Tullow Oil (TLW.L) has warned of lower output this year, saying that its production will fall to between 60,000 to 66,000 barrels a day. This was down from an average of 74,900.
It blamed the drilling hiatus in 2020 on the back of the COVID-19 pandemic, a planned shut-down at one of its key fields in September and deferred development drilling in Gabon.
However, the London-listed oil and gas exploration firm said that it expects a gross profit of around $400m (£291m) as its oil production was in line with guidance.
Revenue for last year is forecasted to be around $1.4bn, down from $1.68bn in 2019, as production averaged 74,900 barrels of oil per day with a realised price of $50.8 per barrel.
In a trading update it also revealed that it had secured an extra month from its banks ahead of a test on a key lending facility.
WATCH: Bocom Has 'Buy' Ratings for China's Big Three Airlines
Rahul Dhir, chief executive, said: “Tullow has a busy year ahead as we begin implementing the business plan that we laid out at our capital markets day. The plan is focused on ensuring that Tullow's producing assets in West Africa reach their full potential.
“We will leverage the new plan and our reduced cost base to generate positive free cash flow at current commodity prices, drive down our net debt and deliver a robust balance sheet."
David Kimberley, analyst at Freetrade, said: “There is still a long way to go and it may not be enough to ease investors’ concern.
“The lack of a meaningful update on the oil firm’s credit facilities will also make shareholders anxious. Banks know that Tullow is stuck in a rut and the danger is that the oil company gets stuck with a burdensome agreement that prevents it from making solid returns to shareholders.
“All in all, today’s update is another sign of how close to the brink Tullow was. It’s going to be a long, hard road back to the big time for the oil company — one that many investors won’t want to risk being a part of.”
It comes as oil prices climbed on Wednesday, with Brent Crude (BZ=F) 0.52% higher at $56.35 a barrel.
Prices have been boosted by US crude stockpiles falling last week as well as China reporting its lowest daily rise in COVID-19 cases. China is the world’s second-largest oil user.
US West Texas Intermediate (WTI) crude futures rose 0.4% to $52.81 a barrel.
The American Petroleum Institute (API) reported crude oil inventories in the US, the world’s biggest oil consumer, fell by 5.3 million barrels in the week to 22 January, compared with analysts’ expectations in a Reuters poll for a build of 430,000 barrels.
ING economics said in a note: “Market participants are now in ‘wait and see’ mode, wanting to see how lockdowns evolve in the coming weeks and months, and how successful countries are in rolling out Covid-19 vaccines.”
WATCH: Why can't governments just print more money?