GCR Upgrades Aradel Rating, Cites Improved Business, Financial Profile
GCR Ratings (GCR) has upgraded Aradel Holdings Plc’s national-scale long-term issuer rating to AA(NG) from AA-(NG) and affirmed the short-term issuer rating at A1+(NG).
The Africa-focused ratings agency also upgraded the national-scale long-term issuer rating accorded to Aradel Holdings Plc’s NGN10.318 billion Series 1 Senior Unsecured Bonds to AA(NG) from AA-(NG) previously.
The outlook on all the ratings is positive, GCR said. The upgrade of Aradel Holdings Plc’s rating reflects its enlarged and stronger business profile following the successful acquisition of a majority equity interest in ND Western Limited.
Ratings analysts said this expansion has bolstered earnings and cash flow generating capacity and supports conservative leverage metrics despite elevated debt levels.
In December 2025, Aradel Holdings increased its equity interest in ND Western from 41.7% to 81.7%, resulting in a corresponding increase in its effective interest in Renaissance Africa Energy Limited from 33.3% to 53.3%.
GCR stated that the analytical approach remains on a stand-alone basis, reflecting the group’s position as the ultimate parent company of the enlarged group.
That said, GCR said it believes there are some execution risks regarding the integration of newly consolidated subsidiaries, the alignment of operating strategies, and management oversight.
Aradel Holdings’ competitive position has strengthened significantly, according to the rating note, supported by its enlarged and integrated business operations across the Nigeria’s oil and gas value chain following the acquisition of an increased equity interest in ND Western.
On the production side, the number of producing fields increased to 52 in 2025 from two in 2024, while proved and probable reserves rose to 594.3 million barrels of oil equivalent (mmboe) from 116.8 mmboe; and contingent reserves reached 1,502.2 mmboe (2024: 98.2 mmboe).
Gas processing capacity also expanded significantly to 3,600 million standard cubic feet per day (mmscf/d) from 700 mmscf/d, driven by the addition of seven processing plants from Renaissance.
The downstream segment continues to provide stable earnings, although revenue contribution has dropped to 5% in H1 2026 from 30% in 2025.
GCR said Aradel Holdings’ management has indicated plans to improve the refinery’s utilisation rate above 50% and commence the sale of refined PMS production in 2027 in addition to the existing product mix.
Aradel Holdings is also exploring growth opportunities in the renewable energy sector, although the execution and benefits of these plans are expected to materialise only over the long-term.
Revenue grew significantly to USD1.8 billion in H1 2026 from USD461 million in 2025, reflecting the growing earnings contribution from ND Western and Renaissance, following the substantial increase in production volumes alongside a supportive commodity price environment.
Oil and gas production rose markedly to 139,500 barrels of oil equivalent per day (boepd) as of June 2026 (2025: 22,400 boepd). In contrast, refined product output moderated by to 126.2 million litres (H1 2025: 161.4 million litres) due to feedstock constraints and unplanned refinery downtime.
Nevertheless, the resulting reduction in refining income had no material effect on consolidated earnings, as it was fully offset by stronger upstream output and profitability.
The EBITDA margin improved to 64% in H1 2026, up from 42% in 2025, exceeding the five-year standalone average margin of 57%.
Looking ahead, ratings analysts expect earnings generation to remain strong, supported by sustained production scale and favourable global crude oil pricing environment.
Together with continued cost discipline, this should support EBITDA margins above 50% over the outlook period. The group’s leverage metrics remain strong despite the increase in the consolidated debt position.
Gross debt increased to USD1.4 billion in financial year 2025 (H1 2026: USD1.3 billion) from only USD63 million in 2024, primarily due to assumed financial liabilities from ND Western and Renaissance.
As at June 2026, the group maintained a net ungeared position supported by the corresponding rise in earnings and cash flow. Barring any aggressive new borrowings, we expect net debt to EBITDA to remain below 1x over the rating horizon.
In addition, ratings analysts expect operating cash flow (OCF) coverage of debt to remain sound above 60% (H1 2026: 99%). The metric was pressured to 7.8% in 2025, as earnings and cash flow from the acquired businesses were not fully reflected in the prior periods due to timing mismatch between consolidation and earnings recognition.
The earnings contribution from these businesses has commenced from the start of the 2026 financial year. Conversely, EBITDA interest coverage compressed to 6.1x in H1 2026 from 37x in 2025 occasioned by the elevated finance costs associated with the rise in debt.
Nevertheless, GCR expects the metrics to improve gradually given expected stronger earnings generation coupled with management’s indicated commitment to a conservative debt funding strategy.
The overall capital structure of the enlarged group remains sound, underpinned by a well-spread maturity profile and demonstrated access to both international and domestic funding sources, including the Nigerian debt capital market.
The rating note stated that the company’s liquidity remains a rating strength, underpinned by the group’s substantial cash holdings of USD1.3 billion as 30 June 2026 and GCR-projected cumulative operating cash flow of USD1.3 billion through 2027.
These sources are sufficient to cover projected debt maturities of USD693 million, estimated capital expenditure of USD883 million, and expected dividend payments. Overall, the sources-to-uses ratio is projected at 1.5x over the 18-month period to December 2027.
“We expect future capital requirements and expansion initiatives to remain prudent and contingent on availability of cash”, GCR said, adding that the positive outlook indicates potential for an upgrade if Aradel Holdings demonstrates successful integration of the acquired upstream assets, evidenced by the effective alignment of operating strategies and sustained production performance.
This, however, would need to be accompanied by sustained strong growth in earnings and operating cash flow, translating into stronger leverage and liquidity metrics commensurate with a higher rating level over the rating horizon, GCR said.
