Traditional energy companies have been buoyed by rising prices and Donald Trump’s pro-oil US presidency at the start of the year. In this market climate, high-yield UK stock Harbour Energy (LSE: HBR) might be an option to consider for those eyeing returns as well as price appreciation.
Admittedly, the field of energy companies wooing investors is very competitive these days. It doesn’t help that Harbour Energy grabbed headlines due to its North Sea exposure. Operators, like the company, were clobbered last summer with heavy taxation by the UK’s Labour government for North Sea production.
But there’s more to the company and its performance.
Not just the North Sea
At the start of 2025, Harbour Energy remains the largest London-listed independent oil company. It has a geographically diverse portfolio comprising assets in Argentina, Mexico, North Africa and Southeast Asia. These sit alongside assets in Germany, and British and Norwegian North Sea holdings.
The company’s current global production level is around 475,000 barrels of oil equivalent per day, enabling it to offer income-chasing investors a near 8% yield.
A well-respected board and CEO Linda Cook have overseen its expansion over the last four years via both organic and acquisitive growth. Their latest strategic play was the acquisition of Wintershall Dea last year for $11.2bn.
Operational discipline
In the six months to January, marked by declining oil prices, Harbour Energy saw its share price fall by around 5%. But over the same period, this compares favourably with its peers along with UK majors Shell and BP, with both posting declines of 3% and 6% respectively.
The first three weeks of January also saw Harbour Energy’s share price rise by 11%, bringing it close to the 300p mark. It hit a 52-week high of 333p in May before oil price volatility and changes to North Sea taxation knocked investor confidence.
Harbour Energy has since been trying to regain it. The company’s net debt has decreased significantly in recent years. It expects to have a net cash position by the end of 2025. Unsurprisingly, dividends have slowly but steadily increased since March 2022.
Market rumours are also rife about Harbour Energy moving its primary listing to the US, giving the energy stock further positive vibes. The company has dismissed the rumours. Instead, it is pursuing an investment-grade credit rating (i.e. bond or other form of debt vehicle / security with a low default risk), through financial and operational discipline.
What’s not to like?
There is a lot to like about Harbour Energy, but caution is still merited. As trading in 2024 demonstrated, direction of oil and gas prices will impact the company’s share price no matter how operationally disciplined it is.
A US listing, should it happen, is not always a one-way ticket to a higher valuation, as Diversified Energy Company recently found out. Some may also find Harbour Energy’s risk versus reward profile to be too timid or conservative, with other small-to-mid sized oil and gas stocks offering greater potential for price appreciation.
On balance, this high-yield energy midcap UK stock with a low risk profile strikes the right note for me, and I will be adding more of it to my portfolio.
