Key points:
- Harbour Energy shares have fallen 31.4% from their April highs.
- The downtrend was fueled by fears about the windfall tax on oil firms.
- So when will the downtrend end? Read on to find out.
The Harbour Energy PLC (LON: HBR) share price has fallen 31.4% from its April highs amid fears of a UK windfall tax on oil companies. Investors’ fears recently materialised after the British government imposed a windfall tax on UK oil companies.
Also read: Oil Trading Guide – How To Trade Oil.
The Conservative government had initially rejected the proposal, which came from the opposition Labour Party, but the rising cost of living in the UK occasioned by higher energy bills forced the government to revise its position and finally approve the windfall tax proposal.
While the initial proposal was for a 10% levy on profits, the UK Chancellor of the Exchequer (Finance Minister) has proposed a 25% levy that could raise approximately £5 billion for the government as part of a £15 billion aid package for UK households to mitigate the rising cost of living pressures.
However, the level also offers a 90% tax relief for energy companies that invest in oil and gas extraction projects within the UK. This clause could be a hail mary for the smaller oil companies such as Harbour Energy, EnQuest and Serica that are likely to be worst hit by the levy.
Large oil companies such as Shell and BP will be least affected by the new levy since they have significant international operations, with only a tiny portion of their oil and gas production facilities located in the UK. The larger companies have sold most of their UK assets to smaller companies such as Harbour Energy, especially in the UK North Sea.
Harbour Energy shares started falling in April when the windfall tax proposal first became public, with savvy investors selling their shares since they knew that the government might finally have to implement the law since the cost of oil and gas was likely to remain high as the Russia-Ukraine war continued.
The question for most investors is, when will the selloff in HBR shares end? The answer is that the selloff will end once the new law’s impact on Harbour’s profits is clear. So, I would stay away from the firm until then.
*This is not investment advice. Always do your due diligence before making investment decisions.
Harbour Energy share price.
Harbour Energy shares have fallen 31.35% from their April high of 538.60p to their current price of 369.7p.