Good morning, all, and welcome to our 2025 full-year results call. I'm Linda Cook, the CEO of Harbor Energy, and as Dan said, joining me for the presentation today are Alexander Crane, our CFO, and Nigel Hearn, the Chief Operating Officer. Before we turn to results, I do want to first just acknowledge recent geopolitical events, which are driving extreme commodity price volatility and raising concerns over energy security. in some ways similar to where we were just about this same time last year with Liberation Day upon us, governments and businesses around the world coming to grips with the impacts of a wide range of new tariffs and trade agreements. And of course, not that long ago, before that, we had the Russian invasion of Ukraine, a conflict that continues to this day. And before that, a global pandemic all in the last five to six years. These are all reminders that we live and make decisions within an uncertain and at times volatile global environment. In response, it's important in a business like ours that we balance the short term with the long term and that we remain focused on the things we can control. Operational excellence, capital discipline, managing risk, and creating value for our shareholders. So turning to the agenda, I'm going to start by taking you through the highlights from what was a very good year for Harbor Energy in 2025 and some changes to our portfolio. Nigel will then cover operations, including how we're driving performance. Alexander will follow with the financial results, 2026 guidance, and a cash flow outlook for the near to midterm, all updated for our recent transactions, and also an outline of our new distribution policy. And then it's back to me to wrap up, leaving plenty of time for questions. So turning to my first slide, Harbor has grown from zero to more than 450,000 barrels per day over the last decade, driven by disciplined M&A and reinvesting in the acquired assets to add value. During that time, we repeatedly demonstrated our ability to identify and secure strategic transactions, and after completion, to safely and successfully integrate the acquired businesses and organizations. While past acquisitions, including Wintershaw Day in 2024, were focused on building scale and diversification. Our more recent ones have been targeted towards strengthening the portfolio, making it more resilient and enhancing longevity. Perhaps the best example is the acquisition of log exploration in the U.S. Gulf, completed ahead of schedule just a few weeks ago. The log assets, oil-weighted and all under operational control, help to secure Harbor's overall production at between 475 to 500,000 barrels per day to the end of the decade. And while overall production stays broadly stable, as you'll see later, replacing the declining UK volumes with growth in the US with its attractive fiscal framework means that we'll see a significant increase over time in cash flow. So turning first to look back to 2025, as I said, another strong year for Harbor Energy, operationally, financially, and strategically. We achieved record production at 474,000 barrels per day. It was up more than 80% on the prior year. And with unit opex at $13 per barrel, our margins were strong. This, along with strong capital discipline and cost control, resulted in materially improved free cash flow and demonstrated our ability to navigate volatile commodity prices. We also had good momentum on our growth projects, including the transfer of operatorship of the major Zama development in Mexico from Pemex, the national oil company, to Harbor. And we continued to improve the overall quality of the portfolio through M&A. And let me just turn to that now. In December, we announced three transactions each of which advances our strategy and strengthens our portfolio first we agreed the sale of our mature higher cost indonesian producing assets and the stalled tuna development project for 215 million dollars improving our portfolio quality and accelerating value we also announced the 170 million dollar acquisition of waldorf a small uk producer that brings around 900 million of value through tax losses. In addition, we unlock $350 million of trapped cash upon completion, more than covering the purchase price. Combining the benefits of Waldorf with the great work by our team in Aberdeen to reduce costs and improve efficiency means we've materially enhanced the resilience and free cash flow outlook of our business in the UK. The proceeds from the Indonesia of Sale, along with the near-term cash flow uplift from Waldorf, help fund our entry into the U.S. Gulf through the acquisition of LOG. As we said in the announcement at the time of this transaction, we're really excited about the addition of a strategic position in the U.S. Deepwater. With LOG, we get a high-quality growth portfolio in one of the most prolific oil and gas-producing basins in the world, along with one of the best teams in the Gulf, and we're more than thrilled to have them join our harbor team. So each transaction was strategic in its own way, and collectively they have a material impact on the overall quality of our portfolio. So the next slide takes us to a snapshot of harbor today, and I'll illustrate that point about the improved quality of the portfolio here. With the divestment of Vietnam in 2024, the announced sale of most of our Indonesia assets and our entry into the U.S., our geographic footprint is shrinking and the portfolio's center of gravity is shifting to the west. We've divested from mature positions in Southeast Asia with declining production and high unit costs, acquired five years ago through the premier oil transaction. and added strategic positions in Norway, Mexico, Argentina, and now the U.S., all with significant running room from a subsurface point of view, demonstrating, I think, that portfolio management is alive and well within harbor. Like in the past, if we can't see a route to scale or the assets can't compete for capital in our portfolio, they become divestment targets. And with the log acquisition, the bar to compete internally for capital has got that much higher. The outcome is a higher quality portfolio with higher margins and, as Alexander will show, increasing free cash flow over time. He'll also talk about the new distribution policy details, which aim to strike a balance, enabling a sustainable dividend and resilient balance sheet across commodity price cycles while supporting investment in future production and enabling shareholders to benefit as that cash flow growth materializes or if, like today, we have an unexpected spike in commodity prices. Turning to my last slide, I've mentioned our shrinking geographic footprint, meaning that today we're focused on five key countries, Norway, the U.K., Argentina, Mexico, and the U.S. As you can see, these account for 90% of our company, however you cut it. Production, cash flow, reserves, resources. As Nigel will explain, each of these countries has its role to play in Harbor. And while together they support flat production over the coming few years, the portfolio evolution continues. And that's hinted at in the bars on this page. While the U.K. is responsible for a third of our production today, it represents only a bit over 10% of our combined reserves and resources. With Norway production expected to be flattish, the U.K. decline is replaced by investing in projects in the Americas, the U.S., Mexico, and Argentina. And this, over time, has positive implications for after-tax margins and cash flow. So now over to Nigel, and he'll take you through each of these countries in more detail, followed by Alexander.
Good morning, and thank you, Linda. Today, our portfolio is more focused, competitive, and resilient. Across the business, we're aligned on delivering against four key priorities to drive total shareholder return. operating safely and reliably, expanding our margins through cost and capital efficiency, converting our resources into reserves and into production profitably and competitively, and growing our free cash flow sustainably. I will shortly take you through how each of our core business units is delivering against those priorities, and how the actions we've taken over the past year has put us on a path to stronger, longer, higher quality cash generation. First and always first is safety. Nothing matters more than protecting our people, our assets and the communities in which we operate. We did see a slight increase in our recordable injury rate in 2025 as we expanded into new countries. But we continue to be a top performer in personal safety. In process safety, we delivered a reduction in Tier 1 and Tier 2 loss of containment events, but unfortunately recorded one Tier 1 event in Mexico. Safety is an area we will never be satisfied. We actively promote the learnings from our incidents and are strengthening our focus on risk assessment, prevention, and assurance activities. we've also delivered a step change reduction in our greenhouse gas emissions intensity creating a more resilient portfolio 2025 was a year of record production delivering at the very top of our guidance this reflects a full year's contribution from winter shaldea but also a strong year of execution across our expanded portfolio we brought new wells online and completed new projects ahead of schedule in Norway, the UK, and Argentina. Reliability across our asset base continued to be high at greater than 90%. And we made structural improvements in our cost base, with unit OPEX down 20%, driven by lower cost barrels from Winter Shaldea, actions taken in the UK to reduce our cost by 10%, our exit from the higher cost Vietnam volumes, and we captured early synergies as we leveraged that increased scale. Together, these actions improved our earnings and cash margins, strengthening our competitiveness and resilience, turning to our core business units. As the second largest Norwegian gas exporter to Europe and Harbour's largest producer, our Norway business is central to our long-term cash flow. Our strong pipeline of infrastructure-led developments sustain profitable production into the next decade. At the end of 2025, we completed the Harbour Operated Maria Phase 2 project, the first of six developments due online in the next 24 months. This project was delivered on time and within budget, and is performing well. Our operator, Devalin North, is on track for completion mid-2026. All subsea infrastructure was successfully installed in 2025, and development drilling is underway. We're also maturing our next set of projects, and we continue to explore. Earlier this week, we announced the Omega SOAR discovery, where we have a 24.5% share. The estimated size of the discovery is between 25 and 89 million barrels of oil equivalent of gross recoverable volumes, exceeding our pre-drill estimates and extending the Snoray Field's lifetime beyond 2040. Our Norway business continues to exemplify our ability to profitably and efficiently turn resource to reserves to production. Despite continued fiscal headwinds, the UK delivered a strong performance in 2025. This was underpinned by high production efficiency and strong turnaround execution at our operated assets, structurally lowering our cost base. We shortened cycle times through near-field development and delivered best-in-class capital efficiency through the 2025 Wells Program. Jocelyn South was brought on stream in March, just three months after discovery. Strong subsurface performance at Talbot and successful intervention campaigns led to the J area producing at rates not seen for over a decade. We are now bringing that same level of focus and discipline to our UK decommissioning program. In addition, the Waldorf acquisition, as Linda said, once completed, will deliver meaningful financial synergies. As a result of these actions, we've materially strengthened the UK's cash flow outlook. Now, turning to the Americas, Argentina provides both low-cost and long-term production, underpinned by our significant reserves and resource position. Today, the majority of our production comes from the conventional CMA-1 license. Phoenix is a great example of the tieback opportunities that supports the stable, low-cost production from this asset. We hold over 700 million barrels of oil equivalent of 2C resources, primarily in the vast of vacuum water shale play. We are progressing the unconventional oil license at San Roque, with a 16-well program expected to start later this year. We are scaling up gas drilling at Ape, and our gas resource development will be optimized through our participation in the Southern Energy LNG project, where export permits and incentives are secured. 80% of the first vessel offtake is now contracted, and the fabrication of the spur line and conversion of a second vessel is underway. First LNG production remains on track for the end of 2027. We continue to focus on drilling and completions efficiency as we increase the scale and pace of our vacuum water development. Argentina is a cornerstone for future flexible and capital efficient reserve replacement. Our newest core business unit, the Gulf of America, adds scale and growth through to the end of the decade. It is a 100% operated, oil-weighted portfolio centered around three deep water hubs at Houdat, Buckskin, and Leon Castile. Production is expected to double by 2028, supported by low break-even drilling targets at our production hubs, and ramp up at Leon Castile. Combined with the attractive fiscal terms, we are adding high-margin barrels that fuel free cash flow growth through to the end of the decade. And with more than 350 million barrels of oil equivalent of 2P reserves and 2C resources, plus half a billion barrels of prospective resources, and success in the recent bid round, we have lots of running room in this prolific oil and gas basin. Our team have a proven track record of profitably and competitively converting resource to production, ranking best in class among global peers when it comes to development cycle time. They're also responsible for one third of all discoveries made in the Gulf since 2014. Over the next three years, we expect to allocate around $400 million a year with 10 to 15 wells planned. This includes development wells with internal rates of return in excess of 40% and low-risk infrastructure-led exploration wells with a short cycle time to production, if successful. The Gulf of America business unit is transformative and raises the bar for capital competition within harbor. Finally, Mexico represents one of our most material long-term growth opportunities. Through the Zama and Kahn shallow water hubs, we are building a scaled, advantaged business with tieback potential. As newly appointed operator of Zama, we've submitted a simplified phase development plan designed to lower break-evens, improve returns, and lower risk. At Kahn in 2025, resource was upgraded by 50% to 150 million barrels of oil equivalent gross. Together, Zahmer and Khan have the potential to deliver reserves equivalent to more than two years of group production. As operator of both hubs, we have the opportunity to capture synergies across design, drilling, and operations. Both projects are expected to enter feed this year. Subject to partner alignment, securing FPSOs and regulatory approval, we're targeting both to be FID ready within an 18-month horizon and possibly one project as early as the year end. We also see additional upside through the alignment with our Gulf of America business unit, using key capabilities and talent that we now have to help successfully deliver Zama and Calm. Mexico builds long-life, high-margin oil exposure with strong operating control. So putting this all together, what does it mean for our CapEx and production outlook? We expect to spend $2 to $2.3 billion per year from 2027, which we believe is the right level given our portfolio and opportunity set. With over 3 billion barrels of oil equivalent of 2P reserves and resources, we will prioritize the most competitive projects, continuing to high-grade the portfolio. This level of investment allows us to sustain production between 475 and 500,000 barrels of oil equivalent per day through the end of the decade. During this period, operated CapEx rises to 60%, giving us more control over cost, schedule, and performance. And while overall production remains stable, we are replacing the declining higher-cost UK production with higher margin growth in the US and, over time, Mexico. We have a strong history of reserves replacement, and we expect that to continue. For 2026, we anticipate at least 150% reserves replacement, supported by the log and Waldorf additions. Historically, we've grown reserves through M&A. Going forward, more will come organically from our large, diverse 2C resource base. The quality of our reserves also improves. More oil-weighted, more operated, and increasingly positioned in lower-cost, lower-tax basins. In summary, we are and will continue to have a laser focus on operating safely, reliably, and with discipline. Expanding margins, lowering break-evens, and improving capital efficiency. Converting resources into production profitably and predictably, and building a portfolio with scale, longevity, and rising free cash flow. This is how we continue to strengthen Harbor. I will now hand over to Alexander for the financial review.
Great. Thanks, Nigel. And again, good morning to everyone dialing in this morning. We've delivered another strong set of financial results, reflecting a full year's contribution from Vintas Aldea, excellent operational performance and strict capital discipline. As a result, we improved our operating margins. We generated 1.1 billion of free cash flow, beating our guidance for the year. And we reduced our net debt. At the end of last year, as Linda mentioned, we announced the Indonesia divestments and the UK Waldorf and US log acquisitions, materially improving our free cash flow outlook. We increased 2025 declared shareholder distributions to approximately 0.5 billion and also announced in December our intention to update our distribution policy, better aligning distributions to our cash flows. 2025 was marked by significant geopolitical and macroeconomic volatility, driving uncertainty in commodity markets. 2026 is proving no different. Recent events in the Middle East have pushed spot prices higher, but concerns around oversupply persist with the possibility of materially lower prices from here. Against this backdrop, Harbour is well positioned, particularly following the Log and Waldorf transactions. We have a large-scale, diverse portfolio, including by-product with 40% of our production exposed to Brent and 40% to European gas, a structurally lower cost base, greater operational control and investment-grade credit ratings supported by our prudent financial policy. As a reminder, we hedge two years forward, targeting 50% of economic exposure in year one and 30% in year two, targeting even a split between swaps and colors. This protects around half of our downside exposure, while preserving meaningful upside participation. And we continue to hedge through the recent volatility this week, securing attractively structured colors, especially for European gas. Turning now to the income statement. Thanks to the hedging results, we realized prices broadly in line with global benchmarks for oil despite slight grade differential on liquids and above benchmarks for our European gas. Revenue and adjusted EBITDAX increased by 65% and 77% reflecting higher production and stronger gas realizations, partly offset by lower realized oil prices. Now, as Nigel outlined, we lowered our unit operating costs by 22% to $12.8 per BOE, despite the significantly weaker US dollar. Net financial items reflected 0.5 billion of foreign exchange losses, partly offset by 0.2 billion of FX hedging gains. Profit before tax Tax increased to $2.8 billion or $3.4 billion on an adjusted basis. While we reported a loss after tax of $0.2 billion driven by a more than 100% effective tax rate, adjusted profit after tax increased to $0.6 billion, up over 60%. Adjustments reflected three main items. 0.4 billion of impairments including as a result of license exits and write-offs in our Mexico, North Africa and CCS portfolios. 0.2 billion of intercompany FX losses and 0.3 billion related to the UK EPL extension to 2030. The letter 2 already reported at our half-year results. The adjusted effective tax rate was 82% compared to 106% reported, more in line with the 78% statutory tax rates we now have in Norway and the UK turning to cash flow during the period we generated 7.3 billion of operating cash flow invested 2.3 billion on total capital expenditure and we paid 3.5 billion of cash taxes substantially in the UK and Norway this resulted in free cash flow generation of 1.1 billion materially higher than in 2024 and significantly above what we expected at the outside of the year once normalizing for commodity prices. This increase was driven by strong operational execution and rigorous capital discipline. Now turning to net debt on the next Next slide. Net debt reduced over the year to 4.4 billion. This reflects strong free cash flow of 1.1 billion, of which approximately 0.5 billion was returned to shareholders, with the balance going towards debt reduction. The impact of the weaker US dollar, which increased the value of our pre-swap euro-denominated bonds by 0.6 billion was partially offset by net 0.4 billion increase in cash balances from the issuance and repayments of subordinated loans. Post period end in February 2026 we completed the 3.2 billion log acquisition funded through a combination of 0.5 billion of equity and 2.7 billion of cash including a one billion bridge facility and a one billion three-year term loan with existing relationship banks and a few new banks joining our syndicate now as a result net debt increased to 7.2 billion on completion having pre-funded 2026 maturities through senior and hybrid bond issuances in 2025 we now have greater flexibility around the timing of the bridge takeout. Consistent with our approach on previous acquisitions, we aim to de-lever using cash flow to repay the term loan over the next three years. We have updated our 2026 guidance to reflect log completion in February and the expected closing of the Waldorf and Indonesia transactions by end Q2. Production guidance is increased to between 475 and 500 KBOE per day, while unit OPEX is expected to be slightly higher at approximately 14.5 per BOE, with LOG and Waldorf increasing near-term unit OPEX. Here, LOG OPEX is expected to be $19 per BOE in 2026, then expected to decline to approximately 12 dollars per boe by 2030 primarily as a result of production increase impacting unit operating costs total capex is expected to increase to 2.2 to 2.4 billion driven mainly by log with also approximately 0.1 billion related to waldorf at 65 brent and 11 european gas prices, we expect to generate approximately 0.6 billion of free cash flow, reflecting investment in the log portfolio and Waldorf synergies starting in 2027. Post-completion of the log acquisition, we are now more sensitive to oil prices. A $5 per barrel move in the average oil price for the full year impacts free cash flow by some $170 million, while a $1 change in European gas prices impacts free cash flow by approximately 150. Forward curves are moving a bit this week but if I use today's curves for the entire year we would expect free cash flow to be closer to 1.4 billion. Looking through to the end of the decade we expect materially increasing free cash flow driven by the continued transformation of our portfolio. Higher cost Southeast Asia exit and declining production in the UK are being replaced by higher margin volumes primarily in the US Gulf, alongside Norway and Argentina, and, over time, Mexico. We expect our effective tax rate to fall quite significantly, reflecting a strategic shift in profitable production towards lower tax jurisdictions. In the US Gulf, a 23% tax rate and the ability to depreciate the log purchase price means we expect to pay very little tax there in the coming years. In parallel, we expect CapEx to reduce to around 2.0 to 2.3 billion from 2027, reflecting continued portfolio high-grading and disciplined capital allocation. As a result, free cash flow is expected to increase to $1 billion in 2028, mainly supported by increasing production in the U.S. Gulf and significant financial synergies from the UK-Waldorf acquisition from 2027. Beyond that, we see further cash flow margin upside towards the end of the decade, driven by continued growth in the U.S. Gulf and as our Mexican projects come on stream. Let's turn now to the shareholder distributions and our revised policy. We communicated our intention to update our distributions policy in December and believe that now is the right time to pivot, linking shareholder distributions directly to cash flows and strengthening our capital allocation framework across the commodity price cycles. In the past, we've returned on average around 40% of free cash flow to shareholders each year. We are now targeting 45% to 75% of annual free cash flows, including an initial base dividend of 16.1 cents per voting ordinary share equivalent to approximately 300 million. By tying distributions directly to our cash flows the new policy builds in the opportunity for shareholders to benefit from the growing cash flow outlook I just showed and from periods of higher oil and gas prices like the ones we're experiencing today. So how will this work? Well when leverage is above one times we expect the payout will be towards the lower end enabling us to prioritize debt reduction. However when leverage is below our target of one times we expect distributions to be at the upper end of the payout range. As such our new policy supports a sustainable base dividend across the commodity price cycles and allows us to share the upside with our shareholders alongside near-term deleveraging and disciplined investment for future growth. In line with the new policy, the board has proposed a final dividend of 8.05 cents per share, equivalent to 150 million, representing a 45% free cash flow payout for 2025. For 2026, at $65 per barrel Brent and $11 per MCF European gas, we'd expect to distribute 300 million to shareholders. Then, just to illustrate the benefits of this updated policy, if we again use 75 dollars per barrel and 14 dollars MCF for the full year, closer to today's forward curve, a 45 percent minimum payout would get us to around 600 million of distributions. My final slide is a reminder of our three capital allocation priorities which we look to balance through the cycle. First, we remain committed to maintaining an investment grade balance sheet. Following every major transaction we have consistently prioritized debt reduction and with the additional leverage from recent transactions we intend to do so again. under our outlook price forecast by 2028 supported by stronger free cash flow we'd expect to have repaid a billion of debts with leverage returning below our through cycle target of less than one times we also aim to maintain a robust and diverse portfolio by investing two to two point three billion per year we expect to be able to deliver increasingly high margin cash generative production through the end of the decade and thirdly we will continue to deliver attractive shareholder returns through the cycle and as you've heard today at current forward prices there is clear potential for significantly higher distributions this year and over time we expect to deliver material distribution growth in line with our growing free cash flow profile so with that thanks for everyone's attention and I will hand you back to Linda for a close.
Thanks Alexander. So in summary we've had an excellent year operationally, financially, strategically and we've carried that momentum into 2026 with the completion of the log acquisition and with production off to a good start. Our portfolio actions have transformed the outlook for Harbour and we're seeing the benefits of our increased scale and resilience. And now the organic opportunity within the portfolio means we can sustain production and generate material and growing free cash flow to the end of this decade and possibly beyond. Looking ahead, our portfolio, our team, and our track record give me confidence that we'll deliver against these capital allocation priorities, including maintaining the strong balance sheet and delivering competitive shareholder returns through the cycle. So it's now time for Q&A. Alexander, Nigel, and I were joined by Alan Bruce, EVP of Tech Services, and we look forward to answering your questions. So now I'll hand it back to Dan.
Dan
Head of Investor Relations
Thank you, Linda. If you'd like to ask a question today, you can do so by pressing the raised hand function on Zoom. If dialing in by phone, you can press star 9 to raise your hand and then star six to unmute yourself once prompted. I will now pause to give everyone a chance to signal for questions. Our first question comes from Lydia Rainforth of Barclays. Lydia, please unmute yourself to ask your question.
Thank you for a fascinating presentation.
I actually have three questions if I could. I'm sorry for quite so many, but there's a lot to go through. um the first one uh was just on the cash return structure and obviously you decide in the past you've done a combination of um buybacks plus dividend and you've now gone with we'll do base or basically the base dividend and then so when you're looking at so why go for 100 base dividend and when you're going forward are you when you look at where the current cash prices are do you split it between a a special dividend plus by i said just to give us an idea of how you're thinking about that um the second question was on the log integration i just wonder if you could just walk us through a little bit more of that whether like sort of culturally how that works um and how that you feel like that's going at the moment and then the third one um is that's more of a how do we actually work today a question so obviously we've got a lot of volatility just in terms of where you're seeing this level of volatility how as harbour energy do you react are there things that you can pull in terms of additional production are you seeing conversations with customers I'm just going to be working through how you're actually seeing practical impacts of the current disruption hey Lydia thanks for the three questions I'll turn to Alexander first to just say a few words about how we think about buybacks in the context of our distribution policy
And then I'll take the last two about log and then the, yeah, how we deal with volatility. So, Alexander.
Yeah, thanks for the question, Lydia. Yeah, I think when it comes to the distribution policy, we've tried to strike a good balance here between a base dividend that we're comfortable through the cycle and then what the added shareholder distributions are going to be on top. You've seen us in the past do quite a bit of share buybacks when we thought that was timely and a good thing to do. And going forward, it's probably going to be a mix of both higher dividends levels and share buybacks. And we on the board will probably assess closer to time which of the two and what that mix is going to be. But I think for today, our point here is to, you know, set that base at a dividend level, the percentage of, you know, how do we think about sharing the extra free cash flow that we expect to see? And also, how do we balance this with debt level? So, you know, hopefully the guidance that we've provided today and what I talk through is helpful in that regard and gives a bit of insight into our thinking. But, yeah, it's probably going to be a mix of the two.
Yeah, thanks, Alexander. I agree with that. I think it will just depend on the circumstances at the time, you know, what's going on with commodity prices, our outlook for cash flow, et cetera, et cetera. So a bit hard to answer hypothetically, I think. Going to the other two questions. So log integration going really, really well, I think. And one of the reasons why I think we were successful landing this transaction was the fact that both sides saw what we believe will be, and so far has proven to be true, a good cultural fit between their organization and ours. And that always helps make an integration go more smoothly. And we're just three weeks in and so far so good. It's not that complex of an integration for us if we compare it to the Wintershaw-Day transaction where we had, I don't know, seven countries we were adding and multiple different onshore and offshore production, operated assets and non-operated assets, dealing with works councils in Germany, etc. et cetera, buying a single business unit, if you will, in a country where we don't currently have operations. So there's no overlap. We're not dealing with two different offices. Who's going to do what? This one from that standpoint is actually fairly straightforward. I was there a couple of weeks ago. We have staff there. This week we call them ambassadors. It's part of our integration toolkit where we send people more experienced in harbor to new locations and they just sit there and answer questions for two or three weeks so that people say how do I get x y or z done somebody can tell them who to call or where to look etc so all going really smoothly the staff there seem excited to be part of harbor and you know curious to see what's going to come next. Volatility. Yeah. Well, you know, never a dull moment in our industry. Lydia wasn't even as recent as last week, right? There were new reports coming out from experts trying to convince everyone that oil was headed to $50 per barrel. I know you weren't one of those, Lydia. So you were a bit of an outlier there, which we've always appreciated. But you know, now here we are with oil. I don't know where it is right now, but $80. So I think it's just another proof point that we live in a volatile world and our sector in particular can be quite buffeted by that. And when that happens, we just have to focus on controlling what we can control. In terms of what we do this year, I mean, production this year, CapEx this year, These are things that have largely been decided months or even years ago or driven by decisions we've made in the past. So not a lot actually to do, in particular with production this year. There are some knobs we can play on CapEx, but no one believes the conflict is going to be long-lived, or at least we can't assume that in our planning. And so what we have to assume is that at some point, prices come back to a more normal range. What is that? Who knows? But we're certainly not making any decisions today that assume prices are going to be $80 or higher for years to come.
Dan
Head of Investor Relations
Thank you. Our next question comes from Alejandro Magana of JPMorgan. Alejandro, please unmute to ask your question.
Alejandro, please unmute to ask your question. hi can you hear me yes we can excellent thanks um good morning thanks for taking my question as a follow-up to how you're responding to the middle east developments um would you consider any changes to your hedging program to potentially accelerate your path uh to um sub one times leverage or does maintaining cash flow stability remain the priority in your prepared remarks you gave illustrative examples of what the cash flows could look like on today's forward curve, which we're encouraging. So I'm curious how you're thinking about that trade-off today. And my second question is on your portfolio. You've discussed five core countries, which implies regions like Germany and North Africa could ultimately be candidates for disposals. how are you thinking about those assets today? What are market conditions like for potential divestments? And does your deleveraging timeline assume any disposals? Or would these just simply accelerate the path? Thanks.
Thanks, Alejandra. I'll turn to Alexander first to talk about hedging. I mean, you know, the phrase never waste a crisis kind of comes to mind.
So he'll say a few words about that and then i'll talk about divestments yeah thanks for the question alejandra um yeah so on hedging uh i mean the starting point is that we i think now for several years had a fairly consistent hedging policy where we do try to get to you know 50 and then 35 hedge for the following year then what's developed over the last year or or two is just how we think about the mix here you know instead of doing consistently swaps we've transitioned into doing more and more of these color structures so trying to lock in a floor typically above what the rating agencies are using in their cash flows and then without giving away too much of the upside so what are we doing today well we we are as you would expect actively engaged looking at sensible structures in in today's environment as well. What has been quite unique is, you know, when you get this type of volatility, it impacts the pricing of color structures. So the what we call the skew on the put and the call. And one thing is, is on the crude side where there's been for us as producers is a positive skew here, but also and more impactful is the skew here on natural gas. And what we've been doing this week is putting quite a bit of structures in place here on the gas side, not enormous amounts, but we're putting quite a bit of hedges in place where we saw the opportunity to lock in, you know, 15, 14 type dollar puts and then participating in the upsides, you know, way up and, you know, mid 20s or so. So the skew on what we've seen here has been, how should I say, unusual and something we've been trying to benefit from. So, yes, we remain very active monitoring this, but of course not, you know, participating and doing way too much as you shouldn't do at the point risk point in time. But, yeah, those volatility impacts those type of opportunities. And we try to be awake and see what's possible to do there.
Thanks, Alexander. Now coming to your question, Alejandro, about divestments. So we do have an active track record of portfolio management, and we expect that to continue. It's just a foundation or one of our keystones of our strategy. Given what we've announced today, we will have nearly exited Southeast Asia. That leaves, as you said, Europe and America as core, the bigger producers there at least. And then what's outside of that ring would be Germany and MENA. So a small position in Libya, also relatively small in Algeria, and then in Egypt. I mean, we have really good assets in those countries and fantastic teams that do amazing things. And they generate positive cash flow for us. So today's certainly doing no harm and providing some benefit to the portfolio. But we look at the portfolio rather dispassionately, and the criteria remain the same. If we can't get to scale in a country, if we're not at scale today and we don't see a profitable path to scale, or if investments in the country are struggling to compete for capital, then it may be more valuable in someone else's hands, and we would consider divesting, and that remains the case. so what does that have to do with the forecast we presented today the production forecast only really includes transactions that have been announced more or less so there's none built into the forecast that doesn't mean we won't continue active portfolio management but there's none actually built into that and in terms of proceeds the free cash flow forecast that we give excludes divestment proceeds but if there are some i think what we do the question was what we would do with them and I think it just depends on the circumstances at the time what's leverage as you said you know what's leverage at the time we get those proceeds what's what are oil and gas prices doing what's our outlet for free cash flow at the time and then depending on the circumstances and the amount of the proceeds the board will decide what the best use of those are and whether they go towards leverage or to shareholder distributions or some other use thanks for the question Alejandra Thank you.
Dan
Head of Investor Relations
Our next question comes from Chris Wheaton of Stifle. Please unmute to ask a question.
Thank you. Alexander, Linda, good morning. Two questions if I may. Firstly, can I come back to the point on 2027-2030 capex, guidance there of 2 to 2.3 billion at DD&A rates of 15-16 dollars a barrel. That doesn't suggest you're replacing all your production in that period of the late 2020s. And that then suggests to me that you're going to see decline post 2030, which is kind of in forecasts already, as you see Norway roll over. I just wondered, why have CapEx number that low? Because that doesn't seem enough to sustain this business post 2030. And my second question, I was on gna cost uh the gna cost now 470 million dollars for 2025 yes there's 70 million odd of transaction costs in there but it feels those restructuring costs are a feature of your business year on year um comparing you to example for woodside that's a pretty similar number to woodside but woodside is 25 bigger um what are you doing about controlling gna costs because it feels like of business is getting more complex, not less. And G&A costs seem to be rising, risen quite substantially. I was going to throw in a third question on windfall tax, but after this week of chaos, I'm not going to bother. I think I'll stop there. Thank you.
Thanks, Chris. Let me turn to Alexander to talk about the CapEx levels. I think what we did lay out was our projection around reserve replacement ratio over the coming years and our current forecast that includes that capex projection or range that you talked about does support a reserve replacement ratio during that period of over 100 percent. So we feel good about that and flat production towards the end of the decade.
But Alexander, do you want to say a bit more about that in gna yeah no i think yeah thanks and good morning chris uh i was almost expecting a question on epl so i'm not going to say i'm disappointed but you know we can take that offline um yeah so on capex i mean the point uh the point today chris is to you know show what this enlarged portfolio uh is now capable of doing and and you know how can we sustain production um through the decade with yeah with these assets on hand and also what you've seen from Nigel's bit is a very significant 2C basket as well and there's also some exploration in here which is of course not necessarily booked in any of these categories and we'd expect to do exploration both in norway and the u.s gulf so i mean again we think this is sort of the right level of capex to you know keep production uh at at these rates uh and and the point is here that we do think that we can high grade this and and margins will will increase um over over time as well with with the new jurisdictions with lower with lower cash taxes coming there as well so you know fairly flat production but you know margins increasing and that's what we expect and that's why we are making the statements about free cash flow growing over time as well.
And on GNA anything to add Alexander?
Yeah I mean I appreciate the comments around us and and uh how you know gna uh has been increasing and and the you know there's obviously uh a few uh one-offs and in terms of um you know being acquisitive and going through all of these processes that that we are so uh i think our target remains the same to get to two dollars per boe or or hopefully lower um yes we're we have been and we will be hard at work to ensure that we're operating just as efficiently as we can not having you know too much overhead or too much process and you know losing the agility that
that you know we think we still have in this company so I mean that is the target and and you know we'll we'll be hard at work to keep that under control and and hopefully reduce that as well yeah I would just add that the Winner Shaldea integration was a particularly complicated and therefore expensive one to do and that we had a 12-month TSA in place that we were paying almost every month last year, at least nine months last year. And so that's now gone away. And in fact, we're getting a bit of rebate on that because we had overpaid. So if we adjust last year's G&A for that, I think $30 million or something comes off of that Chris but that will be helping us this year and as Alexander said targeting to get to two dollars per barrel by 2027 and believe me there is pressure from at least one person in the organization to get there before then and if we think about you know your comment about are we going to continue to see those kind of costs in our GNA you know the The Waldorf and the log transactions are both very simple, as I already commented, when it comes to an integration standpoint. Waldorf, we already have a UK BU. It's all non-operated, so that's very little to be done there. And then in the UK, as I commented earlier, single country where there's no overlap with existing operations. So that's a, I wouldn't say plug and play, but relatively simple. And then there's still scope for all of this to come down as we continue to rationalize IT systems and everything else over time. That doesn't happen overnight, and we're trying to be very thoughtful about does it really make sense to replace certain systems or to change operations in one country onto a system we might be using elsewhere? Does it make more sense to just keep it simple and build an interface between the two? So we're doing that over time, as it makes sense, too, but should drive down costs over time. And then EPL. Yeah. Well, thanks for not asking the question. Thanks, Chris.
Dan
Head of Investor Relations
Thank you. Our next question comes from James Carmichael of Berenberg.
Hi. Morning, guys. Thanks for taking the question. Just going back to the distribution policy um in terms of the the base dividend i appreciate it feels quite far away given where commodity prices are um at the moment but if there was a period of weakness and free cash flow dipped below 400 million let's say does that 300 million sort of base still hold or would um or would the sort of 75 be the ceiling so potentially go below that um just on the us quickly as well i guess if we look at the production growth chart there's a lot of focus on who dat um buckskin and uh leon castile but the the other bucket um looks to be driving quite a bit of the production growth as well you know maybe more than who dat and buckskin combined so maybe just wondering if you could give a bit of color um on what's driving that or underlying um in that other bucket um and then i probably yeah seeing as we're here probably will ask about the epl i'm afraid so um there's obviously been a lot of discussion, headlines, et cetera, around that this week. The Supreme Statement didn't really provide any color, but then stories around the meeting, which I guess you guys were in yesterday. So just wondering what, if anything, you sort of can say around where you think the government's head is at, your level of confidence that that comes forward, et cetera. Thanks.
Great. Thanks, James. I'll turn to Alexander to talk about kind of the sustainability of the $300 million in different price environments. Then to Nigel to talk about other fields where the growth might be coming from in the U.S. And then thank you for asking a question about the EBL, and I'll be happy to take that. So, Alexander.
Yeah. No, thanks. Thanks, James. Good morning. Yeah, I mean, the base dividend, I mean, we we set it at a level which uh you know we're comfortable we we think this will will hold through the cycle and and uh we view that as a you know an initial base uh dividend level uh and uh when we're having uh again back to Alejandra's question earlier when we're having this type of of you know volatility in markets we we do try to be mindful here of of doing hedging doing other things which which protects that as well. So trying to do hedging into future years to protect free cash flow there, just to ensure if we are above that minimum level as well.
Sorry, you didn't come off mute fast enough, sorry about that. James, thanks for the question. Look, we have an active program. we're just working through right now potentially adding a second rig line in the Gulf of America we clearly are focused on our existing hubs to grow production there are other opportunities that you refer to in here really around Taggart which is 100% owned and then potentially beyond that post-2028 is really what we think to think about our short cycle exploration program but the other bucket you referred to on that chart is really driven by Taggart production.
Great, James And then the EPL. Well, Alexander had the honor of representing Harbor Energy at the meeting yesterday with the chancellor. So after I answer, if he wants to add some color, we'll give him the chance to do that. But I guess we'd say we welcome the opportunity to engage with the chancellor on the topic. And we welcome the statement from our office yesterday saying she'd like the EPL to come to an end and that she had hoped to announce it this week. but geopolitical events got in the way, if you will. And certainly there's a lot of overlapping interests and common ground between Harbour and the Chancellor's Office and between industry in general and Treasury. So investment, jobs, growth, all priorities for all of us. The problem is the current fiscal environment for the UK oil and gas sector supports none of those things and actually has led to the opposite over the past few years. Lower investment, job reductions, falling domestic oil and gas production. That's meant more imports with higher emissions, lower energy security. And now we see that it's all come in another bad time with European gas storage levels well below five-year lows, and now 20% of the world's LNG disrupted, LNG supplies disrupted. So we continue to believe in the potential of the UK North Sea. We certainly believe in our team in Aberdeen and have seen them do amazing things when it comes to recovering oil and gas in what can be a sometimes challenging environment. And we do hope to continue to work with the Chancellor now to make the removal of the EPL happen sooner rather than later, especially at this time when energy security is unfortunately back on the radar.
Yeah, thanks for the question, James. And I mean, you know that we have been, you know, one of the vocal companies who said the, you know, EPL has very negative effects for the UK and how we think about energy policy and security here. We've spent quite a bit of resources in engaging with the UK government and helping us to get to a new regime in place, which was announced last year. Now, this regime would not come into play until 2030. And again, we've been vocal in saying, well, why wait? if we have a future-proof fiscal system, why wait until 2030? We believe it's in the best interest of the sector here and the country, quite frankly, to implement this sooner. I mean, we have been working quite a bit with the UK government and we will, of course, continue to do that and support as best we can. And we do also think that the efforts now from the Chancellor's Office do seem genuine and we, you know, we are hopeful to see some progress over here and hopefully the not too distant future.
Thank you. OK, I think we have one more question, maybe, Dan.
Dan
Head of Investor Relations
Thank you. Our last question comes from Matt Smith of Bank of America. Matt, please unmute to ask a question. Hi, Matt, if you can hear us, please unmute to ask your question.
Hi, Matt, I think I've got there. Thanks for taking my questions. I'd love to turn to projects a bit, in LATAM in particular. So first of all, on Argentina, Guacamata specifically, is there any update you could give us as to production performance versus expectations and the latest on licensing there as it relates to the oil and gas side? that'd be interesting and then second question turning to Mexico and ZAMA specifically you know could you give us some more details on the latest development plan that you're working on I guess the overarching improvements versus the old and I'm just wondering also how many phases we could be looking at to exploit the full ZAMA resource please thank you great Matt and thanks
for the questions and it's nice to get questions from time to time about the project so i'm going to turn this over to nigel hey matt thanks for the question so i'll start with argentina you know our base production today is around 70 000 barrels a day the bulk of that comes from our cma one license we completed a project early and had a schedule last year at phoenix to plateau that production through to 2040, and we did actually extend the license. The rural growth opportunities in our resource position is in the Ape gas window, where we have about 22.5% equity, and in the San Roque oil window. We did complete a successful pilot in the unconventional license at San Roque last year, and we've got a 16-well program scheduled for the end of this year. So we're working with our key stakeholders down there and our partners really to secure the unconventional oil license towards the end of the year. So once we have clarity there, we will be progressing that program with our partners. In Ape, today our production is around 20,000 barrels a day from 80 wells. I would say that we've got a significant number of well locations potentially to materially increase the resource. We're not going to drill for the sake of drill and grow production. It's about generating a margin. Today, the gas market has softened a little bit and we've got less offtake and we've got more market penetration from associated gas. So that's one of the key reasons why we've invested in SACER. I think it gives us another avenue to secure a better gas price and give us options on pricing, which allows us to optimize and then underpin our development in APE. So, as you know, the LNG project is an FID we took last year with several partners. That project is underway, and that will, I think, open up avenues to continue to develop our dry gas window. You asked a question around Zama and Khan. We have actually spent a lot of time focusing on what we want our business to look like in Mexico over time. It is about creating two advantaged hubs. We have actually taken some deep water assets out of the portfolio which we won't invest in and we will not be advancing those projects. We're focused on Zama and Khan. we'd like to get both of those projects to FID ready over the next 12 to 18 months. The concepts are nearing completion and we'll be entering feed this year on both projects. We've re-optimized the Zama development for a phased development, which we'll see a $1 to $2 billion investment in the first phase with potentially a small water flood, but we're really finalizing that scope. So we'll see a phase development, small number of wells to generate some early production, and then we'll come back with a more second phase on Zana. Now we're operating, we have more control and are focused on really optimizing that design and that concept. And we'll know more as we get to feed this year and have clarity around FID and first all timing sometime later this year, early next year. We're looking to secure FPSOs for both Karn and Zama. We have line of sight to narrowing the options on both of those. So it's an exciting time to be in Mexico. Both projects have matured a lot in the last 12 months. We're getting close to finalizing the concept for each. Optimizing our well locations is part of driving down our break-even costs. We are focused not necessarily just on schedule but just driving down our break evens these will be long-lived projects we need to make sure they compete and compete over time so a lot of focus on maturing the projects and on driving capital efficiency into both of them we do see some synergies if we can run them somewhat in parallel where we can optimize rig schedule service vessels engineering support. So a lot to get work through this year, but both projects are now getting clearer and clearer on their path forward.
Great. Thanks, Nigel. And thanks everyone for joining. We really appreciate the fact that you've spent some time with us today. And as I've said, I'm really proud of what the teams delivered last year. And it's good to see that we're off to a solid start for 2026. So thanks again for joining and have a good rest of your day.
