British oil and gas group Harbor Energy says the windfall tax has “all but wiped out” profits.

Harbor Energy, the largest oil and gas producer in Britain’s North Sea, has warned against shifting investment overseas after the government’s windfall tax hit its profits.

The company said its after-tax profit fell to $8 million in 2022 from $101 million last year, despite higher oil and gas prices and a nearly one-fifth increase in production by the company. It said the windfall tax resulted in a “one-time non-cash deferred tax charge” of $1.5 billion.

“It pretty much wiped out our profit for the year,” said CEO Linda Cook. “It has also reinforced our strategic goal to grow and diversify internationally, given the fiscal instability and prospects for investment in the country.”

Harbour’s cash tax paid in the UK – money actually paid to HM Revenue & Customs – was more than $500 million, almost four times the amount paid by Shell.

The company has long been among the most vocal critics of the UK’s windfall tax, which was introduced last year after energy bills skyrocketed following the Russian invasion of Ukraine.

While larger energy companies like BP and Shell are reporting record profits, Harbor complains that smaller operators like them are being asked by their lenders to hedge more of their production upfront, meaning they don’t see as much of the rise in energy prices.

After hedging, the company was earning an average of $78 a barrel for its oil and 86 pence a spa for its gas last year. UK gas prices have been above 100p a year for all of last year and peaked at almost 600p a year in the summer.

The company is conducting a strategic review of its future investments and has canceled two construction projects and announced potential job cuts.

Still, the company has been able to keep its $200 million dividend to investors and extend it through 2023 while embarking on a $200 million share buyback program, in a sign it’s recovering from rallies over the past decade year has benefited.

Earnings before taxes, interest, amortization, depreciation and exploration expenses increased to $4 billion from $2.4 billion in 2021.

Neptune Energy, the privately held oil and gas producer built by former Centrica chief Sam Laidlaw, also attacked the windfall tax when it announced results on Thursday.

Chief Executive Pete Jones said the higher taxes would “undermine investment” and “prolonged Europe’s energy security”.

“The introduction of windfall taxes in 2022 has created significant fiscal and political uncertainty in the Netherlands, Germany and especially the UK,” he added.

Neptune didn’t pay taxes in the UK last year because it was able to offset investments against the money it would otherwise have owed under the so-called super deduction introduced by Prime Minister Rishi Sunak when he was Chancellor. Only around 5 per cent of Neptune’s revenue is generated in the UK, but this is expected to increase in 2023 when Seagull development begins production.

The company expects to pay around $60 million in UK taxes to HMRC in 2023, depending on oil and gas prices, a spokesman said. For large operations in Norway, which has long had a higher tax rate for operators, Neptune’s effective tax rate in 2022 was 70 percent globally.