Berenberg trims price target on Harbour Energy

Berenberg reiterated its ‘hold’ rating on Harbour Energy on Friday, but warned of potential downside to the current share price.

In a note on the oil and gas sector, the bank trimmed its price target for the UK’s largest North Sea oil and gas producer to 240p from 290p.

It said: “We see small downside to the current price on our valuation.

“In our view, the main challenge for the company remains the relatively short reserve life in the portfolio and uncertainty over delivery of contingent resources given the industry’s limited appetite for investment in the UK.

“Although current production delivers attractive free cash flow metrics in the short term, this declines quickly and may be channelled into the well-flagged need to buy a material production base in a jurisdiction outside the UK.”

Harbour Energy is looking to diversify overseas after the UK government imposed a windfall tax on British oil and gas producers, hitting profits.

Berenberg continued: “The key problem for operators in the UK is constantly evolving tax environment, making long-term planning difficult.

“At present, the Energy Profits Levy is at 35%, taking the marginal rate to 75%, although this is expected to end in 2028. There is a concern that a new government could extend the level indefinitely.”