(Bloomberg) -- Neptune Energy Group Ltd.’s chief warned that the UK’s windfall tax on oil and gas profits will threaten long-term investment in the sector, but have limited impact on the firm itself.

The government in May slapped a 25% windfall tax on producers’ profits to fund aid to the poorest households amid a cost-of-living crisis. The levy -- which will be removed by 2025 or when energy prices return to more historical norms -- lifts taxes to 65%, though companies can recoup some money through investment allowances.

Neptune Chief Executive Officer Pete Jones said the tax will cause investor uncertainty. It has put a “big question mark” on future phases of investment after 2023, such as the North Sea-focused company’s own potential projects Isabella and Pegasus, he said.

Jones said while it’s important to help those struggling with bills in the short-term, it’s also necessary not to cause a longer-term negative impact. Prices were already rising before the war in Ukraine, and “that’s really due to legacy energy policy,” he said.

Still, the CEO said Neptune will see little impact from the levy due to the high share of profits that it’s reinvesting in the UK. About 30% of its capital is currently in the UK, compared with only 6% of profits.

“We’re investing quite a lot in the UK,” he said in an interview. “We’re investing at least all our UK cash flow back into the UK,” so the levy “doesn’t have a massive impact on us right now.” 

Neptune’s first-half output rose to 132,000 barrels of oil equivalent a day and an additional 47,000 barrels will come onstream within the next year due to UK and Norwegian projects. The Equinor ASA-operated Njord field is on track to come online in November, while the Fenja field should follow some three months later. The Seagull field in the UK North Sea will add another 17,000 barrels a day.

The company paid out $800 million to its shareholders last year, but Chairman Sam Laidlaw said it’s too early to say if the dividend would increase this year.

“The business is clearly generating good cash flows,” Laidlaw said. “But there’s a balance between debt repayment -- recognizing that the maturity of our debt is not that long and we want to be paying some of that down -- and looking at dividend capacity.”

While Neptune executives have previously spoken about listing the business, Jones said that exploration and production firms are largely undervalued.

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