Tullow Oil said today that its lenders had agreed to extend talks about a reserve-based loan by a month beyond the end of January.

In a trading statement, the exploration company also said it expects its operating cash flow to reach $500m in 2021 if the oil price stays above $50 a barrel. 

In September, Tullow, which pays no dividend, raised the prospect of a potential cash crunch at a debt covenant test this month. 

Tullow has a market capitalisation of around $600m, but had net debt of $2.4 billion at the end of 2020. 

Tullow CEO Rahul Dhir announced a new strategy in November, saying the group would commit 90% of its investments in coming years to its West African fields to reduce debt. 

Its 2020 operating cash flow was around $450m, a Tullow spokesman said. 

Its 2020 free cash flow stood at $430m on the back of the $500m it received from selling its Ugandan assets. 

Tullow has forecast that production this year will fall to 60,000-66,000 barrels per day from just under 75,000 bpd last year.

This is mainly due to a lack of drilling in 2020 and a shutdown of its Jubilee oilfield in Ghana planned for September.

Rahul Dhir, Tullow's chief executive, said that despite the challenges that 2020 presented, Tullow delivered production in line with expectations, executed major reductions to its cost-base and reduced net debt through the Uganda asset sale. 

The CEO said the company has a busy year ahead as it begins implementing the business plan that it laid out at its 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," he added.