Afrinvest Initiates Coverage on Aradel, Sets TP at N688.40
Investment firm, Afrinvest Limited, has initiated coverage on Aradel Holdings Plc, the firm said in an emailed note on Friday. “We initiate coverage on Aradel Holdings Plc with a blended 12-month target price (TP) of ₦688.40”. Analysts said its price target on the oil company is supported by base case revenue and profit projections of $$426.3 million and $192.9 million for financial year 2025.
In naira term, the figure is equivalent to ₦713.1 billion and ₦322.7 billion respectively using an exchange rate of ₦1,672.7/$. Afrinvest said relative to the closing market price of ₦529.00 per share as of Friday, February 28, 2025, its target price indicates an upside potential of 30.1%. “Our mid- to long-term outlook for Aradel’s business is positive”, the investment firm told investors in the note.
Afrinvest expressed that Aradel has demonstrated robust growth across its business divisions, evidenced by the five-year compound annual growth rate (CAGR) of 17.3% in crude oil production, 24.1% in gas output, and 61.5% in refined product output, reaching 12.3k bbl/d, 35.8Mscf/d, and 149.7 million litres, respectively, as of 9M:2024.
Excluding potential additions from recently acquired assets such as Olo and Olo West oil fields, the group boasts a combined 2P crude oil and gas reserves of about 48.6mbbl and 410.8bscf, respectively, from PML 14 and OML 34, as well as 2C contingent resources of 40.0mbbl and 297.1bscf from PML 14, PPL 247, and OML 34. Analysts told investors that these underscores the business resource depth needed to power productivity into the future.
It added that the recent ministerial approval of Renaissance Africa Energy Company Limited’s (RAEC) acquisition of Shell Petroleum Development Company’s (SPDC) divested assets — under a consortium arrangement involving Aradel — and the successful acquisition of Olo and Olo West Marginal oil fields in 2024 (previously ran by TotalEnergies and NNPC) are expected to jointly provide a significant boost to the group’s bottom line.
Also, the anticipated commencement of operations at the group’s new 3,000 bbl/d train 4 refinery in 2025, focused on processing PMS and Naphtha, is poised to enhance profitability, Afrinvest said.
Analysts stated that this development aligns with the government’s ongoing deregulation policies, creating a favourable growth environment.
Aradel’s recent acquisition of a minority stake (5.14%) in Chappal Energies Mauritius Limited (though awaiting final regulatory approval) strengthens its access to offshore basins and deepens its gas competencies.
“This positions the group as a key player in Nigeria’s gas market and enhances its ability to capture export opportunities amidst rising global demand for diverse gas products”, Afrinvest said.
The coverage note revealed that following the completion of an Alternative Crude Evacuation (ACE) system in 2022 to reduce dependence on the Trans Niger Pipeline (TNP) characterised by high frequent downtime due to vulnerability to attacks, crude oil loss has reduced from 33.0% in 2022 to 1.0% in 9M:2024. This gain is expected to be sustained in the future.
To Afrinvest analysts minds, the expected cumulative benefits from the above strategic business actions will drive improved returns for shareholders in the coming years.
For perspective, Afrinvest said Aradel’s establishment of a clear dividend framework in 2023 underscores its commitment to delivering sustainable long-term value as the Group continues to expand its bottom line.
Aradel’s strategic investments and operational efficiencies place it on a sustainable growth trajectory, making it an attractive prospect for investors seeking exposure to Nigeria’s evolving energy landscape, Afrinvest told investors in its coverage note. #Afrinvest Initiates Coverage on Aradel, Sets TP at N688.40#
