The Africa-focused rating agency also upgraded the rating of the company’s ₦10.318 billion Series 1 Senior Unsecured Bonds to AA(NG) from AA-(NG), while affirming its short-term issuer rating at A1+(NG). The outlook on all ratings remains positive.
In its latest rating report, GCR attributed the upgrade to Aradel’s enlarged business profile following its acquisition of a majority equity interest in ND Western Limited, which has expanded production capacity, increased reserves and strengthened its earnings base.
The acquisition has also supported the company’s leverage position despite a substantial increase in consolidated debt, with GCR projecting that net debt to EBITDA will remain below one time over the rating horizon, barring aggressive new borrowings.
Aradel increased its equity interest in ND Western from 41.7 per cent to 81.7 per cent in December 2025, raising its effective interest in Renaissance Africa Energy Limited from 33.3 per cent to 53.3 per cent.
The transaction significantly expanded the group’s upstream operations, with the number of producing fields rising to 52 in 2025 from two in 2024.
Proved and probable reserves increased to 594.3 million barrels of oil equivalent (mmboe) from 116.8 mmboe, while contingent reserves climbed to 1,502.2 mmboe from 98.2 mmboe.
Gas processing capacity also expanded to 3,600 million standard cubic feet per day (mmscf/d) from 700 mmscf/d, following the addition of seven processing plants from Renaissance.
The enlarged operations drove a sharp increase in revenue, which rose to $1.8 billion in the first half of 2026 from $461 million in 2025, reflecting higher production volumes and favourable global commodity prices.
Oil and gas production increased to 139,500 barrels of oil equivalent per day (boepd) as of June 2026, compared with 22,400 boepd in 2025.
The stronger upstream performance offset weaker refining output, which declined to 126.2 million litres in H1 2026 from 161.4 million litres in the corresponding period of 2025 due to feedstock constraints and unplanned refinery downtime.
GCR said the reduction in refining income had no material impact on consolidated earnings, as it was fully offset by stronger upstream production and profitability.
The group’s EBITDA margin improved to 64 per cent in H1 2026 from 42 per cent in 2025, exceeding its five-year standalone average of 57 per cent.
However, the downstream segment’s contribution to revenue declined to five per cent in H1 2026 from 30 per cent in 2025, despite continuing to provide stable earnings.
Aradel’s management plans to raise the refinery’s utilisation rate above 50 per cent and commence sales of refined Premium Motor Spirit (PMS) in 2027, alongside its existing product mix.
The company is also exploring opportunities in renewable energy, although GCR expects the benefits of these initiatives to materialise over the longer term.
Despite the stronger earnings profile, Aradel’s gross debt increased to $1.4 billion in 2025 from $63 million in 2024, largely due to financial liabilities assumed from ND Western and Renaissance. The debt position stood at $1.3 billion in H1 2026.
Nevertheless, GCR said the group maintained a net ungeared position as of June 2026, supported by the corresponding increase in earnings and cash flow.
The agency expects the group’s net debt-to-EBITDA ratio to remain below one time over the rating horizon, provided management avoids aggressive additional borrowing.
Operating cash flow coverage of debt is also projected to remain above 60 per cent, compared with 99 per cent in H1 2026.
The metric had fallen to 7.8 per cent in 2025, as earnings and cash flows from the acquired businesses were not fully reflected in the earlier reporting periods due to the timing of consolidation and earnings recognition.
However, EBITDA interest coverage declined to 6.1 times in H1 2026 from 37 times in 2025, reflecting higher finance costs associated with the increase in debt.
GCR expects the financial metrics to improve gradually, supported by stronger earnings generation and management’s commitment to a conservative debt funding strategy.
The rating agency identified liquidity as a key strength, citing Aradel’s cash holdings of $1.3 billion as of June 30, 2026, alongside projected cumulative operating cash flow of $1.3 billion through 2027.
These resources are expected to cover projected debt maturities of $693 million, estimated capital expenditure of $883 million and anticipated dividend payments over the 18 months to December 2027.
GCR projects the group’s sources-to-uses ratio at 1.5 times over the period, indicating that its available funding sources are expected to exceed its projected financial requirements.
The agency also described the enlarged group’s capital structure as sound, supported by a well-spread debt maturity profile and access to international and domestic funding sources, including Nigeria’s debt capital market.
“We expect future capital requirements and expansion initiatives to remain prudent and contingent on availability of cash,” GCR said.
Positive outlook hinges on integration
GCR said the positive outlook reflects the potential for a further upgrade if Aradel successfully integrates its newly consolidated upstream assets, aligns operating strategies and sustains production performance.
The agency added that sustained growth in earnings and operating cash flow, resulting in stronger leverage and liquidity metrics, would also be required to support a higher rating.
However, GCR identified execution risks associated with integrating the acquired subsidiaries, aligning operating strategies and maintaining effective management oversight.
The agency said its analytical approach would remain on a standalone basis, reflecting Aradel Holdings’ position as the ultimate parent company of the enlarged group.
Looking ahead, GCR expects earnings generation to remain strong, supported by sustained production scale and favourable global crude oil prices. Continued cost discipline is expected to keep EBITDA margins above 50 per cent over the outlook period.
