Harbour Energy share price has collapsed: buy the dip or sell the rip?

Harbour Energy (LON: HBR) share price bounced back by more than 4% on Wednesday after the company published a positive update. Shares of the struggling energy giant rose to 227p, a few points above this week’s low of 217p.

Strategy seems to be working

Harbour Energy is a large company that has substantial presence in the North Sea. It is a pure play upstream firm that has come under pressure in the past few months. This view is seen by the company’s stock, which has crashed by over 53% from the highest point this year.

In a statement on Wednesday, Harbour said that its estimated revenue for the nine months to September will be about $2.9 billion. Its total capex for the period was about $1 billion while the forecast cash flow for the year will also be $1 billion. The FCF figure includes tax payments of about $400 million.

Harbour Energy has been working to diversify its operations from the UK, where the government has been less friendly to oil and gas companies. For example, the government has started charging a windfall tax on firms in the energy industry. 

Through the Energy Profits Levy, the marginal tax rate of North Sea oil and gas production rose to 75%. The levy will run through March 2028 albeit at a reduced rate of 40% when oil prices normalise to about $71.

Harbour Energy has criticised the move and slashed investments in its North Sea regions. It has reduced its production in the North Sea to 178 kboepd in the first nine months of the year from the previous 194 kboepd.

The company has diversified its production in countries like Mexico and Indonesia. It is seeking M&A opportunities as the CEO said:

In line with this, it has improved its liquidity as it seeks to be net debt-free by 2024. It has also returned money to investors through dividends and share buybacks worth $440 million.

Harbour Energy share price forecast

HBR chart by TradingView

HBR share price technicals have worked well in the past few months. The stock formed a double-top pattern at 465.3p whose neckline was at 271p, as I wrote in June. It cruised below that level and in January and then retested it in October. In price action analysis, this pattern is one of the most positive signs of a continuation.

Harbour Energy stock has now remained between the key resistance and support levels at 271.8p and 212p. It has also moved below the 50-day moving averages. 

Therefore, the outlook for the stock is still bearish, with the next point to watch being at 210p, the lowest point this year. In 2024, however, the stock could bounce back and retest the resistance point at 270p.