcome.

No director is involved in setting their own remuneration

outcome. There is a formal and transparent procedure in

place to develop the Remuneration Policy, which ensures

that executive remuneration is set with consideration of

the wider workforce and benchmarking.

•

Directors’ Remuneration Policy:

P85

•

2023 Annual bonus outcome:

P96

Directors should exercise independent judgement

and discretion when authorising remuneration

outcomes, taking account of company and individual

performance, and wider circumstances.

The Remuneration Committee comprises only independent

non-executive directors to ensure independent judgement

and discretion when reviewing and authorising remuneration

outcomes. The Committee determines outcomes by assessing

performance against a balanced scorecard of measures.

•

Chair’s annual statement:

P83

•

2023 Annual bonus outcome:

P96

•

Percentage change in directors’

remuneration and CEO pay ratio:

P101

Remuneration

THE UK CORPORATE GOVERNANCE CODE IN ACTION

GOVERNANCE AT A GLANCE

PAGE 66

Harbour Energy plc

Annual Report & Accounts 2023

Dear shareholder,

On behalf of the Board, I am pleased

to present Harbour’s directors’

remuneration report for the year

ended 31 December 2023.

This report contains an updated Directors’

Remuneration Policy (the Policy), for which

we are seeking shareholder approval this

year, alongside the 2023 Annual Report

on Remuneration. The Policy will be put to

a binding vote at the AGM on 9 May 2024

and the Annual Report on Remuneration

will be put to an advisory vote.

During the year the Committee held four

scheduled meetings. We were pleased to

welcome Louise Hough to the Committee in

May following her appointment to the Board.

Remuneration outcomes in 2023

Our people have performed well against an

unpredictable economic and geopolitical

backdrop, delivering improved safety

performance in 2023, continuing to

maximise the value of our producing

assets, investing in our international growth

opportunities in Mexico and in Indonesia,

as well as progressing our two UK CCS

projects. These efforts were supported by

active management of our cost base and

disciplined capital allocation, resulting in

free cash ﬂow generation of $1 billion,

allowing a material reduction in our net debt

and supporting the announcement of $400

million of shareholder returns. In addition,

the company announced a transformational

acquisition towards the end of the year.

2023 annual bonus

Our annual bonus is based on a scorecard

of ﬁnancial and non-ﬁnancial performance

measures. These fall within four categories:

safety and environment, operations, growth

and capital deployment, and ﬁnancial.

Metrics which relate to ﬁnancial performance

include free cash ﬂow performance,

performance related to our capital investment

programme, operating cost performance and

production (which drives revenue). Together

these metrics represent 65 per cent of the

scorecard. The environment metrics include

stretching GHG targets, ensuring investment

in operational efﬁciencies and modiﬁcations

to support Harbour’s Net Zero 2035 goal,

as well as the acquisition of independently

veriﬁed credits to offset residual emissions.

Safety measures, related to safety incident

rate and process safety, continue to be a

critical part of our scorecard. Full details of

the company’s key performance indicators,

to which the scorecard is linked, are detailed

on page 16.

The Committee believes that the use of a

scorecard approach with no one measure

comprising more than 20 per cent ensures

that management are properly incentivised to

drive performance across a range of measures

which are critical to enabling Harbour to grow

in a sustainable and responsible way. The

Committee reviews the scorecard regularly

to ensure appropriate consideration is given

to alignment with sector practice.

Overall, the scorecard outcome for 2023

is a payout of 96 per cent out of a maximum

of 200 per cent for executive directors,

indicating an overall performance on target.

This outcome mainly reﬂects shortfalls versus

the production and unit operating cost targets

offset by strong HSES performance including

in safety and in relation to greenhouse gas

emissions. Other metrics were more or less

on target.

The Committee considered the scorecard

outcome and performance in the round,

including whether this was appropriate in

the context of the Group’s overall strategic

progress, ﬁnancial performance and HSES

record in the year, and the executive directors’

individual performance. In addition the

Committee received a recommendation

from the HSES Committee on performance

against safety and environment measures.

We determined that the formulaic outcome

was appropriate and therefore the ﬁnal

bonus outcome was approved at 96 per cent.

Full details of the measures and targets,

together with the actual performance outcome

for each measure, are provided on page 96.

In line with the existing Policy, 50 per cent

of the bonus for the executive directors will

be deferred into shares for three years.

Vesting of 2021 LTIP awards

The ﬁrst LTIP awards following the merger

were granted to the executive directors in

2021. These were subject to relative total

shareholder return (TSR) performance,

measured against two comparator groups:

the FTSE 100, and a bespoke comparator

group of sector peers. Details of the

bespoke comparator group are listed in

note 2 to the LTIP awards vesting table on

page 97. The company’s three-year relative

TSR performance was -21.4 per cent. This

performance was below median against the

FTSE 100 TSR and the sector peer group

and therefore no portion of the 2021 LTIP

award shall vest. Harbour’s material

under-performance relative to both peer

groups is largely attributed to the signiﬁcant

impact of the UK Energy Proﬁts Levy

(windfall proﬁts tax) on the company’s

earnings, cash ﬂow and value when

compared to the sector peer group whose

asset portfolios are generally much less

concentrated in the UK. The UK Energy

Proﬁts Levy has also impacted the expected

vesting levels in relation to the 2022 and

2023 LTIP awards. The Committee reviewed

the outcome and conﬁrmed that it would

not exercise its discretion to adjust the

formulaic outcome.

Full details of the performance calculation

are provided on page 97.

Review of Directors’ Remuneration Policy

The existing Policy was developed in 2021,

following the merger of Chrysaor and

Premier Oil to form Harbour Energy. At the

time, the Policy was designed to balance the

requirements of the UK listed environment

while also enabling us to offer competitive

rates of pay for a global oil and gas company.

Therefore, whilst our remuneration framework

meets all the best practice expectations of

a UK plc, incentive opportunities were set at

a higher level than typical in the UK market,

to recognise the need to attract high quality,

experienced executives from an international

talent pool in order to deliver our strategy

of building a large, global, diversiﬁed oil and

gas company. The level of quantum is still

signiﬁcantly below US norms, and as such

the Remuneration Committee believes that

opportunity levels were set appropriately, at a

level which balances these conﬂicting priorities.

In line with the typical triennial cycle, the

Committee reviewed the Policy in 2023.

As part of the review, we considered whether

any alternative incentive structures could

be suitable for Harbour, noting that our

framework was the most common in the

UK but that a hybrid long-term incentive

of performance and restricted shares

was the more typical approach in the US.

We believe the hybrid approach would work

well for us given the inherent volatility in

our performance and the prevalence of the

hybrid approach in the talent markets in

which we operate, and this is the approach

that we have implemented for employees

below Board level. However, given that hybrid

remains an unusual structure in the UK

market, the Committee concluded that it was

right to retain our current structure for now.

We will continue to monitor evolving practice

in this area as well as in the context of the

recently announced acquisition of assets

from Wintershall Dea and consequent

transformational impact on the company.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

The Committee is proposing a limited number

of changes for 2024, the key change being:

•

Revised approach to bonus deferral:

Under the current Policy, 50 per cent of

any bonus earned is paid in the form of

share awards which vest after three years.

The purpose of this bonus deferral is to

align management with shareholders’

interests and to encourage long-term

sustainable decision-making. From 2024,

it is proposed that, where an executive

director has already met their minimum

shareholding guideline, and therefore is

already strongly aligned with shareholder

interests, the portion of the bonus that

is deferred into shares will be reduced

from 50 per cent to 25 per cent. Where

an executive director has not yet met their

requirement, 50 per cent of any award

will continue to be deferred into shares.

In practice, this means that the proposed

change only impacts executive directors who

already have a signiﬁcant shareholding and

can clearly demonstrate a strong alignment

with the interest of our shareholders. As can

be seen on page 99, the executive directors

already have sizeable shareholdings, and

the CEO has already exceeded her minimum

shareholding guideline of 300 per cent of

salary. Therefore, any bonus she earns in

respect of 2024 would be subject to a 25

per cent deferral rate rather than 50 per

cent. The CFO will continue to be subject

to 50 per cent deferral until his minimum

shareholding guideline of 250 per cent

of salary is met.

The Committee remains mindful of an

increasingly global talent pool and the

need to ensure that our approach to

executive pay remains attractive to any

future appointments. In other countries,

such as the US, bonus deferral is not

common practice and would be considered

a relatively stringent requirement from

a non-UK perspective. The Committee

therefore believes this change would

support the recruitment and retention

of international talent, whilst continuing

to encourage executives to build and

maintain their shareholding requirements.

Other minor amendments have been made

to the Policy for clarity and/or best practice.

The Committee has also taken steps

during the year to implement the existing

Remuneration Policy, which states that

executive directors are to receive pension

contributions that are in line with the

majority of the UK workforce.

Following the reward strategy review for

the wider workforce in 2021, the pension

contribution for the UK workforce was set at

20 per cent of salary and has remained at

that level since, although executive directors

have received a pension contribution of 15

per cent of salary since 2021. In line with the

Policy, investor guidance and best practice

in the UK, the Remuneration Committee has

therefore decided to increase the executive

directors’ pension allowance from 15 per

cent to 20 per cent of base salary from

1 January 2024.

The new Policy will continue to state that

executive directors are to receive pension

contributions that are in line with the majority

of the UK workforce. Where there is a change

in pension provision, the expectation

would be that the pension contributions for

executive directors would also change.

We engaged with our largest shareholders

in late 2023, representing c.60 per cent

of our shareholder base. We were pleased

that shareholders were supportive of our

proposed changes to the Policy, and I would

like to thank those that engaged with us

for taking the time to share their feedback.

On 21 December 2023, Harbour Energy

announced that it had agreed to acquire

substantially all of Wintershall Dea’s upstream

assets. This transaction will materially change

the size, capacity, complexity and geographical

reach of the business. Given the transformative

effect that this transaction will have on the

business, the Committee will further review the

Directors’ Remuneration Policy during the year.

The Committee expects to review pay levels,

in particular the long-term incentive plan

opportunities and structure, to ensure that

the Policy continues to attract, retain and

motivate in the context of the larger, more

complex organisation.

Remuneration for 2024

The Committee reviewed salary levels in

early 2024 and agreed to award the CEO an

increase of 4.5 per cent, slightly below the

average increase for the broader workforce,

which was 5 per cent. The Committee agreed

to award the CFO an increase of 7 per cent in

recognition of the increased scope of his role

in relation to M&A activities and execution of

the company’s strategy. The salaries effective

1 April 2024 will therefore be £888,250

for the CEO and £584,220 for the CFO.

The Committee has considered the housing

allowances for the executive directors,

and given the ongoing requirement for both

executive directors to remain in the UK, and in

recognition of their criticality to the business,

agreed to extend the housing allowances

whilst each director remains in role.

The annual bonus will continue to be based

on a balanced scorecard of measures linked

to strategy. The Committee reviewed the

scorecard in late 2023 and determined that

the current framework remains appropriate,

with only one minor change incorporated –

expanding the process safety metric to

include some Tier 3 events (in addition

to Tier 1 and Tier 2). The measures and

weightings are set out on page 96.

In recognition of the increased scope of the

CFO’s role in relation to M&A activities and

execution of the company’s strategy, and

to continue to support his retention, the

Committee agreed to increase the CFO’s LTIP

award from 250 per cent to 300 per cent of

base salary. This increase is within the terms

of our current Policy. The LTIP will continue

to be measured on relative TSR performance

compared to the FTSE 100 and the sector

comparator group. As part of the review

of the Policy, the Committee considered

whether it was appropriate to introduce

another measure to the LTIP, such as an ESG

or ﬁnancial measure. As reported in previous

years, the Committee continues to believe

that an LTIP based entirely on relative TSR

is best suited to Harbour’s current strategy,

given the challenges of setting three-year

performance targets as an acquisitive

company in a cyclical environment, and is well

aligned to other companies in our sector. We

review the LTIP measures every year and will

consider this question again in advance of

granting 2025 awards. For now, we consider

that our current approach of measuring ESG

and a ﬁnancial metric within the annual bonus

scorecard is the right one for Harbour.

Last year, we reported some changes to

the constituents of the bespoke comparator

group. The Committee carried out a further

review of the comparator group in late 2023

and determined that Shell and bp should

be removed for the 2024 LTIP award due

to their size and status as integrated oil and

gas businesses rather than independent

operators. The Committee considered that

Ithaca Energy and Vår Energi ASA, as relevant

competitors due to their location, size and

operations, should be added to the bespoke

comparator group listed in note 2 to the LTIP

grant table on page 97.

Non-executive director fees

In early 2024, the Committee reviewed the

remuneration arrangements for the Chair of

the Board. Noting that no increase had been

given since 2021, the Committee approved

an increase of 4.5 per cent to the Chair’s

all-inclusive fee in line with the increase for

the CEO and below the increase for the wider

UK workforce. The Board also reviewed fees

paid to non-executive directors and approved

Harbour Energy plc

Annual Report & Accounts 2023

Directors’ Remuneration Policy

The following sets out our Directors’ Remuneration Policy (Policy). This Policy is being

put forward to shareholders for their binding approval at the AGM on 9 May 2024 and

will apply to payments made from this date. Details of how we intend to operate this

Policy for the 2024 ﬁnancial year are set out in the Annual Report on Remuneration

on pages 102 and 103.

Key principles of our Remuneration Policy

The objective of the Remuneration Policy is to ensure it supports shareholder interests,

reinforces the business strategy and promotes long-term sustainable success. Overall,

the Committee aims to ensure that pay rewards all employees fairly and responsibly for

their contributions. Remuneration packages are intended to be sufﬁciently competitive

to attract, retain and motivate individuals with the deep sector knowledge and extensive

listed company experience required to achieve the Group’s objectives and thereby

enhance shareholder value. In addition, the Committee aims to ensure that the

Remuneration Policy does not raise environmental, operational, social, safety or

governance risks by inadvertently motivating irresponsible behaviours.

The Group’s strategy is to create a leading, global, independent oil and gas company

through investment in its high quality, large-scale asset base in the UK and broad

international growth, leading to a more balanced and diversiﬁed portfolio and delivering

value for shareholders. It is critical that the executive remuneration framework provides

the capability to attract FTSE 100 or Fortune 50 calibre global talent who are able to

deliver the high performance and growth needed to execute the strategy and generate

shareholder value. Many sector peers, with whom Harbour competes for talent, are

located outside the UK where pay practices vary. The Policy was therefore designed

in a way that ensures pay is competitive for a global oil and gas company with a strong

focus on pay for performance, while being structured to reﬂect the expectations of UK

institutional investors. The Policy framework meets all of the best practice expectations of

a UK plc, but pay levels have been set to recognise the executive directors’ deep sector

experience and proven track record of delivering large-scale initiatives at international oil

and gas companies and to reﬂect the global nature of the talent market in our sector.

Committee process in determining the Remuneration Policy

During 2023, the Committee undertook a detailed review of the Remuneration Policy

to ensure that it continues to support the Group’s strategic aims and that pay is

appropriately positioned to retain and attract the talent necessary to deliver long-term

value to shareholders. The process included:

•

review of the wider market context, including current practice in different markets

(the UK, the US and Europe) as well as in other oil and gas businesses to understand

the types of incentive structures used, time horizons and performance measures;

•

consideration of alternative incentive structures, including associated risks, and

assessment of ﬁt for Harbour;

•

review of latest corporate governance best practices and shareholder guidance

for UK-listed companies; and

•

review of pay benchmarking data against a variety of peer groups.

The Committee was mindful in its deliberations on the new Remuneration Policy of

any potential conﬂicts of interest and sought to minimise them through an open and

transparent internal consultation process with the executive directors and other relevant

members of senior management, and by seeking independent advice from its external

advisers including in relation to current investor views.

Following the review, it was determined that only one change would be made to the Policy

which is to the approach to bonus deferral (as described on page 88). The Committee

wrote to major shareholders and three of the proxy advisory ﬁrms in late 2023 inviting

them to discuss the proposed changes to the Policy and its implementation for 2024

and was pleased with the levels of support expressed.

As noted in the Chair’s letter, the Committee will further review the Directors’

Remuneration Policy during the year in the context of the acquisition of Wintershall Dea’s

upstream assets.

an increase of 4.5 per cent on the basic fee

for all non-executive directors. Full details of

non-executive director remuneration are set

out on page 103.

Wider workforce remuneration

In accordance with the UK Corporate

Governance Code, the Committee regularly

reviews updates from management on wider

workforce remuneration policies and practices.

Our reward strategy was reviewed in 2021 and

the new approach is now well embedded in

the business. During the year, the Committee

approved changes to the structure of LTIP

awards below the Board, with LTIP-eligible

employees now receiving their awards as a

mixture of performance shares and restricted

shares, to ensure we remain competitive,

aligned with pay practices in other markets

and to support retention in challenging market

circumstances. In May, grants of options

were made under the 2023 Save As You Earn

scheme, and the Committee was pleased that

we continue to see high levels of participation

from the workforce in this plan.

Our Gender Pay Gap report for the

consolidated Harbour Energy business is

available on our website, and we continue

to work towards a reduction in the gap

through our DE&I initiatives.

The Committee regularly consults with

employees on reward and other matters.

In June 2023, Simon Henry, Belgacem

Chariag, Andy Hopwood and I attended a

Global Staff Forum meeting where executive

pay was discussed. The CEO and Chief

Human Resources Ofﬁcer were also in

attendance. The aim of the remuneration

discussion was to explain the alignment

between executive remuneration and wider

company pay policy, as well as describing

the executive remuneration outcomes for

2022. The meeting agenda also covered

discussions on organisation, culture and

actions from the global engagement survey.

Conclusion

I am always pleased to hear shareholder

feedback on our approach to executive

remuneration at Harbour Energy and look

forward to further engagement in future.

I hope that you will be able to support

our Policy and remuneration report at the

upcoming AGM.

On behalf of the Committee, I would like

to thank all our stakeholders for their

continuing support.

Anne L. Stevens

Committee Chair

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

Executive director Policy

The Policy for executive directors is set out below:

Salary

Purpose and link to strategy

•

To provide an appropriate level of salary to support recruitment and retention of executive directors of the calibre required

to deliver the Group’s strategy, and with due regard to the role and the individual’s responsibilities and experience

Operation

•

Typically reviewed annually with reference to company and individual performance, each executive’s responsibilities

and experience, the external market for talent, and salary increases across the Group

•

Salaries are reviewed taking into account market practice at other oil and gas sector companies in the UK and

internationally and UK-listed companies of a similar size to Harbour

•

Salary increases are normally effective 1 April

Opportunity

•

Whilst there is no maximum salary, increases will normally not exceed the typical increases awarded to other

employees in the Group

•

However, increases may be above this level in certain circumstances such as:

–

Where an executive director has been appointed to the Board at a lower than typical market salary to allow

for growth in the role, larger increases may be awarded to move salary positioning closer to typical market level

as the executive director gains experience

–

Where an executive director has been promoted or has had a change in responsibilities

–

Where the size and complexity of the company has changed materially

–

Where there has been a signiﬁcant change in market practice

Performance metrics

•

Not applicable

Pension

Purpose and link to strategy

•

To help provide a competitive pension provision, facilitating the recruitment and retention of high-calibre executive

directors to execute the Group’s strategy

Operation

•

Executive directors are eligible to participate in the company’s deﬁned contribution personal pension plan and/or

receive an equivalent cash supplement

•

The only pensionable element of pay is salary

Opportunity

•

Executive directors will receive pension contributions and/or an equivalent cash supplement in line with the

contribution for the majority of the UK workforce. Pensions for executive directors are currently set at 20 per cent of

base salary, in line with the rate for the company’s UK workforce. If the pension range of the company’s UK workforce

changes then pension provision for executive directors would normally also change in line with the wider workforce

Performance metrics

•

Not applicable

Beneﬁts

Purpose and link to strategy

•

To provide a beneﬁts package competitive in the market for talent and to support the wellbeing of employees

Operation

•

Executive directors receive a competitive beneﬁts package, which may include medical and dental insurance, car

allowance, life assurance, income protection cover, personal accident insurance, expatriate beneﬁts, relocation

allowance, health checks and a subsidised gym membership

•

Where an executive director has been required to relocate to perform their role they may be provided with additional

beneﬁts to reﬂect their circumstances, which may include items such as a housing allowance, ﬂights home and tax

equalisation. Such beneﬁts will be determined taking into account our expatriate policy for other employees who are

moving from their home location to take up their role

•

Other beneﬁts may be introduced from time to time to ensure the beneﬁts package is appropriately competitive and

reﬂects the circumstances of the individual director

Opportunity

•

Whilst there is no prescribed maximum, beneﬁts will be set at a level which the Committee considers appropriate for

the role, location and individual circumstances

Performance metrics

•

Not applicable

Directors’ Remuneration Policy

continued

Harbour Energy plc

Annual Report & Accounts 2023

All-employee share plans

Purpose and link to strategy

•

To encourage share ownership in Harbour and increase the alignment of the executive directors’ interests to those

of stakeholders

Operation

•

Executive directors may participate in any all-employee share plans operated by the company on the same terms

as other employees

•

UK-based employees (including UK-based executive directors) may be invited to participate in the following tax

advantaged share plans:

–

Share Incentive Plan (SIP), under which employees may buy partnership shares using gross pay and the company

may then grant matching shares. Under the SIP, free shares may also be granted. Dividends may accrue on any

shares and be automatically reinvested

–

Save As You Earn (SAYE) scheme under which employees are invited to make regular monthly contributions over

three or ﬁve years to purchase shares through options which may be granted at a discount

Opportunity

•

Under the SIP, participants may participate up to HMRC prescribed limits

•

Under the SAYE, employees may save up to HMRC prescribed limits

•

For any other all-employee plan operated, executive directors may participate on the same basis as other employees

Performance metrics

•

Not applicable

Annual bonus

Purpose and link to strategy

•

To reinforce the delivery of key short-term ﬁnancial and operational objectives and, through the deferred share

element, help ensure alignment with shareholders and support retention

Operation

•

Performance is normally measured on an annual basis for each ﬁnancial year against stretching but achievable

ﬁnancial and non-ﬁnancial targets, comprising key performance indicators (KPIs), and other corporate objectives

•

Performance measures, weightings and targets are set at the beginning of the year and weighted to reﬂect business priorities

•

A proportion, normally at least 50 per cent, of any annual bonus earned is deferred in shares for three years. Where

the shareholding requirement has been met, awards will normally be delivered up to 75 per cent in cash and 25 per

cent in deferred shares

•

Deferred share awards may be granted in such form as determined by the Committee in accordance with the LTIP

rules including in the form of conditional shares and nil cost options

•

Dividend equivalents may accrue on deferred bonus awards granted under the LTIP and be paid on those shares

which vest. Dividend equivalent payments made under this Policy will be made in shares

•

Annual bonus payouts and deferred shares are subject to malus and clawback in the event of material misstatement

of the company’s ﬁnancial results, gross misconduct, material error in the calculation of performance conditions or

other conditions, serious reputational damage, corporate failure, or in such other exceptional circumstances as the

Committee sees ﬁt

•

The Committee may exercise malus and clawback until the later of: (i) two years from the payment of the bonus or the

vesting of the shares, or (ii) the completion of the second audit after payment/vesting

Opportunity

•

Up to 200 per cent of salary in respect of a ﬁnancial year

•

Normally 50 per cent of the maximum pays out for target performance

•

Normally 0 per cent of the maximum pays out for threshold performance but the Committee may increase this to up

to 25 per cent of maximum if this is considered appropriate

Performance metrics

•

Performance is normally assessed against a corporate scorecard encompassing several performance categories,

which may include some or all of Safety, Environment, Operations, Growth/Capital Deployment, and Financial. Other

measures may also be incorporated if this is considered appropriate

•

Normally, the Committee would not expect the weighting for any performance category in the corporate scorecard to be

higher than 50 per cent. However, it retains discretion to adjust weightings to align with the business plan for each year

•

The Committee retains the discretion to adjust outcomes in the event that they are not considered reﬂective of the

underlying business performance and/or wider circumstances over the vesting period

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

Long Term Incentive Plan: performance share awards

Purpose and link to strategy

•

To support alignment with shareholders by reinforcing the delivery of returns to shareholders, with a focus on relative

stock market out-performance over the long term, and with due regard for the underlying ﬁnancial and operational

performance of the company

Operation

•

The Committee may grant performance share awards annually

•

Awards may be in the form of nil or nominal priced options or conditional shares

•

Performance share awards normally vest based on performance assessed over a period not shorter than three years

•

Awards vesting are normally subject to a minimum two-year holding period such that the total time horizon is at least

ﬁve years (normally on a net of tax basis)

•

Dividend equivalents may accrue on performance share awards. Dividend equivalent payments made under this

Policy will be made in shares

•

All performance share awards are subject to malus and clawback in the event of a material misstatement of the

company’s ﬁnancial results, gross misconduct, material error in the calculation of performance conditions or other

conditions, serious reputational damage, corporate failure, or in such other exceptional circumstances as the

Committee sees ﬁt

•

The Committee may exercise malus and clawback until the later of: (i) two years from the vesting date or (ii) the

completion of the second audit after vesting

Opportunity

•

Performance share awards may be granted up to 300 per cent of salary

•

25 per cent of the award will normally vest for threshold performance, with full vesting for stretch performance.

Vesting increases on a straight-line basis between threshold and stretch

Performance metrics

•

The Committee will select performance measures and determine their weighting for each cycle to ensure that they

continue to be linked to the delivery of company strategy

•

The Committee retains the discretion to adjust the vesting outcomes in the event that these are not considered

reﬂective of the underlying business performance and/or wider circumstances over the vesting period

Share ownership

Purpose and link to strategy

•

Enhances the executive directors’ alignment with shareholders’ long-term interests while in employment and

for a period following departure through the building up of a signiﬁcant shareholding in the company

Operation

•

The executive directors are expected to build up, and maintain, ownership of the company’s shares worth 300 per

cent of salary for the CEO and 250 per cent of salary for the other executive directors

•

Shares owned outright (including by persons closely associated), shares held in the Share Incentive Plan and any unvested

share awards which are no longer subject to performance (net of taxes) will normally count towards this requirement

•

The executive directors are also expected to retain no less than 50 per cent of the net value of shares vesting under

the company’s long-term incentive plans until such a time that the share ownership requirement is met

•

On cessation of employment, executive directors are expected to retain their minimum shareholding requirement

immediately prior to departure for two years. Where their shareholding at departure is below the minimum

requirement, the executive director’s actual shareholding is expected to be retained for two years

•

Shares acquired from own resources are excluded from the post-cessation shareholding requirement. The Committee retains

discretion to exclude other shares from the post-cessation shareholding requirement if it considers it to be appropriate

•

The Committee intends to operate an appropriate enforcement mechanism of the post-cessation shareholding

requirement. The Committee retains discretion to waive or vary the post-cessation shareholding requirement if

it is not considered to be appropriate in the speciﬁc circumstances of an executive director’s departure

Opportunity

•

Not applicable

Performance metrics

•

Not applicable

Summary of changes to the Policy

One material change has been made to the Policy compared to the 2021 policy, which is set out below:

Change to the Policy

Reason for change

Introduction of a lower level of

bonus deferral (25 per cent of

bonus) for executive directors

that have met their minimum

shareholding guideline (50 per cent

deferral rate still applies otherwise)

•

Allows packages to be more competitive relative to other global oil and gas companies, where bonus deferral is

not common practice, ensuring Harbour’s approach to executive pay remains attractive to any future appointments

•

Executive directors that have met their shareholding requirement will have strong alignment with shareholders’

interests, due to their signiﬁcant shareholdings

•

Encourages executive directors to build and maintain their shareholding requirements

Other minor changes have been made to the wording of the Policy to aid operation and to increase clarity.

Directors’ Remuneration Policy

continued

Harbour Energy plc

Annual Report & Accounts 2023

Further details on the Policy

Selection of performance conditions

For the annual bonus, the Committee believes that a mix of ﬁnancial and non-ﬁnancial targets is most appropriate for the Group. The use

of a corporate scorecard encompassing several performance categories ensures delivery of business milestones in a number of key areas.

Performance under the LTIP will typically include a focus on relative stock market outperformance over the long term, in line with common practice

in the oil and gas sector, providing a strong indication of the Group’s long-term ﬁnancial growth and the returns delivered to its shareholders.

The Committee retains discretion to amend a performance condition provided that any amended performance condition will be no less fair,

no less effective an incentive and not materially less demanding than the original target was when set.

Legacy arrangements

The Committee reserves the right to make any remuneration payments and/or payments for loss of ofﬁce (including exercising any discretions

available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out above, where the terms of the

payment were agreed (i) before 14 May 2014; (ii) before the Policy set out above came into effect, provided that the terms of the payment were

consistent with the shareholder-approved Directors’ Remuneration Policy in force at the time they were agreed; or (iii) at a time when the relevant

individual was not a director of the company (or other persons to whom the Policy set out above applies) and, in the opinion of the Committee,

the payment was not in consideration for the individual becoming a director of the company or such other person. For these purposes,

‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the

payment are ‘agreed’ no later than at the time the award is granted. This Policy applies equally to any individual who is required to be treated

as a director under the applicable regulations.

Remuneration Policy for other employees

When determining the Policy, the Committee reviewed wider workforce remuneration and incentives to ensure the approach to executive

remuneration was compatible in this context. Following the merger of Premier Oil plc and Chrysaor Holdings Limited in 2021, the reward strategy

for the workforce was refreshed to ensure pay continued to appropriately motivate and reward the workforce. The new strategy was rolled out in

2022. The Committee will continue to consider the approach to executive remuneration in this context.

The company’s policy for all employees is to provide remuneration packages which reward them fairly and responsibly for their contributions.

In addition to a competitive salary, employees are typically eligible for a performance-related bonus, pension and a number of beneﬁts, including

expatriate beneﬁts where relevant. In the UK, employees are eligible to receive at least the same proportion of salary in pension contributions

as the executive directors, in line with UK best practice. The speciﬁc bonus framework varies by job level and scope to ensure annual incentives

support motivation and retention accordingly.

The Leadership Team and other senior leaders participate in the same annual bonus plan and long-term incentive plan as for executive

directors, except that a portion of long-term incentive awards for the Leadership Team and other senior leaders is delivered as restricted shares

without performance conditions. Performance for the annual bonus and performance shares is assessed on the same criteria for all, though

opportunity levels vary as appropriate. These schemes provide a clear link between pay and performance, ensuring that superior remuneration

is paid only if superior performance is delivered, with the use of restricted shares acting as a complementary vehicle to ensure that packages

are competitive for the sector.

The company currently operates SIP and SAYE share schemes for UK-based and expatriate employees, to foster a sense of ownership in the

company and to increase the alignment of interests across stakeholders. Participation levels among employees in these plans is strong,

outperforming market norms.

Incentive plan discretions

The Committee operates the company’s incentive plans according to their respective rules and Remuneration Policy, and in accordance with

the Listing Rules and HMRC rules where relevant. The rules of the long-term incentive plan (the Harbour 2017 Long Term Incentive Plan)

were approved by shareholders at the 2017 AGM and amended at the 2020 AGM and again at the 2021 AGM.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

In line with common market practice, the Committee retains discretion as to the operation and administration of these incentive plans,

including with respect to:

•

who participates;

•

the timing of grant and/or payment;

•

the size of an award and/or payment and any other terms of the award (within the plan and Policy limits approved by shareholders);

•

form of award (eg nil cost option or conditional award);

•

the manner in which awards are settled;

•

the choice of (and adjustment of) performance measures and targets in accordance with the Remuneration Policy and the plan rules;

•

in exceptional circumstances, amendment of any performance conditions applying to an award, provided the new performance

conditions are considered fair and reasonable and are not materially less challenging than the original performance targets when set;

•

discretion relating to the measurement of performance or other condition in the event of a variation of share capital, change of control,

special dividend, distribution or any other corporate event which may affect the current or future value of an award;

•

determination of a good leaver (in addition to any speciﬁed categories) for incentive-plan purposes, based on the plan rules and the

appropriate treatment under the plan rules;

•

determination of the operation of the post-vesting holding period; and

•

adjustments required in certain circumstances (eg rights issues, share buybacks, special dividends, other corporate events, etc.).

Any use of the above discretions would, where relevant, be explained in the Annual Report on Remuneration for the relevant year. As appropriate,

it might also be the subject of consultation with the company’s major shareholders.

Minor changes

The Committee may make minor amendments to the Policy set out above (if required for legal, regulatory, exchange control, tax or administrative

purposes or to take account of a change in legislation) without requiring prior shareholder approval for that amendment.

Illustration of application of the executive directors’ Remuneration Policy

The performance scenario charts on page 91 show the estimated remuneration that could be received by the current executive directors for

2024, both in absolute terms and as a proportion of the total package under different performance scenarios. The assumptions underlying

each performance scenario are detailed in the table below:

Remuneration receivable for diﬀerent performance scenarios

Fixed pay

•

2024 salary, as disclosed in the Annual Report on Remuneration on page 102

•

Estimated housing beneﬁts of £120,000 for the CEO, £60,000 for the CFO

•

Pension contribution of 20 per cent of salary

Minimum

On-target

Maximum

with share price growth

Annual bonus

Nil payout

Payout of 50 per cent of

maximum (100 per cent

of salary)

Payout of 100 per cent of

maximum (200 per cent

of salary)

As per maximum

Long Term Incentive Plan

Nil payout

Performance share

awards vest at 50 per cent

of maximum

Performance share awards

vest in full (300 per cent of

salary for the CEO and CFO)

As per maximum with a 50 per

cent share price increase over

three years

Note:

The actual value of housing beneﬁts paid during the year is disclosed on page 95 of this report. Other beneﬁts (including tax equalisation for the CEO) are not easily estimated and have

been excluded, with the actual value of these beneﬁts received during the year disclosed on page 95 of this report.

Directors’ Remuneration Policy

continued

Harbour Energy plc

Annual Report & Accounts 2023

The charts below illustrate the potential reward opportunities for the current executive directors for the four performance scenarios:

Chief Executive Ofﬁcer (£’000s)

Minimum

100%

£1,186

Maximum + share

price appreciation

On-target

35%

£3,407

26%

39%

Maximum

£5,627

21%

32%

47%

£6,960

17%

26%

38%

19%

LTIP

Share price appreciation

Annual bonus

Fixed pay

Chief Financial Ofﬁcer (£’000s)

100%

£761

35%

£2,222

£3,682

£4,558

21%

17%

26%

32%

26%

39%

47%

38%

19%

Minimum

Maximum + share

price appreciation

On-target

Maximum

LTIP

Share price appreciation

Annual bonus

Fixed pay

Note:

The valuation of annual bonus and performance share awards (PSAs) for the on-target and maximum scenarios excludes share price appreciation, any dividend accrual and the impact of

any scale back of awards. PSAs vest after three years subject to TSR performance and continued employment. PSAs are subject to a holding period ending on the ﬁfth anniversary of the

date of grant of the awards.

Approach to remuneration of executive directors on recruitment

When determining the remuneration package for a newly appointed executive director, the Committee would seek to apply the following principles:

•

The package should be market competitive to facilitate the recruitment of individuals of sufﬁcient calibre and global experience to lead

the business. At the same time, the Committee would intend to pay no more than it believes is necessary to secure the required talent.

•

New executive directors will normally receive a base salary, beneﬁts and pension contributions in line with the Policy described above

and would also be eligible to join the bonus and long-term incentive plans up to the limits set out in the Policy.

•

In addition, the Committee has discretion to include any other remuneration component or award which it feels is appropriate taking

into account the speciﬁc circumstances of the recruitment, subject to the limit on variable remuneration set out below. The key terms

and rationale for any such component would be disclosed as appropriate in the remuneration report for the relevant year.

•

Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous employer as a result of

appointment, the Committee may offer compensatory payments or awards, in such form as the Committee considers appropriate, taking

into account all relevant factors including the form of awards, expected value and vesting timeframe of forfeited opportunities.

•

When determining any such ‘buyout’, the guiding principle would be that awards would generally be on a ‘like-for-like’ basis unless this

is considered by the Committee not to be practical or appropriate.

•

The maximum level of variable remuneration which may be awarded (excluding any ‘buyout’ awards referred to above) in respect

of recruitment is 500 per cent of salary, which is in line with the current maximum limit under the annual bonus and LTIP.

•

Where an executive director is required to relocate from their home location to take up their role, the Committee may provide assistance

with relocation (either via one-off or ongoing payments or beneﬁts). Should an executive’s employment be terminated without cause

by the Group, repatriation costs may be met by the Group.

•

In the event that an internal candidate is promoted to the Board, legacy terms and conditions would normally be honoured, including any

accrued pension entitlements and any outstanding incentive awards. If an executive director is appointed following an acquisition of, or

merger with, another company, legacy terms and conditions that are of higher value than provided in the Policy would normally be honoured.

To facilitate any buyout awards outlined above, the Committee may grant awards to a new executive director relying: (i) on the exemption in

the Listing Rules which allows for the grant of awards to facilitate, in unusual circumstances, the recruitment of an executive director, without

seeking prior shareholder approval; or (ii) under any other appropriate company incentive plan.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

Service contracts and exit payments and change of control provisions

Executive director service contracts, including arrangements for early termination, are carefully considered by the Committee and are designed

to recruit, retain and motivate directors of the quality required to manage the company. The service contract of each executive director may be

terminated on 12 months’ notice in writing by either party. Executive directors’ contracts are available to view at the company’s registered ofﬁce.

Details of the service contracts of the current executive directors are as follows:

Directors

Contract date

Unexpired term of contract

Linda Z. Cook

01.04.2021

Rolling contract

Alexander Krane

01.04.2021

Rolling contract

The company will consider termination payments in light of the circumstances on a case-by-case basis, taking into account the relevant

contractual terms, the circumstances of the termination and any applicable duty to mitigate. In such an event, the remuneration commitments

in respect of the executive director contracts could amount to one year’s remuneration based on salary, beneﬁts in kind and pension rights

during the notice period, together with payment in lieu of any accrued but untaken holiday leave, if applicable.

There are provisions for termination with less than 12 months’ notice by the company in certain circumstances. If such circumstances were to

arise, the executive director concerned would have no claim against the company for damages or any other remedy in respect of the termination.

The Committee would apply general principles of mitigation to any payment made to a departing executive director and will honour previous

commitments as appropriate, considering each case on an individual basis.

The table below summarises how performance share awards under the Harbour Energy 2017 Long Term Incentive Plan and annual bonus awards

are typically treated in different leaver scenarios and on a change of control. Whilst the Committee retains overall discretion on determining

‘good leaver’ status, it typically deﬁnes a ‘good leaver’ in circumstances such as retirement with agreement of the company, ill health, disability,

death, redundancy, or part of the business in which the individual is employed or engaged ceasing to be a member of the Group.

Event

Timing of vesting/award

Calculation of vesting/payment

Annual bonus/deferred bonus awards

‘Good leaver’

•

Annual bonus is normally paid at the same time as to

continuing employees but may be paid on departure in

compassionate circumstances

•

Unvested deferred bonus awards vest on the normal vesting date

(or, at the Committee’s discretion, on cessation of employment)

•

The Committee has discretion not to defer part of the bonus

earned in the year of leaving

•

Annual bonus is paid only to the extent that any performance

conditions have been satisﬁed and is pro-rated for the proportion

of the ﬁnancial year worked before cessation of employment

•

Unvested deferred bonus awards will vest in full

‘Bad leaver’

•

Not applicable

•

Individuals lose the right to their annual bonus and unvested

deferred bonus awards

Change of control

•

Annual bonus is paid and unvested deferred bonus awards vest

on the date of change of control

•

Annual bonus is paid only to the extent that any performance

conditions have been satisﬁed, and will normally be pro-rated for

the proportion of the ﬁnancial year worked to the effective date

of change of control unless the Committee determines otherwise

•

Unvested deferred bonus awards will vest in full

Performance share awards

‘Good leaver’

•

Awards vest on the normal vesting date subject to the holding

period (or earlier at the Committee’s discretion)

•

Unvested awards normally vest to the extent that any performance

conditions have been satisﬁed over the full performance period

(or a shorter period at the Committee’s discretion)

•

The number of unvested awards is normally reduced pro-rata to

take into account the proportion of the vesting period not served

‘Bad leaver’

•

Unvested awards lapse

•

Any vested shares subject to the holding period are forfeited

by bad leavers who leave due to gross misconduct, but remain

and are released at the end of the holding period for other bad

leavers (eg following resignation)

•

N/A

Change of control

•

Awards vest on the date of the event

•

Unvested awards normally vest to the extent that any

performance conditions have been satisﬁed and a pro-rata

reduction applies for the proportion of the vesting period not

completed unless the Committee determines otherwise

Note:

In certain circumstances, the Committee may determine that unvested deferred bonus awards and performance share awards will not vest on a change of control but will instead be

replaced by an equivalent grant of a new award, as determined by the Committee, in the new company.

Upon exit or change of control, SAYE and SIP awards will be treated in line with the plan rules.

Directors’ Remuneration Policy

continued

Harbour Energy plc

Annual Report & Accounts 2023

If employment is terminated by the company, the departing executive director may have a legal entitlement (under statute or otherwise) to

additional amounts, which would need to be met. In addition, the Committee retains discretion to settle other amounts reasonably due to

the executive director, for example to meet the legal fees incurred by the executive director in connection with the termination of employment,

outplacement support, where the company wishes to enter into a settlement agreement (as provided for below) and, in which case, the

individual is required to seek independent legal advice.

In certain circumstances, the Committee may approve new contractual arrangements with departing executive directors including (but not

limited to) settlement, conﬁdentiality, restrictive covenants and/or consultancy arrangements. These will be used sparingly and only entered

into where the Committee believes that it is in the best interests of the company and its shareholders to do so.

External appointments

Executive directors are entitled to accept non-executive director appointments outside the company and retain any fees received providing

that the Board’s prior approval is obtained.

Consideration of employment conditions elsewhere in the company

While the Committee did not consult with the wider workforce when developing this Policy, more broadly, it receives feedback from employees

through engagement opportunities such as the Global Staff Forum, where staff have the chance to engage with members of the Committee

and other non-executive directors at least once a year on executive remuneration. The Committee considers the pay and conditions elsewhere

in the company, including how company-wide pay tracks against the market. When determining salary and pension for executive directors, the

Committee takes account of salary increases and pension contributions across the Group, particularly for those employees based in the UK.

The Committee ensures that our policies and practices across the business are fair and consistent, and support diversity and equality. Further,

the company seeks to promote and maintain good relationships with employee representative bodies – including trade unions – as part of its

employee engagement strategy and consults on matters affecting employees and business performance as required in each case by law and

regulation in the jurisdictions in which the company operates.

Consideration of shareholder views

The Committee aims to ensure that the Policy serves shareholder interests and is aligned with the Group’s business strategy, market practice

and evolving best practice. The Committee Chair engaged with major shareholders and proxy advisers in developing this Remuneration Policy,

and will also from time-to-time engage to discuss the Remuneration Policy more generally. The Committee considers all feedback received from

such consultations, as well as guidance from shareholder representative bodies more generally, to help to ensure the Policy is aligned with

shareholder views.

Non-executive director Remuneration Policy

Non-executive directors’ appointments and subsequent re-appointments are subject to annual re-election by shareholders at each Annual

General Meeting (AGM) in accordance with the UK Corporate Governance Code. All letters of appointment have a notice period of three months

and provide for no arrangements under which any non-executive director is entitled to receive remuneration upon the early termination of his or

her appointment. Non-executive directors’ letters of appointment are available to view at the company’s registered ofﬁce.

The company’s articles of association provide that the remuneration paid to non-executive directors is to be determined by the Board within

limits set by the shareholders. The Policy for the Chair and non-executive directors is as follows:

Non-executive director fees

Purpose and link

to strategy

•

To provide fees that allow Harbour to attract and retain non-executive directors of the highest calibre that add value to our business

Operation

•

Fees for non-executive directors are normally reviewed at least every two years

•

Fees are set with reference to UK and international oil and gas sector companies and UK-listed companies of a similar size to Harbour

•

Fees paid to the Chair are determined by the Committee, while the fees of the other non-executive directors are determined by

the Board

•

Additional fees may be paid to reﬂect additional Board or committee responsibilities as appropriate

•

Fee increases are normally effective 1 January

•

The non-executive director fees are summarised in the Annual Report on Remuneration on page 103

•

Reasonable costs in relation to travel and accommodation for business purposes are reimbursed to the Chair and non-executive directors.

The company may meet any tax liabilities that may arise on such expenses

•

A travel allowance may be provided where intercontinental travel is required to attend a meeting

•

The Chair and non-executive directors are not entitled to participate in any of the Group’s incentive plans or pension plans

•

Additional beneﬁts may be provided to non-executive directors if considered appropriate

Opportunity

•

Non-executive director fees are set at a level that is considered appropriate in the light of relevant market practice and the

size/complexity of the role

•

Aggregate fees are within the limit approved by shareholders in the articles of association

Performance metrics

•

Not applicable

Approach to non-executive director recruitment remuneration

In the case of hiring or appointing a new non-executive director, the Committee will follow the Policy as set out in the table above.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

Annual Report on Remuneration

Committee membership and operation

Committee members

Date of appointment

to the Committee

Meetings attended

(eligible to attend)

Anne L. Stevens (Committee Chair)

31 March 2021

4(4)

Alan Ferguson

31 March 2021

4(4)

Andy Hopwood

1 November 2022

4(4)

Louise Hough

1 May 2023

3(3)

Note:

Louise Hough joined the Board and was appointed a member of the Remuneration Committee on 1 May 2023.

Committee terms of reference

The Committee acts within written terms of reference which are reviewed regularly and published on the company’s website: harbourenergy.com.

The terms of reference were reviewed in 2018 with amendments made in order to comply with the 2018 UK Corporate Governance Code.

Minor amendments have been made in subsequent years, most recently in August 2023.

The main responsibilities of the Committee include:

•

determining the Remuneration Policy for executive directors and senior management and engaging with the company’s principal

shareholders thereon;

•

determining the individual remuneration packages for each executive director, other members of senior management, and any changes thereto;

•

approving the remuneration package of the Chair;

•

considering the design of, and determining targets for, the annual bonus plan;

•

reviewing and recommending to the Board the establishment of any new employee share plans and any material amendments to the

company’s existing share plans;

•

determining the overall quantum and performance conditions for long-term incentive awards;

•

reviewing pension arrangements, service agreements and termination payments for executive directors and senior management;

•

approving the directors’ remuneration report, ensuring compliance with related governance provisions and legislation;

•

reviewing the Gender Pay Gap report;

•

reviewing bonus outcomes for the company, including executive directors; and

•

considering the remuneration policies and practices across the company.

Advisers

The Committee receives advice from independent remuneration committee advisers Deloitte LLP. Deloitte LLP were appointed by the Committee

in March 2021 following a competitive tender process.

The fees charged for the provision of independent advice to the Committee during the year were £96,600 from Deloitte LLP. Other than in

relation to advice on remuneration, Deloitte LLP provided support to management in relation to corporate tax, indirect tax, payroll taxes, internal

audit, internal controls, ﬁnancial advisory services in relation to mergers and acquisitions, and other related services.

Deloitte are founding members of the Remuneration Consultants Group and voluntarily operated under its code of conduct in dealings with the

Committee. The Committee is satisﬁed that the Deloitte engagement team, who provided remuneration advice to the Remuneration Committee,

do not have connections with Harbour Energy plc or its directors that may impair their independence.

During the year, the Committee also took into account the views of the Chief Executive Ofﬁcer and other members of management. Their

attendance at Remuneration Committee meetings was by invitation from the Committee Chair to advise on speciﬁc questions raised by the

Committee and on matters relating to the performance and remuneration of the senior management team. No director was present for any

discussions that related directly to their own remuneration.

Harbour Energy plc

Annual Report & Accounts 2023

Voting on remuneration matters

Votes received at the 2023 AGM in respect of approval of the Annual Report on Remuneration and the 2021 AGM in respect of the Directors’

Remuneration Policy are set out below:

Resolution

Votes FOR and % of votes cast

Votes AGAINST and % of votes cast

Votes WITHHELD

Annual Report on Remuneration (2023 AGM)

527,704,770

97.16%

15,439,596

2.84%

57,802

Directors’ Remuneration Policy (2021 AGM)

14,593,098,273

97.19%

421,903,633

2.81%

72,728,980

Single total ﬁgure of remuneration for executive directors (audited)

Executive

directors

Year

Salary £’000

Taxable

beneﬁts

£’000

Pension

£’000

Total ﬁxed

remuneration

£’000

Bonus £’000

LTIP

£’000

Total variable

remuneration

£’000

Total

remuneration

£’000

Linda Z. Cook

2023

850.0

615.4

125.6

1,591.0

816.0

–

816.0

2,407.0

2022

850.0

873.9

125.6

1,849.5

1,275.0

–

1,275.0

3,124.5

Alexander Krane

2023

540.8

132.7

69.7

743.2

519.1

–

519.1

1,262.3

2022

525.0

97.5

67.4

689.9

787.5

–

787.5

1,477.4

Notes to 2023 ﬁgures (unless stated):

The executive directors receive a beneﬁts package aligned with the approach for other employees. In 2021, Linda Z. Cook and Alexander Krane relocated from the US and Norway

respectively to join Harbour Energy and they are entitled to receive the same expatriate beneﬁts as other employees relocating internationally. They both elected not to take the full

expatriate beneﬁts available to them, and their beneﬁts are therefore limited to housing costs and two return ﬂights home per year as well as tax equalisation arrangements. Alexander

Krane received £64,272 in respect of housing costs during the year and his beneﬁt ﬁgure also includes £50,704 in respect of tax equalisation payments for his housing allowance.

Linda Z. Cook received £120,000 in respect of housing costs during the year and her beneﬁt ﬁgure also includes £459,139 in respect of a tax equalisation beneﬁt. Given Linda was

required to relocate from the US to the UK to take up the role of CEO, tax equalisation is provided to ensure that she is not required to pay more tax in the UK than she would do in the US.

Tax equalisation disclosed for 2022 of £740,270 was based on an estimate of the value of this beneﬁt. The ﬁnal amounts were determined in 2023 following the submission of the

relevant tax returns and resulted in a decrease of £512,860 and therefore the amount disclosed in respect of 2023 has been reduced by this amount. Any changes to the estimated

value of beneﬁts disclosed in 2023 will be adjusted against the 2024 amounts. As outlined in the Notice of 2021 AGM, the Committee approved the provision of these beneﬁts to the

executive directors for an initial three-year period. The Committee considers it appropriate to continue providing these beneﬁts, including the housing allowance, given the executive

directors’ criticality to the business.

No portion of the executive directors’ LTIP awards vested during the period.

Single total ﬁgure of remuneration for non-executive directors (audited)

Non-executive directors

Year

Base fees

£’000

Travel

allowance

£’000

Expenses

£’000

Total

remuneration

£’000

R. Blair Thomas (Chair)

2023

300.0

20.0

3.7

323.7

2022

300.0

30.0

4.0

334.0

Simon Henry

2023

140.0

–

3.0

143.0

2022

140.0

–

2.0

142.0

Belgacem Chariag

2023

73.3

20.0

8.4

101.7

2022

–

Alan Ferguson

2023

120.0

–

0.7

120.7

2022

120.0

–

0.4

120.4

Andy Hopwood

2023

110.0

–

3.3

113.3

2022

105.8

–

2.7

108.5

Louise Hough

2023

76.7

–

0.1

76.8

2022

–

Margareth Øvrum

2023

115.0

–

6.0

121.0

2022

115.0

–

5.1

120.1

Anne L. Stevens

2023

115.0

25.0

12.4

152.4

2022

115.0

30.0

11.9

156.9

Former non-executive directors

G. Steven Farris

2023

34.6

10.0

5.9

50.5

2022

95.0

25.0

11.1

131.1

Notes to 2023 ﬁgures (unless stated):

The base fees for R. Blair Thomas were paid to EIG Management LLC.

In addition to base fees for acting as a non-executive director, base fees include amounts payable for acting as a member or Chair of a Committee, and fees for the Senior Independent

Director role. Further detail on the level of these fees is set out on page 103. The Chair waived his fees for acting as Chair of the Nomination Committee.

In accordance with the Remuneration Policy approved by shareholders in June 2021, R. Blair Thomas, G. Steven Farris, Anne L. Stevens and Belgacem Chariag received an allowance

for intercontinental travel during 2023.

Amounts disclosed relate to taxable travel and accommodation expenses paid to non-executive directors in respect of qualifying services during the year.

Belgacem Chariag and Louise Hough were appointed to the Board on 1 May 2023. The fees reﬂect the time served as non-executive directors since that date.

G. Steven Farris stepped down from the Board on 10 May 2023.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

2023 Annual bonus outcome (audited)

The maximum bonus opportunity for executive directors in respect of 2023 was 200 per cent of salary. The scorecard below summarises the

Group’s performance against the ﬁnancial and operational targets set by the Board for 2023 that are used to determine the level of bonus awarded.

Category

Metric

Weighting

2023 performance

Scorecard

Actual

Weighted

Threshold

Target

Stretch

Safety &

environment

(35%)

Safety incident rate

TRIR incident rate/

million hours

10%

0.69

17%

1.20

0.9

0.6

Process safety

Tier 1 and Tier 2 events

10%

20%

GHG emissions

ktonnes CO

15%

1,282

30%

1,520

1,435

1,350

Operations

(30%)

Oil and gas production

kboepd

20%

186

185

198

205

Unit operating costs

$/boe

10%

16.4

16.5

15.9

15.0

Growth &

capital

deployment

(20%)

Expenditure vs AFE

10%

113

120

100

Reserves vs AFE

10%

114

17%

100

120

Financial

(15%)

Free cash ﬂow

Million $

15%

1,042

910

1,410

1,910

Total

96%

Note:

Free cash ﬂow is post-tax, pre-dividend and pre-share buyback.

Summary of performance

Safety & environment

•

Safety incident rate: Target exceeded, with the Total Recordable Injury Rate of 0.69 being materially better than target, an improvement

over 2022 (0.75) and prior years.

•

Process safety: Stretch target met. For the ﬁrst time since the company was established, no Tier 1 or Tier 2 events were recorded,

representing an improvement on our performance in 2022 (one Tier 2 process safety event).

•

GHG emissions: Emissions were better than the stretch target, reﬂecting the success of decarbonisation projects during the year as well

as the production shortfall.

Operations

•

Production: 2023 production was 186 kboepd, short of our target of 198 kboepd and resulting in performance close to threshold.

•

Unit operating costs: Driven by lower than forecast production volumes, unit costs were $16.4/boe, more than our target of $15.9/boe.

Growth & capital deployment

•

Expenditure vs AFE: Expenditure of 113 per cent was higher than anticipated, reﬂecting cost performance above estimates for capital projects.

•

Reserves vs AFE: Performance of 114 per cent, exceeding target and reﬂecting higher than predicted volumes developed or discovered

in relation to capital projects.

Financial

•

Free cash ﬂow: Cash ﬂow generation of $1,042 million was below our target of $1,410 million, driven mainly by lower production volumes

and lower commodity prices than forecast.

The calculated score was 96 per cent of the target bonus (where the target bonus is 100 per cent of salary and the maximum is 200 per cent

of salary). The Committee considered this score in the context of broader company performance and approved bonus payouts for the executive

directors on that basis.

Annual Report on Remuneration

continued

Harbour Energy plc

Annual Report & Accounts 2023

Amounts paid to executive directors are set out below. In line with the 2021 Remuneration Policy, 50 per cent of the bonus paid to the executive

directors will be deferred into shares for three years.

Directors

Bonus as a %

of maximum

Total value

£’000s

Cash amount

£’000s

Amount deferred

into shares

£’000s

Linda Z. Cook

48%

816.0

408.0

Alexander Krane

48%

519.1

259.56

LTIP awards vesting in respect of the year ended 31 December 2023 (audited)

LTIP awards were granted to the executive directors in 2021. Awards were subject to relative TSR performance conditions over the three years

to 31 December 2023. The structure and performance outcome were as follows:

Performance element

Weighting

Minimum

performance

Mid

performance

Maximum

performance

Actual

performance

Vesting

outcome

Relative TSR

performance vs

FTSE 100 index

50%

25% vesting at

median performance

(50

percentile)

Linear vesting

between minimum and

maximum performance

100% vesting if in the

upper quartile

(75

percentile)

-21.4%

(Below median)

Relative TSR vs bespoke

peer group of oil and gas

companies

50%

-21.4%

(Below median)

Notes:

Constituents of the FTSE 100 as at the start of the performance period on 1 January 2021.

Selected oil and gas peer group, including European and US independent oil and gas companies. The group consists of the following 17 companies: Aker BP, Apache Corp, bp, Capricorn

Energy, Diversiﬁed Energy, Energean, Genel Energy, Hess, Kosmos Energy, Lundin Energy, Marathon Oil, Murphy Oil, Shell, Seplat Energy, Tullow Oil, Vermillion Energy and John Wood

Group. As announced in the 2022 directors’ remuneration report, the Committee determined to remove Lundin Energy (now Orrön Energy) from the peer group for inﬂight awards as it

was no longer a relevant comparator.

Based on the above performance levels, the vesting outcome was 0 per cent. The Committee considered whether to exercise any discretion

to amend the formulaic outcome, and determined that the outcome was appropriate in the context of company performance in the round.

The amounts vesting to the executive directors are therefore as follows:

Executive directors

Vesting outcome

(% of maximum)

Value of shares vesting

£’000s

Value of dividend

equivalents accrued

£’000s

Total

£’000s

Linda Z. Cook

Alexander Krane

LTIP awards granted during the year ended 31 December 2023 (audited)

For the awards granted to executive directors under the 2017 LTIP during 2023, the performance condition is based 100 per cent on relative

TSR performance conditions against two peer groups. The structure has been summarised below:

Performance element

Weighting

Minimum

performance

Mid

performance

Maximum

performance

Performance

period

Relative TSR performance

vs FTSE 100 index

50%

25% vesting at

median performance

(50

percentile)

Linear vesting

between minimum and

maximum performance

100% vesting if in the

upper quartile

(75

percentile)

1 January 2023 –

31 December 2025

Relative TSR vs bespoke peer

group of oil and gas companies

50%

Notes:

Constituents of the FTSE 100 as at the start of the performance period on 1 January 2023.

Selected oil and gas peer group, including European and US independent oil and gas companies. This group consists of the following 17 companies: Aker BP, Apache Corp, bp, Capricorn

Energy, Diversiﬁed Energy, Energean, EnQuest, Genel Energy, Hess, Kosmos Energy, Marathon Oil, Murphy Oil, Shell, Seplat Energy, Serica Energy, Tullow Oil and Vermillion Energy. The

group was updated in 2023, with John Wood Group and Orrön Energy (formerly Lundin Energy) removed and EnQuest and Serica Energy added.

Details of the awards made to executive directors are as follows:

Executive directors

Date of grant

Number of

shares awarded

Type of

award

Face value

(% of salary)

Face

value

Linda Z. Cook

03.04.23

947,955

Performance share award

300%

£2,550,000

Alexander Krane

03.04.23

507,434

Performance share award

250%

£1,365,000

Note:

Face value was calculated using the average of the mid-market closing prices for the ﬁve dealing days preceding the award date being £2.69 per share.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

Outstanding share awards

2017 Long Term Incentive Plan (2017 LTIP)

As at 31 December 2023, Linda Z. Cook and Alexander Krane held the following outstanding performance share awards (PSAs) and conditional

share awards (CSAs) under the 2017 LTIP:

Directors

Type of

award

Date of

grant

Awards held

at 1 January

2023

Granted

Dividend

equivalents

accrued

Lapsed

Vested

Awards held at

31 December

2023

Market price

of shares on

date of award

Earliest

vesting

date

Linda Z. Cook

CSA 2021-24

04.05.21

804,653

–

47,713

–

418,450

433,916

393.53p

04.05.24

PSA 2021-24

30.06.21

703,921

–

55,271

–

759,192

378.28p

30.06.24

PSA 2022-25

24.03.22

604,631

–

47,475

–

652,106

440.40p

24.03.25

PSA 2023-26

03.04.23

–

947,955

74,433

–

1,022,388

269.00p

03.04.26

2,113,205

947,955

224,892

–

418,450

2,867,602

Alexander Krane

CSA 2021-24

30.06.21

276,048

–

21,675

–

297,723

378.28p

01.04.24

PSA 2021-24

30.06.21

362,312

–

28,448

–

390,760

378.28p

30.06.24

PSA 2022-25

24.03.22

311,207

–

24,435

–

335,642

440.40p

24.03.25

PSA 2023-26

03.04.23

–

507,434

39,843

–

547,277

269.00p

03.04.26

949,567

507,434

114,401

–

1,571,402

Notes:

Any vested awards (except for Linda Z. Cook’s 2021 conditional share award) are subject to a two-year holding period such that the total time horizon is ﬁve years.

Linda Z. Cook received a buyout award to compensate for loss of performance-based incentives from her previous employer. This award was made on a like-for-like basis and is to vest

one-third per year on the ﬁrst, second and third anniversary of the award. The ﬁrst tranche of the award vested on 4 May 2022, the second tranche vested on 4 May 2023 and the third

tranche will vest on 4 May 2024. Further details of the award can be found in the 2021 directors’ remuneration report.

Deferred bonus awards

As of 31 December 2023, the following deferred bonus awards were held in respect of the deferred element of the annual bonus award.

Directors

Date of

grant

Awards held at

1 January 2023

Granted

Dividend

equivalents

accrued

Lapsed

Vested

Awards held at

31 December

2023

Market price

of shares on

date of award

Earliest vesting

date

Linda Z. Cook

24.03.22

50,109

–

3,934

–

54,043

440.40p

24.03.25

03.04.23

–

236,988

18,608

–

255,596

269.00p

03.04.26

50,109

236,988

22,542

–

309,639

Alexander Krane

24.03.22

30,274

–

2,377

–

32,651

440.40p

24.03.25

03.04.23

–

146,375

11,493

–

157,868

269.00p

03.04.26

30,274

146,375

13,870

–

190,519

Note:

The average of the closing prices of a Harbour Energy share over the ﬁve dealing days immediately preceding the award date (on a post-consolidation basis).

Annual Report on Remuneration

continued

Harbour Energy plc

Annual Report & Accounts 2023

Statement of directors’ shareholdings and scheme interests (audited)

The table below summarises the directors’ interests in shares, including unvested awards under employee share schemes, as at 31 December

2023. The total share interests as at 6 March 2024 were the same as shown below for all directors in service as at 31 December 2023.

Further details of all outstanding awards are provided on page 98.

Directors

Own shares at

31 December 2023

(or date of leaving)

Unvested shares subject

to continued employment

at 31 December 2023

(or date of leaving)

Unvested shares subject

to performance at

31 December 2023

Linda Z. Cook

8,517,482

743,555

2,433,686

Alexander Krane

488,242

1,273,679

R. Blair Thomas

12,824,781

–

Simon Henry

20,000

–

Belgacem Chariag

–

Alan Ferguson

14,203

–

Andy Hopwood

10,000

–

Louise Hough

–

Margareth Øvrum

8,500

–

Anne L. Stevens

30,000

–

Former directors

G. Steven Farris

418,343

–

Notes:

Own shares includes shares held by the director and/or connected persons. For R. Blair Thomas this ﬁgure includes indirect interests he holds in shares in the company through certain

entities managed by EIG, the company’s major shareholder. R. Blair Thomas is also Chief Executive Ofﬁcer of EIG and a director of a number of EIG’s wholly owned subsidiaries. Details

regarding EIG’s shareholding are set out on page 105.

Unvested shares subject to continued employment comprise deferred bonus awards and conditional share awards awarded to Linda Z. Cook and Alexander Krane in connection with their

recruitment. The deferred bonus awards are subject to malus and clawback in accordance with the terms set out in the Directors’ Remuneration Policy on page 87. Alexander Krane’s CSA

is subject to the malus and clawback provisions set out in the 2021 Directors’ Remuneration Policy on page 84 of the 2022 Annual Report. The malus and clawback provisions for Linda

Z. Cook’s buyout award are in line with those set out on page 88 for the performance share awards of the LTIP.

Shares owned outright are reported as at 10 May 2023, the date on which G. Steven Farris’s directorship ceased.

Awards under all the company’s share schemes may be met using a combination of market purchases, ﬁnanced by the company through the

Harbour Energy plc Employee Beneﬁt Trust, and newly issued shares. The company complies with the Investment Association’s recommended

guidelines on shareholder dilution through employee share schemes: awards under the company’s discretionary schemes which may be

satisﬁed with newly issued shares must not exceed 5 per cent of the company’s issued share capital in any rolling 10-year period, and the total

of all awards satisﬁed with newly issued shares under all plans must not exceed 10 per cent of the company’s issued share capital in any rolling

10-year period.

Directors’ shareholding requirements

The company requires the executive directors to retain no less than 50 per cent of the net value of shares vesting under the company’s long-term

incentive plans until such a time that they have reached a holding worth 300 per cent of salary (CEO) and 250 per cent of salary (CFO).

Shares owned outright including shares purchased and received from incentive arrangements, shares subject to deferral or a holding period (which

are not beneﬁcially owned by the senior executive) net of any relevant tax and social security that would be due, vested but unexercised nil

cost options under any share plan, unvested share plan awards where vesting is not subject to the achievement of any performance conditions

or underpins net of any relevant tax and social security and free shares under any UK share incentive plan count towards this requirement.

Based on an average share price of £2.45 during the ﬁnal three months of 2023, Linda Z. Cook currently holds shares (directly and indirectly),

an unvested conditional share award and a deferred bonus award worth 2,669 per cent of her salary. Alexander Krane holds an unvested

conditional share award and deferred bonus awards worth 219 per cent of his salary using the same average price. Alexander is working

towards the guideline of 250 per cent of salary and will continue to be subject to 50 per cent deferral of his annual bonus until his minimum

shareholding is met.

Under the company’s Remuneration Policy, the shareholding requirement extends for two years post-cessation of employment. Shares

purchased by the departed executive directors are not covered by the post-cessation requirement.

Executive director external appointments

Executive directors are permitted to accept non-executive appointments outside the company providing that the Board’s approval is obtained.

Details of external appointments are set out on pages 70 and 71.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

Comparison of company performance

The chart below compares the value of £100 invested in the company’s shares, including reinvested dividends, on 31 December 2013

compared to the equivalent investment in the FTSE 100 index over the last 10 ﬁnancial years. The FTSE 100 index has been chosen as the

comparator for this graph because it is used as a peer group against which relative TSR performance is measured for awards granted under

the 2017 LTIP.

10-year TSR performance

Value of £100 invested on 31 December 2013:

£0

£50

£100

£150

£200

31 Dec 2023

31 Dec 2022

31 Dec 2021

31 Dec 2020

31 Dec 2019

31 Dec 2018

31 Dec 2017

31 Dec 2016

31 Dec 2015

31 Dec 2014

31 Dec 2013

FTSE 100 index

Harbour Energy plc

£5.59

£167.98

Note:

The closing share price of the company on 29 December 2023 was 308.6p. On 6 March 2024, being the date of approval of this report, the closing share price was 273.3p.

The table below shows the CEO single ﬁgure of remuneration for the past 10 years and corresponding performance under the annual and

long-term incentives, as a percentage of maximum.

Year

CEO

CEO single ﬁgure

of remuneration

£’000s

Annual bonus

payout as %

of maximum

Equity pool

as % of

maximum

Restricted share

award vesting as

% of maximum

Performance

share award

vesting as %

of maximum

Matching share

award vesting as

% of maximum

2014

Simon Lockett

680.3

(pro-rated)

–

Tony Durrant

428.7

–

2015

Tony Durrant

1,040.4

–

2016

Tony Durrant

1,404.3

66.5

–

2017

Tony Durrant

1,474.3

63.4

–

2018

Tony Durrant

1,558.4

54.3

45.1

–

75.1

2019

Tony Durrant

1,631.1

–

100

–

2020

Tony Durrant

814.1

10.4

–

2021

Richard Rose

436.6

–

Linda Z. Cook

5,978.3

–

2022

Linda Z. Cook

3,124.5

–

2023

Linda Z. Cook

2,407.0

–

Notes:

The maximum opportunity for the 2016 equity pool was 50 per cent of salary.

The maximum opportunity for the restricted share award was 20 per cent of salary.

Figures shown for 2014 for Tony Durrant relate to the period during 2014 that he served as Chief Executive Ofﬁcer: 25 June to 31 December 2014; and for Simon Lockett relate to the

period during 2014 that he served as Chief Executive Ofﬁcer: 1 January to 25 June 2014.

Tony Durrant stepped down from the Board on 16 December 2020.

Figures shown for 2021 for Richard Rose relate to the period during 2021 that he served as interim Chief Executive Ofﬁcer: 1 January 2021 to 31 March 2021; and for Linda Z. Cook

relate to the period during 2021 that she served as Chief Executive Ofﬁcer: 1 April 2021 to 31 December 2021.

Annual Report on Remuneration

continued

100

Harbour Energy plc

Annual Report & Accounts 2023

Percentage change in directors’ remuneration compared with other employees

The table below shows the percentage change in each director’s remuneration, comprising salary/fees, beneﬁts and annual bonus, and

comparable data for the average of all UK-based employees within the company, over each of the four years from 2020 to 2023. Figures

are presented on an annualised basis to allow for comparison.

Salary/fees

Beneﬁts

Annual bonus

2023

2022

2021

2020

2023

2022

2021

2020

2023

2022

2021

2020

Executive directors

Linda Z. Cook

–

(26)%

103%

–

(36)%

126%

–

Alexander Krane

–

23%

–

(34)%

118%

–

Non-executive directors

R. Blair Thomas

–

Simon Henry

–

Belgacem Chariag

–

Alan Ferguson

–

Andy Hopwood

4.0%

0.76%

–

Louise Hough

–

Margareth Øvrum

–

Anne L. Stevens

–

Former non-executive directors

G. Steven Farris

–

All employees

7.48%

2.91%

3.69%

2.51%

7.11%

11.85%

26.09%

(3.54)%

(30.07)% 115.82%

98.20%

(69.43)%

Notes:

Includes cash bonus and amount deferred into shares.

The beneﬁts ﬁgure for Linda Z. Cook for 2022 and 2023 reﬂects increased tax equalisation payments provided in connection with the vesting of the ﬁrst and second tranche of the

conditional share award during 2022 and 2023.

The increase for Andy Hopwood in 2022 and 2023 reﬂects a change in his committee membership and therefore an increase in the scope and complexity of his role.

CEO pay ratio

The table below sets out the ratio of the CEO’s pay to the lower quartile, median and upper quartile pay of the company’s UK employees for

the past ﬁve years.

Year

Method

P25 (lower quartile)

P50 (median)

P75 (upper quartile)

2023

Method A

22.03 : 1

18.16 : 1

13.40 : 1

Total pay and beneﬁts

£109,255

£132,570

£179,575

Salary

£73,665

£70,187

£114,002

2022

Method A

28.35 : 1

23.68 : 1

17.10 : 1

Total pay and beneﬁts

£110,200

£131,961

£182,684

Salary

£57,220

£85,513

£92,870

2021

Method A

76.6 : 1

62.3 : 1

40.99 : 1

Total pay and beneﬁts

£80,077

£98,476

£149,729

Salary

£58,880

£70,210

£97,340

2020

Method A

10.8 : 1

7.5 : 1

5.1 : 1

Total pay and beneﬁts

£75,717

£108,225

£160,027

Salary

£58,140

£81,412

£121,107

2019

Method A

19.8 : 1

11.9 : 1

8.2 : 1

Total pay and beneﬁts

£82,237

£136,538

£200,076

Salary

£52,508

£79,465

£124,584

Note:

The salary for the median employee in 2023 is less than that received by the lower quartile employee. This reﬂects a higher proportion of variable pay received by the median employee.

This anomaly arises due to the differences in the nature and pay structure of certain roles.

The 2023 pay ratio of 18.16 for the median group reﬂects the fact that CEO remuneration is heavily weighted to variable pay, resulting in larger

year-on-year variations than wider workforce pay. The difference in the 2023 ratio when compared with 2022 is a result of the decrease in the

CEO’s bonus outcome compared to the prior year. The pay ratio for 2021 reﬂects that the CEO’s 2021 remuneration included a one-off buyout

award in respect of remuneration forfeited at her former employer, without which the 2021 ratio would have been 16.1 for the median position.

The 2020 and 2019 ﬁgures represent the data for Premier Oil plc prior to the merger.

Total pay and beneﬁts for all employees has remained in line with 2022. The median pay ratio is consistent with the pay, reward and progression

policies for the company’s UK employees as a whole, with pay grades benchmarked to the oil and gas industry and a graduated bonus scheme

based on these grades. The results are consistent with the professional nature of our workforce.

101

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ remuneration report

continued

The Committee believes that, of the methodologies permitted under the regulations, Method A provides the most statistically accurate

representation of the Chief Executive Ofﬁcer’s remuneration relative to the UK workforce. Total pay and beneﬁts (on a full-time equivalent basis)

for the people employed at 31 December 2023 have been calculated in line with the ‘single ﬁgure methodology’ used for the Chief Executive

Ofﬁcer. Employees were then ranked to identify each individual at the 25

, 50

and 75

percentiles.

Relative importance of spend on pay

The table below shows the company’s actual expenditure on shareholder distributions and total employee pay expenditure for the ﬁnancial years

ending 31 December 2022 and 31 December 2023. Total shareholder distribution expenditure is composed of dividends and share buybacks.

2023

$ million

2022

$ million

change

Remuneration paid to or receivable by all employees of the Group

379

366

3.6%

Distributions to shareholders by way of dividend

190

191

(0.5)%

Distributions to shareholders by way of share buyback

248

359

(30.9)%

Notes:

The $300 million share buyback programme completed on 26 September 2022. The company announced a further $100 million share buyback programme on 3 November 2022,

which was implemented across 2022 and 2023. The 2022 ﬁgure reﬂects the cost of the shares during the buyback programmes in 2022 and excludes associated fees of $2 million.

Part of the share buyback programme announced on 3 November 2022 (referenced in note 1) was implemented during 2023 and concluded on 15 February 2023. On 9 March 2023

the company announced a further $200 million share buyback programme which concluded on 28 September 2023. The 2023 ﬁgure reﬂects the cost of the shares during 2023 and

excludes associated fees of $1 million.

Implementation of executive director Remuneration Policy for 2024

This section sets out the proposed implementation of the Directors’ Remuneration Policy in 2024.

Salary

The salaries of the executive directors are reviewed annually to ensure that they remain appropriate. The Committee reviewed salary levels

in early 2024 and agreed to award the CEO an increase of 4.5 per cent, slightly below the average increase for the broader workforce, which

was 5 per cent. The Committee agreed to award the CFO an increase of 7 per cent in recognition of the increased scope of his role in the

context of M&A activities and execution of the company’s strategy.

The base salaries of the executive directors effective from 1 April 2024 are shown below:

Directors

Position

Salary from

1 April 2023

Salary from

1 April 2024

Percentage

increase

Linda Z. Cook

Chief Executive Ofﬁcer

850,000

888,250

4.5%

Alexander Krane

Chief Financial Ofﬁcer

546,000

584,220

Pension and beneﬁts

As discussed in the Remuneration Committee Chair’s statement on page 84, from 2024 pension levels for executive directors will increase from

15 per cent to 20 per cent of salary, which is the level available to the wider workforce. There are no other changes intended to the beneﬁts

provided to executive directors. The Committee has considered the housing allowances for the executive directors, and given the ongoing

requirement for both executive directors to remain in the UK, and in recognition of their criticality to the business, agreed to extend the housing

allowances whilst each director remains in role.

Annual bonus

The executive director annual bonus corporate scorecard, setting out measures for 2024, is summarised below. Individual performance

targets are considered to be commercially sensitive and will be disclosed in next year’s Annual Report & Accounts.

Category

Targets

Weighting

(% of maximum corporate

bonus opportunity)

1. Safety & environment

Safety incident rate, Process safety, GHG emissions

35%

2. Operations

Oil and gas production, Unit operating costs

30%

3. Growth & capital deployment

Expenditure vs AFE, Reserves vs AFE

20%

4. Financial

Free cash ﬂow

15%

Annual Report on Remuneration

continued

102

Harbour Energy plc

Annual Report & Accounts 2023

Long Term Incentive Plan

The Committee intends to grant LTIP awards to executive directors of a value equal to 300 per cent of salary in line with the Policy. In recognition

of the increased scope of his role in relation to M&A activities and execution of the company’s strategy, the Committee agreed in March 2024 to

increase the CFO LTIP award from 250 per cent to 300 per cent of base salary. The award will continue to be assessed against relative TSR,

with 50 per cent of the award being assessed against the FTSE 100 index and 50 per cent against a bespoke oil and gas peer group.

The Committee carried out a further review of the bespoke oil and gas peer group in late 2023 and determined that Shell and bp should

be removed for the 2024 LTIP award due to their size and status as integrated oil and gas businesses rather than independent operators.

The Committee also considered that Ithaca Energy and Vår Energi ASA, as genuinely relevant competitors due to their location and size,

should be added to the bespoke comparator group. The structure of the award will be threshold vesting (25 per cent of maximum) for

performance in line with the median and maximum vesting for performance in line with the upper quartile.

Non-executive director remuneration

The fee structures for the Chair and non-executive directors are reviewed annually to ensure that they remain appropriate to reﬂect time

commitment, demands and responsibilities for the role. The Board last approved changes to fee levels in April 2021, with no changes made

in 2022 or 2023.

Following a review in March 2024, the Remuneration Committee approved a 4.5 per cent increase to the base fee for the Chair. The Board

approved the same increase to the base fee for non-executive directors, marginally lower than the average increase for the wider UK workforce

(5 per cent). The remuneration arrangements for the Chair and non-executive directors will be adjusted with effect from 1 April 2024 as per

the table below:

Basic fees

Salary from

1 April 2023

Salary from

1 April 2024

Chair all-inclusive fee

300,000

313,500

Other non-executive directors’ basic fee

85,000

88,825

Supplementary fees

Senior Independent Director

30,000

–

Chair of Audit and Risk Committee

20,000

–

Chair of Remuneration Committee

Chair of Health, Safety, Environment and Security Committee

15,000

–

Chair of Nomination Committee (N.B. waived by R. Blair Thomas)

Member of Audit and Risk Committee

Member of Remuneration Committee

Member of Health, Safety, Environment and Security Committee

10,000

–

Member of Nomination Committee

For and on behalf of the Remuneration Committee:

Anne L. Stevens

Committee Chair

6 March 2024

103

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ report

The directors present their Annual Report on the affairs of the Group,

together with the audited Group and parent company ﬁnancial

statements and Auditor’s report for the year ended 31 December

2023. There are certain disclosure requirements which form part of

the directors’ report and are included elsewhere in this Annual Report.

The location of information incorporated by reference into this

directors’ report is set out on page 106.

Dividend

The Board is proposing a ﬁnal dividend of 13 cents per ordinary

share (2022: 12 cents) to be paid in pound sterling at the spot rate

prevailing on the record date. This dividend is subject to shareholder

approval at the AGM, to be held on 9 May 2024. If approved, the

dividend will be paid on 22 May 2024 to shareholders on the register

as of 12 April 2024 (the record date).

Annual General Meeting

The company anticipates that the next AGM will be held on 9 May

2024. The notice of the AGM (the Notice), together with details of all

resolutions which will be placed before the meeting, will be published

in due course and will be available online in the shareholder

information section of the website.

Directors

The directors of the company as at 6 March 2024 are shown on

pages 70 and 71. Changes to the directors during the year and

up to the date of this report are set out below:

Appointments

Role

Eﬀective date

of appointment

Belgacem Chariag

Non-Executive Director

1 May 2023

Louise Hough

Non-Executive Director

1 May 2023

Resignations

Role

Eﬀective date

of departure

G. Steven Farris

Non-Executive Director

10 May 2023

Meeting attendance

Ten Board meetings were held during the year, seven of which were

scheduled meetings covering a full agenda of strategic, performance

and governance items.

Three additional meetings were called during the year to discuss

speciﬁc topics.

Director

Meetings attended

Percentage

R. Blair Thomas

10/10

100%

Linda Z. Cook

10/10

100%

Alexander Krane

10/10

100%

Simon Henry

10/10

100%

Alan Ferguson

10/10

100%

Andy Hopwood

10/10

100%

Margareth Øvrum

10/10

100%

Anne L. Stevens

10/10

100%

Belgacem Chariag

7/7

100%

Louise Hough

7/7

100%

G. Steven Farris

4/4

100%

Belgacem Chariag joined the Board on 1 May 2023.

Louise Hough joined the Board on 1 May 2023.

G. Steven Farris stepped down from the Board on 10 May 2023.

Articles of association

The company’s articles of association were adopted at the 2021

Annual General Meeting (AGM) and may only be amended by a special

resolution of the shareholders. The company’s articles of association

contain provisions regarding the appointment, retirement and removal

of directors and how the directors can use all of the company’s

powers. A copy of the articles of association can be found on our

website: harbourenergy.com.

Indemniﬁcation of directors and insurance

During the ﬁnancial year, the company had in place an indemnity to

each of its directors and the Company Secretary under which the

company will, to the fullest extent permitted by law and to the extent

provided by the articles of association, indemnify them against all

costs, charges, losses and liabilities incurred by them in the execution

of their duties. The indemnity was in force for all directors who served

during the year. The company also has directors’ and ofﬁcers’ liability

insurance in place.

Share capital

Details of the company’s issued share capital, together with details of

any movement in the issued share capital during the year, are shown

in note 24 to the consolidated ﬁnancial statements on page 164. The

company has one class of ordinary shares which carries no right to

ﬁxed income. Each share carries the right to one vote at shareholder

meetings of the company.

The company was authorised at the 2023 AGM to allot (i) relevant

securities for a nominal amount of up to £5,562 and (ii) equity securities

up to a nominal amount of £11,124 less the nominal amount of any

shares issued under part (i) of the authority. In connection with the

all-employee Save As You Earn scheme, 5,092 shares were allotted

under the ﬁrst authority during the year at a price of £2.208 per share.

Purchase of own shares

During the period from 1 January to 15 February 2023 the company

completed the $100 million share buyback programme announced

on 3 November 2022, repurchasing 11,093,925 ordinary shares.

Shareholders approved a resolution at the 2023 AGM for the company

to make purchases of its own shares up to a maximum of approximately

14.99 per cent (125,000,000 shares) of its issued share capital.

This authority will expire at the conclusion of the 2024 AGM.

The Board announced a further $200 million share buyback

programme on 9 March 2023. The buyback programme commenced

on 15 March 2023, concluding on 28 September 2023 with a total

of 65,709,133 ordinary shares repurchased for cancellation.

The total amount of shares repurchased by the company during 2023

was therefore 76,803,058 ordinary shares, 9 per cent of the

company’s issued share capital for a total consideration of $249 million.

104

Harbour Energy plc

Annual Report & Accounts 2023

Employee share schemes

Details of employee share schemes are set out in note 25 to the

consolidated ﬁnancial statements on pages 165 and 166. Voting

rights in relation to the shares held within the Employee Beneﬁt

Trust are exercisable by the trustee but it has no obligation to do so.

Details of the number of shares held by the Employee Beneﬁt Trust

are set out in note 24 to the ﬁnancial statements on page 164.

Equal opportunities

Full and fair consideration is given to all applications for

employment by disabled persons, having regard for any particular

aptitudes and abilities. We strive to provide continued employment

and arrange appropriate training for members of our workforce

who become disabled whilst employed by us. We provide training,

career development and promotion of disabled employees.

Our commitment to building a diverse, equitable and inclusive

environment is foundational to our values and is underpinned

by our People and Diversity, Equity and Inclusion Policies.

American Depositary Receipt programme

Harbour Energy plc has a sponsored Level 1 American Depositary

Receipt (ADR) programme which BNY Mellon administers and for

which it acts as Depositary. Each ADR represents one ordinary share

of the company. The ADRs trade on the US over-the-counter market

under the symbol HBRIY.

Hedging and risk management

Details of the Group’s hedging and risk management are provided in

the Financial review on page 30. A further disclosure has been made

in notes 22 and 23 to the consolidated ﬁnancial statements on

pages 158 and 159, related to various ﬁnancial instruments and

exposure of the Group to price, credit, liquidity and cash ﬂow risk.

Branches

As a global group our interests and activities are held or

operated through subsidiaries, branches, joint arrangements

or associates established in and subject to the laws and

regulations of different jurisdictions.

Signiﬁcant shareholdings

As at 6 March 2024, the company had received notiﬁcation from the institutions below, in accordance with chapter 5 of the Disclosure and

Transparency Rules, of their signiﬁcant holdings of voting rights (3 per cent or more) in its ordinary shares:

Name of shareholder

Date of notiﬁcation to

the stock exchange

Notiﬁed number

of voting rights

Notiﬁed percentage

of voting rights

Nature of holding

EIG Asset Management, LLC

11.07.2023

134,281,887

16.74%

Direct

Control Empresarial de Capitales

23.02.2024

54,901,500

7.13%

Direct

Bank of America Corporation

22.02.2024

25,380,961

3.29%

Indirect

Notiﬁed number of voting rights in issue at the time of the announcement to the market.

The company has in place a relationship agreement with

EIG Global Energy Partners (EIG) which was entered into on

completion of the merger in March 2021 (the relationship

agreement). EIG currently holds 16.74 per cent of the company’s

issued share capital. Participation in this agreement will continue

in force unless and until EIG and its afﬁliates cease to own at

least 10 per cent or more of the ordinary shares or the voting

rights attaching to the ordinary shares. EIG may terminate the

relationship agreement in certain circumstances, including where

the ordinary shares cease to be admitted to the premium listing

segment of the Ofﬁcial List and admitted to trading to the

London Stock Exchange’s main market for listed securities.

Under the relationship agreement, EIG is entitled to nominate one

non-executive director for appointment to the Board for so long

as it holds between 10 per cent and 25 per cent of the issued

shares of the company and two non-executive directors for so

long as it holds over 25 per cent of the shares. At the current

time, R. Blair Thomas (Chair) is EIG’s nominated appointee.

In addition, pursuant to the relationship agreement EIG

undertakes that it shall not:

•

take any action that would have the effect of preventing

the company from complying with its obligations under the

Listing Rules;

•

propose or procure the proposal of a shareholder resolution

of the company which is intended or appears to be intended

to circumvent the proper application of the Listing Rules;

•

exercise any of its voting rights in the company in a way that

would be inconsistent with, or breach any of the provisions

of, the relationship agreement;

•

inﬂuence the day-to-day running of the company at an

operational level and shall allow the company to operate

on an independent basis;

•

vote its ordinary shares, and shall use its reasonable

endeavours to procure that any director appointed by it does

not vote his or her shares, in a manner that would prevent

the company from operating and making decisions for the

beneﬁt of shareholders of the company as a whole; and

•

act in a manner which would be inconsistent with the

independence of the Board being maintained in accordance

with the rules of the London Stock Exchange or the FCA

applicable to the company, including the Listing Rules and

the UK Corporate Governance Code.

Relationship agreement

105

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Directors’ report

continued

Signiﬁcant agreements

The following signiﬁcant agreements will, in the event of a change

of control of the company, be affected as follows:

•

under the up to $2.75 billion senior secured revolving borrowing base

facility agreement between, among others, the company, certain

subsidiaries of the company and a syndicate of ﬁnancial institutions,

upon a change of control (save for certain exceptions), each lender

has the right to serve notice, and following a short prescribed

period after such notice, all of that lender’s commitments under

the agreement would be cancelled and all amounts owing to it

would become immediately due and payable; and

•

the Group has outstanding senior unsecured bond notes totalling

$500 million due 2026. Upon a change of control (save for

certain exceptions), each noteholder will have the right to require

Harbour Energy plc to repurchase all or any part of that holder’s

notes at a premium, together with accrued interest.

Political donations

No political donations were made during the year (2022: $nil).

Signiﬁcant events since 31 December 2023

Details of signiﬁcant events since the balance sheet date are

contained in note 30 to the ﬁnancial statements on page 169.

Information set out in the Strategic Report

In accordance with s414C(11) of the Companies Act 2006, the

directors have chosen to set out the information outlined below,

required to be included in the directors’ report, in the Strategic Report.

•

the main trends and factors likely to affect the future

development, performance and position of the business:

pages 4 to 9;

•

information on the company’s research and development

activities: page 20 and page 45;

•

a summary of the company’s principal risks: pages 60 to 65;

•

employee engagement and involvement: pages 12 to 15 and

pages 50 and 51;

•

diversity, equity and inclusion: pages 51 and 52;

•

information about greenhouse gas emissions and addressing

our environmental impact: pages 38 to 47; and

•

engagement with suppliers, customers and other stakeholders:

pages 12 to 15.

The Strategic Report and the directors’ report together include

the ‘management report’ for the purposes of the FCA’s Disclosure

& Transparency Rules (DTR 4.1.8R).

Information set out elsewhere in this Annual Report

Information regarding the company’s governance arrangements

is included in the corporate governance report and related Board

committee reports on pages 66 to 103. These sections of the

report are incorporated into this report by reference.

For the purposes of Listing Rule 9.8.4C R, the information

required to be disclosed by Listing Rule 9.8.4 R can be found

in the following locations:

Listing rule

sub-section Item

Location

9.8.4 (1)

Interest capitalised

Note 7 to the ﬁnancial statements:

page 141

9.8.4 (4)

Details of long-term

incentive schemes

Directors’ remuneration report:

pages 97 and 98, and 103

9.8.4 (5)

Waiver of emoluments

by a director

Directors’ remuneration report:

page 95

Non-ﬁnancial reporting

In order to consolidate our reporting requirements under sections

414CA and 414CB of the Companies Act 2006 in respect of

non-ﬁnancial reporting, the table opposite shows where in this

Annual Report to ﬁnd each of the disclosure requirements.

Audit information

Each of the persons who is a director at the date of approval

of this Annual Report and ﬁnancial statements conﬁrms that:

•

so far as the director is aware, there is no relevant audit

information of which the company’s auditors are unaware; and

•

the director has taken all reasonable steps that he/she ought

to have taken as a director in order to make himself/herself

aware of any relevant audit information and to establish that

the company’s auditors are aware of that information.

This conﬁrmation is given and should be interpreted in accordance

with the provisions of s418 of the Companies Act 2006. By order

of the Board:

Rachel Rickard

Company Secretary

6 March 2024

106

Harbour Energy plc

Annual Report & Accounts 2023

Non-ﬁnancial and sustainability information statement

Complying with the UK’s non-ﬁnancial reporting directive

Non-ﬁnancial measures are an important part of our business and the Board is committed to acting responsibly and working with our

stakeholders to manage the impact of our activities. The table and cross references below aim to help stakeholders better understand

our approach to key non-ﬁnancial matters.

Safety matters

•

Health, Safety, Environment

and Security (HSES) Policy

•

Corporate Major Accident

Prevention Policy

•

ISO 45001 occupational health and

safety management system standards

•

International Association of Oil & Gas

Producers (member)

•

Global Reporting Initiative (GRI) Standards

•

Pages 34 to 37

Environmental

matters

•

Health, Safety, Environment

and Security (HSES) Policy

•

Sustainability Policy

•

ISO 14001 (environmental) and OHSAS

18001 (occupational health and safety)

management system standards

•

International Association of Oil & Gas

Producers (member)

•

Global Reporting Initiative (GRI) Standards

•

Pages 38 to 47

Climate change

•

Health, Safety, Environment

and Security (HSES) Policy

•

Sustainability Policy

•

Task Force on Climate-related

Financial Disclosures (TCFD)

•

Pages 39 to 44

•

Pages 124 to 127

Employees

•

People Policy

•

Sustainability Policy

•

Corporate Major Accident

Prevention Policy

•

N/A

•

Pages 50 to 52

Human rights

•

Human Rights Statement

•

Supply Chain Policy

•

Sustainability Policy

•

Voluntary Principles on Security

and Human Rights

•

United Nations Guiding Principles

on Business and Human Rights

•

Page 52

Social matters

•

Sustainability Policy

•

N/A

•

Pages 48 to 52

Anti-corruption

and anti-bribery

•

Code of Conduct

•

Tax Policy

•

N/A

•

Pages 53 to 55

Business model

description

•

N/A

•

N/A

•

Pages 10 and 11

Principal risks

and uncertainties

•

Risk Management Policy

•

ISO 31000 risk management

system standard

•

Pages 56 to 58

•

Pages 60 to 65

Non-ﬁnancial

KPIs

•

N/A

•

N/A

•

Throughout

Section 414CB(2A) of the Companies Act 2006 requires that organisations disclose information to support all material environmental,

social and governance aspects through their Annual Report & Accounts. Through the 2023 materiality process a number of topics with

increasing importance to Harbour and our stakeholders were identiﬁed. These include Biodiversity and Local Communities as examples.

Harbour intends to support this increased potential risk by developing additional policies and associated standards, as required, to ensure

the correct focus and risk mitigation are in place across the organisation.

Reporting

requirement

Internal policies

and standards

External frameworks

and standards

Information on our

business impacts

and outcomes

107

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Statement of directors’ responsibilities

The directors are responsible for preparing the Annual Report and the

ﬁnancial statements in accordance with applicable United Kingdom

law and regulations.

Group ﬁnancial statements

Company law requires the directors to prepare ﬁnancial statements

for each ﬁnancial year. Under that law the directors have elected

to prepare the Group ﬁnancial statements in accordance with

UK-adopted International Accounting Standards (IAS) in conformity

with the requirements of the Companies Act 2006, and the parent

company ﬁnancial statements in accordance with United Kingdom

Generally Accepted Accounting Practice (United Kingdom Accounting

Standards and applicable law), including Financial Reporting Standard

101 Reduced Disclosure Framework (FRS 101). Under company law

the directors must not approve the ﬁnancial statements unless they

are satisﬁed that they give a true and fair view of the state of affairs

of the Group and the company and of the proﬁt or loss of the Group

and the company for that period.

In preparing the Group and parent company ﬁnancial statements the

directors are required to:

•

select suitable accounting policies in accordance with IAS 8

Accounting Policies, Changes in Accounting Estimates and Errors

and then apply them consistently;

•

make judgements and accounting estimates that are reasonable

and prudent;

•

present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and

understandable information;

•

provide additional disclosures when compliance with the speciﬁc

requirements in IFRS and, in respect of the parent company

ﬁnancial statements, FRS 101 is insufﬁcient to enable users to

understand the impact of particular transactions, other events

and conditions on the Group and company ﬁnancial position

and ﬁnancial performance;

•

in respect of the Group ﬁnancial statements, state whether UK-

adopted International Accounting Standards have been followed,

subject to any material departures disclosed and explained in

the ﬁnancial statements;

•

in respect of the parent company ﬁnancial statements, state

whether International Accounting Standards in conformity with

the requirements of the Companies Act 2006/applicable UK

Accounting Standards, including FRS 101, have been followed,

subject to any material departures disclosed and explained in

the ﬁnancial statements; and

•

prepare the ﬁnancial statements on the going concern basis

unless it is inappropriate to presume that the company and/or

the Group will continue in business.

The directors are responsible for keeping adequate accounting records

that are sufﬁcient to show and explain the company’s and Group’s

transactions and disclose with reasonable accuracy at any time the

ﬁnancial position of the company and the Group and enable them

to ensure that the company and the Group ﬁnancial statements

comply with the Companies Act 2006. They are also responsible

for safeguarding the assets of the Group and parent company

and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

Under applicable law and regulations, the directors are also

responsible for preparing a strategic report, directors’ report, directors’

remuneration report and corporate governance statement that comply

with that law and those regulations. The directors are responsible

for the maintenance and integrity of the corporate and ﬁnancial

information included on the company’s website: harbourenergy.com.

Directors’ responsibility statement (DTR 4.1)

The directors, whose names and functions are set out on pages

70 and 71, conﬁrm, to the best of their knowledge:

•

that the consolidated ﬁnancial statements, prepared in

accordance with UK-adopted International Accounting Standards,

give a true and fair view of the assets, liabilities, ﬁnancial position

and proﬁt of the parent company and undertakings included in

the consolidation taken as a whole;

•

that the Annual Report & Accounts, including the Strategic Report,

includes a fair review of the development and performance of

the business and the position of the company and undertakings

included in the consolidation taken as a whole, together with a

description of the principal risks that they face; and

•

that they consider the Annual Report & Accounts, taken as a

whole, is fair, balanced and understandable and provides the

information necessary for shareholders to assess the company’s

position, performance, business model and strategy.

This responsibility statement was approved by the board of directors

on 6 March 2024 and is signed on its behalf by:

Linda Z. Cook

Chief Executive Ofﬁcer

108

Harbour Energy plc

Annual Report & Accounts 2023

Independent auditor’s report to the members of Harbour Energy plc

Opinion

In our opinion:

•

Harbour Energy plc’s Group ﬁnancial statements and parent company ﬁnancial statements (the ﬁnancial statements) give a true and fair view

of the state of the Group’s and of the parent company’s affairs as at 31 December 2023 and of the Group’s proﬁt for the year then ended;

•

the Group ﬁnancial statements have been properly prepared in accordance with UK-adopted international accounting standards;

•

the parent company ﬁnancial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice; and

•

the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the ﬁnancial statements of Harbour Energy plc (the parent company) and its subsidiaries (the Group) for the year ended

31 December 2023 which comprise:

Group

Parent company

Consolidated balance sheet as at 31 December 2023

Company balance sheet as at 31 December 2023

Consolidated income statement for the year then ended

Company statement of changes in equity for the year then ended

Consolidated statement of comprehensive income for the year then ended

Related notes 1 to 10 to the ﬁnancial statements including material

accounting policy information

Consolidated statement of changes in equity for the year then ended

Consolidated statement of cash ﬂows for the year then ended

Related notes 1 to 31 to the ﬁnancial statements, including material

accounting policy information

The ﬁnancial reporting framework that has been applied in the preparation of the Group ﬁnancial statements is applicable law and UK-adopted

international accounting standards. The ﬁnancial reporting framework that has been applied in the preparation of the parent company ﬁnancial

statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom

Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities

under those standards are further described in the Auditor’s responsibilities for the audit of the ﬁnancial statements section of our report.

We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group and parent in accordance with the ethical requirements that are relevant to our audit of the ﬁnancial

statements in the UK, including the UK Financial Reporting Council’s (FRC) Ethical Standard as applied to listed public interest entities,

and we have fulﬁlled our other ethical responsibilities in accordance with these requirements.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and we remain

independent of the Group and the parent company in conducting the audit.

Conclusions relating to going concern

In auditing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation

of the ﬁnancial statements is appropriate. Our evaluation of the directors’ assessment of the Group and parent company’s ability to continue

to adopt the going concern basis of accounting included:

•

Conﬁrming our understanding of management’s going concern assessment process in conjunction with our walkthrough of the Group’s

ﬁnancial close process and engaging with management to conﬁrm all relevant assumptions were considered

•

Obtaining the cash ﬂow forecasts prepared by management for the Group, including the base case and downside scenarios

•

Testing the integrity of management’s going concern model by ensuring the forecasts were consistent with the budget approved by the

Board and with other areas of the audit such as the impairment assessments

•

Challenging the key assumptions included in the model, including management’s oil and gas price assumptions. Our assessment of these price

assumptions included a comparison of management’s price assumptions with recent broker and consultant estimates together with estimates

used by other market participants, including those estimates that reﬂect the potential impact of the climate change transition risks

•

Evaluating the reasonableness of all other key assumptions, such as production proﬁles and operating and capital expenditure

forecasts, through assessing their consistency with other areas of the audit, including management’s impairment assessments. We also

ensured these assumptions were consistent with the budget approved by Harbour Energy’s Board

•

Inspecting the Group’s loan agreements, ensuring that the cash outﬂows relating to interest and repayments are consistent with the

agreements, verifying that no covenants have been breached and evaluating whether there is any forecast covenant breach in either

the base case or downside case scenarios during the going concern period

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Additional information

Independent auditor’s report to the members of Harbour Energy plc

continued

•

Verifying that the cash ﬂow forecasts included estimated outﬂows in respect of the Energy Proﬁts Levy (EPL) and ensuring such outﬂows

were consistent with our work on management’s impairment assessments

•

Reviewing management’s reverse stress tests in order to identify what factors would lead to the Group not meeting the ﬁnancial

covenants during the going concern period, including the minimum liquidity requirement as set in the reserve based lending loan

agreement, and assessing the likelihood of occurrence of such a scenario

•

Understanding the impact of the proposed Wintershall Dea AG transaction on the cash ﬂow forecasts and loan covenants in the going

concern period

•

Evaluating the appropriateness of the going concern disclosures in the ﬁnancial statements to determine whether they are accurate and

in line with IAS 1 – Presentation of ﬁnancial statements and our expectations given the procedures we have performed

Based on the procedures performed, we observed that the oil and gas prices are within the range of recent brokers’ and consultants’

estimates and production proﬁles are consistent with those used in management’s impairment assessment and in our work on oil and gas

reserves. In the downside cases modelled by management, we observed that there remained liquidity headroom and that under these cases

the Group operates within the requirements of its ﬁnancial covenants. We concluded that the modelled plausible downside scenarios were

reasonable for concluding on the going concern assumption. In addition, we have concluded that the reverse stress test scenarios, under

which there is either a liquidity issue or the covenants are breached, have a remote likelihood of occurrence.

Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that, individually or

collectively, may cast signiﬁcant doubt on the Group and parent company’s ability to continue as a going concern for a period up to 30 June 2025.

In relation to the Group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing

material to add or draw attention to in relation to the directors’ statement in the ﬁnancial statements about whether the directors considered

it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue

as a going concern.

Overview of our audit approach

Audit scope

•

We performed an audit of the complete ﬁnancial information of six components and audit procedures on speciﬁc

balances for a further 14 components

•

The components where we performed full or speciﬁc audit procedures accounted for 94% of Adjusted Earnings

Before Interest, Tax, Depreciation and Amortisation (Adjusted EBITDA), 99% of Revenue and 93% of Total assets

Key audit matters

•

Oil and gas reserves estimation including reserves used in the calculation of depreciation, depletion and

amortisation, impairment testing and the assessment of recoverability of deferred tax assets

•

Impairment of tangible oil and gas properties and associated goodwill

•

Tax liabilities and contingencies

Materiality

•

Overall Group materiality of $72m which represents 2.7% of Adjusted Earnings Before Interest, Tax, Depreciation

and Amortisation (Adjusted EBITDA)

An overview of the scope of the parent company and Group audits

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each

company within the Group. Taken together, this enables us to form an opinion on the consolidated ﬁnancial statements. We take into account size,

risk proﬁle, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment, the potential impact

of climate change and other factors such as recent Internal audit results when assessing the level of work to be performed at each company.

In assessing the risk of material misstatement to the Group ﬁnancial statements, and to ensure we had adequate quantitative coverage of

signiﬁcant accounts in the ﬁnancial statements, of the 95 reporting components of the Group, we selected 20 components covering entities

within the United Kingdom, Indonesia and Vietnam, which represent the principal business units within the Group.

Of the 20 components selected, we performed an audit of the complete ﬁnancial information of six components (full scope components)

which were selected based on their size or risk characteristics. Out of these six components, the UK integrated primary team performed

audit procedures for ﬁve components. Of the remaining 14 components (speciﬁc scope components), we performed audit procedures

on speciﬁc accounts within these components that we considered had the potential for the greatest impact on the signiﬁcant accounts

in the ﬁnancial statements either because of the size of these accounts or their risk proﬁle. Out of these 14 components, the UK integrated

primary team performed audit procedures for 12 components.

The reporting components where we performed audit procedures accounted for 94% (2022: 99%) of the Group’s Adjusted EBITDA, 99%

(2022: 97%) of the Group’s Revenue and 93% (2022: 91%) of the Group’s Total assets. For the current year, the full scope components

contributed 94% (2022: 99%) of the Group’s Adjusted EBITDA, 90% (2022: 97%) of the Group’s Revenue and 68% (2022: 81%) of the

Group’s Total assets. The speciﬁc scope components contributed 0% (2022: 0%) of the Group’s Adjusted EBITDA, 8% (2022: 0%) of the

Group’s Revenue and 18% (2022: 10%) of the Group’s Total assets. The audit scope of these components may not have included testing

of all signiﬁcant accounts of the component but will have contributed to the coverage of signiﬁcant accounts tested for the Group.

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Of the remaining 75 components that together represent 6% of the Group’s Adjusted EBITDA, none are individually greater than 1% of

the Group’s Adjusted EBITDA. For these components, we performed other procedures, including analytical review, testing of consolidation

journals and intercompany eliminations to respond to any potential risks of material misstatement to the Group ﬁnancial statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

Full scope components

Specific scope components

Other procedures

94%

Full scope components

Specific scope components

Other procedures

90%

Full scope components

Specific scope components

Other procedures

68%

18%

14%

Adjusted EBITDA

Revenue

Total assets

Changes from the prior year

We decreased the number of full scope components from nine to six in the current year and increased the number of speciﬁc scope

components from seven to 14 reﬂecting the change in contribution to the Group’s results across these entities.

Involvement with component teams

In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the

components by us, as the primary audit engagement team, or by component auditors from other EY global network ﬁrms operating under

our instruction. Of the six full scope components and 14 speciﬁc scope entities, audit procedures were performed on ﬁve of the full scope

entities and 12 of the speciﬁc entities directly by the integrated primary audit team. One full scope entity and two speciﬁc scope entities

were audited by component teams based in Indonesia and Vietnam, where we determined the appropriate level of involvement to enable

us to determine that sufﬁcient audit evidence had been obtained as a basis for our opinion on the Group as a whole.

The majority of the Group’s activities are based in the UK for which all audit procedures are performed by the UK integrated primary team.

The Group audit team continued to follow a programme of planned virtual meetings and ﬁle review for the component teams in Indonesia

and Vietnam. This included the involvement of the Senior Statutory Auditor and were in the form of video calls with local management and

with the local EY component teams. During the visits we held discussions on the audit approach and understood any issues arising from

their work and were responsible for the scope and direction of the audit process. We reviewed the component team’s working papers

remotely to validate that the required procedures had been performed in line with our audit instructions. We also virtually attended

year-end closing meetings for both the components and interacted regularly with the component teams throughout the year.

Climate change

Stakeholders are increasingly interested in how climate change will impact Harbour Energy plc. The Group has determined that the most

signiﬁcant future impacts from climate change on their operations will be from reduced customer demand for fossil fuels, policy incentives

and emerging regulation curtailing future fossil fuel demand, carbon pricing mechanisms applied to direct operations, limitations on access

to capital or the increase in the cost of capital, and acute physical risks. These are explained on pages 42 and 43 in the required Task Force

On Climate-related Financial Disclosures and on page 65 in the principal risks and uncertainties. The Group has also explained its climate

commitments on page 40. All of these disclosures form part of the ‘Other information’, rather than the audited ﬁnancial statements.

Our procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with

the ﬁnancial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line

with our responsibilities on ‘Other information’.

In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential

material impact on its ﬁnancial statements.

The Group has explained in note 2 – Accounting Policies, how they have reﬂected the impact of climate change in their ﬁnancial statements

including how this aligns with their commitment to achieve net zero across gross operated Scope 1 and 2 emissions by 2035 and their

interim target of a 50% reduction in 2030 against their 2018 baseline. Signiﬁcant judgements and estimates relating to climate change

are included in note 2 to the ﬁnancial statements. In this note, management has provided supplementary sensitivity disclosures showing

the impact of oil, gas and carbon costs under IEA scenarios (Net Zero Emissions by 2050 (NZE), Stated Policies (STEPS) and Announced

Pledges (APS)) on the carrying value of tangible oil and gas assets.

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Governance

Financial statements

Additional information

Independent auditor’s report to the members of Harbour Energy plc

continued

Our audit effort in considering the impact of climate change on the ﬁnancial statements was focused on evaluating management’s

assessment of the impact of climate risk, their climate commitments, the effects of material climate risks disclosed on pages 40, 42 and

43, and 65 and the signiﬁcant judgements and estimates disclosed in note 2 and whether these have been appropriately reﬂected in (i) oil

and gas reserves estimation, (ii) the impairment assessments for tangible oil and gas assets and associated goodwill and associated

sensitivity disclosures, (iii) the valuation of net deferred tax liabilities, and (iv) the timing and nature of decommissioning liabilities recognised

following the requirements of UK-adopted international accounting standards. As part of this evaluation, we performed our own risk

assessment, supported by our climate change internal specialists and senior audit team members with signiﬁcant experience in climate

change and energy transition. This included meetings with the Group’s net zero strategy, Financial Planning and Group Finance teams

and a review of peer disclosures and sector guidance on climate change and energy transition to determine the risks of material

misstatement in the ﬁnancial statements from climate change which needed to be considered in our audit.

We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and the associated

disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above.

Based on our work, whilst we have not identiﬁed the impact of climate change on the ﬁnancial statements to be a standalone key audit

matter, we have considered the impact on the following key audit matters: oil and gas reserves estimation; and impairment of tangible oil

and gas properties and associated goodwill. Details of the impact, our procedures and ﬁndings are included in our explanation of key audit

matters below.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most signiﬁcance in our audit of the ﬁnancial statements of

the current period and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud) that we identiﬁed.

These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and

directing the efforts of the engagement team. These matters were addressed in the context of our audit of the ﬁnancial statements as

a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Risk

Our response to the risk

Key observations communicated

to the Audit and Risk Committee

Oil and gas reserves estimation

Refer to the Audit and Risk Committee

report (page 76); Material accounting

policies (page 123); and Additional

information (page 182).

At 31 December 2023, Harbour reported

361 million barrels of oil equivalent

(mmboe) of proven and probable (2P)

reserves (2022: 410 mmboe).

The estimation and measurement of oil

and gas reserves impacts various material

elements of the ﬁnancial statements

including depreciation, depletion and

amortisation (DD&A), impairment,

decommissioning provisions and

deferred tax asset (DTA) recoverability.

Auditing the estimation of oil and gas

reserves is complex, as there is signiﬁcant

estimation uncertainty in assessing the

quantities of reserves and resources in

place. Estimation uncertainty is further

elevated given the transition to a low-carbon

economy which could impact life-of-ﬁeld

assumptions and increase the risk of

underutilised or stranded oil and gas

assets. Also, given the estimation of oil and

gas reserves is complex, there is a risk that

inappropriate management bias inﬂuences

the estimates.

Management’s 2P reserves estimates are

prepared by an internal specialist whilst

an external specialist is engaged for the

purpose of assessing the appropriateness

of management’s internal estimates.

The audit procedures in respect of oil and gas reserves estimation were

performed by the primary audit team; our procedures covered 100% of

2P reserve volumes.

Our work to address the identiﬁed risks included the following procedures:

•

we conﬁrmed our understanding of Harbour’s oil and gas reserve

estimation process as well as the control environment implemented

by management;

•

we assessed the appropriateness of reliance on management’s

internal and external reserve specialists by undertaking procedures

to evaluate their competence and objectivity;

•

we met separately with management’s internal and external

specialists to understand the basis, and therefore appropriateness,

for any signiﬁcant variances between the two sets of estimates at a

cash-generating unit (CGU) level;

•

where variances of a technical nature were identiﬁed, we utilised

the knowledge and expertise of an EY internal specialist from our

Financial Accounting Advisory Services practice with signiﬁcant oil

and gas reserves expertise as part of our work to assess the nature

of the variances and appropriateness of management’s estimates;

•

we recalculated net entitlement production that reﬂects the terms

of production sharing contracts for the relevant ﬁelds and is derived

from reserves prepared by internal specialists and independently

assessed by external specialists;

•

we investigated all material volume movements from management’s

prior period estimates and where there was a lack of movement

where changes were expected based on our understanding of the

Group’s operations and ﬁndings from other areas of our audit;

•

in light of Harbour’s pledge to reach net zero for Scope 1 and 2

emissions by 2035 (equity share), we considered the extent of 2P

reserves recognised that are due to be produced beyond 2035 in

assessing the potential impact of a risk of stranded assets; and

•

we ensured the 2P reserve volumes were consistently applied

throughout all relevant accounting processes including DD&A,

impairment, decommissioning provisions and DTA recoverability.

We reported to the Audit and Risk

Committee that based on our

procedures performed, we had

not identiﬁed any errors or factual

inconsistencies with reference to

Harbour’s oil and gas reserves

estimates that would materially impact

the ﬁnancial statements and that,

as a result, we consider the reserve

estimates to be reasonable.

We reported that a signiﬁcant majority

of Harbour’s 2P reserves are expected

to be produced by 2035. As such we

are satisﬁed that the risk of there

being a material stranded asset is low.

Management has sufﬁcient time and

options to decarbonise their assets in

line with their stated target, including

the use of carbon capture and storage

facilities or through the purchase of

carbon credits.

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Risk

Our response to the risk

Key observations communicated

to the Audit and Risk Committee

Impairment of tangible oil and gas

properties and associated goodwill

Refer to the Audit and Risk Committee

report (page 76); Material accounting

policies (pages 123 to 137); and notes 10

and 12 of the Consolidated Financial

Statements (pages 145 and 146, and

pages 147 and 148).

In the current period, management noted

impairment indicators for certain of the

Group’s assets and recorded a pre-tax

impairment of $239 million (2022: net

pre-tax impairment reversal of $170 million).

Management prepares the tangible asset

impairment tests under the Fair Value Less

Cost to Sell methodology. The impairment

models include a number of estimates

including: future oil and gas prices; discount

rates; inﬂation rates; production forecasts;

operating expenditures; and capital

expenditures for each CGU. Changes to any

of these key inputs could lead to a material

change in an impairment or a reversal

of impairment, hence this is considered

a key audit matter.

Our audit response was executed by the primary audit team, covering all

assets at risk of material impairment. We performed the following audit

procedures with respect to management’s impairment assessment:

•

conﬁrmed our understanding of Harbour’s impairment assessment

process, as well as the controls implemented by management;

•

considered the internal and external sources of information included

in IAS 36 to identify any potential indicators of impairment loss and/or

reversal, including any downgrades in oil and gas reserve estimates

or sustained increase / decrease in oil and gas prices compared to

the prior year;

•

following management’s identiﬁcation of impairment indicators,

we obtained the discounted cash ﬂow model that reﬂects the

expectations of an external market participant for each of these

CGUs and tested the models for integrity which included the use

of EY technology tools to evaluate spreadsheet integrity;

•

we assessed the appropriateness of management’s oil and gas

price assumptions through comparison with the estimates of

market participants;

•

in conjunction with our EY valuations specialists, we assessed the

appropriateness of management’s impairment discount rates based

on an independent re-calculation of the Group’s weighted average

cost of capital;

•

we evaluated management’s production proﬁles through

reconciliation to the results of our audit work in respect of oil and

gas reserves estimation;

•

we tested the appropriateness of other cashﬂow assumptions

such as opex, capex and decommissioning spend by comparing

against Board approved plans and actual costs incurred. We

compared inﬂation and FX rates to recent market forecasts to

assess their reasonableness;

•

we performed headroom analysis for the oil and gas production

CGUs as part of our assessment of the recoverability of the

goodwill recognised in the Group ﬁnancial statements; and

•

we also evaluated the accuracy and completeness of the impairment

disclosures included in the notes to the ﬁnancial statements.

In assessing the impact of climate transition risk on impairment,

we performed the following procedures:

•

comparison of Harbour’s long-term oil and gas price assumption

to International Energy Association (IEA) Announced Pledges Scenario

(APS) and Net Zero Emissions (NZE) Scenario;

•

reasonableness assessment of carbon prices and sensitivity of

future carbon costs in the cash ﬂow models, including comparison

of prices to IEA APS and NZE scenarios;

•

understood how management intend to achieve their planned Scope

1 and 2 emissions reductions and whether these actions have been

reﬂected in the cash ﬂow forecasts;

•

analysed the emissions and production data to understand the current

and future carbon intensity of assets to identify higher risk assets;

•

evaluated the stranded asset risk arising from useful economic lives

of assets post 2035; and

•

veriﬁed the appropriateness of the climate change sensitivity

included in note 2 to the ﬁnancial statements.

We reported to the Audit and Risk

Committee in its March 2024 meeting

that the key assumptions used within

the impairment models were within

a reasonable range and, based on

our testing performed, we considered

the recognition and valuation of the

current period impairment charge to

be reasonable.

Speciﬁcally related to our procedures

on climate change, we reported

that Harbour’s oil and gas price

assumptions are in line or lower than

the commodity prices in the IEA APS

scenario from 2023 onwards.

We concur with management that

carbon costs are not a sensitive

assumption in the cash ﬂow forecasts;

the results of our independent

sensitivity analysis indicated that

applying the IEA NZE50 carbon prices

would not lead to a material impact

on the valuation of oil and gas assets.

For assets with a higher risk of impact

from climate change, we assessed

the headroom in the most recent

impairment models and also checked

the reasonableness of the costed plans

in place to decarbonise the assets.

Overall, we concluded there were no

additional impairment triggers arising

from the impact of climate change

in the 2023 ﬁnancial statements.

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Strategic report

Governance

Financial statements

Additional information

Independent auditor’s report to the members of Harbour Energy plc

continued

Risk

Our response to the risk

Key observations communicated

to the Audit and Risk Committee

Tax liabilities and contingencies

Refer to the Audit and Risk Committee

report (page 76); Material accounting

policies (page 135); and note 8 to the

ﬁnancial statements on page 142).

As described in note 8 to the consolidated

ﬁnancial statements, the misallocation

of hedging positions across certain UK

subsidiaries of the Group has resulted in the

disclosure of a contingent tax liability currently

estimated not to exceed $120 million.

The recognition and/or disclosure of a

contingent liability involves judgement

related to assessing whether a future cash

outﬂow is probable, possible or remote.

It often also involves estimation risk since

management is required to provide an

estimate of the potential ﬁnancial effect

of the matter giving rise to the contingent

liability. There is therefore a risk that a

liability is not recognised, or a contingent

liability is not disclosed, in the ﬁnancial

statements and a risk that the estimated

ﬁnancial effect may be materially misstated.

The audit procedures in respect of tax liabilities and contingencies were

performed by the primary audit team, which included team members with

signiﬁcant UK tax experience and knowledge of oil and gas tax legislation

and tax disregard rules applicable to commodity hedging.

Our work to assess potential tax liabilities related to the misallocation of

hedging positions at UK legal entity level included the following procedures:

•

We held several discussions with management and understood the

fact patterns and judgements involved in the matter;

•

With the assistance of our tax controversy and risk management

specialist team, we reviewed the reports from management’s external

specialists – comprising both legal and tax advisors – and raised

certain challenges to management’s analysis and conclusions with

reference to the accounting guidance in IFRIC 23 and IAS 37;

•

We obtained management’s analysis to support their estimate

of the potential ﬁnancial effect of the hedge misallocations and

assessed its reasonableness, including the calculation basis, the

apportionment pre and post the introduction of the Energy Proﬁts

Levy (EPL) and the consistency of derivative hedging transactions

with those we have audited in prior periods; and

•

We reviewed the contingent liability disclosure in the notes to the

ﬁnancial statements and management’s assessment of any penalties

and interest that may be applicable.

We reported to the Audit and Risk

Committee in its March 2024 meeting

that the disclosure of a contingent

liability for the tax exposure created

by the hedging misallocations was

appropriate on the basis of a possible

risk of a future cash outﬂow at the

balance sheet date.

We communicated to the Committee

that we had evaluated and were

satisﬁed with the judgements and

supporting documentation that

management had relied upon when

determining the probability of a

materially higher ﬁnancial outcome

to be remote. We also conﬁrmed

our agreement with management’s

estimate of the potential ﬁnancial effect

disclosed in the ﬁnancial statements.

Principal changes as compared to prior year

In the prior year, our auditor’s report included a key audit matter for the ‘Impact of Energy Proﬁts Levy on current and deferred taxes’, since

these represented new UK tax legislation which required management to make certain judgements and had a material impact on both

current and deferred taxes. In the current year there have been no changes to the legislation and the computation was non-complex and

hence we concluded it is not a key audit matter.

In the current year, assessing the ﬁnancial statement impact from the hedging misallocation in line with IAS 37 and IFRIC 23 required

signiﬁcant management and auditor judgement and audit effort including reliance on both management’s external and EY internal

specialists. Hence, we have included this as a key audit matter.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identiﬁed misstatements on the audit

and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to inﬂuence the economic

decisions of the users of the ﬁnancial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

Our key criterion in determining materiality remains our perception of the needs of Harbour’s stakeholders. We consider which earnings,

activity or capital-based measure aligns best with the expectations of the users of Harbour’s ﬁnancial statements. In doing so, we apply

a ‘reasonable investor perspective’, which reﬂects our understanding of the common ﬁnancial information needs of the members of

Harbour as a group. We consider EBITDA, adjusted for the impact of any non-recurring items, to be consistent with the type of measures

that are the primary focus of Harbour’s investors.

We determined that the basis of planning materiality should be earnings before interest, tax, depreciation, impairments and amortisation,

adjusted to exclude exploration cost write-off but including exploration and evaluation expenses and new ventures (Adjusted EBITDA).

We believe that Adjusted EBITDA provides us with a measure that is of particular focus to shareholders and is closely linked to both the

metric used in the covenant included in the Group’s major loan agreement and the key performance indicator for the Group, EBITDAX.

Measures such as EBITDAX are a primary indicator of company valuation and cash ﬂow generation across the upstream oil and gas sector.

Based on the above, we determined materiality for the Group to be $72 million (2022: $93 million), which is 2.7% of Adjusted EBITDA

(2022: 2.9% of Normalised Adjusted EBITDA). In 2022, the war in Ukraine led to exceptionally high oil and gas prices and in response we

normalised the Adjusted EBITDA downwards. As oil and gas prices have returned to a more stable state in 2023, we have not normalised

Adjusted EBITDA for materiality purposes.

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Starting

basis

Adjustments

Materiality

• $2,675 million (EBITDAX)

• Less adjustments related to:

–

Exploration and evaluation expenses and new ventures of $36 million

• Basis: Adjusted EBITDA $2,639 million

• Materiality of $72 million (2.7% of materiality basis)

We determined materiality for the parent company to be $27 million (2022: $46.7 million), which is 0.7% (2022: 0.7%) of Total Assets.

During the course of our audit, we reassessed initial materiality and found no reason to change from our original assessment at planning.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the

probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that

performance materiality was 50% (2022: 50%) of our planning materiality, namely $36 million (2022: $46.5 million). We have set

performance materiality at this percentage due to quantitative and qualitative assessment of prior year misstatements, our assessment

of the Group’s overall control environment, and consideration of relevant changes in market conditions during the year.

Audit work at component locations for the purpose of obtaining audit coverage over signiﬁcant ﬁnancial statement accounts is undertaken

based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale

and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year,

the range of performance materiality allocated to components was $6.5 million to $26 million (2022: $8.4 million to $35 million).

Reporting threshold

An amount below which identiﬁed misstatements are considered as being clearly trivial.

We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of $3.6 million

(2022: $4.7 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted

reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other

relevant qualitative considerations in forming our opinion.

Other information

Other information comprises the information included in the annual report set out on pages 1 to 188 – including the Strategic report,

Governance and Additional information sections – other than the ﬁnancial statements and our auditor’s report thereon. The directors

are responsible for the other information contained within the annual report.

Our opinion on the ﬁnancial statements does not cover the other information and, except to the extent otherwise explicitly stated in this

report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the

ﬁnancial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such

material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement

in the ﬁnancial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the

other information, we are required to report that fact.

We have nothing to report in this regard.

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Strategic report

Governance

Financial statements

Additional information

Independent auditor’s report to the members of Harbour Energy plc

continued

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the

Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

•

the information given in the Strategic Report and the Directors’ Report for the ﬁnancial year for which the ﬁnancial statements

are prepared is consistent with the ﬁnancial statements; and

•

the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the

audit, we have not identiﬁed material misstatements in the Strategic Report or the Directors’ Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,

in our opinion:

•

adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received

from branches not visited by us; or

•

the parent company ﬁnancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement

with the accounting records and returns; or

•

certain disclosures of directors’ remuneration speciﬁed by law are not made; or

•

we have not received all the information and explanations we require for our audit.

Corporate Governance Statement

We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance

Statement relating to the Group and company’s compliance with the provisions of the UK Corporate Governance Code speciﬁed for our

review by the Listing Rules.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance

Statement is materially consistent with the ﬁnancial statements or our knowledge obtained during the audit:

•

directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material

uncertainties identiﬁed set out on page 31;

•

directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers and why the period

is appropriate set out on page 59;

•

directors’ statement on whether they have a reasonable expectation that the Group will be able to continue in operation and meet

its liabilities set out on page 59;

•

directors’ statement on fair, balanced and understandable set out on page 108;

•

the Board’s conﬁrmation that it has carried out a robust assessment of the emerging and principal risks set out on page 57;

•

the section of the annual report that describes the review of effectiveness of risk management and internal control systems set

out on page 58; and

•

the section describing the work of the Audit and Risk committee set out on page 76.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on page 108, the directors are responsible for the preparation of

the ﬁnancial statements and for being satisﬁed that they give a true and fair view, and for such internal control as the directors determine

is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the ﬁnancial statements, the directors are responsible for assessing the Group and parent company’s ability to continue as

a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the

directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the ﬁnancial statements

Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,

but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to inﬂuence the economic decisions of users taken on the basis of these ﬁnancial statements.

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Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,

outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of

not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,

or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company

and management.

•

We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most

signiﬁcant are those that relate to the reporting framework (UK-adopted international accounting standards, Companies Act 2006, the

UK Corporate Governance Code and the Listing Rules of the UK Listing Authority) and the relevant tax compliance regulations in the

jurisdictions in which Harbour Energy plc operates. In addition, we concluded that there are certain signiﬁcant laws and regulations

that may have an effect on the determination of the amounts and disclosures in the ﬁnancial statements, relating to health and safety,

employee matters, environmental, and bribery and corruption practices. We understood how Harbour Energy plc is complying with

those frameworks by making enquiries of management, Internal Audit, Legal Counsel and the Company Secretary. We corroborated our

enquiries through inspection of board minutes, papers provided to the Audit and Risk Committee and correspondence received from

regulatory bodies and there was no contradictory evidence.

•

We assessed the susceptibility of the Group’s ﬁnancial statements to material misstatement, including how fraud might occur by

considering the degree of incentive, opportunity and rationalisation that may exist to undertake fraud. We also considered performance

targets and their potential impact on risks related to managing earnings or inﬂuencing the perceptions of analysts. We engaged our

forensics specialists to assist with our assessment of the susceptibility of the Group’s ﬁnancial statements to fraud. We have determined

there is a risk of fraud associated with management override related to manual revenue journals that do not follow the expected process.

We performed audit procedures to address the identiﬁed fraud risk. These procedures were designed to provide reasonable assurance

that the ﬁnancial statements as a whole are free from material misstatement, due to fraud or error.

•

Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures

involved journal entry testing with a focus on manual consolidation journals and journals indicating large or unusual transactions based on

our understanding of the business; enquiries of Legal Counsel, Group management, Internal Audit, and component management at all full

scope components; review of the volume and nature of whistleblowing complaints received during the year; and focused testing, including in

respect of management override through manual revenue journals and speciﬁc searches derived from forensic investigations experience.

•

If any instances of non-compliance with laws and regulations were identiﬁed, these were communicated to the Group team and the

relevant local EY teams who performed sufﬁcient and appropriate audit procedures, supplemented by audit procedures performed

at the Group level.

A further description of our responsibilities for the audit of the ﬁnancial statements is located on the Financial Reporting Council’s website:

frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other matters we are required to address

•

Following the recommendation from the Audit and Risk Committee we were appointed on 22 April 2021 to audit the Group and parent

company ﬁnancial statements for the year ending 31 December and subsequent ﬁnancial periods. Our appointment was subsequently

ratiﬁed at the annual general meeting of the company.

•

On 31 March 2021, Harbour Energy plc (formerly Premier Oil plc) acquired Chrysaor Holdings Limited as part of a reverse acquisition.

EY was the auditor of Premier Oil plc from the period ended 31 December 2017 up to and including the period ended 31 December

2020. As a result, the period of total uninterrupted engagement including previous renewals and reappointments is seven years,

covering the period from our appointment as auditors of Premier Oil plc for the period ended 31 December 2017 to the period ended

31 December 2023 as auditors of Harbour Energy plc.

•

The audit opinion is consistent with the additional report to the Audit and Risk Committee.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them

in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone

other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Andrew Smyth (Senior Statutory Auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

London, United Kingdom

6 March 2024

117

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Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Note

2023

$ million

2022

$ million

Revenue

3,715

5,390

Other income

Revenue and other income

3,751

5,431

Cost of operations

(2,357)

(2,845)

(Impairment)/impairment reversal of property, plant and equipment

5, 12

(214)

170

Impairment of goodwill

5, 10

(25)

–

Exploration and evaluation expenses and new ventures

(36)

(42)

Exploration costs written-off

(57)

(64)

Gain on disposal

–

General and administrative expenses

(149)

(121)

Operating proﬁt

913

2,541

Finance income

104

279

Finance expenses

(420)

(358)

Proﬁt before taxation

597

2,462

Income tax expense

(565)

(2,454)

Proﬁt for the year

Proﬁt for the year attributable to:

Equity owners of the company

Earnings per share

Note

cents

Basic

Diluted

Consolidated income statement

For the year ended 31 December 2023

118

Harbour Energy plc

Annual Report & Accounts 2023

118

Harbour Energy plc

Annual Report & Accounts 2023

2023

$ million

2022

$ million

Proﬁt for the year

Other comprehensive proﬁt

Items that may be subsequently reclassiﬁed to income statement:

Fair value gains on cash ﬂow hedges

3,168

269

Tax (expense)/credit on cash ﬂow hedges

(2,376)

1,006

Exchange differences on translation

103

(198)

Other comprehensive proﬁt for the year, net of tax

895

1,077

Total comprehensive proﬁt for the year

927

1,085

Total comprehensive proﬁt attributable to:

Equity owners of the company

927

1,085

Consolidated statement of comprehensive income

For the year ended 31 December 2023

119

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Strategic report

Governance

Financial statements

Additional information

119

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Note

2023

$ million

2022

$ million

Assets

Non-current assets

Goodwill

1,302

1,327

Other intangible assets

1,172

880

Property, plant and equipment

4,717

5,690

Right-of-use assets

587

735

Deferred tax assets

1,406

Other receivables

184

298

Other ﬁnancial assets

112

103

Total non-current assets

8,081

10,439

Current assets

Inventories

200

143

Trade and other receivables

832

1,403

Other ﬁnancial assets

170

Cash and cash equivalents

280

500

1,482

2,127

Assets held for sale

334

–

Total current assets

1,816

2,127

Total assets

9,897

12,566

Equity and liabilities

Equity

Share capital

171

Other reserves

289

(606)

Retained earnings

1,080

1,456

Total equity

1,540

1,021

Non-current liabilities

Borrowings

493

1,216

Provisions

3,818

3,934

Deferred tax

1,260

397

Trade and other payables

Lease creditor

474

604

Other ﬁnancial liabilities

1,279

Total non-current liabilities

6,145

7,449

Current liabilities

Trade and other payables

886

1,252

Borrowings

Lease creditor

199

221

Provisions

230

231

Current tax liabilities

442

199

Other ﬁnancial liabilities

197

2,171

1,970

4,096

Liabilities directly associated with the assets held for sale

242

–

Total current liabilities

2,212

4,096

Total liabilities

8,357

11,545

Total equity and liabilities

9,897

12,566

The notes on pages 123 to 171 form part of these ﬁnancial statements.

The ﬁnancial statements on pages 118 to 171 were approved by the board of directors and authorised for issue on 6 March 2024

and signed on its behalf by:

Alexander Krane

Chief Financial Ofﬁcer

Consolidated balance sheet

As at 31 December 2023

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Annual Report & Accounts 2023

120

Harbour Energy plc

Annual Report & Accounts 2023

capital

$ million

premium

$ million

Merger

reserve

$ million

Capital

redemption

reserve

$ million

Cash ﬂow

hedge

reserve

$ million

Costs of

hedging

reserve

$ million

Currency

translation

reserve

$ million

Retained

earnings

$ million

Total

equity

$ million

At 1 January 2022

171

1,505

677

(2,062)

474

Proﬁt for the year

–

Other comprehensive income

1,286

(11)

(198)

–

1,077

Total comprehensive income

–

1,286

(11)

(198)

1,085

Purchase and cancellation

of own shares

–

(361)

Share-based payments

–

Capital restructuring

–

(1,505)

(406)

–

1,911

–

Purchase of ESOP Trust shares

–

(22)

Dividend paid

–

(191)

At 31 December 2022

171

–

271

(776)

(9)

(100)

1,456

1,021

Proﬁt for the year

–

Other comprehensive income

–

779

103

–

895

Total comprehensive income

–

779

103

927

Purchase and cancellation

of own shares

–

(249)

Share-based payments

–

Purchase of ESOP Trust shares

–

(15)

Dividends paid

–

(190)

At 31 December 2023

171

–

271

1,080

1,540

Share premium and merger reserve balances recategorised to retained earnings following capital reduction effective 3 August 2022.

Disclosed net of deferred tax.

Consolidated statement of changes in equity

For the year ended 31 December 2023

121

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Strategic report

Governance

Financial statements

Additional information

121

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Note

2023

$ million

2022

$ million

Net cash inﬂow from operating activities

2,144

3,130

Investing activities

Expenditure on exploration and evaluation assets

(202)

(127)

Expenditure on property, plant and equipment

(496)

(477)

Expenditure on non-oil and gas intangible assets

(20)

(30)

Expenditure on other intangible assets

(81)

–

Receipts for sub-lease income

Proceeds from/(payments) relating to disposal of oil and gas properties

(6)

Expenditure on business combinations – deferred consideration

–

(19)

Finance income received

Net cash outﬂow from investing activities

(693)

(629)

Financing activities

Repurchase of shares

(249)

(361)

Proceeds from new borrowings – reserve based lending facility

660

–

Proceeds from new borrowings – exploration ﬁnancing facility

–

Lease liability payments

(259)

(254)

Repayment of reserve based lending facility

(1,435)

(1,663)

Repayment of exploration ﬁnancing facility

(11)

(38)

Repayment of ﬁnancing arrangement

(21)

(15)

Purchase of ESOP Trust shares

(12)

(21)

Interest paid and bank charges

(150)

(142)

Dividends paid

(190)

(191)

Net cash outﬂow from ﬁnancing activities

(1,667)

(2,674)

Net decrease in cash and cash equivalents

(216)

(173)

Net foreign exchange difference

(4)

(26)

Cash and cash equivalents at 1 January

500

699

Cash and cash equivalents at 31 December

280

500

Consolidated statement of cash ﬂows

For the year ended 31 December 2023

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Annual Report & Accounts 2023

122

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Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

Notes to the consolidated ﬁnancial statements

Harbour Energy plc

Annual Report & Accounts 2023

123

1. Corporate information

Harbour Energy plc (Harbour or the company) is a limited liability company incorporated in Scotland and listed on the London Stock

Exchange. The address of the registered ofﬁce is 4

Floor, Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2EN, United Kingdom.

The consolidated ﬁnancial statements of the company and all its subsidiaries (the Group) for the year ended 31 December 2023

were authorised for issue by the board of directors on 6 March 2024.

The Group’s principal activities are the acquisition, exploration, development and production of oil and gas reserves on the UK and

Norwegian continental shelves, Indonesia, Vietnam and Mexico.

2. Material accounting policies

Basis of preparation

The consolidated ﬁnancial statements have been prepared on a going concern basis in accordance with UK-adopted International

Accounting Standards (IAS) in conformity with the requirements of the Companies Act 2006. The analysis used by the Directors in

adopting the going concern basis considers the various plans and commitments of the Group as well as various sensitivity and reverse

stress test analyses. The results from the downside sensitivities and reverse stress testing with regard to production and commodity

price assumptions, which in management’s view reﬂect two of the principal risks, indicate that material changes within one year that

would impact the going concern basis of preparation are unlikely. Further details are within the ﬁnancial review on page 26 and viability

statement on page 59.

The presentation currency of the Group ﬁnancial information is US dollars and all values in the Group ﬁnancial information are presented

in millions ($ million) and all values are rounded to the nearest 1 million, except where otherwise stated.

The ﬁnancial statements have been prepared on the historical cost basis, except for certain ﬁnancial assets and liabilities, including

derivative ﬁnancial instruments, which have been measured at fair value.

The accounting policies which follow set out those policies which apply in preparing the ﬁnancial statements for the year ended

31 December 2023. All accounting policies are consistent with those adopted and disclosed in Harbour’s 2022 Annual Report &

Accounts, except for the inclusion of a new policy for the cost of carbon allowances.

Basis of consolidation

The consolidated ﬁnancial statements comprise the ﬁnancial statements of the company and its subsidiaries as at 31 December 2023.

Subsidiaries are those entities over which the Group has control. Control is achieved where the Group has the power over the subsidiary,

has rights, or is exposed to variable returns from the subsidiary and has the ability to use its power to affect its returns. All subsidiaries

are 100 per cent owned by the Group and there are no non-controlling interests.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest

and other components of equity, while any resultant gain or loss is recognised in proﬁt or loss. Any investment retained is recognised

at fair value.

The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of

acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the ﬁnancial statements

of subsidiaries acquired to bring the accounting policies used into line with those used by other members of the Group.

All intra-group transactions and balances have been eliminated on consolidation.

Use of judgements and estimates

In preparing these ﬁnancial statements, management has made judgements and estimates that affect the application of accounting policies

and the reported amounts of assets and liabilities, income and expenses including those that have the potential impact to materially impact

the balance sheet over the next 12 months. Actual results may differ from these estimates. The signiﬁcant judgements made by

management in applying the Group’s accounting policies, and the key sources of estimation uncertainty, were the same as those described

in Harbour’s 2022 Annual Report & Accounts, with the addition of judgements in relation to the tax risk associated with the uncertain tax

position on commodity derivatives. Disclosure regarding the judgements and estimates made in assessing the impact of climate change

and the energy transition are detailed on pages 124 to 127 and references to notes to the ﬁnancial statements are provided.

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

124

Impact of climate change on the ﬁnancial statements and related disclosures

Judgements and estimates made in assessing the impact of climate change and the energy transition

Harbour monitors global climate change and energy transition developments and plans. Management recognises there is a general high level

of uncertainty about the speed and scale of impacts which, together with limited historical information, provides challenges in the preparation

of forecasts and plans with a range of possible future scenarios, which may have the potential to materially impact the balance sheet.

The Group’s continued strategic ambition is to achieve net zero by 2035 with an interim target of a 50 per cent reduction in Scope 1 and

2 emissions by 2030 against the 2018 baseline. This will be achieved through several opportunities, including operational efﬁciency

improvements, UK offshore electriﬁcation and the eventual cessation of production of mature ﬁelds. In addition, opportunities for offshore

electriﬁcation are being explored and the company is investing in the development of carbon capture and storage projects in the UK.

Where the Group cannot reduce its Scope 1 and 2 emissions, it will invest in high quality, independently veriﬁed, carbon offsets to

achieve the goal of net zero.

All new economic investment decisions include the cost of carbon, and opportunities are assessed on their climate-impact potential and

alignment with Harbour Energy’s net zero goal, taking into consideration both GHG volumes and intensity. The corporate modelling that

supports the preparation of the ﬁnancial statements (such as asset and goodwill impairment assessment, going concern and viability,

deferred tax asset recoverability) includes project costs related to CCS, certain limited electriﬁcation and other activities to reduce Scope

1 and 2 GHG emissions, the UK Emissions Trading Scheme and carbon offset purchases.

Emissions reduction incentives are part of staff remuneration through the annual bonus programme. Additionally, the cost of borrowing is

tied to our gross operated CO

emissions performance, with GHG metrics being linked to our RBL interest expense, further incentivising

our emissions reduction targets.

Climate change and the energy transition have the potential to signiﬁcantly impact the accounting estimates adopted by management

and therefore the valuation of assets and liabilities reported on the balance sheet. On an ongoing basis management continues to

assess the potential impacts on the signiﬁcant judgements and estimates used in the preparation of the ﬁnancial statements. Estimates

adopted in the ﬁnancial statements reﬂect management’s best estimate of future market conditions where, in particular, commodity prices

can be volatile. Commodity and carbon price curve assumptions are described below noting that there is consideration given to other

assumptions, not exhaustively, such as foreign exchange and discount rates. Notwithstanding the challenges around climate change and

the energy transition, it is management’s view that the ﬁnancial statements are consistent with the disclosures in the Strategic report.

This note provides insight into how Harbour has considered the impact on valuations of key line items in the ﬁnancial statements and how

they could change based on the climate change scenarios and sensitivities considered. The scenarios presented show what the possible

impact could be on the ﬁnancial statements considering both high and low commodity price outlooks. Importantly, these climate change

scenarios do not form the basis of the preparation of the ﬁnancial statements but rather indicate how the key assumptions that underpin the

ﬁnancial statements would be impacted by the climate change scenarios. They are also designed to challenge management’s perspective

on the future business environment. It is recognised that the reality of the nature of progress of energy transition will bring greater levels

of disruption and volatility than these external scenarios expect and do not represent management’s current best estimate.

Management’s current best estimate for the foreseeable future, which was derived from consideration of a range of considered economic

forecasts, has been used on the same basis to prepare the ﬁnancial statements and is represented by the Harbour scenario oil price

curve. Management continues to review these estimates and assumptions to ensure they reﬂect the latest economic environment

conditions and market information available.

Impairment of property, plant and equipment, and goodwill

The energy transition has the potential to signiﬁcantly impact future commodity and carbon prices which would, in turn, affect the future

operating and capital costs, estimates of cessation of production, useful lives, and consequently the recoverable amount of property,

plant and equipment and goodwill. In the current period, when testing for impairment, the Harbour scenario real long-term commodity

price assumptions from 2026 for Brent crude were $70/bbl (2022: $65/bbl) and UK NBP gas 90 pence/therm (2022: 65 pence/therm)

combined with the short-term forecast period reﬂecting market forward curves at the year end.

Carbon costs will develop over time and carry considerable uncertainty due to the rate of transition and maturity of regulatory regimes.

For the UK price of carbon, Harbour management’s real forward price curve assumption in 2024 is £50/tonne ($63/tonne) rising to

£140/tonne ($175/tonne) in 2030. The sensitivity was run on the IEA Net Zero carbon price curve. The foreign exchange rate was

assumed to be $1.00:£1.25 ﬂat for future periods to convert to nominal prices. Such assumptions are inherently uncertain and may

ultimately differ from the actual amounts.

During 2023 there was a total net pre-tax impairment charge of $239 million (2022: $170 million net reversal) across goodwill of

$25 million and property, plant and equipment of $214 million. Further details can be found in note 10 and note 12 respectively.

2. Material accounting policies

continued

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

125

Further, sensitivities on the impairment of property, plant and equipment and goodwill have been prepared using various commodity price

scenarios to show the possible impact on net book carrying values. As noted, the Harbour scenario is the basis for the preparation of the

ﬁnancial statements. Impairment sensitivities have been prepared at an average -10 per cent and +10 per cent to the Harbour scenario

average for crude, gas and carbon and selected published climate change price curves.

The sensitivity scenarios described below incorporate changes to the commodity price assumptions and assume that all other factors

remain unchanged from the Harbour scenario used for the basis of preparation of the ﬁnancial statements. These sensitivities are stated

before any management mitigation actions to manage downside risks if the scenarios were to occur.

The ESG review on pages 39 to 44 discusses both transition and physical risk climate change scenarios. This analysis covers the transition

risks and the graphs below show the crude oil and UK NBP gas price curves for the period to 2050 for the following scenarios: IEA Net Zero

2050, IEA Stated Policies and IEA Announced Pledges.

All the scenario price curves are dependent on factors covering supply, demand, economic and geopolitical events and therefore are

inherently uncertain and subject to signiﬁcant volatility and hence unlikely to reﬂect the future outcome.

•

Harbour scenario: base price curves used for impairment testing

•

IEA Net Zero Emissions by 2050 (NZE): limiting global temperature rise to 1.5

•

IEA Stated Policies (STEPS): current policy commitments by sector and country

•

IEA Announced Pledges (APS): current climate commitments by governments and industries

100

H2 2030

H1 2030

H2 2029

H1 2029

H2 2028

H1 2028

H2 2027

H1 2027

H2 2026

H1 2026

H2 2025

H1 2025

H2 2024

H1 2024

$/bbl

Crude

$/bbl

Crude

Harbour scenario

NZE

STEPS

APS

0.0

0.2

0.4

0.6

0.8

1.0

1.2

H2 2030

H1 2030

H2 2029

H1 2029

H2 2028

H1 2028

H2 2027

H1 2027

H2 2026

H1 2026

H2 2025

H1 2025

H2 2024

H1 2024

£/therm

Gas

Harbour scenario

NZE

STEPS

APS

120

150

H2 2030

H1 2030

H2 2029

H1 2029

H2 2028

H1 2028

H2 2027

H1 2027

H2 2026

H1 2026

H2 2025

H1 2025

H2 2024

H1 2024

£/tonne

Carbon

Harbour scenario

NZE

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

126

The crude price curves reﬂect the published IEA price curves for all periods. For UK NBP gas there are no IEA published price curves

therefore management has derived the UK NBP gas price curves by converting from the published IEA European gas price curve.

This was achieved by converting from USD per mbtu to pence per therm and applying other known correlation coefﬁcients between the

European and UK gas markets. In addition, for the period 2024-2027, the derived gas price curve matches the Harbour scenario

price curve to create a scenario that was considered reasonably plausible.

Pre-development assets such as Zama in Mexico and Andaman in Indonesia are recorded in other intangible assets ahead of demonstration

of commerciality and recognition of 2P reserves and hence are not included below, however they are subject to the same management rigour

with the corporate models.

The results of the sensitivities are as follows and show the impact on the property, plant and equipment balance sheet carrying values

when it had resulted in a material decrease in carrying value.

				Pre-tax sensitivity in carrying value
				$ million
					IEA Net Zero	IEA	IEA
			+10% price	-10% price	Emissions	Stated	Announced
		Carrying value	to Harbour	to Harbour	by 2050	Policies	Pledges
	Commodity	$ million	scenario	scenario	(NZE)	(STEPS)	(APS)
Property, plant	Crude oil		–	(86)	(221)	–	–
and equipment	UK NBP gas (derived)	4,717	–	(21)	(9)	–	–
(note 12)	Carbon		–	–	(27)	N/A	N/A

The +/-10 per cent price curves used in the Harbour scenarios adjust long-term prices from 2027.

Under the -10 per cent price to Harbour scenario for crude there is a pre-tax impairment to property, plant and equipment on two UK

ﬁelds of $86 million (post-tax $40 million) and for UK NBP gas a pre-tax impairment on a single UK ﬁeld of $21 million (post-tax

$6 million).

For crude, under the IEA NZE 2050 scenario, there is a pre-tax impairment to property, plant and equipment on a single UK ﬁeld

of $221 million (post-tax $104 million) and for UK NBP gas, there is a pre-tax impairment on two UK ﬁelds of $9 million (post-tax $3 million).

There is no impairment to property, plant and equipment across the three +10 per cent price to Harbour scenarios nor the IEA STEPS

and APS scenarios.

Under the IEA Net Zero Emissions by 2050 scenario for carbon, there is a pre-tax impairment to property, plant and equipment

on a single UK ﬁeld of $27 million (post-tax $13 million).

For goodwill, there are no impairments under any scenario except for the -10 per cent price to Harbour scenario for UK NBP gas which

reﬂects an impairment of $4 million.

Property, plant and equipment – depreciation and expected useful lives

A signiﬁcant proportion of property, plant and equipment assets are expected to reach cessation of production over the next

10 to 20 years. There are no signiﬁcant judgements and/or critical estimation uncertainty related to climate factors.

See Accounting policy: Property, plant and equipment – oil and gas assets for further information (page 129).

Intangible assets – exploration and evaluation assets

The energy transition has the potential to affect the future development or viability of exploration and evaluation prospects. A signiﬁcant

portion of the Group’s exploration and evaluation assets relate to prospects that could be tied back to existing infrastructure and hence

require less capital investment as these assets are less exposed to the impacts of the energy transition compared to large frontier

developments. At each balance sheet date, all exploration and evaluation prospects are reviewed against the Group’s ﬁnancial framework

to ensure that the continuation of activities is planned and expected. There are no signiﬁcant judgements and/or critical estimation

uncertainty related to climate factors.

See Judgements: Exploration and evaluation expenditure (page 137) and note 11 to the ﬁnancial statements for further information.

2. Material accounting policies

continued

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

127

Decommissioning cost and provisions

The energy transition may accelerate the decommissioning of assets which would result in an increase in the carrying value of associated

decommissioning provisions. Whilst the Group currently expects to incur decommissioning costs over the next 40 years, we anticipate the

majority of costs will be incurred between the next 10 to 20 years which will reduce the exposure to the impact of the energy transition.

Decommissioning cost estimates are based on the current regulatory and external environment. These cost estimates and recoverability

of associated deferred tax may change in the future, including as a result of the energy transition.

On the basis that all other assumptions in the calculation remain the same, a 10 per cent increase in the cost estimates, and a

10 per cent reduction in the applied discount rates used to assess the ﬁnal decommissioning obligation, would result in increases to the

decommissioning provision of approximately $456 million and $440 million, respectively. This change would be principally offset by a

change to the value of the associated asset unless the asset is fully depreciated, in which case the change in estimate is recognised

directly within the income statement.

Currently, the timing of decommissioning expenditures has not been materially brought forward and management do not consider that

any reasonable change in the timing of decommissioning expenditure will have a material impact on the decommissioning provisions.

See Key sources of estimation uncertainty: Decommissioning costs for further information (page 137).

Cost of carbon allowances

Harbour is part of the UK Emissions Trading Scheme (UK ETS) and purchases carbon allowances under the scheme to meet its regulatory

obligations under the scheme. The costs for purchasing allowances are recorded in costs of operations matching emissions for the

period. Accruals that are required for allowances to be purchased are measured at market price. Allowances owned in excess of liabilities

to date that are available to be used in future periods are recorded in other intangible assets and measured at cost. Harbour is entitled

to receive a share of free allowances according to UK ETS regulations.

Segment reporting

The Group’s activities consist of one class of business being the acquisition, exploration, development and production of oil and gas

reserves and related activities and are split geographically and managed in two Business Units: namely ‘North Sea’ and ‘International’.

Joint arrangements

A joint arrangement is one in which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an

arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Exploration and production operations are usually conducted through joint arrangements with other parties. The Group reviews all joint

arrangements and classiﬁes them as either joint operations or joint ventures depending on the rights and obligations of each party to the

arrangement and whether the arrangement is structured through a separate vehicle. The Group’s interest in joint operations, such as

exploration and production arrangements, are accounted for by recognising its:

•

Assets, including its share of any assets held jointly

•

Liabilities, including its share of any liabilities incurred jointly

•

Revenue from the sale of its share of the output arising from the joint operation

•

Expenses, including its share of any expenses incurred jointly

A joint venture, which normally involves the establishment of a separate legal entity, is a contractual arrangement whereby the parties

that have joint control of the arrangement have the rights to the arrangement’s net assets. The results, assets and liabilities of a joint

venture are incorporated in the consolidated ﬁnancial statements using the equity method of accounting. During 2023, the Group did

not have any interests in joint ventures.

Where the Group transacts with its joint operations, unrealised proﬁts and losses are eliminated to the extent of the Group’s interest in

the joint operation.

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

128

Foreign currency translation

Each entity in the Group determines its own functional currency, being the currency of the primary economic environment in which the

entity operates, and items included in the ﬁnancial statements of each entity are measured using that functional currency.

The consolidated ﬁnancial statements are presented in US dollars, which is also the parent company’s functional currency.

Transactions recorded in foreign currencies are initially recorded in the entity’s functional currency by applying an average rate of

exchange. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange

ruling at the reporting date. All differences are taken to the income statement.

Non-monetary assets and liabilities denominated in foreign currencies are measured at historic cost based on exchange rates at the date

of the initial transaction and subsequently not retranslated.

On consolidation, the assets and liabilities of the Group’s operations are translated at exchange rates prevailing on the balance sheet

date. Income and expense items are translated at the average monthly exchange rates for the year. Equity is held at historic cost and is

not retranslated. The resulting exchange differences are recognised as other comprehensive income and are transferred to the Group’s

currency translation reserve.

When an overseas operation is disposed of, such translation differences relating to it are recognised as income or expense.

Goodwill

In the event of a business combination or acquisition of an interest in a joint operation in which the activity constitutes a business, as deﬁned in

IFRS 3 Business Combinations, the acquisition method of accounting is applied. Goodwill represents the difference between the aggregate

of the fair value of purchase consideration transferred at the acquisition date and the fair value of the identiﬁable assets, liabilities and

contingent liabilities acquired. If however, the fair value of the purchase consideration transferred is lower than the fair value of the identiﬁable

assets and liabilities acquired, the difference is recognised in the income statement as negative goodwill. Goodwill is initially measured at cost.

Following initial recognition, goodwill is measured at cost less any accumulated impairment. For the purpose of impairment testing, goodwill

acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs), or groups of

CGUs, which are expected to beneﬁt from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned

to those units. Goodwill is treated as an asset of the relevant entity to which it relates and accordingly non-US dollar goodwill is translated

into US dollars at the closing rate of exchange at each reporting date.

Goodwill, as disclosed in note 10, is not amortised but is reviewed for impairment at least annually by assessing the recoverable amount

of the CGUs to which the goodwill relates. Where the carrying amount of the CGU and related goodwill is higher than the recoverable

amount of the CGU, an impairment loss is recognised in the income statement. The recoverable amounts of the CGUs have been

determined on a fair value less costs to sell basis. Impairment losses relating to goodwill cannot be reversed in future periods. Goodwill

acquired through business combinations has been allocated to two CGUs, being North Sea and International.

Intangible oil and gas assets

Pre-licence costs

Pre-licence costs are expensed in the period in which they are incurred.

Licence and property acquisition costs

Licence and property acquisition costs paid in connection with a right to explore in an existing exploration area are capitalised as

exploration and evaluation costs within intangible assets.

Licence and property acquisition costs are reviewed at each reporting date to conﬁrm that there is no indication that the carrying amount

exceeds the recoverable amount. If no future activity is planned or the related licence has been relinquished or has expired, the carrying

value of the property acquisition costs is written off through the income statement. Upon recognition of proved reserves and internal

approval for development, the relevant expenditure is transferred to oil and gas properties within development and production assets.

2. Material accounting policies

continued

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

129

Exploration and evaluation costs

Once the legal right to explore has been acquired, costs directly associated with the exploration are capitalised as exploration and

evaluation (E&E) intangible non-current assets until the exploration is complete and the results have been evaluated. If no potential

commercial resources are discovered, the exploration asset is written off.

All such capitalised costs are subject to technical, commercial and management review, as well as review for indicators of impairment

at least annually. This is to conﬁrm the continued intent to develop or otherwise extract value from the discovery. When this is no longer

the case, the costs are written off through the income statement.

When proved reserves of oil or natural gas are identiﬁed and development is sanctioned by management, the relevant capitalised

expenditure is ﬁrst assessed for impairment and, if required, any impairment loss is recognised, then the remaining balance is

transferred to oil and gas properties within development and production assets. No amortisation is charged during the exploration

and evaluation phase.

Farm-outs – in the exploration and evaluation phase

The Group does not record any expenditure made by the farmee on its account. It also does not recognise any gain or loss on its

exploration and evaluation farm-out arrangements but re-designates any costs previously capitalised in relation to the whole interest

as relating to the partial interest retained. Any cash consideration received directly from the farmee is credited against costs previously

capitalised in relation to the whole interest with any excess accounted for by the farmor as a gain on disposal.

Property, plant and equipment – oil and gas assets

Oil and gas development and production assets are accumulated generally on a ﬁeld-by-ﬁeld basis. This represents expenditure on the

construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells,

including E&E expenditures incurred in ﬁnding commercial reserves transferred from intangible E&E assets, as outlined in the intangible

asset policy above, which is capitalised as oil and gas properties within development and production assets.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into

operation, the initial estimate of the decommissioning obligation and, for qualifying assets, where relevant, borrowing costs. The purchase

price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

An item of development and production expenditure and any signiﬁcant part initially recognised is derecognised upon disposal or when

no future economic beneﬁts are expected. Any gain or loss arising on derecognition of the asset (calculated as the difference between

the net disposal proceeds and the carrying amount of the asset) is included in the income statement.

Expenditure on major maintenance includes reﬁts, inspections or repairs comprising the cost of replacement assets or parts of assets,

inspection costs and overhaul costs. Where an asset, or part of an asset, that was separately depreciated and is now written off is

replaced and it is probable that future economic beneﬁts associated with the item will ﬂow to the Group, the expenditure is capitalised.

All other day-to-day repairs and maintenance costs are expensed as incurred.

Depreciation, depletion and amortisation (DD&A) of oil and gas assets

All costs relating to a development are accumulated and not depreciated until the commencement of production. Depreciation is provided

generally on a ﬁeld-by-ﬁeld basis, using the unit of production method by reference to the ratio of production in the year and the related

commercial proven and probable reserves of the ﬁeld, considering future development expenditures necessary to bring those reserves

into production.

When there is a change in the estimated total recoverable proven and probable reserves of a ﬁeld, that change is accounted for in the

depreciation charge over the revised remaining proven and probable reserves.

Acquisitions, asset purchases and disposals

Acquisitions of oil and gas properties are accounted for using the acquisition method when the assets acquired and liabilities assumed

constitute a business.

Transactions involving the purchase of an individual ﬁeld interest, or a group of ﬁeld interests, which do not constitute a business, are

treated as asset purchases irrespective of whether the speciﬁc transactions involve the transfer of the ﬁeld interests directly or the

transfer of an incorporated entity. Accordingly, no goodwill and no deferred tax gross up arises, and the consideration is allocated to

the assets and liabilities purchased on an appropriate basis.

Proceeds on disposal are applied to the carrying amount of the speciﬁc intangible asset or oil and gas property disposed of and any

surplus is recorded as a gain on disposal in the income statement.

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

130

Decommissioning

A provision for decommissioning is recognised in full when the related facilities are installed. The amount recognised is the present value

of the estimated future expenditure. A corresponding amount equivalent to the provision is also recognised as part of the cost of the

related oil and gas property. This is subsequently depreciated as part of the capital costs of the production facilities. Any change in the

present value of the estimated expenditure is dealt with from the start of the ﬁnancial year as an adjustment to the opening provision

and the oil and gas property. The unwinding of the discount is included as a ﬁnance cost.

Non-oil and gas assets

Property, plant and equipment – ﬁxtures and ﬁttings and oﬃce equipment

Fixtures and ﬁttings and ofﬁce equipment is stated at cost less accumulated depreciation and impairment. Depreciation is provided for

on a straight-line basis at rates sufﬁcient to write off the cost of the assets less any residual value over their estimated useful economic

lives. The depreciation periods for the principal categories of assets are as follows:

•

Fixtures and ﬁttings: Up to 10 years

•

Ofﬁce furniture and equipment: Up to 5 years

Intangible assets

Intangible assets principally comprise IT software/licences and carbon allowances. IT software/licences are carried at cost less any

accumulated amortisation. These assets are amortised on a straight-line basis over their useful economic lives of between three and

ten years. Carbon allowances are carried at cost and subject to impairment testing.

Impairment of non-current assets (excluding goodwill)

In accordance with IAS 36 Impairment of Assets, impairment tests are carried out on items of property, plant and equipment and

intangible assets where there is an indicator of impairment, or an indicator identiﬁed that a prior year impairment may have reversed

or decreased. Such indications may be based on events or changes in the market environment, or on internal sources of information.

Impairment and reversal indicators

Property, plant and equipment and intangible assets with ﬁnite useful lives are only tested for impairment when there is an indication

that they may be impaired. This is generally the result of signiﬁcant changes to the environment in which the assets are operated or when

asset performance is signiﬁcantly lower than expected.

The main impairment indicators used by the Group are described below:

•

External sources of information:

–

Signiﬁcant changes in the economic, technological, political or market environment in which the entity operates or to which

an asset is dedicated

–

Fall in demand

–

Changes in commodity prices and exchange rates

•

Internal sources of information:

–

Evidence of obsolescence or physical damage

–

Signiﬁcantly lower than expected production or cost performance

–

Reduction in reserves and resources, including as a result of unsuccessful results of drilling operations

–

Pending expiry of licence or other rights

–

In respect of capitalised exploration and evaluation costs, lack of planned future activity on the prospect or licence

–

For reversals, plausible downside sensitivity scenarios are run to test the robustness of the asset carrying values

typically against changes in production and commodity prices

2. Material accounting policies

continued

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

131

Measurement of recoverable amount

The cash-generating unit (CGU) applied for impairment test purposes is generally the ﬁeld, except that a number of ﬁeld interests may

be grouped as a single CGU where the cash inﬂows of each ﬁeld are interdependent. The carrying value of each CGU is compared

against the expected recoverable amount of the asset, which is primarily determined based on the fair value less cost of disposal

(FVLCD) method, where the fair value is determined from the estimated present value of the future net cash ﬂows expected to be derived

from production of commercial reserves. Standard valuation techniques are used based on the discount rates that reﬂect the speciﬁc

characteristics of the operating entities concerned; discount rates are determined on a post-tax basis and applied to post-tax cash ﬂows.

Any impairment loss is recorded in the income statement under ‘Impairment of property, plant and equipment’. Impairment losses recorded

in relation to property, plant and equipment may be subsequently reversed if the recoverable amount of the assets subsequently increases

above carrying value. The increased carrying amount of an item of property, plant or equipment attributable to a reversal of an impairment

loss may not exceed the carrying amount that would have been determined (net of depreciation/amortisation) had no impairment loss been

recognised in prior periods.

Non-current assets held for sale and discontinued operations

The Group classiﬁes non-current assets and disposal groups as assets held for sale if their carrying amounts will be recovered principally

through a sale transaction rather than through continuing use. Non-current assets and disposal groups classiﬁed as held for sale are

measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable

to the disposal group, excluding ﬁnance costs and income tax expense. The criteria for held for sale classiﬁcation is regarded as met only

when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Management must

be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classiﬁcation. Actions

required to complete the sale should indicate that it is unlikely that signiﬁcant changes to the sale will be made or that the decision to sell

will be withdrawn. Property, plant and equipment and intangible assets are not depreciated or amortised once classiﬁed as assets held for

sale. Assets and liabilities classiﬁed as held for sale are presented separately as current line items in the balance sheet.

Financial assets

Financial assets are recognised and measured in accordance with IFRS 9 Financial Instruments.

The Group uses two criteria to determine the classiﬁcation of ﬁnancial assets: the Group’s business model and contractual cash ﬂow

characteristics of the ﬁnancial assets. Where appropriate the Group identiﬁes three categories of ﬁnancial assets: amortised cost, fair

value through proﬁt or loss (FVTPL), and fair value through other comprehensive income (FVOCI).

Financial assets held at amortised cost

Financial assets held at amortised cost are initially measured at fair value except for trade debtors which are initially measured at cost.

Both are subsequently carried at amortised cost using the effective interest rate (EIR) method, less impairment. The EIR amortisation

is presented within ﬁnance income in the income statement.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are readily convertible to a known

amount of cash and are subject to an insigniﬁcant risk of changes in value.

Impairment of ﬁnancial assets

The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through proﬁt or loss.

ECLs are based on the difference between the contractual cash ﬂows due in accordance with the contract and all the cash ﬂows that the

Group expects to receive, discounted at an approximation of the original effective interest rate.

ECLs are recognised in two stages:

•

12-month ECL: for credit exposures for which there has not been a signiﬁcant increase in credit risk since initial recognition, ECLs are

provided for credit losses that result from default events (payment, prospective or covenant) that are possible within the next 12 months

•

Lifetime ECL: for those credit exposures for which there has been a signiﬁcant increase in credit risk since initial recognition, a loss

allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default

For trade receivables and contract assets, the Group applies a simpliﬁed approach in calculating ECLs as allowed under IFRS 9.

Provision rates are calculated based on estimates including the probability of default by assessing counterparty credit ratings, as

adjusted for forward-looking factors speciﬁc to the debtors, the economic environment and the Group’s historical credit loss experience.

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

132

Credit impaired ﬁnancial assets

At each reporting date, the Group assesses whether ﬁnancial assets carried at amortised cost and debt ﬁnancial assets carried at FVOCI

are credit impaired. A ﬁnancial asset is ‘credit impaired’ when one or more events that have a detrimental impact on the estimated future

cash ﬂows of the ﬁnancial asset have occurred.

Evidence that a ﬁnancial asset is credit impaired includes the following observable data:

•

Signiﬁcant ﬁnancial difﬁculty of the borrower or issuer

•

A breach of contract such as default or past due event

•

The restructuring of a loan or advance by the Group on terms that the Group would otherwise not consider

•

It is becoming probable that the borrower will enter bankruptcy or other ﬁnancial reorganisation

•

The disappearance of an active market for a security because of ﬁnancial difﬁculties

Financial liabilities

Financial liabilities are recognised and measured in accordance with IFRS 9 Financial Instruments.

Financial liabilities are classiﬁed, at initial recognition, as ﬁnancial liabilities at fair value through proﬁt or loss, loans and borrowings,

payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All ﬁnancial liabilities are recognised

initially at fair value and, in the case of loans, borrowings and payables, net of directly attributable transaction costs which are capitalised

and amortised over the term of the borrowings. Where borrowings have been fully repaid but the borrowing facility remains, directly

attributable transaction costs that remain unamortised are presented within current and/or non-current assets.

Borrowings and loans

Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including

premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement

using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the

year in which they arise.

Derecognition

A ﬁnancial liability is derecognised when the obligation under the liability is discharged, cancelled, or expires. When an existing ﬁnancial

liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially

modiﬁed, such an exchange or modiﬁcation is treated as the derecognition of the original liability and the recognition of a new liability.

The difference in the respective carrying amounts is recognised in the income statement.

Derivative ﬁnancial instruments

The Group uses derivative ﬁnancial instruments such as forward currency contracts, interest rate swaps, commodity option contracts and

commodity swap arrangements, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Derivative

ﬁnancial instruments are initially recognised and subsequently remeasured at fair value. Certain derivative ﬁnancial instruments are

designated as cash ﬂow hedges in line with the Group’s risk management policies. When derivatives do not qualify for hedge accounting

or are not designated as accounting hedges, changes in the fair value of the instrument are recognised within the income statement.

A derivative with a positive fair value is recognised as a ﬁnancial asset whereas a derivative with a negative fair value is recognised as a

ﬁnancial liability. Derivatives are not offset in the ﬁnancial statements unless the Group has both a legally enforceable right and intention

to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than

12 months and it is not due to be realised or settled within 12 months. Other derivatives maturing in less than 12 months and expected

to be realised or settled in less than 12 months are presented as current assets or current liabilities.

Cash ﬂow hedges

The effective portion of gains and losses arising from the remeasurement of derivative ﬁnancial instruments designated as cash ﬂow

hedges are deferred within other comprehensive income and subsequently transferred to the income statement in the period the hedged

transaction is recognised in the income statement. When a hedging instrument is sold or expires, any cumulative gain or loss previously

recognised in other comprehensive income remains deferred until the hedged item affects proﬁt or loss or is no longer expected to occur.

Any gain or loss relating to the ineffective portion of a cash ﬂow hedge is immediately recognised in the income statement. Hedge

ineffectiveness could arise if volumes of the hedging instruments are greater than the hedged item of production, or where the

creditworthiness of the counterparty is signiﬁcant and may dominate the transaction and lead to losses.

2. Material accounting policies

continued

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

133

Fair values

Fair value is deﬁned as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date. It is determined by reference to quoted market prices adjusted for estimated transaction

costs that would be incurred in an actual transaction, or by the use of established estimation techniques such as option pricing models

and estimated discounted values of cash ﬂows.

For ﬁnancial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.

Under IFRS 9, embedded derivatives are not separated from a host ﬁnancial asset, and are classiﬁed based on their contractual terms

and the Group’s business model.

Equity

Share capital

Share capital includes the total net proceeds, both nominal and share premium, on the issue of ordinary and preference shares of the company.

Capital redemption reserve

The capital redemption reserve represents the nominal value of shares transferred following the company’s purchase of them.

Merger reserve

On 31 March 2021, Harbour Energy plc (formerly Premier Oil plc) acquired Chrysaor Holdings Limited as part of a reverse acquisition.

Under the terms of the merger, Premier legally acquired Chrysaor through the issuance of consideration shares whilst Chrysaor was the

acquirer for accounting purposes, primarily as a result of its ability to appoint the Board of the enlarged group. The merger reserve

primarily represents Premier’s opening balance on the legal reserve plus the fair value of the assets and liabilities acquired by Chrysaor.

Cash ﬂow hedge reserve

The cash ﬂow hedge and cost of hedging reserves represent gains and losses on derivatives classiﬁed as effective cash ﬂow hedges.

Upon the designation of option instruments as hedging instruments, the intrinsic and time value components are separated, with only

the intrinsic component being designated as the hedging instrument and the time value component is deferred in other comprehensive

income as a ‘cost of hedging’.

Currency translation reserve

This reserve comprises exchange differences arising on consolidation of the Group’s operations with a functional currency other than

the US dollar.

Share-based payments

The Group has applied the requirements of IFRS 2 Share-based Payment. The Group has share-based awards that are equity and cash

settled as deﬁned by IFRS 2. The fair value of the equity-settled awards has been determined at the date of grant of the award allowing

for the effect of any market-based conditions. The fair value determined at the grant date of the equity-settled share-based payments is

expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted

for the effect of non-market based vesting conditions. For cash-settled awards, a liability is recognised for the goods or service acquired.

This is measured initially at the fair value of the liability. The fair value of the liability is subsequently remeasured at each balance sheet

date until the liability is settled, and at the date of settlement, with any changes in fair value recognised in the income statement.

Inventories

All inventories, except for petroleum products, are stated at the lower of cost and net realisable value. The cost of materials is the purchase

cost, determined on a weighted average cost basis. Petroleum products and underlift and overlift positions are measured at net realisable

value using an observable year-end oil or gas market price, and are included in other debtors or creditors, respectively.

Notes to the consolidated ﬁnancial statements

continued

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134

Leases

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use

by the Group. The ﬁnance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of

interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of lease term

and useful life. The Group recognises right-of-use assets and lease liabilities on a gross basis and the recovery of lease costs from joint

operations’ partners is recorded as other income.

Right-of-use assets and lease liabilities arising from a lease are initially measured on a present value basis reﬂecting the net present

value of the ﬁxed lease payments and amounts expected to be payable by the Group assuming leases run to full term. The Group

has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options.

The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which signiﬁcantly

impacts the amount of lease liabilities and right-of-use assets recognised.

•

The lease payments are discounted using the Group’s incremental borrowing rates of between 1.9 per cent and 8.8 per cent, being

the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic

environment with similar terms and conditions

To determine the incremental borrowing rate, the Group where possible:

•

Uses recent third-party ﬁnancing received by the individual lessee as a starting point, adjusted to reﬂect changes in ﬁnancing conditions

since third-party ﬁnancing was received

•

Makes adjustments speciﬁc to the lease, for example term, country, currency and security

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in

the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability

is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and ﬁnance cost. The ﬁnance cost is charged to the income statement over the lease

period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

•

The amount of the initial measurement of lease liability

•

Any lease payments made at or before the commencement date less any lease incentives received

•

Any initial direct costs and restoration costs

Right-of-use assets are generally depreciated over the shorter of the asset’s estimated useful life and the lease term on a straight-line basis.

Payments associated with short-term leases and leases of low value assets are recognised on a straight-line basis as an expense in the

income statement. Short-term leases are leases with a lease term of 12 months or less.

For lease arrangements where all partners of a joint operation are considered to share the primary responsibility for lease payments

under a lease contract, the Group recognises its share of the respective right-of-use asset and lease liability. This situation is most

common where the parties of a joint operation co-sign the lease contract.

The Group recognises a gross lease liability for leases entered into on behalf of a joint operation where it has primary responsibility

for making the lease payments. In such instances, if the arrangement between the Group and the joint operation represents a ﬁnance

sublease, the Group recognises a net investment in sublease for amounts recoverable from non-operators whilst derecognising the

respective portion of the gross right-of-use asset. The gross lease liability is retained on the balance sheet.

The net investment in sublease is classiﬁed as either trade and other receivables or long-term receivables on the balance sheet

according to whether or not the amounts will be recovered within 12 months of the balance sheet date. Finance income is recognised

in respect of net investment in subleases.

2. Material accounting policies

continued

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135

Provisions for liabilities

A provision is recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable that an outﬂow of resources

embodying economic beneﬁts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money

is material, provisions are discounted using a current pre-tax rate that reﬂects, where appropriate, the risk speciﬁc to the liability. Where

discounting is used, the increase in the provision due to the passage of time is recognised as part of ﬁnance costs in the income statement.

The estimated cost of dismantling and restoring the production and related facilities at the end of the economic life of each ﬁeld is

recognised in full when the related facilities are installed. The amount provided is the present value of the estimated future restoration

cost. A non-current asset is also recognised. Any changes to estimated costs or discount rates are dealt with prospectively.

The Group recognises provision for the estimated CO

emissions costs when actual emissions exceed the emission rights granted and

still held. When actual emissions exceed the amount of emission rights granted, provision is recognised for the exceeding emission rights

based on the purchase price of allowance concluded in forward contracts or market quotations at the reporting date.

Group retirement beneﬁts

Payments to deﬁned contribution retirement beneﬁt plans are charged as an expense as they fall due. Payments made to state-managed

retirement beneﬁt schemes are dealt with as payments to deﬁned contribution plans where the Group’s obligations under the schemes

are equivalent to those arising in a deﬁned contribution retirement beneﬁt plan.

The Group operates a deﬁned beneﬁt pension scheme, which requires contributions to be made to a separately administered fund.

The cost of providing beneﬁts is determined using the projected unit credit method, with actuarial valuations being carried out at each

balance sheet date. Actuarial gains and losses are recognised immediately in the statement of comprehensive income.

The retirement beneﬁt obligation recognised in the balance sheet represents the present value of the deﬁned beneﬁt obligation as

reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds

and reductions in future contributions to the plan.

Trade payables

Initial recognition of trade payables is at fair value. Subsequently they are stated at amortised cost.

Taxes

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to

the taxation authorities. The tax rates and laws used to compute the amount are those that are enacted or substantively enacted at the

reporting date in the countries where the Group operates and generates taxable income.

Current income tax related to items recognised directly in other comprehensive income or equity is recognised in other comprehensive

income or directly in equity, not in the income statement.

Deferred tax

Deferred taxation is recognised in respect of all timing differences arising between the tax bases of the assets and liabilities and their

carrying amounts in the ﬁnancial statements with the following exceptions:

•

Deferred income tax assets are recognised only to the extent that it is probable that the taxable proﬁt will be available against which

the deductible temporary difference, carried forward tax credits or tax losses can be utilised

•

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when

the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the reporting date.

The carrying amount of the deferred income tax asset is reviewed at each balance sheet date and reduced to the extent that it is no

longer probable that sufﬁcient taxable proﬁts will be available to allow all or part of the asset to be recovered. The Group reassesses

any unrecognised deferred tax assets each year taking into account changes in oil and gas prices, the Group’s proven and probable

reserves and resources proﬁle and forecast capital and operating expenditures

•

Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to offset current assets against current tax liabilities,

the deferred income tax relates to the same tax authority and that same tax authority permits the Group to make a single net payment

Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive

income, in which case the deferred tax is also dealt with in other comprehensive income.

Notes to the consolidated ﬁnancial statements

continued

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136

Revenue from contracts with customers

Revenue from contracts with customers is recognised when the Group satisﬁes a performance obligation by transferring a good or

service to a customer. A good or service is transferred when the customer obtains control of that good or service. Revenue associated

with the sale of crude oil, natural gas, and natural gas liquids (NGLs) is measured based on the consideration speciﬁed in contracts with

customers with reference to quoted market prices in active markets, adjusted according to speciﬁc terms and conditions as applicable

according to the sales contracts. The transfer of control of oil, natural gas, natural gas liquids and other items sold by the Group occurs

when title passes at the point the customer takes physical delivery. The Group principally satisﬁes its performance obligations at a point

in time and the amounts of revenue recognised relating to performance obligations satisﬁed over time are not signiﬁcant.

Over/underlift

Differences between the production sold and the Group’s share of production result in an overlift or an underlift. Underlift positions are

measured at net realisable value using an observable year-end oil or gas market price. Overlift positions are measured using the sales

price that generated the overlift. Underlift and overlift positions are included in receivables or payables respectively. Movements during

the accounting period are recognised within cost of sales.

Interest income

Interest income is recognised on an accruals basis, by reference to the principal outstanding and at the effective interest rate applicable.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period

of time to get ready for its intended use or sale (a qualifying asset) are capitalised as part of the cost of the respective assets. Where

the funds used to ﬁnance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of

rates applicable to relevant general borrowings of the Group during the period. All other borrowing costs are recognised in the income

statement in the period in which they are incurred.

New accounting standards and interpretations

The Group applied for the ﬁrst time certain standards and amendments, which are effective for annual periods beginning on or after

1 January 2023 (unless otherwise stated). The Group has not early adopted any other standard, interpretation or amendment that

has been issued but is not yet effective.

Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2

The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and examples to help entities

apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures

that are more useful by replacing the requirement for entities to disclose their ‘signiﬁcant’ accounting policies with a requirement to

disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions

about accounting policy disclosures.

The amendments have had an impact on the Group’s disclosures removing accounting policies not considered to be material along with

associated notes, but not on the measurement, recognition or presentation of any items in the Group’s ﬁnancial statements.

Deﬁnition of Accounting Estimates – Amendments to IAS 8

The amendments to IAS 8 clarify the distinction between changes in accounting estimates, changes in accounting policies and the

correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.

The amendments had no impact on the Group’s consolidated ﬁnancial statements.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12

The amendments to IAS 12 Income Tax narrow the scope of the initial recognition exception, so that it no longer applies to transactions

that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities.

The amendments had no impact on the Group’s consolidated ﬁnancial statements.

International Tax Reform—Pillar Two Model Rules – Amendments to IAS 12

The amendments to IAS 12 have been introduced in response to the OECD’s BEPS Pillar Two rules and include:

•

a mandatory temporary exception to the recognition and disclosure of deferred taxes arising from the jurisdictional implementation

of the Pillar Two model rules; and

•

disclosure requirements for affected entities to help users of the ﬁnancial statements better understand an entity’s exposure to

Pillar Two income taxes arising from that legislation, particularly before its effective date.

2. Material accounting policies

continued

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Annual Report & Accounts 2023

137

The mandatory temporary exception – the use of which is required to be disclosed – applies immediately. The remaining disclosure

requirements apply for annual reporting periods beginning on or after 1 January 2023, but not for any interim periods ending on or

before 31 December 2023.

IFRS 17 Insurance Contracts

IFRS 17 Insurance Contracts is a comprehensive new accounting standard for insurance contracts covering recognition and

measurement, presentation and disclosure. IFRS 17 replaces IFRS 4 Insurance Contracts. IFRS 17 applies to all types of insurance

contracts (ie life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them as well as to certain

guarantees and ﬁnancial instruments with discretionary participation features; a few scope exceptions will apply. The overall objective

of IFRS 17 is to provide a comprehensive accounting model for insurance contracts that is more useful and consistent for insurers,

covering all relevant accounting aspects. IFRS 17 is based on a general model, supplemented by:

•

A speciﬁc adaptation for contracts with direct participation features (the variable fee approach)

•

A simpliﬁed approach (the premium allocation approach) mainly for short-duration contracts

The new standard had no impact on the Group’s consolidated ﬁnancial statements.

Signiﬁcant accounting judgements and estimates

The preparation of the Group’s ﬁnancial statements in conformity with IFRS requires management to make judgements, estimates

and assumptions at the date of the ﬁnancial statements. Estimates and assumptions are continuously evaluated and are based on

management experience and other factors, including expectations of future events that are believed to be reasonable under the

circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to

the carrying amount of the assets or liabilities affected in future periods. In particular, the Group has identiﬁed the following areas

where signiﬁcant judgement, estimates and assumptions are required.

Judgements

The signiﬁcant accounting judgements for the Group are considered to be:

•

the carrying value of intangible exploration and evaluation assets, in relation to whether commercial determination of an exploration

prospect had been reached;

•

the carrying value of property, plant and equipment regarding assessing assets for indicators of impairment;

•

decommissioning costs in relation to the timing of when decommissioning would occur;

•

tax including assessment of risks around tax uncertainties and the recognition of deferred tax assets; and

•

the application of the going concern basis of accounting (see ‘Basis of preparation’ section above).

Key sources of estimation uncertainty

Details of the Group’s critical accounting estimates are set out in these ﬁnancial statements and are considered to be:

•

the carrying value of property, plant and equipment and goodwill, where the key assumptions relate to oil and gas prices expected

to be realised, the estimation of 2P reserves and the associated production proﬁles;

•

decommissioning costs where the key assumptions relate to the discount and inﬂation rates applied, applicable rig rates and expected

timing of cessation of production (COP) on each ﬁeld;

•

the provision for, or disclosure of, areas of uncertainty for tax purposes where the key assumptions are driven by technical analysis

corroborated by external advice; and

•

recognition of net deferred tax liabilities, where key assumptions relate to oil and gas prices expected to be realised, and production proﬁles.

The results from downside sensitivities prepared with regard to production and commodity price assumptions, which in management’s

view reﬂect the principal risks, indicate that material changes that would impact the carrying amounts of assets and liabilities within

the next ﬁnancial year are unlikely.

Further information is provided in the Audit and Risk Committee report on pages 76 to 79.

3. Segment information

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the Group’s business

segments, has been identiﬁed as the Chief Executive Ofﬁcer.

The Group’s activities consist of one class of business being the acquisition, exploration, development and production of oil and gas

reserves and related activities, and are split geographically and managed in two regions, namely ‘North Sea’ and ‘International’. The North

Sea segment includes the UK and Norwegian continental shelves, and the ‘International’ segment includes Indonesia, Vietnam and Mexico.

Information on major customers can be found in note 4.

Notes to the consolidated ﬁnancial statements

continued

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Annual Report & Accounts 2023

138

Income statement

	2023	2022
	$ million	$ million
Revenue
North Sea	3,478	5,082
International	237	308
Total Group sales revenue	3,715	5,390
Other income
North Sea	36	41
International	–	–
Total Group revenue and other income	3,751	5,431
Operating proﬁt
North Sea	898	2,388
International	15	153
Group operating proﬁt	913	2,541
Finance income	104	279
Finance expenses	(420)	(358)
Proﬁt before income tax	597	2,462
Income tax expense	(565)	(2,454)
Proﬁt for the ﬁnancial year	32	8

Balance sheet

	2023	2022
	$ million	$ million
Segment assets
North Sea	8,632	11,346
International	1,265	1,220
Total assets	9,897	12,566
Segment liabilities
North Sea	(7,818)	(10,938)
International	(539)	(607)
Total liabilities	(8,357)	(11,545)

3. Segment information

continued

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Annual Report & Accounts 2023

139

Other information

	2023	2022
	$ million	$ million
Capital additions
North Sea	611	576
International	110	109
Total capital additions	721	685
Depreciation, depletion and amortisation
North Sea	1,369	1,471
International	61	75
Total depreciation, depletion and amortisation	1,430	1,546
Exploration and evaluation expenses and new ventures
North Sea	36	34
International	–	8
Total exploration and evaluation expenses and new ventures	36	42
Exploration costs written-oﬀ
North Sea	38	71
International 1	19	(7)
Total exploration costs written-oﬀ	57	64

In 2022, International included a credit to the income statement related to a change to the decommissioning estimate in the Falkland Islands Business Unit.

4. Revenue from contracts with customers and other income

	2023	2022
	$ million	$ million
Type of goods
Crude oil sales	2,086	2,792
Gas sales	1,415	2,322
Condensate sales	179	238
Total revenue from contracts with customers 1	3,680	5,352
Tariff income	30	30
Other revenue	5	8
Total revenue from production activities	3,715	5,390
Other income 2	36	41
Total revenue and other income	3,751	5,431

Revenues from contracts with customers of $4,591 million (2022: $8,537 million) include crude oil sales of $2,179 million (2022: $3,545 million) and gas sales of $2,233 million

(2022: $4,754 million). This was prior to realised hedging losses in the period of $93 million (2022: $753 million) on crude oil and $818 million (2022: $2,432 million) on gas sales.

Other income mainly represents partner recoveries related to lease obligations and, in 2023 a receipt related to the Viking CCS Development Agreement that was signed in March.

Approximately 88 per cent (2022: 84 per cent) of the revenues were attributable to sales to energy trading companies of the Shell group.

Notes to the consolidated ﬁnancial statements

continued

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140

5. Operating proﬁt

		2023	2022
	Note	$ million	$ million
Cost of operations
Production, insurance and transportation costs		1,171	1,114
Gas purchases		12	36
Royalties		4	5
Depreciation of oil and gas assets	12	1,192	1,319
Depreciation of right-of-use oil and gas assets	13	230	219
Capitalisation of IFRS 16 lease depreciation on oil and gas assets	13	(27)	(30)
Amortisation of capacity rights		–	1
Movement in over/underlift balances and hydrocarbon inventories		(225)	181
Total cost of operations		2,357	2,845
Impairment expense/(reversal) of property, plant and equipment	12	108	(88)
Impairment loss/(gain) due to increase/(decrease) in decommissioning provisions
on oil and gas tangible assets	12	106	(82)
Impairment of goodwill	10	25	–
Exploration costs written-off 1	11	57	64
Exploration and evaluation expenditure and new ventures 2		36	42
Gain on disposal 3		–	(12)
General and administrative expenses
Depreciation of right-of-use non-oil and gas assets	13	9	11
Depreciation of non-oil and gas assets	12	3	5
Amortisation of non-oil and gas intangible assets	11	23	21
Other administrative costs 4		114	84
Total general and administrative expenses		149	121
Auditor’s remuneration
Audit fees
Fees payable to the company’s auditor for the company’s Annual Report		3	3
Audit of the company’s subsidiaries pursuant to legislation		1	1
Non-audit fees 5
Other services pursuant to legislation – interim review		–	–
Other services 6		1	1

Exploration costs written-off of $57 million (2022: $64 million) includes $13 million related to the Ix-1EXP well in Mexico, $15 million related to the JDE well in Norway, and also includes

costs associated with licence relinquishments and uncommercial well evaluations and $4 million related to an increase in decommissioning provisions in the North Sea (note 11).

Exploration and evaluation expenditure and new ventures of $36 million (2022: $42 million) includes $29 million (2022: $28 million) of early project costs on new ventures incurred in

respect of the Group’s interest in CCS and electriﬁcation projects in the UK, plus $7 million (2022: $13 million) of ongoing pre-licence costs.

The gain on disposal in 2022 of $12 million relates to the release of a provision associated with Premier’s sale of its legacy Pakistan assets in 2019 after the expiry of the deadline in the

period for tax claims to be submitted.

Other administrative costs in 2023 include consultancy costs of $33 million (2022: $9 million).

The company has a policy on the provision of non-audit services by the auditor which is aimed at ensuring their continued independence. This policy is available on the company’s website.

The use of the external auditor for services relating to accounting systems or ﬁnancial statement preparations is not permitted, as are various other services that could give rise to

conﬂicts of interest or other threats to the auditor’s objectivity that cannot be reduced to an acceptable level by applying safeguards.

Other non-audit services in 2023 primarily relate to transaction related activities.

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141

6. Staff costs

	2023	2022
	$ million	$ million
Wages and salaries and other staff costs	325	306
Social security costs	25	30
Pension costs	29	30
Total staﬀ costs	379	366

	2023	2022
Average annual number of employees employed by the Group worldwide was:	No.	No.
Offshore based	534	559
Ofﬁce and administration	1,271	1,273
Total staﬀ	1,805	1,832

Staff costs above are recharged to joint venture partners where applicable, or are capitalised to the extent that they are directly

attributable to capital or decommissioning projects. The above costs include share-based payments as disclosed in note 25.

All employees were engaged in the acquisition, exploration, development and production of oil and gas reserves, and energy transition activities.

The Group operates a deﬁned contribution scheme and one deﬁned beneﬁt pension scheme for which further details are provided in

note 26.

7. Finance income and ﬁnance expenses

		2023	2022
	Note	$ million	$ million
Finance income
Bank interest		19	10
Other interest and ﬁnance gains		6	20
Lease ﬁnance income		2	2
Realised gains on interest rate swaps		–	6
Realised gains on foreign exchange forward contracts		9	1
Gains on derivatives 1		68	38
Foreign exchange gains 2		–	202
Total ﬁnance income		104	279
Finance expenses
Interest payable on reserve based lending		15	71
Interest payable on bond		27	27
Other interest and ﬁnance expenses		17	12
Lease interest	13	51	25
Losses on derivatives 1		–	48
Finance expense on deferred revenue	19	4	20
Foreign exchange losses		57	–
Bank and ﬁnancing fees 3		100	91
Unwinding of discount on decommissioning and other provisions	20	156	65
		427	359
Finance costs capitalised during the year 4		(7)	(1)
Total ﬁnance expense		420	358

Gains and losses on derivatives mainly relates to changes in the fair value of an embedded derivative within one of the Group’s gas contracts (2022: $48 million loss on derivatives).

Gains on derivatives in 2022 included mark to market gains on unrealised interest rate and foreign exchange derivatives.

In 2022, signiﬁcant unrealised foreign exchange gains arose mainly from the revaluation of open gas hedges denominated in sterling.

Bank and ﬁnancing fees include an amount of $48 million (2022: $55 million) relating to the amortisation of arrangement fees and related costs capitalised against the Group’s long-term

borrowings (note 21).

The amount of ﬁnance costs capitalised was determined by applying the weighted average rate of ﬁnance costs applicable to the borrowings of the Group of 6.0 per cent to the

expenditures on the qualifying assets (2022: 4.4 per cent).

Notes to the consolidated ﬁnancial statements

continued

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142

8. Income tax

	2023	2022
	$ million	$ million
Current income tax expense
UK corporation tax	641	672
Overseas tax	14	53
Adjustments in respect of prior years	22	(19)
Total current income tax expense	677	706
Deferred tax (credit)/expense
UK corporation tax 1	(74)	1,772
Overseas tax	(18)	(8)
Adjustments in respect of prior years	(20)	(16)
Total deferred tax (credit)/expense	(112)	1,748
Total tax expense reported in the income statement	565	2,454
The tax expense/(credit) in the statement of comprehensive income is as follows:
Tax expense/(credit) on cash ﬂow hedges	2,376	(1,006)

2022 includes a $1,469 million charge in respect of the revaluation of the deferred tax on the balance sheet due to the introduction of the Energy Proﬁts Levy.

Reconciliation of tax expense and the accounting proﬁt before taxation multiplied by the statutory rate of corporation tax and supplementary

charge applying to UK oil and gas production operations for the years ended 31 December 2023 and 2022 is as follows:

	2023	2022
	$ million	$ million
Proﬁt before income tax	597	2,462
At the Group’s statutory income tax rate of 75.0% (2022: 55.0%)	448	1,354
Eﬀects of:
Expenses/(income) not deductible/(taxable) for tax purposes	101	(12)
Interest not deductible for supplementary charge and Energy Proﬁts Levy	60	53
Adjustments in respect of prior years	2	(36)
Remeasurement of deferred tax	13	(72)
Deferred Energy Proﬁts Levy	–	1,469
Impact of different tax rates	(29)	(190)
Expenses not deductible for Energy Proﬁts Levy	52	8
Energy Proﬁts Levy investment allowance	(64)	(81)
Investment allowance	(18)	(39)
Total tax expense reported in the consolidated income statement at the eﬀective tax rate of 95% (2022: 100%)	565	2,454

The effective tax rate for the year was 95 per cent, compared to 100 per cent for 2022.

The tax expense reconciliation has been prepared based on the statutory rate of taxation applying to UK oil and gas production because

the majority of Group proﬁt was generated on the UK continental shelf. UK oil and gas production is taxed at a rate of 30 per cent

(2022: 30 per cent), a supplementary charge of 10 per cent (2022: 10 per cent), and with effect from 1 January 2023, the Energy

Proﬁts Levy (EPL) of 35 per cent (2022: 25 per cent) to give an overall tax rate of 75 per cent (2022: 65 per cent). As the EPL was

introduced part way through the previous ﬁnancial year, a blended average rate of 55 per cent was applied.

The future effective tax rate is impacted by the mix of jurisdictions in which the Group operates. The UK statutory tax rate for oil and

gas production operations is expected to remain a primary inﬂuence on the effective tax rate. The Energy Proﬁts Levy at the 35 per cent

rate is currently in place until 31 March 2028.

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143

Deferred tax

The principal components of deferred tax are set out in the following tables:

		2023	2022
	Note	$ million	$ million
Deferred tax assets		7	1,406
Deferred tax liabilities		(1,291)	(397)
		(1,284)	1,009
Reclassiﬁcation of deferred tax liabilities directly associated with assets held for sale	17	31	–
Total deferred tax		(1,253)	1,009

The origination of and reversal of temporary differences are, as shown in the next table, related primarily to movements in the carrying amounts

and tax base values of expenditure and the timing of when these items are charged and/or credited against accounting and taxable proﬁt.

	Accelerated
	capital			Fair value of
	allowances	Decommissioning	Losses	derivatives	Other	Overseas	Total
	$ million	$ million	$ million	$ million	$ million	$ million	$ million
As at 1 January 2022	(2,820)	2,013	1,314	1,392	39	(187)	1,751
Deferred tax (expense)/credit	(658)	(362)	(745)	49	(40)	8	(1,748)
Comprehensive income	–	–	–	1,006	–	–	1,006
Foreign exchange	82	(86)	–	5	(2)	1	–
As at 31 December 2022	(3,396)	1,565	569	2,452	(3)	(178)	1,009
Deferred tax (expense)/credit	546	(25)	(388)	(61)	22	18	112
Comprehensive expense	–	–	–	(2,376)	1	–	(2,375)
Foreign exchange	(51)	34	–	(9)	1	(5)	(30)
As at 31 December 2023	(2,901)	1,574	181	6	21	(165)	(1,284)

The Group’s deferred tax assets as at 31 December 2023 are recognised to the extent that taxable proﬁts are expected to arise against

which the tax assets can be utilised. The Group assessed the recoverability of its UK ring fenced losses and allowances using corporate

assumptions which are consistent with the Group’s impairment assessment. Based on those assumptions, the Group expects to fully

utilise its recognised UK tax losses and allowances. The recovery of the Group’s UK decommissioning deferred tax asset is additionally

supported by the ability to carry back decommissioning tax losses and set these against ring fence taxable proﬁts of prior periods.

The EPL increased to a rate of 35 per cent from 25 per cent with effect from 1 January 2023. The EPL will currently be in place until

31 March 2028. Any temporary differences subject to the EPL expected to reverse in this period have consequently been remeasured to the

higher rate. Ring fence tax losses cannot be offset against proﬁts subject to EPL nor are deductions given for expenditure incurred on

decommissioning. Consequently, the deferred tax assets representing future decommissioning deductions and ring fence tax losses are not

impacted by EPL with the effect of EPL primarily being on the deferred tax liability associated with accelerated capital allowances. The closing

deferred tax liability for the period of $1,284 million includes $1,014 million of deferred tax liabilities arising from the impact of EPL.

In line with other sensitivity analysis undertaken, we have assessed the impact on the recoverability of deferred tax assets based on an

average -10 per cent to the Harbour scenario average crude price curves. The sensitivity analysis indicates that there would no material

impact to the recoverability of deferred tax assets.

The Group has unrecognised UK tax losses and allowances as at 31 December 2023 of approximately $181 million (2022: $202 million)

in respect of ring fence losses, $138 million (2022: $111 million) in respect of ring fence investment allowance and $803 million

(2022: $807 million) in respect of non-ring fence losses.

The Group also has unrecognised tax losses of approximately $168 million (2022: $157 million) in respect of its international operations.

These losses include amounts of $13 million which will expire within 10 years and $24 million which will expire within ﬁve years.

The overseas deferred tax relates mainly to temporary differences associated with ﬁxed asset balances.

No deferred tax liabilities have been provided on unremitted earnings of overseas subsidiaries, because due to the application of

withholding reliefs under international double taxation treaties and dividend exemptions under UK and Netherlands legislation no

additional taxation is expected to arise on future distribution.

Notes to the consolidated ﬁnancial statements

continued

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144

Legislation was introduced in UK Finance Act 2021 to increase the main rate of UK corporation tax for non-ring fence proﬁts from

19 per cent to 25 per cent from 1 April 2023. This change does not have a material impact on the Group as the UK proﬁts are primarily

subject to the UK ring fence tax rate.

Global minimum corporation tax rate – Pillar Two requirements

The legislation implementing the Organisation for Economic Co-operation and Development’s (OECD) proposals for a global minimum

corporation tax rate (Pillar Two) was substantively enacted into UK law on 20 June 2023. The rules have effect from 1 January 2024

and therefore the rules do not impact the Group’s results to 31 December 2023.

The Group has applied the mandatory exception to recognising and disclosing information about the deferred tax assets and liabilities

related to Pillar Two income taxes in accordance with the amendments to IAS 12 published by the IASB on 23 May 2023.

The Group has performed an assessment of the Group’s potential exposure to Pillar Two income taxes for periods from 1 January 2024.

The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax ﬁlings, country-by-country reporting

and ﬁnancial statements for the constituent entities in the Group. Based on the assessment, the Pillar Two effective tax rates in most of

the jurisdictions in which the Group operates are above 15 per cent and the transitional safe harbour relief is expected to apply. On this

basis the Group does not expect a material exposure to Pillar Two income taxes in any jurisdictions.

Uncertain tax positions

During the period an uncertain tax position has been identiﬁed in certain UK subsidiaries relating to the timing of the taxation of fair value

movements and realised gains and losses on hedges entered into in order to manage commodity price risk. On the strength of independent

advice, management considers that there is no expectation of a net additional outﬂow of funds. As such no additional liability has been

recognised in the consolidated ﬁnancial statements as at 31 December 2023. However, a contingent liability exists as the UK Tax Authorities

could take an alternative view on whether the fair value movements on the hedged instruments are disregarded for tax purposes. While not

considered a likely outcome, if the UK Tax Authorities were to disagree and successfully challenge the position, a possible liability currently

estimated not to exceed $120 million could arise because of the differences in tax rates across the periods in question.

9. Earnings per share (EPS)

Basic EPS is calculated by dividing the proﬁt after tax attributable to ordinary shareholders of the Group by the weighted average number

of ordinary shares in issue during the year.

Diluted EPS is calculated by dividing the proﬁt after tax attributable to ordinary shareholders by the weighted average number of ordinary

shares in issue during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the

dilutive potential ordinary shares into ordinary shares.

The following table reﬂects the income and share data used in the basic and diluted EPS calculations:

	2023	2022
Earnings for the year ($ millions)
Earnings for the purpose of basic earnings per share	32	8
Effect of dilutive potential ordinary shares	–	–
Earnings for the purpose of diluted earnings per share	32	8
Number of ordinary shares (millions)
Weighted average number of ordinary shares for the purpose of basic earnings per share 1	804	900
Dilutive potential ordinary shares 2	2	12
Weighted average number of ordinary shares for the purpose of diluted earnings per share	806	912
Earnings per share ($ cents)
Basic	4	1
Diluted	4	1

During the current period 76.8 million ordinary shares were repurchased as part of the share buyback programme.

Excludes certain share options outstanding at 31 December 2023 as their option price was greater than market price.

8. Income tax

continued

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145

10. Goodwill

Goodwill represents the difference between the aggregate of the fair value of purchase consideration transferred at the acquisition date

and the fair value of the identiﬁable assets.

	2023	2022
Cost and net book value	$ million	$ million
At 1 January	1,327	1,327
Impairment charge	(25)	–
At 31 December	1,302	1,327

The goodwill balance consists of balances arising from the completion of the all-share merger between Premier Oil plc and Chrysaor

Holdings Limited in March 2021, on Chrysaor Holdings Limited’s acquisition of the ConocoPhillips UK business, and of the UK North Sea

assets from Shell, which completed on 30 September 2019 and 1 November 2017, respectively.

Goodwill acquired through business combinations has been allocated to two groups of cash-generating units (CGUs), being the North

Sea, of $1,278 million (2022: $1,278 million), and International, of $24 million (2022: $49 million).

Impairment testing of goodwill

In accordance with IAS 36 Impairment of Assets, goodwill is reviewed for impairment at the year end or more frequently if there are

indications that goodwill might be impaired. In assessing whether goodwill has been impaired, the carrying amount of the CGU for

goodwill is compared with its recoverable amount. At the year end, the Group tested for impairment in accordance with the accounting

policy and recognised a goodwill impairment of $25 million in the International CGU (2022: $ nil) related to the Vietnam business being

classed as an asset held for sale as per note 17.

Determining recoverable amount

The recoverable amounts of the CGU and ﬁelds have been determined on a fair value less costs to sell basis. The key assumptions

used in determining the fair value are often subjective, such as the future long-term oil and gas price assumption, or the operational

performance of the assets. Discounted cash ﬂow models comprising asset-by-asset life of ﬁeld projections using level 3 inputs (based

on the IFRS 13 fair value hierarchy) have been used to determine the recoverable amounts.

The cash ﬂows have been modelled on a post-tax and post-decommissioning basis, inﬂated at 2.5 per cent per annum from 1 January 2027,

and discounted at the Group’s post-tax discount rate of between 9.0 per cent and 12.4 per cent (pre-tax 12.0 – 15.5 per cent) (2022: 8.5

– 11.0 per cent post-tax; pre-tax 12.1 per cent – 14.1 per cent). Risks speciﬁc to assets within the CGU are reﬂected within the cash ﬂow forecasts.

Key assumptions used in calculations

Assumptions involved in impairment measurement include estimates of commercial reserves and production volumes, future oil and gas

prices, discount rates and the level and timing of expenditures, all of which are inherently uncertain.

Commodity and carbon prices

Management’s commodity price curve assumptions are benchmarked against a range of external forward price curves on a regular basis.

The ﬁrst three years reﬂect the market forward prices curves transitioning to a long-term price thereafter. The long-term commodity prices

and carbon prices are shown in note 2 to the ﬁnancial statements on page 123.

Production volumes and oil and gas reserves

Based on life of ﬁeld production proﬁles for each asset within the CGU. Proven and probable reserves are estimates of the amount of

oil and gas that can be economically extracted from the Group’s oil and gas assets. The Group estimates its reserves using standard

recognised evaluation techniques and they are assessed at least annually by management and by an independent consultant. Proven

and probable reserves are determined using estimates of oil and gas in place, recovery factors and future commodity prices.

Costs

Operating expenditure, capital investment and decommissioning costs, which have been inﬂated at 2.5 per cent per annum from

1 January 2027, are derived from the Group’s business plan.

Discount rates

Represent management’s estimate of the Group’s country-based weighted average cost of capital (WACC), considering both debt and

equity. The cost of equity is derived from an expected return on investment by the Group’s investors, and the cost of debt is based on

its interest-bearing borrowings. Segment-speciﬁc risk is incorporated by applying a beta factor based on publicly available market data.

The discount rate is based on an assessment of a relevant peer group’s post-tax WACC.

Notes to the consolidated ﬁnancial statements

continued

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146

Foreign exchange rates

Based on management’s long-term rate assumptions, with reference to a range of underlying economic indicators.

Sensitivity to changes in assumptions used in calculations

The Group has run sensitivities on its long-term commodity price assumptions, which have been based on long-range forecasts from

external ﬁnancial analysts, using alternate long-term price assumptions, and discount rates. These are considered to be reasonably

possible changes for the purposes of sensitivity analysis. As shown in note 2 to the ﬁnancial statements the sensitivity analysis on

commodity prices reﬂecting a 10 per cent reduction in the long-term oil and gas price deck applied in the impairment test would result

in a reduction to the goodwill impairment of $4 million. A 1 per cent increase in the discount rate would result in a further impairment

to goodwill of $1 million.

11. Other intangible assets

		Oil and gas	Non-oil and	Carbon
		assets	gas assets 1	allowances 2	Total
	Note	$ million	$ million	$ million	$ million
Cost
At 1 January 2022		813	119	–	932
Additions during the year		111	31	–	142
Transfers to property, plant and equipment	12	(29)	–	–	(29)
Reduction in decommissioning asset	20	(12)	–	–	(12)
Exploration write-off 3		(64)	–	–	(64)
Currency translation adjustment		(2)	(13)	–	(15)
At 31 December 2022		817	137	–	954
Additions during the year		210	20	–	230
Transfers from property, plant and equipment	12	–	7	–	7
Reclassiﬁcation from trade and other receivables 2		–	–	86	86
Increase in decommissioning asset	20	4	–	–	4
Exploration write-off 3		(57)	–	–	(57)
Currency translation adjustment		42	8	–	50
At 31 December 2023		1,016	172	86	1,274
Amortisation
At 1 January 2022		–	60	–	60
Charge for the year		–	21	–	21
Currency translation adjustment		–	(7)	–	(7)
At 31 December 2022		–	74	–	74
Charge for the year		–	23	–	23
Currency translation adjustment		–	5	–	5
At 31 December 2023		–	102	–	102
Net book value
At 31 December 2022		817	63	–	880
At 31 December 2023		1,016	70	86	1,172

Non-oil and gas assets relate primarily to Group IT software.

On 31 December 2023, the Group reclassiﬁed purchases of UK ETS carbon allowances of $61 million and Voluntary Emissions Reductions (VER) credits of $25 million from trade and

other receivables to intangible assets, $43 million of which are expected to be released to the income statement in the next 12 months.

The exploration write-off of $57 million (2022: $64 million) includes $13 million related to the Ix-1EXP well in Mexico, $15 million related to the JDE well in Norway and also includes costs

associated with licence relinquishments and uncommercial well evaluations and $4 million related to an increase in decommissioning provisions in the North Sea (note 20)

(2022: $6 million credit).

10. Goodwill

continued

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147

12. Property, plant and equipment

			Fixtures and
		Oil and gas	ﬁttings & ofﬁce
		assets	equipment	Total
	Note	$ million	$ million	$ million
Cost
At 1 January 2022		12,022	30	12,052
Additions 1		532	11	543
Transfers from intangible assets	11	29	–	29
Decrease in decommissioning asset 2	20	(778)	–	(778)
Currency translation adjustment		(369)	(3)	(372)
At 31 December 2022		11,436	38	11,474
Additions 1		482	9	491
Transfers to intangible assets	11	–	(7)	(7)
Reclassiﬁcation of asset held for sale	17	(198)	–	(198)
Decrease in decommissioning asset 2	20	(22)	–	(22)
Currency translation adjustment		159	2	161
At 31 December 2023		11,857	42	11,899
Accumulated depreciation
At 1 January 2022		4,785	21	4,806
Charge for the year		1,319	5	1,324
Net impairment reversal		(170)	–	(170)
Currency translation adjustment		(174)	(2)	(176)
At 31 December 2022		5,760	24	5,784
Charge for the year		1,192	3	1,195
Impairment charge		214	–	214
Reclassiﬁcation of asset held for sale	17	(103)	–	(103)
Currency translation adjustment		91	1	92
At 31 December 2023		7,154	28	7,182
Net book value
At 31 December 2022		5,676	14	5,690
At 31 December 2023		4,703	14	4,717

Included within property, plant and equipment additions of $491 million (2022: $543 million) are associated cash ﬂows of $496 million (2022: $477 million) and non-cash ﬂow

movements of $5 million (2022: $66 million), represented by a $30 million decrease in capital accruals (2022: $43 million increase), $18 million of capitalised lease depreciation

(2022: $22 million) and $7 million of capitalised interest (2022: $1 million).

A decrease in the decommissioning assets of $22 million (2022: $778 million) was made during the year as a result of both an update to the decommissioning estimates and new

obligations (note 20).

During the year, the Group recognised a pre-tax impairment charge of $214 million (post-tax $109 million) (2022: net impairment credit

of $170 million; post-tax $50 million). This comprised a pre-tax impairment charge representing a write-down of property, plant and

equipment assets of $108 million (2022: $163 million) across two CGUs in the UK of $70 million. Of these CGUs, one was driven

primarily by a signiﬁcant reduction in the gas price forward curve, and the other by a revised decommissioning cost proﬁle. In addition,

there was a Vietnam fair value impairment on the held for sale asset of $38 million and a pre-tax impairment charge of $106 million

(2022: $82 million credit) in respect of revisions to decommissioning estimates on the Group’s non-producing assets with no remaining

net book value (see note 20).

In 2022, a net pre-tax impairment credit of $170 million was recognised as a result of impairment reversals on North Sea assets of

$251 million driven by a higher forward curve and long-term price assumption for gas, and a pre-tax impairment credit of $82 million

in respect of revisions to decommissioning estimates on the Group’s non-producing assets with no remaining net book value. This was

partially offset by an impairment to property, plant and equipment of $163 million from a single CGU in the UK North Sea, driven primarily

by the contracted price realised for crude sales being negatively impacted by the pricing differential between Urals and Brent crude and

a revised operating cost proﬁle for the ﬁeld.

Notes to the consolidated ﬁnancial statements

continued

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148

Key assumptions used in calculations

Assumptions used in impairment measurement include estimates of commercial reserves and production volumes, future oil and gas

prices, discount rates and the level and timing of expenditures, all of which are inherently uncertain.

Commodity and carbon prices

The Group uses the fair value less cost of disposal method (FVLCD) to calculate the recoverable amount of the cash-generating

units (CGU) consistent with a level 3 fair value measurement (see note 22). In determining the recoverable value, appropriate discounted-

cash-ﬂow valuation models were used, incorporating market-based assumptions. Management’s commodity price curve assumptions are

benchmarked against a range of external forward price curves on a regular basis. Individual ﬁeld price differentials are then applied. The

ﬁrst three years reﬂect the market forward price curves transitioning to a long-term price from 2027, thereafter inﬂated at 2.5 per cent

per annum. The long-term commodity prices used were $70 per barrel for crude and 90 pence per therm for gas.

Production volumes and oil and gas reserves

Production volumes are based on life of ﬁeld production proﬁles for each asset within the CGU. Proven and probable reserves are

estimates of the amount of oil and gas that can be economically extracted from the Group’s oil and gas assets. The Group estimates

its reserves using standard recognised evaluation techniques, assessed at least annually by management. Proven and probable

reserves are determined using estimates of oil and gas in place, recovery factors and future commodity prices.

Costs

Operating expenditure, capital expenditure and decommissioning costs are derived from the Group’s business plan. The discount

rate reﬂects management’s estimate of the Group’s country-based weighted average cost of capital (WACC). Foreign exchange rates

are based on management’s long-term rate assumptions, with reference to a range of underlying economic indicators.

Sensitivity to changes in assumptions used in calculations

Reductions or increases in the long-term oil and gas prices of 10 per cent are considered to be reasonably possible changes for the

purpose of sensitivity analysis. As shown in note 2 to the ﬁnancial statements the decreases to the long-term oil and gas prices from

1 January 2027 speciﬁed above would result in a further pre-tax impairment of $86 million (post-tax $40 million) and $21 million

(post-tax $6 million), respectively.

Considering the discount rates, the Group believes a 1 per cent increase in the post-tax discount rate is considered to be a reasonable

possibility for the purpose of sensitivity analysis. A 1 per cent increase in the post-tax discount rate would lead to a further pre-tax

impairment of $24 million (post-tax $11 million), and a 1 per cent decrease in the post-tax discount rate would have no impact on the

post-tax impairment charge.

12. Property, plant and equipment

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13. Leases

This note provides information for leases where the Group is a lessee.

Balance sheet

		Land and			Offshore
		buildings	Drilling rigs	FPSO	facilities	Equipment	Total
Right-of-use assets	Note	$ million	$ million	$ million	$ million	$ million	$ million
Cost
At 1 January 2022		100	153	509	–	18	780
Additions during the year 1		–	–	–	338	–	338
Cost revisions/remeasurements		3	33	53	(4)	4	89
Disposals		(6)	–	–	–	–	(6)
Currency translation adjustment		(9)	(17)	–	–	(2)	(28)
At 31 December 2022		88	169	562	334	20	1,173
Additions during the year 1		25	–	–	–	1	26
Cost revisions/remeasurements		1	48	63	(6)	4	110
Reclassiﬁcation as asset held for sale	17	(5)	–	(71)	–	–	(76)
Disposals		(4)	(19)	–	–	–	(23)
Currency translation adjustment		4	10	–	–	1	15
At 31 December 2023		109	208	554	328	26	1,225
Accumulated depreciation
At 1 January 2022		22	98	102	–	7	229
Charge for the year		12	43	107	61	7	230
Disposals		(6)	–	–	–	–	(6)
Currency translation adjustment		(2)	(12)	–	–	(1)	(15)
At 31 December 2022		26	129	209	61	13	438
Charge for the year		9	42	94	89	5	239
Reclassiﬁcation of asset held for sale	17	(2)	–	(23)	–	–	(25)
Disposals		(4)	(19)	–	–	–	(23)
Currency translation adjustment		1	7	–	–	1	9
At 31 December 2023		30	159	280	150	19	638
Net book value
At 31 December 2022		62	40	353	273	7	735
At 31 December 2023		79	49	274	178	7	587

Additions of $26 million mainly related to new land and buildings were made to the right-of-use assets during the year (2022: total additions of $338 million related to the Tolmount

offshore facilities).

Notes to the consolidated ﬁnancial statements

continued

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Annual Report & Accounts 2023

150

		2023	2022
Right-of-use liabilities	Note	$ million	$ million
At 1 January		825	654
Additions		28	338
Remeasurement		110	89
Finance costs charged to income statement	7	51	25
Finance costs charged to decommissioning provision	20	1	1
Reclassiﬁcation of liabilities as held for sale	17	(95)	–
Lease payments		(262)	(254)
Currency translation adjustment		15	(28)
At 31 December		673	825
Classiﬁed as
Current		199	221
Non-current		474	604
Total lease liabilities		673	825

The signiﬁcant portion of the Group’s lease liabilities represent lease arrangements for an FPSO vessel on the Catcher asset, and

offshore facilities on the Tolmount asset.

The lease liabilities and associated right-of-use-assets have been calculated by reference to in-substance ﬁxed lease payments in the

underlying agreements incurred throughout the non-cancellable period of the lease along with periods covered by options to extend the

lease where the Group is reasonably certain that such options will be exercised. When assessing whether extension options were likely

to be exercised, assumptions are consistent with those applied when testing for impairment.

Income statement

		2023	2022
Depreciation charge of right-of-use assets	Note	$ million	$ million
Land and buildings – non-oil and gas assets		8	11
Land and buildings – oil and gas assets		1	1
Drilling rigs		42	43
FPSO		94	107
Offshore facilities		89	61
Equipment – non-oil and gas assets		1	–
Equipment – oil and gas assets		4	7
		239	230
Capitalisation of IFRS 16 lease depreciation 1
Drilling rigs		(25)	(26)
Equipment		(2)	(4)
Depreciation charge included within the consolidated income statement		212	200
Lease interest	7	51	25

Of the $27 million (2022: $30 million) capitalised IFRS 16 lease depreciation, $18 million (2022: $22 million) has been capitalised within property, plant and equipment and $9 million

(2022: $8 million) within provisions (note 20).

The total cash outﬂow for leases in 2023 was $259 million (2022: $254 million).

13. Leases

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151

14. Inventories

	2023	2022
	$ million	$ million
Hydrocarbons	49	22
Consumables and subsea supplies	151	121
Total inventories	200	143

Inventories of consumables and subsea supplies include a provision of $28 million (2022: $25 million) where it is considered that the

net realisable value is lower than the original cost.

Inventories recognised as an expense during the year ended 31 December 2023 amounted to $1 million (2022: $22 million).

These expenses are included within production costs.

15. Trade and other receivables

	2023	2022
	$ million	$ million
Trade receivables	359	392
Underlift position	146	69
Other debtors	67	97
Prepayments and accrued income	223	785
Corporation tax receivable	37	60
Total trade and other receivables	832	1,403

Trade receivables are non-interest bearing and are generally on 20-to-30-day terms. As at 31 December 2023, there were no trade

receivables that were past due (2022: nil).

Other debtors include the current element of the unamortised portion of issue costs and bank fees of $19 million related to the RBL (note 27)

and includes amounts due from joint venture partners.

Prepayments and accrued income mainly comprise amounts due, but not yet invoiced, for the sale of oil and gas.

The carrying value of the trade and other receivables are equal to their fair value as at the balance sheet date.

Other long-term receivables

	2023	2022
	$ million	$ million
Net investment in sublease	1	44
Decommissioning funding asset 1	56	62
Other receivables 2	127	164
Prepayments and accrued income	–	28
Total other long-term receivables	184	298

The decommissioning funding asset relates to the Decommissioning liability agreement entered into with E.ON whereby E.ON agreed to part fund Premier’s share of decommissioning the

Johnston and Ravenspurn North assets. Under the terms of the agreement, E.ON will reimburse 70 per cent of the decommissioning costs between a range of £40 million to £130 million

based on Premier’s net share of the total decommissioning cost of the two assets. This results in maximum possible funding of £63 million from E.ON. At 31 December 2023, a long-term

decommissioning funding asset of $56 million (2022: $62 million) has been recognised utilising the year-end US dollar/pound sterling exchange rate and underlying assumptions

consistent with those used for the corresponding decommissioning provision.

Other receivables includes $39 million in cash held in escrow accounts for expected future decommissioning expenditure in Indonesia and Vietnam (2022: $123 million), and $21 million

(2022: $23 million) held as security for the Mexican letters of credit. Also included are the non-current element of the unamortised portion of issue costs and bank fees of $42 million

related to the RBL (note 27).

Notes to the consolidated ﬁnancial statements

continued

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16. Cash and cash equivalents

	2023	2022
	$ million	$ million
Cash at banks and in hand	280	500

Cash at bank earns interest at ﬂoating rates based on daily bank deposit rates. The Group only deposits cash with major banks of high

quality credit standing.

17. Assets held for sale

In August 2023, Harbour announced that it had entered into a Sale and Purchase Agreement to sell its business in Vietnam, which holds

its 53.125 per cent interest in Chim Sáo and Dua producing ﬁelds to Big Energy Joint Stock Company for a consideration of $84 million.

The transaction, which is subject to government approvals, has an effective date of 1 January 2023. The assets and liabilities of Vietnam

have been classiﬁed as assets held for sale in the balance sheet as at 31 December 2023 as completion is expected to be achieved

within 12 months from entering into the SPA.

The Group’s Vietnam operations are included in the International segment however are not considered a major geographical area or line

of business and therefore the disposal has not been classiﬁed as discontinued operations.

The major classes of assets and liabilities of the Group as held for sale as at 31 December 2023 are as follows:

		2023
Current	Note	$ million
Assets
Property, plant and equipment	12	95
Right-of-use-assets	13	51
Other receivables and working capital		188
Assets held for sale		334
Liabilities
Provisions	20	87
Lease creditor	13	95
Trade and other payables		29
Deferred tax	8	31
Liabilities directly associated with assets held for sale		242
Net assets directly associated with disposal group		92
Impairment loss recorded		38

Immediately before the classiﬁcation of the disposal group as assets held for sale, the recoverable amount was estimated for the disposal

group and no impairment loss was identiﬁed. The assets in the disposal group are held at the lower of their carrying amount and fair value

less costs to sell. As at 31 December 2023, an impairment of $38 million was recognised as the fair value less cost to sell, being the

expected consideration adjusted for items agreed under the SPA, was below the carrying amount of the disposal group. Following the

impairment charge the net assets directly associated with the disposal group held on the consolidated balance sheet were $92 million.

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18. Commitments

Capital commitments

As at 31 December 2023, the Group had commitments for future capital expenditure amounting to $389 million (2022: $409 million).

Where the commitment relates to a joint arrangement, the amount represents the Group’s net share of the commitment. Where the Group

is not the operator of the joint arrangement then the amounts are based on the Group’s net share of committed future work programmes.

19. Trade and other payables

	2023	2022
	$ million	$ million
Current
Trade payables	52	47
Overlift position	33	132
Other payables	143	118
Matured ﬁnancial instruments	48	258
Accruals	600	682
Deferred income 1	10	15
	886	1,252
Non-current
Other payables	13	11
Deferred income 1	–	8
	13	19

Deferred income includes $10 million (2022: $23 million) in relation to the closing year-end fair value payable to FlowStream. In June 2015, Premier received $100 million from FlowStream

in return for granting them 15 per cent of production from the Solan ﬁeld until sufﬁcient barrels have been delivered to achieve the rate of return within the agreement. This balance is being

released to the income statement within revenue as barrels are delivered to FlowStream from production from Solan. The estimated fair value includes unobservable inputs and is level 3 in

the IFRS 13 hierarchy and is held at fair value through proﬁt and loss. The balance has decreased by $13 million in the year reﬂecting the impact of barrels delivered to FlowStream

($15 million) and a change in estimate following an increase in the oil price resulting in a debit of $4 million to the income statement within ﬁnance expense (note 7).

Notes to the consolidated ﬁnancial statements

continued

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20. Provisions

	Decommissioning
	provision	Other	Total
	$ million	$ million	$ million
At 1 January 2022	5,354	27	5,381
Additions	24	–	24
Changes in estimates – decrease to oil and gas tangible decommissioning assets	(720)	–	(720)
Changes in estimates – decrease to oil and gas intangible decommissioning assets	(6)	–	(6)
Changes in estimate – credit to income statement	–	(1)	(1)
Changes in estimate on oil and gas tangible assets – credit to income statement	(82)	–	(82)
Changes in estimate on oil and gas intangible assets – credit to income statement	(6)	–	(6)
Amounts used	(223)	(2)	(225)
Disposal	(9)	–	(9)
Interest on decommissioning lease	(1)	–	(1)
Depreciation, depletion & amortisation on decommissioning right-of-use leased asset	(8)	–	(8)
Unwinding of discount	65	–	65
Currency translation adjustment	(247)	–	(247)
At 31 December 2022	4,141	24	4,165
Additions	40	–	40
Changes in estimates – decrease to oil and gas tangible decommissioning assets	(203)	–	(203)
Changes in estimate on oil and gas tangible assets – debit to income statement	141	–	141
Changes in estimate on oil and gas intangible assets – debit to income statement	4	–	4
Changes in estimate – debit to income statement	–	3	3
Amounts used	(248)	–	(248)
Reclassiﬁcation of liabilities directly associated with assets held for sale	(87)	–	(87)
Interest on decommissioning lease	(1)	–	(1)
Depreciation, depletion & amortisation on decommissioning right-of-use leased asset	(9)	–	(9)
Unwinding of discount	156	–	156
Currency translation adjustment	87	–	87
At 31 December 2023	4,021	27	4,048

	Non-current	Current
	liabilities	liabilities	Total
Classiﬁed within	$ million	$ million	$ million
At 31 December 2022	3,934	231	4,165
At 31 December 2023	3,818	230	4,048

Decommissioning provision

All of the $40 million decommissioning provision additions relate to oil and gas tangible assets (2022: $24 million).

The Group provides for the estimated future decommissioning costs on its oil and gas assets at the balance sheet date. The payment

dates of expected decommissioning costs are uncertain and are based on economic assumptions of the ﬁelds concerned. The Group

currently expects to incur decommissioning costs within the next 40 years, the majority of which are anticipated to be incurred between

the next 10 to 20 years. These estimated future decommissioning costs are inﬂated at the Group’s long-term view of inﬂation of

2.5 per cent per annum (2022: 2.5 per cent per annum) and discounted at a risk-free rate of between 4.3 per cent and 5.2 per cent

(2022: 3.5 per cent and 3.7 per cent) reﬂecting a six-month (2022: six-month) rolling average of market rates over the varying lives of the

assets to calculate the present value of the decommissioning liabilities. The unwinding of the discount is presented within ﬁnance costs.

These provisions have been created based on internal and third-party estimates. Assumptions based on the current economic

environment have been made, which management believe are a reasonable basis upon which to estimate the future liability. These

estimates are reviewed regularly to consider any material changes to the assumptions. However, actual decommissioning costs will

ultimately depend upon market prices for the necessary decommissioning work required, which will reﬂect market conditions at the

relevant time. In addition, the timing of decommissioning liabilities will depend upon the dates when the ﬁelds become economically

unviable, which in itself will depend on future commodity prices and climate change, which are inherently uncertain.

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155

Other provisions

Other provisions relate to termination beneﬁt provision in Indonesia of $27 million (2022: $24 million), where the Group operates

a service, severance and compensation pay scheme under a collective labour agreement with the local workforce.

21. Borrowings and facilities

The Group’s borrowings are carried at amortised cost:

	2023	2022
	$ million	$ million
Reserve based lending (RBL) facility 1	–	702
Bond	493	491
Exploration ﬁnance facility	–	11
Other loans	16	34
Total borrowings	509	1,238
Classiﬁed within
Non-current liabilities	493	1,216
Current liabilities	16	22
Total borrowings	509	1,238

The reserve based lending (RBL) facility was fully repaid in the year, leaving $61 million of unamortised fees and related costs to be amortised over the remaining term of the facility which

have been reclassiﬁed within current and non-current assets as appropriate.

The RBL facility was amended and extended in November 2023, and the key terms of the amended facility are:

•

Term matures 31 December 2029

•

Facility size of $2.75 billion, with a $1.75 billion letter of credit sub-limit

•

Debt availability at $1.346 billion effective 24 November 2023

•

Debt availability to be redetermined on an annual basis

•

Interest at compounded SOFR plus a margin of 3.2 per cent, rising to a margin of 3.4 per cent from November 2025 and 3.6 per cent

from November 2027

•

A margin adjustment linked to carbon-emission reductions

•

Straight-line amortisation of letter of credit sub-limit from January 2027 to six months before maturity. No material cash collateralisation

required until 2028

•

Liquidity and leverage covenant tests

•

A syndication group of 15 banks

Certain fees are also payable, including fees on available commitments at 40 per cent of the applicable margin and commission

on letters of credit issued at 50 per cent of the applicable margin.

In October 2021, the Group issued a $500 million bond under Rule 144A and with a tenor of ﬁve years to maturity. The coupon was

set at 5.50 per cent and interest is payable semi-annually.

At the balance sheet date, the outstanding RBL balance excluding incremental arrangement fees and related costs was $nil

(2022: $775 million). As at 31 December 2023, $1,340 million remained available for drawdown under the RBL facility

(2022: $1,972 million).

The Group has facilities to issue up to $1,750 million of letters of credit, of which $1,186 million was in issue as at 31 December

(2022: $966 million), mainly in respect of future abandonment liabilities.

A further $34 million of arrangement fees and related costs were capitalised during the year following amendments to the RBL facility

which became effective from November 2023.

During the year $48 million (2022: $55 million) of arrangement fees and related costs have been amortised and are included within

ﬁnancing costs.

At 31 December 2023, $68 million of arrangement fees and related costs remain capitalised (2022: $82 million), of which $21 million

is due to be amortised within the next 12 months (2022: $20 million). $61 million of these arrangement fees relate to the RBL facility,

$19 million of which have been reclassiﬁed within current assets, and $42 million, which are due to be amortised beyond the next

12 months, have been reclassiﬁed to non-current assets (note 15).

Notes to the consolidated ﬁnancial statements

continued

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156

Bond interest of $6 million (2022: $6 million comprising both bond and RBL interest) had accrued by the balance sheet date and

has been classiﬁed within accruals.

Since 2019, the Group has been operating within an exploration ﬁnance facility (EFF), of NOK 1 billion, in relation to part-ﬁnancing

the exploration activities of Harbour Energy Norge AS. This facility was repaid in full in February 2023.

Other loans represent a commercial ﬁnancing arrangement with Baker Hughes (formerly BHGE), that covered a three-year work

programme for drilling, completion and subsea tie-in of development wells on Harbour’s operated assets. The loan will be repaid

based on production performance, subject to a cap.

The table below details the change in the carrying amount of the Group’s borrowings arising from ﬁnancing cash ﬂows.

	$ million
Total borrowings as at 1 January 2022	2,886
Repayment of RBL	(1,663)
Repayment of ﬁnancing arrangement	(15)
Repayment of EFF loan	(38)
Proceeds from EFF loan	11
Currency translation adjustment on EFF loan	(7)
Financing arrangement interest payable	9
Amortisation of arrangement fees and related costs	55
Total borrowings as at 31 December 2022	1,238
Proceeds from drawdown of borrowing facilities	660
Repayment of RBL	(1,435)
Repayment of ﬁnancing arrangement	(21)
Repayment of EFF loan	(11)
Arrangement fees and related costs on RBL capitalised	(34)
Financing arrangement interest payable	3
Amortisation of arrangement fees and related costs	48
Reclassiﬁcation of RBL arrangement fees and related costs to current and non-current assets	61
Total borrowings as at 31 December 2023	509

21. Borrowings and facilities

continued

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22. Other ﬁnancial assets and liabilities

The Group held the following ﬁnancial instruments at fair value at 31 December 2023. The fair values of all derivative ﬁnancial

instruments are based on estimates from observable inputs and are all level 2 in the IFRS 13 hierarchy, except for the royalty valuation,

which includes estimates based on unobservable inputs and is level 3 in the IFRS 13 hierarchy.

	31 December 2023		31 December 2022
	Assets	Liabilities	Assets	Liabilities
	$ million	$ million	$ million	$ million
Current
Measured at fair value through proﬁt and loss
Foreign exchange derivatives	6	–	6	–
Interest rate derivatives	–	–	24	–
Fair value of embedded derivative within gas contract	10	–	–	(57)
	16	–	30	(57)
Measured at fair value through other comprehensive income
Commodity derivatives	154	(197)	51	(2,114)
Total current	170	(197)	81	(2,171)
Non-current
Measured at fair value through proﬁt and loss
Interest rate derivatives	–	–	18	–
	–	–	18	–
Measured at fair value through other comprehensive income
Commodity derivatives	112	(87)	85	(1,279)
Total non-current	112	(87)	103	(1,279)
Total current and non-current	282	(284)	184	(3,450)

Fair value measurements

All ﬁnancial instruments that are initially recognised and subsequently remeasured at fair value have been classiﬁed in accordance with

the hierarchy described in IFRS 13 ‘Fair Value Measurement’. The hierarchy groups fair value measurements into the following levels

based on the degree to which the fair value is observable.

•

Level 1:

fair value measurements are derived from unadjusted quoted prices for identical assets or liabilities

•

Level 2:

fair value measurements include inputs, other than quoted prices included within level 1, which are observable directly or indirectly

•

Level 3:

fair value measurements are derived from valuation techniques that include signiﬁcant inputs not based on observable data

	Financial assets		Financial liabilities
	Level 2	Level 3	Level 2	Level 3
As at 31 December 2023	$ million	$ million	$ million	$ million
Fair value of embedded derivative within gas contract	10	–	–	–
Commodity derivatives	266	–	(284)	–
Foreign exchange derivatives	6	–	–	–
Total fair value	282	–	(284)	–

	Financial assets		Financial liabilities
	Level 2	Level 3	Level 2	Level 3
As at 31 December 2022	$ million	$ million	$ million	$ million
Fair value of embedded derivative within gas contract	–	–	(57)	–
Commodity derivatives	136	–	(3,393)	–
Foreign exchange derivatives	6	–	–	–
Interest rate derivatives	42	–	–	–
Total fair value	184	–	(3,450)	–

There were no transfers between fair value levels in 2022 or 2023.

Notes to the consolidated ﬁnancial statements

continued

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158

Fair value movements recognised in the income statement on ﬁnancial instruments are shown below.

	2023	2022
Finance income	$ million	$ million
Change in fair value of embedded derivative within gas contract	68	–
Foreign exchange derivatives	–	7
Interest rate derivatives	(43)	31
	25	38

	2023	2022
Finance expenses	$ million	$ million
Change in fair value of embedded derivative within gas contract	–	(48)
	–	(48)

Fair values of other ﬁnancial instruments

The following ﬁnancial instruments are measured at amortised cost and are considered to have fair values different to their book values.

		2023		2022
		$ million		$ million
	Book value	Fair value	Book value	Fair value
Bond	(493)	(487)	(491)	(446)

The fair value of the bond is within level 2 of the fair value hierarchy and has been estimated by discounting future cash ﬂows by the relevant

market yield curve at the balance sheet date. The fair values of other ﬁnancial instruments not measured at fair value including cash and

short-term deposits, trade receivables, trade payables and ﬂoating rate borrowings equate approximately to their carrying amounts.

Cash ﬂow hedge accounting

The Group uses a combination of ﬁxed price physical sales contracts and cash-settled ﬁxed price commodity swaps and options to

manage the price risk associated with its underlying oil and gas revenues. As at 31 December 2023, all of the Group’s cash-settled

ﬁxed price commodity swap derivatives have been designated as cash ﬂow hedges of highly probable forecast sales of oil and gas.

The following table indicates the volumes, average hedged price and timings associated with the Group’s ﬁnancial commodity derivatives.

Volumes hedged through ﬁxed price contracts with customers for physical delivery are excluded.

Position as at 31 December 2023	2024	2025	2026
Oil volume hedged (thousand bbls)	7,320	4,380	–
Weighted average hedged price ($/bbl)	84.37	77.35	–
Gas volume hedged (million therms)	759	428	90
Weighted average hedged price (p/therm)	67.19	89.68	99.28

As at 31 December 2023, the fair value of net ﬁnancial commodity derivatives designated as cash ﬂow hedges, all executed under ISDA

agreements with no margining requirements, was a net payable of $66 million (2022: $3,516 million) and net unrealised pre-tax losses of

$16 million (2022: $3,185 million) were deferred in other comprehensive income in respect of the effective portion of the hedge relationships.

Amounts deferred in other comprehensive income will be released to the income statement as the underlying hedged transactions occur.

As at 31 December 2023, net deferred pre-tax losses of $51 million (2022: $2,368 million) are expected to be released to the income

statement within one year.

Interest Rate Benchmark Reform (IBOR)

During the year, the Group transitioned to alternative benchmark rates to cater for the discontinuation of IBOR rates. Our bond is at

a ﬁxed interest rate of 5.5 per cent whilst the RBL (undrawn at 31 December 2023) transitioned from US LIBOR to SOFR (Secured

Overnight Financing Rate).

22. Other ﬁnancial assets and liabilities

continued

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23. Financial risk factors and risk management

The Group’s principal ﬁnancial assets and liabilities comprise trade and other receivables, cash and short-term deposits accounts, trade

payables, interest bearing loans and derivative ﬁnancial instruments. The main purpose of these ﬁnancial instruments is to manage

short-term cash ﬂow, price exposures and raise ﬁnance for the Group’s expenditure programme. Further information on the Group’s

ﬁnancial instrument risk management objectives, policies and strategies are set out in the discussion of capital management policies

in the Strategic report (see page 62).

Risk exposures and responses

The Group manages its exposure to key ﬁnancial risks in accordance with its ﬁnancial risk management policy. The objective of the policy

is to support the delivery of the Group’s ﬁnancial targets while protecting future ﬁnancial security. The main risks that could adversely

affect the Group’s ﬁnancial assets, liabilities or future cash ﬂows are market risks comprising commodity price risk, interest rate risk and

foreign currency risk, liquidity risk, and credit risk. Management reviews and agrees policies for managing each of these risks which are

summarised in this note.

The Group’s management oversees the management of ﬁnancial risks. The Group’s senior management ensures that ﬁnancial risk-taking

activities are governed by appropriate policies and procedures and that ﬁnancial risks are identiﬁed, measured and managed in

accordance with Group policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist

teams that have the appropriate skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative

purposes shall be undertaken.

Market risk

Market risk is the risk that the fair value of future cash ﬂows of a ﬁnancial instrument will ﬂuctuate because of changes in market prices.

Market risk comprises three types of risk: commodity price risk, interest rate risk and foreign currency risk. Financial instruments mainly

affected by market risk include loans and borrowings, deposits and derivative ﬁnancial instruments.

The sensitivity analyses in the following sections relate to the position as at 31 December 2023 and 31 December 2022.

The sensitivity analyses have been prepared on the basis that the number of ﬁnancial instruments are all constant. The sensitivity

analyses are intended to illustrate the sensitivity to changes in market variables on the composition of the Group’s ﬁnancial instruments

at the balance sheet date and show the impact on proﬁt or loss and shareholders’ equity, where applicable.

The following assumptions have been made in calculating the sensitivity analyses:

•

The sensitivity of the relevant proﬁt before tax item and/or equity is the effect of the assumed changes in respective market risks

for the full year based on the ﬁnancial assets and ﬁnancial liabilities held at the balance sheet date

•

The sensitivities indicate the effect of a reasonable increase in each market variable. Unless otherwise stated, the effect of

a corresponding decrease in these variables is considered approximately equal and opposite

•

Fair value changes from derivative instruments designated as cash ﬂow hedges are considered fully effective and recorded

in shareholders’ equity, net of tax

•

Fair value changes from derivatives and other ﬁnancial instruments not designated as cash ﬂow hedges are presented as a sensitivity

to proﬁt before tax only and not included in shareholders’ equity

Commodity price risk

The Group is exposed to the risk of ﬂuctuations in prevailing market commodity prices on the mix of oil and gas products. On a rolling

basis, the Group’s policy is to hedge the commodity price exposure associated with 40 to 70 per cent of the next 12 months’ production

(year 1), between 30 and 60 per cent of ‘year 2’ production, from ‘year 3’ up to 50 per cent of production and from ‘year 4’ up to

40 per cent of production. The Group manages these risks through the use of ﬁxed price contracts with customers for physical delivery

and derivative ﬁnancial instruments including ﬁxed price swaps and options.

Notes to the consolidated ﬁnancial statements

continued

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160

Commodity price sensitivity

The following table summarises the impact on the Group’s pre-tax proﬁt and equity from a reasonably foreseeable movement in

commodity prices on the fair value of commodity based derivative instruments held by the Group at the balance sheet date.

		Eﬀect
		on proﬁt	Eﬀect
		before tax	on equity
As at 31 December 2023	Market movement	$ million	$ million
Brent oil price	$10 /bbl increase	–	(28)
Brent oil price	$10 /bbl decrease	–	28
NBP gas price	£0.1 /therm increase	–	(28)
NBP gas price	£0.1 /therm decrease	–	28

		Effect
		on proﬁt	Effect
		before tax	on equity
As at 31 December 2022	Market movement	$ million	$ million
Brent oil price	$10 /bbl increase	–	(49)
Brent oil price	$10 /bbl decrease	–	49
NBP gas price	£0.1 /therm increase	–	(49)
NBP gas price	£0.1 /therm decrease	–	49

Interest rate risk

Interest rate risk is the risk that the fair value of future cash ﬂows of a ﬁnancial instrument will ﬂuctuate because of changes in market

interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt

obligation with ﬂoating interest rates.

Fixed rate borrowings at 31 December 2023 comprise a bond which incurs interest at 5.5 per cent per annum. Following the settlement

of the RBL and exploration ﬁnancing balances during the year, the Group has no ﬂoating rate borrowings at 31 December 2023. As at

31 December 2022, ﬂoating rate borrowings comprised loans under the RBL facility which incurred interest ﬁxed either one month,

three months or six months in advance at USD LIBOR plus a margin of 3.21 per cent. Floating rate ﬁnancial assets comprise cash and

cash equivalents which earn interest at the relevant market rate. Prior to settlement of the RBL, the Group monitored its exposure

to ﬂuctuations in interest rates and uses interest rate derivatives to manage the ﬁxed and ﬂoating composition of its borrowings.

The interest rate ﬁnancial instruments in place at the balance sheet date are shown below:

	Derivative	Currency	Period of hedge	Terms
31 December 2023	Interest rate swaps	$nil million	N/A	N/A
31 December 2022	Interest rate swaps	$545 million	Jun 20 – Jun 25	Average 0.55%

23. Financial risk factors and risk management

continued

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161

The interest rate and currency proﬁle of the Group’s interest-bearing ﬁnancial assets and liabilities are shown below:

	Cash	Fixed rate	Floating rate
	at bank	borrowings	borrowings	Total
As at 31 December 2023	$ million	$ million	$ million	$ million
US dollar	238	(493)	–	(255)
Pound sterling	28	–	–	28
Norwegian krone	13	–	–	13
Other	1	–	–	1
	280	(493)	–	(213)

	Cash	Fixed rate	Floating rate
	at bank	borrowings	borrowings	Total
As at 31 December 2022	$ million	$ million	$ million	$ million
US dollar	481	(491)	(702)	(712)
Pound sterling	8	–	–	8
Norwegian krone	6	–	(11)	(5)
Other	5	–	–	5
	500	(491)	(713)	(704)

Interest rate sensitivity

The following table demonstrates the indicative pre-tax effect on proﬁt and equity of applying a reasonably foreseeable increase in

interest rates to the Group’s ﬁnancial assets and liabilities at the balance sheet date.

		Effect
		on proﬁt	Effect
		before tax	on equity
	Market movement	$ million	$ million
31 December 2023
US dollar interest rates	+100 basis points	2	–
31 December 2022
US dollar interest rates	+100 basis points	8	–

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash ﬂows of a ﬁnancial instrument will ﬂuctuate because of changes in

foreign exchange rates.

The Group is exposed to foreign currency risk primarily arising from exchange rate movements in US dollar against pound sterling.

To mitigate exposure to movements in exchange rates, wherever possible ﬁnancial assets and liabilities are held in currencies that

match the functional currency of the relevant entity. The Group has subsidiaries with functional currencies of pound sterling, US dollar,

Norwegian krone, Mexican pesos and Brazilian reals. Exposures can also arise from sales or purchases denominated in currencies

other than the functional currency of the relevant entity; such exposures are monitored and hedged with agreement from the Board.

The Group enters into forward contracts as a means of hedging its exposure to foreign exchange rate risks. As at 31 December 2023, the

Group had £212 million hedged at a forward rate of between $1.2182 and $1.2742:£1 for the period January 2024 to October 2024.

As at 31 December 2022, the Group had £42 million hedged at forward rates of between $1.18331 and $1.24045:£1 for the period

to January 2023, and $100 million hedged at forward rates of between $1.17543 and $1.18131:£1 for the period to January 2023.

Notes to the consolidated ﬁnancial statements

continued

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Foreign currency sensitivity

The following table demonstrates the sensitivity to a reasonably foreseeable change in US dollars against pound sterling with all

other variables held constant, of the Group’s proﬁt before tax (due to foreign exchange translation of monetary assets and liabilities).

The impact of translating the net assets of foreign operations into US dollars is excluded from the sensitivity analysis.

		Effect
		on proﬁt	Effect
	Market	before tax	on equity
	movement	$ million	$ million
31 December 2023
US dollar/pound sterling	10% strengthening	78	–
US dollar/pound sterling	10% weakening	(78)	–
31 December 2022
US dollar/pound sterling	10% strengthening	291	–
US dollar/pound sterling	10% weakening	(291)	–

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a ﬁnancial instrument or customer contract, leading to

ﬁnancial loss. The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to

trade on credit terms are subject to credit veriﬁcation procedures, which include an assessment of credit rating, short-term liquidity

and ﬁnancial position. In addition, receivables balances are monitored on an ongoing basis, with the result that the Group’s exposure

to bad debts is not signiﬁcant.

The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its ﬁnancing activities, including

deposits with banks and derivative ﬁnancial instruments.

The Group has two ratings from two credit rating agencies: S&P Global at BB and Fitch at BB.

The Group only sells hydrocarbons to recognised and creditworthy parties, typically the trading arm of large, international oil and gas

companies. An indication of the concentration of credit risk on trade receivables is shown in note 4, whereby the revenue from one

customer exceeds 88 per cent (2022: 84 per cent) of the Group’s consolidated revenue.

The credit risk on liquid funds and derivative ﬁnancial instruments is limited because the counterparties are internationally recognised

banking institutions and are considered to represent minimal credit risk.

There are no signiﬁcant concentrations of credit risk within the Group unless otherwise disclosed, and credit losses are expected to be

near to zero. The maximum credit risk exposure relating to ﬁnancial assets is represented by carrying value as at the balance sheet date.

23. Financial risk factors and risk management

continued

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Financial statements

Additional information

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Annual Report & Accounts 2023

163

Liquidity risk

Liquidity risk is the risk that the Group will encounter difﬁculty in meeting obligations associated with ﬁnancial liabilities that are settled

by delivering cash or another ﬁnancial asset. The Group monitors the amount of borrowings maturing within any speciﬁc period and

expects to meet its ﬁnancing commitments from the operating cash ﬂows of the business and existing committed lines of credit.

The table below summarises the maturity proﬁle of the Group’s ﬁnancial liabilities based on contractual undiscounted payments:

	Within 1 year	1 to 2 years	2 to 5 years	Over 5 years	Total
As at 31 December 2023	$ million	$ million	$ million	$ million	$ million
Non-derivative ﬁnancial liabilities
Bond	28	28	528	–	584
Other loans	16	–	–	–	16
Trade and other payables	825	13	–	–	838
Lease obligations	250	186	340	121	897
Total non-derivative ﬁnancial liabilities	1,119	227	868	121	2,335
Derivative ﬁnancial liabilities
Net-settled commodity derivatives	197	87	–	–	284
	1,316	314	868	121	2,619

	Within 1 year	1 to 2 years	2 to 5 years	Over 5 years	Total
As at 31 December 2022	$ million	$ million	$ million	$ million	$ million
Non-derivative ﬁnancial liabilities
Reserve based lending facility	61	61	881	–	1,003
Bond	28	27	555	–	610
Exploration ﬁnance facility	11	–	–	–	11
Other loans	11	9	18	–	38
Trade and other payables	1,318	19	–	–	1,337
Lease obligations	208	180	386	61	835
Total non-derivative ﬁnancial liabilities	1,637	296	1,840	61	3,834
Derivative ﬁnancial liabilities
Net-settled commodity derivatives	2,308	930	155	–	3,393
	3,945	1,226	1,995	61	7,227

The maturity proﬁles in the above tables reﬂect only one side of the Group’s liquidity position and will be recorded in the income

statement against future production and revenue which are not recognised on the balance sheet as assets. Interest bearing loans and

borrowings and trade payables mainly originate from the ﬁnancing of assets used in the Group’s ongoing operations such as property,

plant and equipment and working capital such as inventories. These assets are considered part of the Group’s overall liquidity risk.

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

164

24. Share capital

		2023		2022
Issued and fully paid	Number	$ million	Number	$ million
Ordinary shares of 0.002p each	770,370,830	0	847,168,796	0
Ordinary non-voting deferred shares of 12.4999p each	925,532,809	171	925,532,809	171
		171		171

The rights and restrictions attached to the ordinary shares are as follows:

•

Dividend rights:

the rights of the holders of ordinary shares shall rank pari passu in all respects with each other in relation to dividends

•

Winding up or reduction of capital:

on a return of capital on a winding up or otherwise (other than on conversion, redemption or

purchase of shares) the rights of the holders of ordinary shares to participate in the distribution of the assets of the company available

for distribution shall rank pari passu in all respects with each other

•

Voting rights:

the holders of ordinary shares shall be entitled to receive notice of, attend, vote and speak at any General Meeting of the company

The rights and restrictions attached to the non-voting deferred shares are as follows:

•

They will have no voting or dividend rights and, on a return of capital or on a winding up of the company, will have the right to receive the

amount paid up thereon only after holders of all ordinary shares have received, in aggregate, any amounts paid up on each ordinary

share plus £10 million on each ordinary share. The non-voting deferred shares will not give the holder the right to receive notice of, nor

attend, speak or vote at, any General Meeting of the company

Issue of ordinary shares

During the year, the company issued 5,092 ordinary shares at a nominal value of 0.002 pence per share in relation to the exercise

of SAYE awards.

Purchase and cancellation of own shares

During 2023, the company repurchased 76,803,058 ordinary shares for a total consideration, including transaction costs, of

$249 million, as part of the share purchase programmes announced on 3 November 2022 and 9 March 2023, which concluded on

28 September 2023. All shares purchased were cancelled. As at 31 December 2023, the buyback programme had been completed.

Capital reduction

The capital reduction, comprising the share premium and the merger reserve, was approved by shareholders at the General Meeting held

on 11 May 2022. In connection with the capitalisation of the merger reserve, the resolutions authorising the Directors to allot new B

ordinary shares and subsequently cancel them was also passed at the General Meeting. B ordinary shares totalling $4,806 million

were issued on 25 July 2022.

On 3 August 2022, Harbour announced that the capital reduction had become effective following the conﬁrmation by the Court of Session,

Edinburgh on 2 August 2022 and the registration of the Court order with the Registrar of Companies in Scotland on 3 August 2022. The

share premium account ($1,505 million) and the shares arising on the capitalisation of the merger reserve ($4,806 million) were cancelled.

The capital reduction created additional distributable reserves to the value of $6,311 million.

	2023
Own shares	$ million
At 1 January 2023	21
Purchase of ESOP Trust shares	16
Release of shares	(13)
	24

The own shares represent the net cost of shares in Harbour Energy plc purchased in the market or issued by the company into the

Harbour Energy plc employee beneﬁt (ESOP) trust. This ESOP Trust holds shares to satisfy awards under the Group’s share incentive

plans. At 31 December 2023, the number of ordinary shares of 0.002 pence each held by the trust was 6,079,705 (2022: 4,487,267).

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

165

25. Share-based payments

The company currently operates a Long Term Incentive Plan (LTIP) for certain employees and a Share Incentive Plan (SIP), a Save As You Earn

(SAYE) scheme for UK-based employees, and an Expatriate SIP for expatriate employees only.

For the year ended 31 December 2023, the total cost recognised by the company for share-based payment transactions was $46 million

(2022: $36 million). A credit of $46 million (2022: $36 million) has been recorded in retained earnings for all equity-settled payments of

the company.

Like other elements of remuneration, this charge is processed through the time-writing system which allocates cost, based on time spent

by individuals, to various entities within the Group. Part of this cost is therefore recharged to the relevant subsidiary undertakings, part is

capitalised as directly attributable to capital projects and part is charged to the income statement as operating costs, pre-licence

exploration costs or general and administration costs.

Details of the various share incentive plans currently in operation are set out below.

2017 Long Term Incentive Plan (2017 LTIP)

Discretionary share awards are granted to employees under the company’s Long Term Incentive Plan (LTIP).

The following types of award have been granted under the 2017 LTIP:

•

Performance share awards (PSAs):

vesting is subject to a Performance Target, normally measured over a three-year period from 1 January

based on total shareholder return (TSR) relative to (i) the FTSE 100 index, and (ii) a bespoke peer group of oil and gas companies, and aligns

to longer-term strategic objectives

•

Conditional share awards (CSAs):

vesting is only subject to continued employment

•

Deferred bonus share (DBS) awards:

certain employees are required to defer a portion of their annual bonus into shares which vest

over a three-year period subject to continued employment

All LTIP awards are granted in the form of nil-cost options or conditional share awards and therefore there is no exercise price payable

on the exercise of these awards.

For further details of the LTIP awards, including the performance conditions of the PSAs granted in 2023, please refer to the Directors’

remuneration report (page 97).

The following table shows the movement in the number of LTIP awards:

	2023	2022
	million shares	million shares
Outstanding at 1 January	27.8	20.5
Granted	15.1	10.3
Vested	(8.7)	(1.6)
Forfeited	(0.5)	(1.4)
Outstanding at 31 December 1	33.7	27.8

This includes 0.6 million cash settled awards at 31 December 2023 (2022: 1.6 million), which are revalued using the year-end share price.

LTIP awards totalling 8.7 million shares were vested during the period. The weighted average remaining contractual life of the LTIP awards

at 31 December 2023 was 2.2 years (2022: 1.5 years).

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

166

Key assumptions used to calculate the fair value of awards

The fair value of PSAs which are subject to TSR conditions is determined using a Monte Carlo simulation. The fair value of all other

awards is calculated using the share price at the date of grant, adjusted for dividends not received during the vesting period.

The following table lists the inputs to the model used in respect of the PSAs granted during the ﬁnancial year:

	2023	2022
Share price at date of grant	£2.44 – £2.90	£5.00 – £5.19
Dividend yield	0%	0%
Expected term	2.9 – 3.0 years	3.0 years
Risk free rate	3.3% – 4.2%	1.4% – 1.6%
Share price volatility of the company	49.2% – 50.2%	50.5% – 51.3%

The weighted average fair value of the PSAs granted in 2023 was $2.86 (2022: $4.02).

Expected volatility was determined by reference to both the historical volatility of the company and the historical volatility of a group

of comparable quoted companies over a period in line with the expected term assumption.

Share Incentive Plan (SIP)

Under the SIP, employees are invited to make contributions to buy partnership shares. If an employee agrees to buy partnership shares

the company currently matches the number of partnership shares bought with an award of shares (matching shares), on a one-for-one

basis. In 2023, 0.3 million matching shares were awarded to employees (2022: 0.4 million). The SIP matching shares are valued based

on the quoted share price on the grant date.

Save As You Earn (SAYE) scheme

Under the SAYE scheme, UK qualifying employees with one month or more continuous service can join the scheme. Under the SAYE

scheme, employees can save up to a maximum of £500 per month through payroll deductions for a period of three years, after which

time they can acquire shares at the option price, which is set at a discount of up to 20 per cent to the prevailing market price at the

grant date, determined in accordance with SAYE scheme rules. In 2023, 3.1 million SAYE options were granted (2022: 1.6 million).

The SAYE options outstanding at 31 December 2023 had exercise prices ranging from £2.21 to £4.12 (2022: £4.12 to £5.53) and

a weighted average remaining contractual life of 2.8 years (2022: 2.8 years).

26. Group pension schemes

Deﬁned contribution schemes

The Group operates deﬁned contribution retirement beneﬁt schemes. The only obligation of the Group with respect to the retirement

beneﬁt schemes is to make speciﬁed contributions. Payments to the deﬁned contribution schemes are charged as an expense as they

fall due. The total cost charged to income of $29 million (2022: $30 million) represents contributions payable to these schemes by the

Group at rates speciﬁed in the rules of the schemes.

25. Share-based payments

continued

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

167

27. Notes to the statement of cash ﬂows

Net cash ﬂows from operating activities consist of:

	2023	2022
	$ million	$ million
Proﬁt before taxation	597	2,462
Adjustments to reconcile proﬁt before tax to net cash ﬂows
Finance cost, excluding foreign exchange	363	358
Finance income, excluding foreign exchange	(104)	(77)
Depreciation, depletion and amortisation	1,430	1,546
Fair value movement in unrealised carbon swaps	–	2
Net impairment of property, plant and equipment	214	(170)
Impairment of goodwill	25	–
Share-based payments	20	17
Decommissioning payments	(268)	(217)
Exploration costs written-off	57	64
Onerous contract payments	–	(2)
Gain on disposal	–	(12)
Movement in realised cash ﬂow hedges not yet settled	(207)	(104)
Unrealised foreign exchange loss/(gain)	49	(238)
Working capital adjustments
(Increase)/decrease in inventories	(52)	65
Decrease/(increase) in trade and other receivables	519	(75)
(Decrease)/increase in trade and other payables	(61)	63
Net tax payments	(438)	(552)
Net cash inﬂow from operating activities	2,144	3,130

Reconciliation of net cash ﬂow to movement in net borrowings

	2023	2022
	$ million	$ million
Proceeds from drawdown of borrowing facilities	(660)	–
Proceeds from EFF loan	–	(11)
Repayment of RBL facility	1,435	1,663
Repayment of EFF loan	11	38
Repayment of ﬁnancing arrangement	21	15
Financing arrangement interest payable	(3)	(9)
Arrangement fees and related costs on RBL capitalised	34	–
Amortisation of arrangement fees and related costs capitalised	(48)	(55)
Currency translation adjustment on EFF loan	–	7
Movement in total borrowings	790	1,648
Movement in cash and cash equivalents	(220)	(199)
Decrease in net borrowings in the year	570	1,449
Opening net borrowings	(738)	(2,187)
Closing net borrowings	(168)	(738)

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

168

Analysis of net borrowings

	2023	2022
	$ million	$ million
Cash and cash equivalents	280	500
RBL facility	–	(702)
Bond	(493)	(491)
EFF loan	–	(11)
Net debt	(213)	(704)
Financing arrangement	(16)	(34)
Closing net borrowings	(229)	(738)
Non-current assets	42	–
Current assets	19	–
Closing net borrowings after total unamortised fees 1	(168)	(738)

$61 million of fees associated with the RBL are recognised in debtors.

The carrying values on the balance sheet are stated net of the unamortised portion of issue costs and bank fees of $68 million of

which $61 million relates to the RBL and is recognised in assets (note 15) and $7 million is netted against the bond (2022: $82 million

of which $73 million related to the RBL and $9 million related to the bond both of which were netted off against the borrowings).

28. Related party disclosures

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not

disclosed in this note.

Harbour Energy’s Viking CCS entered into an arrangement with West Burton Energy, the independent power generation company based

in Nottinghamshire which is a subsidiary of EIG, Harbour’s largest shareholder. The intention is to capture, transport and permanently

store CO

emissions from the West Burton B power station. Harbour Energy and West Burton Energy have begun the necessary

engineering design to connect West Burton B to the high-capacity Viking CCS storage sites located beneath the Southern North Sea.

There have not been any ﬁnancial transactions with West Burton Energy in 2023.

Compensation of key management personnel of the Group

Remuneration of key management personnel, including directors of the Group, is shown below:

	2023	2022
	$ million	$ million
Salaries and short-term employee beneﬁts	13	15
Payments made in lieu of pension contributions	1	1
	14	16

27. Notes to the statement of cash ﬂows

continued

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

169

29. Distributions made and proposed

A ﬁnal dividend of 12 cents per ordinary share in relation to the year ended 31 December 2022 was paid on 24 May 2023 pursuant

to shareholder approval received on 10 May 2023.

An interim dividend of 12 cents per ordinary share in relation to the half year ended 30 June 2023 was paid on 18 October 2023.

	2023	2022
	$ million	$ million
Cash dividends on ordinary shares declared and paid
Final dividend for 2022: 12 cents per share (2021: 11 cents per share)	99	98
Interim dividend for 2023: 12 cents per share (2022: 11 cents per share)	91	93
	190	191
Proposed dividends on ordinary shares
Final dividend for 2023: 13 cents per share (2022: 12 cents per share)	100	100

Proposed dividends on ordinary shares are subject to approval at the Annual General Meeting and are not recognised as a liability as at

31 December.

30. Post balance sheet events

On 5 March 2024 Harbour signed a new $3.0 billion fully unsecured revolving credit facility (RCF) and $1.5 billion bridge facility which

will be available at completion to fund the acquisition of the Wintershall Dea asset portfolio. The RCF has a $1.75 billion letter of credit

sub-limit, a ﬁve-year term from signing and will replace the existing RBL facility.

On 6 March 2024, the UK Government announced that the Energy Proﬁts Levy (EPL) would be extended for a further 12 months to

31 March 2029 from the former end date of 31 March 2028. Harbour is currently assessing the potential impact of this announcement.

Notes to the consolidated ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

170

31. Investments and amounts due from subsidiary undertakings

At 31 December 2023, the subsidiary undertakings of the company which were all wholly owned were:

Name of company	Area of operation	Country of incorporation	Main activity
Chrysaor (U.K.) Alpha Limited	UK	UK 2	Exploration, production, and development
Chrysaor (U.K.) Beta Limited	UK	UK 2	Decommissioning activities
Chrysaor (U.K.) Sigma Limited	UK	UK 2	Exploration, production, and development
Chrysaor (U.K.) Theta Limited	UK	UK 2	Exploration, production, and development
Chrysaor CNS Limited	UK	UK 2	Exploration, production, and development
Chrysaor Developments Limited	UK	UK 2	Decommissioning activities
Chrysaor E&P Finance Limited	UK	UK 2	Financing company
Chrysaor E&P Limited	UK	UK 2	Intermediate holding company
Chrysaor Holdings Limited 1	UK	Cayman Islands 13	Intermediate holding company
Chrysaor Limited	UK	UK 2	Exploration, production, and development
Chrysaor Marketing Limited	UK	UK 2	Gas trading
Chrysaor North Sea Limited	UK	UK 2	Exploration, production, and development
Chrysaor Petroleum Company U.K. Limited	UK	UK 2	Exploration, production, and development
Chrysaor Petroleum Limited	UK	UK 2	Decommissioning activities
Chrysaor Production (U.K.) Limited	UK	UK 2	Exploration, production, and development
Chrysaor Production Holdings Limited	UK	UK 2	Intermediate holding company
Chrysaor Resources (Irish Sea) Limited	UK	UK 2	Exploration, production, and development
Ebury Gate Limited	Guernsey	Guernsey 11	Risk mitigation services
EnCore (NNS) Limited	UK	UK 2	Intermediate holding company
EnCore Oil Limited	UK	UK 2	Intermediate holding company
FP Mauritania A BV	Mauritania	Netherlands 7	Decommissioning activities
FP Mauritania B BV	Mauritania	Netherlands 7	Decommissioning activities
Harbour Energy Services Limited	UK	UK 2	Service company
(formerly Chrysaor E&P Services Limited)
Harbour Energy Norge AS	Norway	Norway 3	Exploration, production, and development
Premier Oil (EnCore Petroleum) Limited	UK	UK 2	Intermediate holding company
Premier Oil (Vietnam) Limited	Vietnam	British Virgin Islands 8	Exploration, production, and development
Premier Oil Aberdeen Services Limited	UK	UK 2	Service company
Premier Oil and Gas Services Limited	UK	UK 2	Service company
Premier Oil Andaman I Limited	Indonesia	UK 2	Exploration, production, and development
Premier Oil Andaman Limited	Indonesia	UK 2	Exploration, production, and development
Premier Oil Barakuda Limited	Indonesia	UK 2	Exploration, production and development
Premier Oil do Brasil Petroleo e Gas Ltda	Brazil	Brazil 9	Exploration, production, and development
Premier Oil E&P Holdings Limited	UK	UK 2	Intermediate holding company
Premier Oil E&P UK EU Limited	UK	UK 2	Exploration, production, and development
Premier Oil E&P UK Limited	UK	UK 2	Exploration, production, and development
Premier Oil Exploration (Mauritania) Limited	Mauritania	Jersey 6	Decommissioning activities
Premier Oil Exploration and Production	Mexico	Mexico 10	Exploration, production, and development
Mexico S.A.de C.V.
Premier Oil Far East Limited	Singapore	UK 2	Service company
Premier Oil Group Holdings Limited 1	UK	UK 2	Intermediate holding company
Premier Oil Group Limited	UK	UK 5	Intermediate holding company
Premier Oil Holdings Limited	UK	UK 2	Intermediate holding company
Premier Oil Mauritania B Limited	Mauritania	Jersey 6	Decommissioning activities
Premier Oil Mexico Holdings Limited	UK	UK 2	Intermediate holding company
Premier Oil Mexico Investments Limited	UK	UK 2	Intermediate holding company
Premier Oil Mexico Recursos S.A. de C.V.	Mexico	Mexico 10	Exploration, production, and development
Premier Oil Natuna Sea BV	Indonesia	Netherlands 7	Exploration, production, and development
Premier Oil Overseas BV	Netherlands	Netherlands 7	Intermediate holding company
Premier Oil South Andaman Limited	Indonesia	UK 2	Exploration, production, and development
Premier Oil Tuna BV	Indonesia	Netherlands 7	Exploration, production, and development

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

171

Name of company	Area of operation	Country of incorporation	Main activity
Premier Oil UK Limited	UK	UK 5	Exploration, production, and development
Premier Oil Vietnam Offshore BV	Vietnam	Netherlands 7	Exploration, production, and development
Chrysaor (U.K.) Britannia Limited	–	UK 2	Dormant company
Chrysaor (U.K.) Delta Limited	–	UK 2	Non-trading
Chrysaor (U.K.) Eta Limited	–	UK 2	Non-trading
Chrysaor (U.K.) Lambda Limited	–	ROI 4	Dormant company
Chrysaor Production Limited	–	UK 2	Non-trading
Chrysaor Resources (UK) Holdings Limited	–	UK 2	Non-trading
Chrysaor (U.K.) Zeta Limited	–	UK 2	Non-trading
Harbour Energy Argentina Limited	–	UK 2	Dormant company
Harbour Energy Developments Limited	–	UK 2	Dormant company
Harbour Energy Secretaries Limited	–	UK 2	Dormant company
Harbour Energy Production Limited	–	UK 2	Dormant company
Premier Oil ANS Holdings Limited	–	UK 2	Non-trading
Premier Oil ANS Limited	–	UK 2	Non-trading
Premier Oil B Limited	–	UK 2	Dormant company
Premier Oil Congo (Marine IX) Limited	–	Jersey 6	Dormant company
Premier Oil Exploration Limited	–	UK 5	Non-trading
Premier Oil Exploration ONS Limited	–	UK 2	Dormant company
Premier Oil Finance (Jersey) Limited 1	–	Jersey 6	Non-trading
Premier Oil ONS Limited	–	UK 2	Dormant company
Premier Oil Pakistan Offshore BV	–	Netherlands 7	Dormant company
Premier Oil Vietnam 121 Limited	–	UK 2	Non-trading
Viking CCS Limited (formerly Chrysaor Energy Limited)	–	UK 2	Dormant company
Chrysaor Investments Limited	–	UK 2	Liquidation
Chrysaor Petroleum Chemicals U.K. Limited	–	UK 2	Liquidation
(formerly Harbour Energy Services Limited)
Chrysaor Production Oil (GB) Limited	–	UK 2	Liquidation
(formerly Harbour Energy Production Limited)
Chrysaor Supply & Trading Limited	–	UK 2	Liquidation
EnCore (VOG) Limited	–	UK 2	Liquidation
EnCore CCS Limited	–	UK 2	Liquidation
EnCore Natural Resources Limited	–	UK 2	Liquidation
EnCore Oil and Gas Limited	–	UK 2	Liquidation
Premier Oil Belgravia Holdings Limited	–	UK 2	Liquidation
Premier Oil Belgravia Limited	–	UK 2	Liquidation
Premier Oil Bukit Barat Limited	–	UK 2	Liquidation
Premier Oil CCS Limited	–	UK 2	Liquidation
Premier Oil E&P UK Energy Trading Limited	–	UK 2	Liquidation
Premier Oil Exploration and Production (Iraq) Limited	–	UK 2	Liquidation
Premier Oil Investments Limited	–	UK 2	Liquidation
Premier Oil Paciﬁc Limited	–	Hong Kong 12	Liquidation
Premier Overseas Holdings Limited	–	UK 2	Liquidation
XEO Exploration Limited (formerly XEO Exploration plc)	–	UK 2	Liquidation

Note:

Held directly by the company. All other companies are held through a subsidiary undertaking.

Registered ofﬁce – 23 Lower Belgrave Street, London, United Kingdom, SW1W ONR.

Registered ofﬁce – Haakon VII’s gate 1, 4

Floor, 0161 Oslo, Norway.

Registered ofﬁce – Riverside One, Sir John Rogerson’s Quay, Dublin 2, Ireland.

Registered ofﬁce – 4

Floor, Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2EN.

Registered ofﬁce – 46/50 Kensington Place, 1

Floor, Kensington Chambers, St. Helier, JE4 0ZE, Jersey.

Registered ofﬁce – Herikerbergweg 88, 1101 CM, Amsterdam, Netherlands.

Registered ofﬁce – Commerce House, Wickhams Cay 1, Road Town, Tortola, VG1110.

Registered ofﬁce – Rua Lauro Müller, 116 – Sala 2006, Torre Rio Sul, Shopping, 20º andar, Botafogo, Rio de Janeiro – RJ – CEP: 22.290-906, Brazil.

10 Registered ofﬁce – Presidente Masaryk 111, Piso 1, Polanco V Seccion, Mexico City, CP 11560, Mexico.

11 Registered ofﬁce – Level 5, Mill Court, La Charroterie, St Peter Port, Guernsey, GY1 1EJ.

12 Registered ofﬁce – 31/F, Tower Two, Time Square, 1 Matheson Street, Causeway Bay, Hong Kong.

13 Registered ofﬁce – Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111.

Company balance sheet

As at 31 December 2023

Harbour Energy plc

Annual Report & Accounts 2023

172

		2023	2022
	Note	$ million	$ million
Assets
Non-current assets
Investments in subsidiaries	3	2,238	2,302
Long-term receivables	4	1,924	2,209
Total non-current assets		4,162	4,511
Current assets
Trade and other receivables	4	22	4
Total current assets		22	4
Current liabilities
Trade and other payables	5	(54)	(15)
Net current liabilities		(32)	(11)
Non-current liabilities
Borrowings	6	(493)	(491)
Long-term employee beneﬁt plan deﬁcit	7	(1)	(1)
Net assets		3,636	4,008
Equity and reserves
Share capital	9	171	171
Retained earnings		3,457	3,829
Other reserves		8	8
Total equity and reserves		3,636	4,008

Proﬁt for the year ending 31 December 2023 was $36 million (2022: $2,704 million loss).

The notes on pages 174 to 176 form part of these ﬁnancial statements.

The ﬁnancial statements of Harbour Energy plc (registered number SC234781) on pages 172 and 173 were approved by the board

of directors and authorised for issue on 6 March 2024 and signed on its behalf by:

Alexander Krane

Chief Financial Ofﬁcer

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

173

				Capital
	Share	Share	Merger	redemption	Retained	Total
	capital	premium	reserve	reserve	earnings	equity
	$ million	$ million	$ million	$ million	$ million	$ million
At 1 January 2022	171	1,505	4,806	8	762	7,252
Purchase and cancellation of own shares 1	–	–	–	–	(361)	(361)
Loss for the ﬁnancial year	–	–	–	–	(2,704)	(2,704)
Capital restructuring 2	–	(1,505)	(4,806)	–	6,311	–
Share-based payments	–	–	–	–	34	34
Purchase of ESOP Trust shares	–	–	–	–	(22)	(22)
Dividend paid	–	–	–	–	(191)	(191)
At 31 December 2022	171	–	–	8	3,829	4,008
Purchase and cancellation of own shares 1	–	–	–	–	(249)	(249)
Proﬁt for the ﬁnancial year	–	–	–	–	36	36
Share-based payments	–	–	–	–	46	46
Purchase of ESOP Trust shares	–	–	–	–	(15)	(15)
Dividend paid	–	–	–	–	(190)	(190)
At 31 December 2023	171	–	–	8	3,457	3,636

Includes $1 million costs in relation to fees and stamp duty (2022: $2 million).

Share premium and merger reserve balances recategorised to retained earnings following capital reduction effective 3 August 2022. Of the reserves capitalised $1.65 billion is

non-distributable until 31 March 2028.

Company statement of changes in equity

For the year ended 31 December 2023

Notes to the company ﬁnancial statements

Harbour Energy plc

Annual Report & Accounts 2023

174

1. Material accounting policies

The separate ﬁnancial statements of the company are presented as required by the Companies Act 2006. The company meets the

deﬁnition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council (FRC).

These ﬁnancial statements have been prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’.

As permitted by FRS 101, the company has taken advantage of the disclosure exemptions available under that standard in relation

to accounting standards issued but not yet effective or implemented, share-based payment information, ﬁnancial instruments, capital

management, presentation of comparative information in respect of certain assets, presentation of a cash ﬂow statement and certain

related party transactions.

The ﬁnancial statements have been prepared on a going concern basis. Further information relating to the going concern assumption

is provided in the Financial review on page 31.

Where required, the equivalent disclosures are given in the consolidated ﬁnancial statements. Key sources of estimation uncertainty

disclosure are provided in the accounting policies and in relevant notes to the consolidated ﬁnancial statements as applicable. Details

of the company’s share-based payment schemes are provided in note 25 of the consolidated ﬁnancial statements.

The ﬁnancial statements have been prepared on the historical cost basis. The material accounting policies adopted are the same as

those set out on pages 123 to 137 to the consolidated ﬁnancial statements except that investments in subsidiaries are stated at cost

less, where appropriate, provisions for impairment.

2. Proﬁt/loss for the year

As permitted by section 408 of the Companies Act 2006, the company has elected not to present its own proﬁt and loss account

for the year. The company reported a proﬁt for the ﬁnancial year ended 31 December 2023 of $36 million (2022: $2,704 million loss).

Other comprehensive expense for the year was $nil (2022: $nil).

The auditor’s remuneration for audit and other services is disclosed in note 5 to the consolidated ﬁnancial statements.

3. Fixed asset investments

Net book value

	2023	2022
	$ million	$ million
At 1 January	2,302	4,966
Impairment	(64)	(2,664)
At 31 December	2,238	2,302

The impairment of $64 million reﬂects the investment in a subsidiary that is planned to enter liquidation during 2024.

Further, an additional impairment review was undertaken with reference to the company’s market capitalisation at the year-end date

(level 1 under IFRS 13 fair value hierarchy), adjusted to reﬂect a control premium and cost of disposal in order to determine the

recoverable amount of the investments on a fair value less cost to sell basis. This was also tested against internal corporate valuations

modelled using asset portfolio and corporate data (level 3 under IFRS 13 fair value hierarchy). This resulted in a surplus of recoverable

amount over the cost of investment. Given the impairment recognised in 2022, this surplus was further assessed for reversal, however

was not found to be robust when evaluated with reference to reasonable downside sensitivities. As part of this assessment, it was noted

that a 10 per cent decrease in the share price would result in a $156 million increase in the impairment provision.

A list of all investments in subsidiaries held at 31 December 2023, including the name and type of business, the country of operation

and the country of incorporation or registration, is given in note 31 to the consolidated ﬁnancial statements.

Strategic report

Governance

Financial statements

Additional information

Harbour Energy plc

Annual Report & Accounts 2023

175

4. Receivables

	2023	2022
	$ million	$ million
Current
Amounts owed by subsidiary undertakings 1	–	1
Trade debtors	1	–
Prepayments	21	3
	22	4
Non-current
Amounts owed by subsidiary undertakings 2	1,924	2,209

Amounts owed by subsidiary undertakings include non-interest bearing loans that are repayable on demand, although the company has conﬁrmed that it has no current intention to call

on the loans until at least 12 months from the date of the approval of these ﬁnancial statements.

The above carrying value reﬂects an impairment provision required under IFRS 9, which was calculated using the Group’s 12-month probability of default. The closing balance at year end

was $1,924 million, being the carrying value of $1,933 million reduced during the year by a charge of $9 million.

The carrying values of the company’s receivables approximate their fair value.

5. Trade and other payables

	2023	2022
	$ million	$ million
Amounts owed to subsidiary undertakings	–	2
Amounts owed to subsidiary undertakings in respect of taxation	8	5
Other creditors	–	1
Accruals	46	7
	54	15

The carrying values of the company’s payables approximate their fair value.

6. Borrowings

		2023		2022
	Book value	Fair value	Book value	Fair value
	$ million	$ million	$ million	$ million
Bond	(493)	(487)	(491)	(446)

In October 2021, the company issued a $500 million bond under Rule 144A which has a tenor of ﬁve years to maturity. The coupon was

set at 5.50 per cent and interest is payable semi-annually. Further details can be found in note 21 of the Group accounts.

Notes to the company ﬁnancial statements

continued

Harbour Energy plc

Annual Report & Accounts 2023

176

7. Long-term employee beneﬁt plans

Deﬁned beneﬁt schemes

The company operates a ﬁnal salary deﬁned beneﬁt pension plan in the UK. The Plan is an HMRC registered pension plan and is subject

to standard UK pension and tax laws. Details on the beneﬁts provided by the Plan are set out in the Trust Deed and Rules dated

16 October 2008 (as amended).

The Plan’s assets are held in a separate trustee-administered fund to meet long-term pension liabilities to beneﬁciaries. The Trustee of the Plan

is required to act in the best interest of the beneﬁciaries. The appointment of trustee directors is determined by the trust documentation.

The Trustee of the Plan invests assets in line with the Statement of Investment Principles. The Statement of Investment Principles has

been established taking into consideration the liabilities of the Plan and the investment risk the Trustee is willing to accept.

Under the Scheme Funding regime introduced by the Pensions Act 2004, the Trustee is required to carry out regular actuarial valuations of the

Plan, establish a schedule of contributions and, when there is a shortfall, a recovery plan. Scheme funding valuations are carried out at least

every three years. Approximate funding updates are produced annually in years where a full scheme funding valuation is not completed.

The deﬁned beneﬁt pension plan exposes the company to actuarial risk, such as longevity risk, interest rate risk, salary risk, investment

market risk and currency risk.

Further details of this Plan have not been provided as the Plan is not material to the ﬁnancial position or results of the company.

Deﬁned contribution schemes

The company operates a deﬁned contribution retirement beneﬁt scheme. Further details of this scheme are provided in note 26 of the

consolidated ﬁnancial statements.

8. Commitments and guarantees

At the year-end date, the company (together with certain subsidiary undertakings) guaranteed the Group’s principal borrowing facilities,

which comprise:

•

$2.75 billion reserve based lending facility, of which $1.75 billion is available for drawing letters of credit;

•

$500 million unsecured bond; and

•

$400 million of surety bond capacity for the purposes of posting decommissioning security, which is effective from 1 January 2024.

9. Share capital and share premium

Further details of these items are disclosed in note 24 of the consolidated ﬁnancial statements.

10. Dividends

Further details of these items are disclosed in note 29 of the consolidated ﬁnancial statements.

Recommendation

Recommended disclosure

Disclosure level

Reference

1. Governance

Disclose the organisation’s

governance around climate-related

risks and opportunities

a) Describe the Board’s oversight of climate-related

risks and opportunities

Full

Strategic report

•

ESG review: page 32

b) Describe management’s role in assessing and

managing climate-related risks and opportunities

Full

Governance

•

Chair’s introduction to

governance: page 68

•

Audit and Risk Committee report:

page 76

•

HSES Committee report: page 80

2. Strategy

Disclose the actual and potential

impacts of climate-related risks and

opportunities on the organisation’s

businesses, strategy and ﬁnancial

planning where such information

is material

a) Describe the climate-related risks and opportunities

the organisation has identiﬁed over the short, medium

and long term

Full

Strategic report

•

ESG review: page 32

•

Risk management: page 56

•

Viability statement: page 59

•

Note 2 to the ﬁnancial

statements: page 123

b) Describe the impact of climate-related risks and

opportunities on the organisation’s businesses,

strategy and ﬁnancial planning

Full

c) Describe the resilience of the organisation’s strategy,

taking into consideration different climate-related

scenarios, including a 2°C or lower scenario

Full

3. Risk management

Disclose how the organisation

identiﬁes, assesses, and

manages climate-related risks

a) Describe the organisation’s processes for identifying

and assessing climate-related risks

Full

Strategic report

•

ESG review: page 32

•

Risk management: page 56

•

Principal risks: page 60

b) Describe the organisation’s processes for managing

climate-related risks

Full

c) Describe how processes for identifying, assessing,

and managing climate-related risks are integrated into

the organisation’s overall risk management

Full

4. Metrics and targets

Disclose the metrics and targets

used to assess and manage

relevant climate-related risks

and opportunities where such

information is material

a) Disclose the metrics used by the organisation to

assess climate-related risks and opportunities in line

with its strategy and risk management process

Full

Strategic report

•

ESG review: page 32

b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3

greenhouse gas (GHG) emissions, and the related risks

Full

c) Describe the targets used by the organisation to

manage climate-related risks and opportunities and

performance against targets

Full

TCFD index

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

177

Independent assurance statement

Scope

We have been engaged by Harbour Energy plc (Harbour) to perform a

‘limited assurance engagement’, as deﬁned by International Standards

on Assurance Engagements, here after referred to as the engagement,

to report on selected data indicated with a ‘^’ (the Subject Matter) within

the ESG review section of the Annual Report & Accounts for the year

ended 31 December 2023. The selected data is on the following pages:

•

Safety metrics: page 35

•

GHG and energy metrics: page 47

•

Efﬂuent spills and waste metrics: page 47

•

Social metrics: page 49

Other than as described in the preceding paragraph, which sets

out the scope of our engagement, we did not perform assurance

procedures on the remaining information included in the Report,

and accordingly, we do not express a conclusion on this information.

Criteria applied by Harbour Energy plc

In preparing the Subject Matter, Harbour applied The Global Reporting

Initiative Standard, GRI 11: Oil and Gas Sector 2021 (including

associated GRI Topic Standard Disclosures) (the Criteria).

Harbour’s responsibilities

Harbour’s management is responsible for selecting the Criteria, and

for presenting the Subject Matter in accordance with that Criteria, in

all material respects. This responsibility includes establishing and

maintaining internal controls, maintaining adequate records and making

estimates that are relevant to the preparation of the Subject Matter, such

that it is free from material misstatement, whether due to fraud or error.

EY’s responsibilities

Our responsibility is to express a conclusion on the presentation of

the Subject Matter based on the evidence we have obtained.

Our engagement was conducted in accordance with the International

Standard for Assurance Engagements Other Than Audits or Reviews of

Historical Financial Information (ISAE 3000 (Revised)), and the terms

of reference for this engagement as agreed with Harbour Energy plc

on 10 November 2023. Those standards require that we plan and

perform our engagement to express a conclusion on whether we are

aware of any material modiﬁcations that need to be made to the

Subject Matter in order for it to be in accordance with the Criteria, and

to issue a report. The nature, timing, and extent of the procedures

selected depend on our judgement, including an assessment of

the risk of material misstatement, whether due to fraud or error.

We believe that the evidence obtained is sufﬁcient and appropriate

to provide a basis for our limited assurance conclusion.

Our independence and quality management

We have maintained our independence and conﬁrm that we have met

the requirements of the Code of Ethics for Professional Accountants

issued by the International Ethics Standards Board for Accountants,

and have the required competencies and experience to conduct this

assurance review.

EY also applies International Standard on Quality Management 1,

Quality Management for Firms that Perform Audits or Reviews of

Financial Statements, or Other Assurance or Related Services

engagements, which requires that we design, implement and operate

a system of quality management including policies or procedures

regarding compliance with ethical requirements, professional

standards and applicable legal and regulatory requirements.

Description of procedures performed

Procedures performed in a limited assurance engagement vary in

nature and timing from, and are less in extent than for a reasonable

assurance engagement. Consequently the level of assurance

obtained in a limited assurance engagement is substantially

lower than the assurance that would have been obtained had a

reasonable assurance engagement been performed. Our procedures

were designed to obtain a limited level of assurance on which

to base our conclusion and do not provide all the evidence that

would be required to provide a reasonable level of assurance.

Although we considered the effectiveness of management’s internal

controls when determining the nature and extent of our procedures,

our assurance engagement was not designed to provide assurance

on internal controls. Our procedures did not include testing controls

or performing procedures relating to checking aggregation or

calculation of data within IT systems.

A limited assurance engagement consists of making enquiries, primarily

of persons responsible for preparing the Subject Matter and related

information, and applying analytical and other relevant procedures.

Our procedures included:

1. Conducted interviews with relevant staff in order to understand the

data reporting processes, the key sources of information and the

boundaries used for reporting. We did this to obtain an understanding

of the internal control environment for the data, performance of KPIs

in the period and reporting processes both at a group and site level

2. Reviewed a selection of management documentation and

reporting tools, including guidance documents, to understand

internal controls, reporting processes and policies to further

inform our assurance approach and procedures

3. Identiﬁed those data points (and associated data processes and

systems), that are most material, in order to inform and target our

testing procedures

4. Conﬁrmed our understanding of the key risks to data integrity and

the controls associated with the collection and collation of the data

5. Reperformed calculations to check the accuracy of the data

collation and KPIs reported

6. Tested underlying documentation for a sample, based on

professional judgement, of site-level data points to determine the

accuracy and completeness of data points within the data sets

7. Challenged the accuracy of data aggregation for reporting purposes

– including the use of any speciﬁc tools, systems or estimation methods

8. Assessed the Report for the appropriate presentation of the

Subject Matter, including the limitations and assumptions

We also performed such other procedures as we considered

necessary in the circumstances.

Conclusion

Based on our procedures and the evidence obtained, we are not

aware of any material modiﬁcations that should be made to the

Subject Matter for the year ended 31 December 2023, in order

for it to be in accordance with the Criteria.

Use of our assurance statement

We disclaim any assumption of responsibility for any reliance on this

assurance report or its conclusions to any other persons, or for any

purpose other than that for which it was prepared. Accordingly, we

accept no liability whatsoever, whether in contract, tort or otherwise,

to any third party for any consequences of the use or misuse of this

assurance report or its conclusions.

Ernst & Young LLP

6 March 2024

London

Harbour Energy plc

Annual Report & Accounts 2023

178

UK Government payment reporting

For the year ended 31 December 2023

Basis of preparation

The Reports on Payments to Governments Regulations (UK Regulations) came into force on 1 December 2014 and require UK companies

in the extractive sector to publicly disclose payments made to governments in the countries where they undertake extractive operations.

The aim of the regulations is to enhance the transparency of the payments made by companies in the extractive sector to host

governments in the form of taxes, bonuses, royalties, fees and support for infrastructure improvements.

This consolidated report provides information in accordance with DTR 4.3A in respect of payments made by the company and its subsidiaries

to governments for the year ended 31 December 2023 and in compliance with the Reports on Payments to Governments Regulations 2014

(SI 2014/3209), as amended by the Reports on Payments to Governments (Amendment) Regulations 2015 (SI 2015/1928).

The payments disclosed are based on where the obligation for the payment arose: payments levied at a project level have been disclosed

at a project level and payments levied at a corporate level have been disclosed on that basis.

The payments disclosed are for the 12-month period ending 31 December 2023.

Within the UK Regulations, a project is deﬁned as being the operational activities which are governed by a single contract, licence, lease,

concession or a similar legal agreement. The company undertakes extractive activities in different types of ﬁscal petroleum regimes and

therefore the types of payments disclosed vary from country to country. For the purposes of our reporting, for the UK, individual licences

have been grouped into geographical hubs and are classiﬁed as projects; for Norway we have classiﬁed each individual licence as a

project; whereas for Indonesia, Vietnam and Mexico each PSC arrangement has been classiﬁed as a project.

All of the payments disclosed have been made to national governments, either directly or through a Ministry or Department, or to a

national oil company, who have a working interest in a particular licence. For projects where we are the operator we have disclosed the

full payment made on behalf of the project; where we have a non-operated interest we have not disclosed payments made on our behalf

by another party.

In line with the UK Regulations, where a payment or a series of related payments do not exceed $106,976 (£86,000), they have

not been disclosed. Where the aggregate payments made in the period for a project or country are less than $106,976 we have

not disclosed the payments made for this project or country.

Our total economic value generated and distributed to all stakeholders can be found in the ESG review on page 49.

Reporting currency:

Payments disclosed in this report have been disclosed in US dollars, consistent with the rest of the 2023 Annual

Report. Where actual payments have been made in a currency other than US dollars, they have been translated using the prevailing

exchange rate when the payment was made.

Production entitlements in barrels:

Includes non-cash royalties and state non-participating interest paid in barrels of oil or gas out

of the Group’s working interest share of production in a licence. The ﬁgures disclosed are on a cash paid liftings basis.

Income taxes:

This represents cash tax calculated on the basis of proﬁts including income or capital gains and taxes on production.

Income taxes are usually reﬂected in corporate income tax returns. The cash payment of income taxes occurs in the year in which the

tax has arisen or up to one year later. Income taxes also include any cash tax rebate received from the government or revenue authority

during the year. Income taxes do not include ﬁnes and penalties. In accordance with the UK Regulations, payments made in relation to

sales, employee, environmental or withholding taxes have not been disclosed.

Dividends:

This includes dividends that are paid in lieu of a production entitlement or royalty. It does not include any dividends paid to

a government as an ordinary shareholder.

Royalties:

This represents cash royalties paid to governments during the year for the extraction of oil or gas. The terms of the royalties are

described within our PSCs and can vary from project to project within one country. Export duties paid in kind have been recognised within

the royalties category. The cash payment of royalties occurs in the year in which the tax has arisen.

Bonus payments:

This represents any bonus paid to governments during the year, usually as a result of achieving certain milestones,

such as a signature, discovery or production bonuses.

Licence fees:

This represents licence fees, rental fees, entry fees and other consideration for licences and/or concessions paid for

access to an area during the year (with the exception of signature bonuses which are captured within bonus payments).

Infrastructure improvement payments:

This represents payments made in respect of infrastructure improvements for projects that

are not directly related to oil and gas activities during the year. This can be a contractually obligated payment in a PSC or a discretionary

payment for building/improving local infrastructure such as roads, bridges and ports.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

179

UK Government payment reporting

continued

For the year ended 31 December 2023

Country

Licence and hub/

company level

Production

entitlements

bbls ‘000s

Production

entitlements

$ ‘000s

Income

taxes

$ ‘000s

Royalties:

cash only

$ ‘000s

Dividends

$ ‘000s

Bonus

payments

$ ‘000s

Licence

fees

$ ‘000s

Infrastructure

improvement

payments

$ ‘000s

Total

$ ‘000s

Indonesia

Natuna Sea Block A

1,163

77,473

25,255

–

102,728

Total Indonesia

1,163

77,473

25,255

–

102,728

Mexico

Block 11

–

Block 13

–

Total Mexico

–

Norway

Corporate

–

(19,293)

–

(19,293)

Total Norway

–

(19,293)

–

(19,293)

United

Central North Sea

–

(559)

–

7,502

–

6,943

Kingdom

Southern North Sea

–

(7,301)

–

2,886

–

(4,415)

East Irish Sea

–

802

–

802

West of Shetland

–

334

–

334

Corporate

–

423,387

–

423,387

Total United Kingdom

–

415,527

–

11,524

–

427,051

Vietnam

Chim Sáo

152

11,973

–

11,973

Corporate

–

22,119

7,453

–

29,572

Total Vietnam

152

11,973

22,119

7,453

–

41,545

Total Group

1,315

89,446 443,608

7,453

–

11,524

–

552,031

Harbour Energy plc

Annual Report & Accounts 2023

180

Country

Government

Production

entitlements

bbls ‘000s

Production

entitlements

$ ‘000s

Income

taxes

$ ‘000s

Royalties:

cash only

$ ‘000s

Dividends

$ ‘000s

Bonus

payments

$ ‘000s

Licence

fees

$ ‘000s

Infrastructure

improvement

payments

$ ‘000s

Total

$ ‘000s

Indonesia

SKK Migas

1,163

77,473

–

77,473

Directorate General

of Taxes

–

25,255

–

25,255

Total Indonesia

1,163

77,473

25,255

–

102,728

Mexico

Fondo Mexicano del

Petróleo para la

Estabilización y el

Desarrollo (FMP)

–

Servicio de

Administración

Tributaria (SAT)

–

Total Mexico

–

Norway

Tax authorities

(Skatteetaten)

–

(19,293)

–

(19,293)

Total Norway

–

(19,293)

–

(19,293)

United

Kingdom

HM Revenue

& Customs

–

415,527

–

415,527

Oil & Gas Authority

–

10,696

–

10,696

The Crown Estate

–

639

–

639

Crown Estate Scotland

–

189

–

189

Total United Kingdom

–

415,527

–

11,524

–

427,051

Vietnam

Petro Vietnam

152

11,973

–

11,973

HCM Tax Department

–

22,119

3,938

–

26,057

Vung Tau

Customs ofﬁce

–

3,515

–

3,515

Total Vietnam

152

11,973

22,119

7,453

–

41,545

Total Group

1,315

89,446 443,608

7,453

–

11,524

–

552,031

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

181

Oil and gas 2P reserves and 2C resources

International

Total

Oil, NGLs

mmbbls

Gas

bcf

Total

mmboe

Oil, NGLs

mmbbls

Gas

bcf

Total

mmboe

Oil, NGLs

mmbbls

Gas

bcf

Total

mmboe

2P reserves (working interest)

1 January 2023

213

936

390

221

993

410

Revisions and additions

–

Production

(31)

(173)

(64)

(1)

(14)

(4)

(33)

(186)

(68)

31 December 2023

183

851

343

190

905

361

2P reserves (entitlement)

31 December 2023

183

851

343

189

893

357

2C resources (working interest)

1 January 2023

142

361

204

137

657

250

279

1,019

455

Revisions, additions, relinquishments

(27)

(2)

238

210

31 December 2023

145

334

202

162

895

316

307

1,229

519

Volumes reﬂect internal estimates. ERCE as a competent independent person has audited the Group’s 2P net entitlement and working interest reserves as at 31 December 2023

and ERCE considers these to be fair and reasonable as per the SPE Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information. ERCE has also audited

c.80 per cent of the Group’s 2C contingent resources as at 31 December 2023 and is of the opinion that Harbour’s estimates are fair and reasonable. Further, ERCE believes that if

its audit had included all of Harbour’s 2C resources then it would have been able to express the same opinion. Conversion of gas volumes from bcf to boe is determined using an energy

conversion of 5.8 mmbtu per boe. Fuel gas is not included in these estimates.

International consists of Indonesia, Vietnam and Mexico.

UK 2P reserves additions includes over 20 mmboe of additions across Harbour’s UK operated J-Area, AELE and GBA hubs, following the approval of several new wells.

Harbour’s net entitlement 2P reserves are lower than its working interest 2P reserves for its international assets, reﬂecting the terms of the Production Sharing Contracts (PSC).

Increase in 2C resource largely reﬂects the addition of the Layaran gas discovery in Indonesia and the Kan oil discovery in Mexico.

The Group provides for amortisation of costs relating to evaluated properties based on direct interests on an entitlement basis, which

incorporates the terms of the PSCs in Indonesia and Vietnam. On an entitlement basis, reserves were 357 mmboe as at 31 December 2023.

Because of rounding, some totals may not agree exactly with the sum of their component parts.

storage capacity

2C resources (working interest)

million tonnes

1 January 2023

300

Additions and disposals

(78)

31 December 2023

222

Reﬂects Harbour’s internal estimates which have been externally audited by ERCE, a competent independent person. ERCE considers Harbour’s internal estimates to be fair and reasonable.

Reﬂects the addition of storage resource associated with Harbour’s 30 per cent working interest in the Acorn project offset by the impact of bp joining the Viking project with a 40 per

cent interest during 2023. Excludes any potential storage capacity associated with the two Viking licences which were awarded during 2023 and are in the process of being appraised

and volumes associated with several further development options available to Acorn.

Group reserves and resources

For the year ended 31 December 2023

Harbour Energy plc

Annual Report & Accounts 2023

182

Worldwide licence interests

As at 31 December 2023

United Kingdom

Operated producing assets

Location

Asset(s)

Operator

Harbour

equity

Associated

ﬁelds

Associated

discoveries

Armada Area (AELE)

Armada, Everest and Lomond

Harbour

100.0%

Drake, Fleming, Hawkins, Maria and Seymour

–

Catcher Area

Catcher

Harbour

50.0%

Burgman and Varadero

–

Greater Britannia

Area

Britannia

Brodgar

Callanish

Enochdhu

Harbour

58.7%

93.8%

83.5%

50.0%

–

J-Area

J-Block

Talbot

Jade

Harbour

67.0%

67.5%

Jasmine, Joanne, Judy

–

Dunnottar

–

West of Shetland

Solan

Harbour

100.0%

–

Southern North Sea

Johnston

Tolmount

Harbour

28.8%

50.0%

–

Tolmount East

–

Earn

East Irish Sea

Calder

Harbour

100.0%

–

Operated on our behalf by Perenco.

Operated by Dana Petroleum, to be tied back to Tolmount operated by Harbour.

Operated on our behalf by Spirit Energy.

Non-operated producing assets

Location

Asset(s)

Operator

Harbour

equity

Associated

ﬁelds

Associated

discoveries

West of Shetland

Clair

Schiehallion

7.5%

10.0%

–

Central North Sea

Alder

Buzzard

Elgin/Franklin

Erskine

Glenelg

Leverett

Nelson

Ithaca

CNOOC

Total

Ithaca

Total

NEO Energy

Shell

26.3%

21.7%

19.3%

32.0%

33.3%

44.0%

1.7%

–

Northern North Sea

Beryl

Buckland

Callater

Ness/Nevis Central

Nevis South

Nevis West

Skene

Storr

Apache

39.4%

37.5%

45.0%

39.4%

42.8%

49.1%

34.0%

39.5%

–

Southern North Sea

Galleon

Ravenspurn North

Shell

Perenco

8.4%

28.8%

–

Note:

These lists are not exhaustive. Harbour also holds a number of operated and non-operated interests in ﬁelds on the UK continental shelf that have ceased production and are in or are

entering decommissioning, as well as operated and non-operated exploration and pre-development interests.

Infrastructure

Asset

Operator

Harbour equity

Beryl Pipeline

Ancala Midstream

39.4%

Brent Pipeline System

TAQA

1.6%

Central Area Transmission System (CATS ) pipeline

Kellas Midstream

0.7%

Esmond Transportation System (ETS) pipeline

Kellas Midstream

10.0%

Glen Lyon FPSO

8.2%

Graben Area Export Line (GAEL) Northern Spurline

INEOS

4.0%

Graben Area Export Line (GAEL) Southern Spurline

INEOS

13.2%

Northern Leg Gas Pipeline

EnQuest

1.3%

Rivers Terminal

Harbour Energy

100.0%

Scottish Area Gas Evacuation (SAGE) pipeline

Ancala Midstream

19.7%

SEAL Interconnector Link (SILK) pipeline

TotalEnergies

20.98%

Shearwater and Elgin Area Line (SEAL) pipeline

TotalEnergies

19.3%

Sullom Voe Terminal (SVT)

EnQuest

0.99%

West of Shetland Pipeline System (WoSPS)

2.7%

Operated on our behalf by Spirit Energy.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

183

Worldwide licence interests

continued

As at 31 December 2023

Norway

Location

Asset(s)

Operator

Harbour

equity

Associated

ﬁelds

Associated

discoveries

PL 956

Block 25/8

Vår Energi

15.0%

–

PL 1032

Blocks 2/7 and 2/10

Aker BP

40.0%

–

PL 1058

Blocks 6307/1 and 6407/10

Equinor

40.0%

–

PL1 066 & PL 1066B

Blocks 6507/3 and 6507/3m

Aker BP

50.0%

–

PL 1087

Blocks 2/2 and 2/5

Harbour

50.0%

–

PL 1089

Blocks 1/5 and 1/6

Aker BP

50.0%

–

PL 1092

Blocks 15/6 and 9

Aker BP

50.0%

–

PL 1093

Blocks 16/4, 5, 6, 8 and 9

Harbour

50.0%

–

PL 1113

Blocks 6407/8, 9 and 11

Neptune

40.0%

–

PL 1114

Blocks 640/7/7. 8, 10 and 11

Harbour

40.0%

–

PL 1138

Blocks 15/9, 16/4, 16/7

Harbour

40.0%

–

PL 1155 & PL 1155B

Blocks 6407/10, 6407/10b

and 6407/11

Equinor

20.0%

–

PL 1162

Block 6407/2

Aker BP

30.0%

–

PL 1164

Block 6507/11

Aker BP

30.0%

–

PL 1190

Blocks 6507/10 and 6507/11

Harbour

50.0%

–

Other worldwide licences

Licence

Asset(s)

Operator

Harbour

equity

Associated

ﬁelds

Associated

discoveries

Indonesia

South Andaman

Mubadala Petroleum

20.0%

–

Lavaran

Andaman I

Mubadala Petroleum

20.0%

–

Andaman II

Harbour

40.0%

–

Timpan

Natuna Sea

Block A

Harbour

28.7%

Anoa, Gajah Baru, Naga, Pelikan,

Bison, Iguana and Gajah Puteri

–

Tuna Block

Harbour

50.0%

–

Kuda Laut and Singa Laut

Mexico

Mexico Block 7

Talos

25.0%

–

Zama

Mexico Block 11

Harbour

100.0%

–

Mexico Block 13

Harbour

100.0%

–

Mexico Block 30

WDEA

30.0%

–

Kan

Vietnam

Block 12W

12W

Harbour

53.1%

Chim Sáo, Chim Sáo North and Dua

–

Harbour has a 12.4 per cent non-operated interest in the Zama unit.

Note:

These lists are not exhaustive. Harbour also holds a number of non-operated interests in ﬁelds in Mauritania that are currently being decommissioned.

Harbour Energy plc

Annual Report & Accounts 2023

184

Best estimate of contingent resources

Proven and probable reserves

ABP

Associated British Ports

ADR

American depositary receipt

AFE

Authorisation for expenditure

AGM

Annual General Meeting

APS

Announced Pledges Scenario

bbl

Barrel

bcf

Billion cubic feet

BMS

Business management system

boe

Barrel(s) of oil equivalent

CCGT

Combined cycle gas turbine

CCS

Carbon capture and storage

CGUs

Cash-generating units

Chrysaor

Chrysaor Holdings Limited and subsidiaries

CMAPP

Corporate major accident prevention policy

Carbon dioxide equivalent

COP

Cessation of production

CRR

Corporate reporting review

CRROs

Climate-related risks and opportunities

CSA

Conditional share awards

DD&A

Depreciation, depletion and amortisation

DE&I

Diversity, equity and inclusion

DRIP

Dividend reinvestment plan

DTA

Deferred tax asset

EBITDA

Earnings before interest, tax, depreciation and amortisation

EBITDAX

Earnings before interest, tax, depreciation, amortisation

and exploration

ECL

Expected credit losses

E&E

Exploration and evaluation

EFF

Exploration ﬁnancing facility

EIR

Effective interest rate

EMS

Enterprise management system

EPL

Energy Proﬁts Levy

EPS

Earnings per share

ERAPs

Emissions reduction action plans

ESG

Environmental, social and governance

ESOP

Employee stock ownership plan

EVP

Executive Vice President

Ernst & Young LLP

FCA

Financial Conduct Authority

FEED

Front-end engineering and design

FPSO

Floating production, storage and offtake vessel

FRC

Financial Reporting Council

FVLCD

Fair value less cost of disposal

FVOCI

Fair value through other comprehensive income

FVTPL

Fair value through proﬁt or loss

Foreign exchange

Full year

GHG

Greenhouse gas emissions

Gigajoule

GRI

Global reporting initiative

HiPo

High potential incident

(Any incident or near miss that could, in other circumstances,

have realistically resulted in one or more fatalities)

HiPoR

High potential incident rate

(The frequency of HiPos per million worked hours)

HMRC

HM Revenue & Customs

HSES

Health, safety, environment and security

IAS

International Accounting Standards

IASB

International Accounting Standards Board

IEA

International Energy Agency

IFRIC

IFRS Interpretations Committee

IFRS

International Financial Reporting Standards

IOGP

International Association of Oil and Gas Producers

IPIECA

International Petroleum Industry Environmental

Conservation Association

ISAs (UK)

International Standards on Auditing (UK)

ISDA

International Swaps and Derivatives Association

Joint venture

kboepd

Thousand barrels of oil equivalent per day

kgCO

Kilograms of carbon dioxide equivalent

Kilometre

KPI

Key performance indicator

Thousand tonnes

LIBOR

London Inter-Bank Offered Rate

LNG

Liqueﬁed natural gas

Glossary

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

185

Glossary

continued

LTIP

Long Term Incentive Plan

LWDC

Lost work day cases

M&A

Mergers and acquisitions

MAH

Major accident hazards

mmboe

Million barrels of oil equivalent

mscf

Thousand standard cubic feet

Million tonnes

MTC

Medical treatment cases

mtpa

Million tonnes per annum

Megawatt

NBP

National Balancing Point (UK natural gas prices)

NGL

Natural gas liquids

NGO

Non-government organisation

NOK

Norwegian krone

NSTA

North Sea Transition Authority

NTS

National Transmission System

NZE

Net zero emissions

OCM

Operating Committee Meetings

OECD

Organisation for Economic Co-operation and Development

OEUK

Offshore Energies UK

OPEC

The Organisation of the Petroleum Exporting Countries

PP&E

Property, plant and equipment

Premier

Premier Oil plc and subsidiaries

PSA

Performance share awards

PSC

Production sharing contract

PSE

Process safety events

RBL

Reserve based lending

RWDC

Restricted work day cases

SAYE

Save As You Earn

Scope 1

Direct emissions from owned or operated sources

Scope 2

Indirect emissions from the generation of purchased energy

Scope 3

All indirect emissions (not included in Scope 2) that occur

in the value chain of the reporting company, including both

upstream and downstream emissions

SIP

Share Incentive Plan

SOFR

Secured Overnight Financing Rate

SPE

Society of Petroleum Engineers

SSP

Shared Socioeconomic Pathways

Tcf

Trillion cubic feet

TCFD

Task Force on Climate-related Financial Disclosures

Therm

A unit for quantity of heat that equals 100,000 British thermal

units. One therm is equal to approximately 100 cubic feet of

natural gas

TRIR

Total Recordable Injury Rate

(The number of fatalities, lost time injuries, substitute work,

and other injuries requiring treatment by a medical professional

per million hours worked)

TSR

Total shareholder return

USD

US dollar

Vice President

WACC

Weighted average cost of capital

Harbour Energy plc

Annual Report & Accounts 2023

186

Non-IFRS measures

Harbour uses certain measures of performance that are not speciﬁcally deﬁned under IFRS or other generally accepted accounting

principles (GAAP). These non-IFRS measures, which are presented within the Financial review, are deﬁned below:

•

Capital investment:

Depicts how much the Group has spent on purchasing ﬁxed assets in order to further its business goals and

objectives. It is a useful indicator of the Group’s organic expenditure on oil and gas assets, and exploration and appraisal assets,

incurred during a period.

•

DD&A per barrel:

Depreciation and amortisation of oil and gas properties for the period divided by working interest production.

This is a useful indicator of ongoing rates of depreciation and amortisation of the Group’s producing assets.

•

EBITDAX:

Earnings before tax, interest, depreciation and amortisation, impairments, remeasurements, onerous contracts and

exploration expenditure. This is a useful indicator of underlying business performance.

•

Free cash ﬂow:

Operating cash ﬂow less cash ﬂow from investing activities less interest and lease payments.

•

Leverage ratio:

Net debt divided by the last 12 months EBITDAX.

•

Liquidity:

The sum of cash and cash equivalents on the balance sheet and the undrawn amounts available to the Group on our principal

facilities. This is a key measure of the Group’s ﬁnancial ﬂexibility and ability to fund day-to-day operations.

•

Net debt:

Total reserve based lending facility and bond (net of the carrying value of unamortised fees) less cash and cash equivalents

recognised on the consolidated balance sheet. This is an indicator of the Group’s indebtedness and contribution to capital structure.

•

Operating cost per barrel:

Direct operating costs (excluding over/underlift) for the period, including tariff expense, insurance costs and

mark to market movements on emissions hedges, less tariff income, divided by working interest production. This is a useful indicator of

ongoing operating costs from the Group’s producing assets.

•

Shareholder returns paid:

Dividends plus share buybacks completed in the period are included in this metric which shows the overall

value returned to stakeholders in the period.

•

Total capital expenditure:

Capital investment ‘additions’ per notes 11 and 12 plus decommissioning expenditure ‘amounts used’

per note 20.

Harbour Energy plc

Annual Report & Accounts 2023

Strategic report

Governance

Financial statements

Additional information

187

Registrar

All enquiries concerning your shareholding

should be directed to Equiniti:

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

United Kingdom

Website: shareview.co.uk

Share portal

As a shareholder you have direct access

to an online share portal operated by

Equiniti at shareview.co.uk. You can access

the share portal with your Shareholder

Reference Number (SRN) which can be

found on your share certiﬁcate. The portal

provides a range of services, free of charge,

to help you to administer your shareholding

quickly and efﬁciently by allowing you to:

•

change your address details;

•

choose to receive electronic shareholder

communications;

•

set up or amend a dividend mandate

so dividends can be paid directly to your

bank account; and

•

buy and sell Harbour Energy plc shares using

the dealing service operated by Equiniti.

Shareholder information

E-communications

Shareholders have the option to receive

communications including annual reports

and notices of meetings electronically. This is

a faster, more environmentally friendly and,

for Harbour Energy plc, a more cost-effective

way for shareholders to receive annual

reports and other statutory communications

as soon as they are available. To register for

this service, please visit the share portal:

shareview.co.uk. You will need your 11 digit

Shareholder Reference Number which can

be found on documents that you have been

sent by Equiniti. Once registered, Harbour

Energy plc will communicate with you via

email rather than post.

Dividends

Details of dividend payments made are

included within the shareholder information

section of the investors area of the company

website: harbourenergy.com.

The company operates a Dividend

Reinvestment Plan (DRIP) which enables

shareholders to buy the company’s shares

on the London stock market with their cash

dividend. Further information about the

DRIP is available from Equiniti.

Shareholder security

Shareholders are advised to be cautious about

any unsolicited ﬁnancial advice, including

offers to buy Harbour Energy plc shares at

inﬂated prices, or offers of free reports about

Harbour. More information can be found

at fca.org.uk/consumers/scams and

in the shareholder information section of

the investors area of the company website:

harbourenergy.com.

American Depositary Receipt programme

Harbour Energy plc has a sponsored Level 1

American Depositary Receipt (ADR)

programme which BNY Mellon administers

and for which it acts as Depositary. Each

ADR represents one ordinary share of

the company. The ADRs trade on the US

over-the-counter market under the symbol

HBRIY. When dividends are paid to

shareholders, the Depositary converts

such dividends into US dollars, net of

fees and expenses, and distributes the

net amount to ADR holders.

Registered Depositary Receipt holders

can trade, access account balances

and transaction history, ﬁnd answers to

frequently asked questions and download

commonly needed forms online at

adrbnymellon.com. To speak directly to

a BNY Mellon representative, please call

1-888-BNY-ADRS (1-888-269-2377) if you

are calling from within the United States.

If you are calling from outside the United

States, please call 001-201-680-6825.

You may also send an email inquiry to

shrrelations@cpushareownerservices.com

or visit the website:

computershare-na.com/bnym_adr.

Harbour Energy plc

Annual Report & Accounts 2023

188

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Registered ofﬁce

Harbour Energy plc

Floor

Saltire Court

20 Castle Terrace

Edinburgh

EH1 2EN

Registered number SC234781

Head ofﬁce

Harbour Energy plc

23 Lower Belgrave Street

London

SW1W 0NR

Tel: +44 (0)20 7730 1111

harbourenergy.com