EU ENERGY SECTOR: Harbour Energy: US Acquisition
(HBRLN; Baa2/BBB-/BBB-)
We had flagged recent media reports indicating interest in US M&A. LLOG’s production is small (34kboepd vs. Harbour’s 488kboepd in H125) albeit set to double by 2028 while improving Harbour’s reserve life (by 22%) and costs ($12/boe vs. Harbour’s $12.6 in H125).
Cash component implies reported EBITDAX leverage would rise from 0.5x to 0.9x (constant EBITDA; no measure for LLOG given but presumed small). Fitch affirmed in September; forecasting adj-leverage <1x from 2026-2028 against a downside threshold of consistently >1.5x.
S&P/Moody’s don’t have explicit leverage thresholds albeit both flag potential downside on debt-funded acquisitions impacting cash flow metrics. The investor presentation describes ~60% FCF uplift over 2026-2030 vs. Harbour standalone while also flagging intention to move to a payout ratio policy incorporating both a base dividend and buybacks.
- Harbour Energy to acquire LLOG Exploration for $3.2bn; $2.7bn cash, $0.5bn equity.
- Privately Gulf of America deepwater E&P with oil-weighted offshore assets.
- Cash funded via $1bn bridge, $1bn term loan and existing liquidity.
- LLOG owners 11% pro forma with a 70% one-year lock-up clause.
- Harbour’s 2P reserves to rise by 22%, extending reserve life from 7 to 8 years.
- Completion flagged for late Q126.
- FCF accretive from 2027. Harbour to move to a payout ratio approach in 2026.
- 10am GMT call: https://events.teams.microsoft.com/event/71ea0b2b-c532-4a73-8074-7ad002e95364@9c727081-3c95-4d0d-9b9c-334d12ae6f94
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A Thanksgiving-condensed week sees data highlights from delayed retail sales and PPI reports for September on Tuesday (Nov 25) before a Wednesday release for weekly jobless claims (Nov 26). Aside, the Fed’s Beige Book should also offer another important update on Wednesday for latest liaison reporting, with no Fedspeak currently scheduled around the holiday and the FOMC media blackout due to start on Saturday, Nov 29.
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- PPI inflation will offer a useful albeit not overly timely update on input cost pressures.
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