Hartshead’s Gas Development to Benefit from UK Windfall Tax Benefits
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Hartshead expects to benefit from the UK’s new Windfall Tax Investment Allowance as it progresses through pre-development stages of its UK Southern Gas Basin assets.
The Windfall Tax was aimed at supporting a raft of measures designed to alleviate the cost of living in the UK, by increasing the combined tax rate on oil and gas production by 25% to 65%.
It ends automatically on 31 December 2025 due to a sunset clause but will be phased out earlier if prices revert to historically normal levels.
However, it also includes a new “Super Deduction” style investment allowance to incentivise oil and gas investment and promote UK energy security.
Hartshead Resources (ASX:HHR) says the tax relief of between 46p to 91p for every £1 of capital expenditure makes the economics for the Phase 1 development of its Anning and Somerville gas fields even more attractive to potential industry partners.
“The tax levy represents a strong commitment from the UK Government and reiterates their commitment to energy security both within the UK and broader Europe,” Chief Executive Officer Chris Lewis says.
He explains that the additional 80% allowance for investment expenditure means that a total of 180% of capital expenditure will be available for tax relief in the year of expenditure.
Previous year tax loss also means that the company will not be subject to the additional 25% Windfall Tax until the 2028 financial year, which is after its expiration date at the end of 2025.
Hartshead has already submitted the Phase 1 Concept Select Report (CSR) for its UK Southern Gas Basin assets to the North Sea Transition Authority.
Its preferred development concept consists of six production wells from two wireline capable Normally Unmanned Installation (NUI) platforms at Anning and Somerville, which collectively have best estimate (2C) Contingent Resources of 324 billion cubic feet of gas.
These platforms will then connect subsea to third party infrastructure for onward transportation and processing to entry into the UK gas network.
Peak production is estimated to be about 140 million standard cubic feet per day.
Phase 2 will tap the Hodgkin and Lovelace fields, which host further 2C Contingent Resources totalling 139Bcf, while the third phase contains new exploration prospects in its inventory that currently hosts Prospective Resources of 344Bcf.
This article was developed in collaboration with Hartshead Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
This article also appeared on The Australian.