Aradel to See Earnings Upside on Acquisition of Additional 40% Equity Stake in ND Western

Aradel Holdings Plc has announced that its wholly owned subsidiary, Aradel Energy Limited has entered into a definitive agreement to acquire a 40% equity interest, in ND Western (NDW) Limited from Petrolin Trading Ltd.

Aradel Energy Limited currently owns 41.67% of NDW.

Upon completion of this transaction, Aradel’s total shareholding in NDW will significantly increase, reinforcing its strategic position within Nigeria’s upstream oil and gas sector.

NDW holds a 45% participating interest in OML 34, a producing Oil Mining Lease located in the Western Niger Delta.

OML 34 contains material crude oil and associated gas reserves contributing to Nigeria’s domestic energy supply and exports.

In addition, NDW owns 50% of the share capital of Renaissance Africa Energy Holding Company Ltd, the parent company of Renaissance Africa Energy Company Limited which operates the Renaissance Joint Venture.

Implication of the Deal

ARADEL currently owns 41.7% of NDW. Upon regulatory approval from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Federal Competition and Consumer Protection Commission (FCCPC), and Ministerial Consent, ARADEL’s total shareholding in NDW is expected to increase to 81.7%, giving it majority control.

In addition to this, given the effective c.50.0% stake of NDW in the Renaissance African Energy Consortium (RAEC), ARADEL could potentially benefit from an indirect interest in the SPDC onshore assets via ND Western of 41.4% (vs 20.8% previously). Cumulatively, ARADEL would have an effective stake of c.53.9% (41.4% indirectly through ND Western Limited and 12.5% directly).

The approval of this transaction bodes well for ARADEL’s earnings potential, according to Investment firm Cardinal Stone Partners, in two major ways:

• The acquisition positions ARADEL to consolidate NDW’s financials fully, thereby potentially increasing its upstream exposure significantly.

• ARADEL is also set to own a majority stake in RAEC (effectively c.53.9%). Recall that earlier this year, following the approval of the sale of SPDC’s onshore assets to RAEC, ARADEL reported a 109.7% YoY increase in the “share of profit of an associate” line following increased contributions from the consolidated RAEC stake. If the new agreement is approved, ARADEL also fully consolidates RAEC’s numbers, deepening its participation in the SPDC onshore asset portfolio, benefitting significantly from the production volumes and stronger earnings contribution from Renaissance.

“Overall, this development marks substantial earnings upside potential for ARADEL, reinforcing the company’s position as a major player within the Oil & Gas industry,” Cardinal Stone Partners said.

Aradel shares have a 1-year return of 48.7% and closed trading Friday at N790 per share for a market capitalisation of N3.43 trillion ($2.28 billion).

Aradel Holdings Plc, formerly known as Niger Delta Exploration & Production Plc, is an energy Company in Nigeria with interests in multiple oil and gas assets.

The Company was incorporated on March 25, 1992 (as the Midas Drilling Fund), changed its name to Niger Delta Exploration and Production Plc in November 1996, and assumed its current name in May 2023. Aradel Holdings’ unique offerings incorporate the full spectrum of the energy industry, encompassing exploration, production, refining, and distribution.

The Group’s shares are traded on the Main Board of the NGX Exchange under the ticker symbol, ARADEL.

Get More of our proprietary news and analysis as MoneyCentral is now on WhatsApp Channels  Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!