Aradel revenue jumps 633% to N3.94tn, profit falls 82%

By Abubakar Yunusa

Aradel Holdings Plc grew its revenue by 633 per cent to N3.94tn in the first nine months of 2026, but its profit after tax plunged by 82 per cent, largely due to a N529.1bn earnout charge linked to the acquisition of Shell Petroleum Development Company assets.

The indigenous energy company disclosed this in its unaudited financial results for the nine months ended September 30, 2026.

The revenue represents a significant increase from the N538.8bn recorded in the corresponding period of 2025.

Aradel attributed the growth to the consolidation of ND Western and Renaissance, increased production and favourable commodity prices.

Crude oil accounted for 69 per cent of the company’s revenue, while gas and refined products contributed 26 per cent and five per cent, respectively.

The company’s gross profit also rose by 609 per cent to N1.66tn, compared with N234.7bn recorded in the corresponding period last year.

Similarly, operating profit increased by 832 per cent to N1.56tn from N167.5bn, supported partly by other income of N253.1bn.

Aradel said the other income comprised principally crude handling fees generated from third-party use of the group’s evacuation infrastructure.

Its earnings before interest, tax, depreciation and amortisation increased by 702 per cent to N2.09tn from N261.5bn, while its EBITDA margin improved to 53 per cent from 49 per cent.

Net cash generated from operations also rose sharply by 1,097 per cent to N2.45tn, compared with N205.4bn in the same period of 2025.

The company recorded average production of 144,700 barrels of oil equivalent per day during the period, representing a 502 per cent increase from 24,000 barrels recorded a year earlier.

The output also exceeded its previous full-year 2026 production guidance of between 110,000 and 140,000 barrels of oil equivalent per day, prompting the company to revise the target to between 140,000 and 150,000 barrels.

Its average daily crude oil production increased by 279 per cent to 57,900 barrels, compared with 15,300 barrels in the corresponding period of 2025.

Gas production recorded an even sharper increase, rising by 895 per cent to 503.6 million standard cubic feet per day from 50.6 million standard cubic feet.

The company attributed the growth to expanded processing capacity, sustained pipeline availability and stronger customer demand.

Commenting on the results, Aradel’s Chief Executive Officer, Adegbite Falade, said the performance demonstrated the potential of the company’s expanded asset portfolio.

He said production had exceeded the group’s previous full-year guidance, with significant growth in both crude oil and gas output.

“This drove a step-change in revenue and EBITDA, alongside improved margins. Our operations generated substantial cash, which allowed us to fund our investment programme, reduce our debt and move the Group from net debt to net cash position,” Falade said.

However, despite the strong revenue and production figures, the company’s profit after tax declined significantly during the period.

Aradel’s profit after tax fell to N43.3bn from N245.1bn in the corresponding period of 2025, representing an 82 per cent decline.

This happened despite a 154 per cent increase in profit before tax to N764.7bn from N300.7bn.

Profit attributable to shareholders also dropped to N141.5bn from N242.9bn, while earnings per share declined from N55.90 to N32.57.

The company attributed the pressure on its bottom line largely to increased finance costs and tax expenses.

According to the financial statement, net finance costs surged to N797.3bn from N6bn in the corresponding period of 2025.

The figure included interest on the consolidated borrowings of ND Western and Renaissance, the unwinding discount on decommissioning provisions and an earnout charge arising from contingent consideration.

Tax expenses also increased to N721.4bn from N55.6bn, reflecting the higher tax rates applicable to ND Western and Renaissance.

Aradel further reported a 652 per cent increase in its cost of sales to N2.28tn.

The company attributed the increase to a N455.8bn stock adjustment arising from an overlift position, higher royalties and statutory payments on stronger crude oil prices, as well as increased field, host-community and well maintenance costs.

Explaining the impact of the earnout payment on the company’s financial performance, Falade said the N529.1bn charge was connected to contingent consideration under Renaissance’s acquisition of Shell Petroleum Development Company of Nigeria assets.

An earnout is an additional payment arising from an acquisition, usually determined by agreed conditions or performance targets.

Speaking to TheCable, Falade said Renaissance’s acquisition arrangement included a carve-out area in which the seller retained an economic interest as part of guarantees for the sustained development and supply of gas to Nigeria LNG Limited.

He explained that the arrangement was originally designed to ensure an equal sharing of the value generated from the retained economic interest.

However, he said subsequent developments had created an imbalance that tilted more value towards the seller at the expense of Renaissance.

“The imbalance that has occurred at this instant in time shifts more of that value towards the seller and less towards ourselves as Renaissance,” Falade said.

He added that Aradel was engaging the seller constructively to resolve the disagreement before the end of the year.

According to him, although earnout payments would remain part of the company’s future obligations, resolving the imbalance could reduce the amounts payable.

“There will still be earnout going into the future, but the conversation is around the appropriateness of the earnout relative to the retained economic interest of the seller,” he said.

Falade said the N529bn charge significantly affected the company’s reported profit after tax and earnings per share.

He explained that adjusting the earnout payment to reflect the original agreement would have produced a substantially different financial outcome.

“If you normalised for the earnouts to have followed the form and the pattern of the original intention, what we would have been seeing by way of PAT and EPS would have changed dramatically,” he said.

He identified finance costs, particularly the earnout charge, and statutory tax payments as the two major factors responsible for the decline in profit after tax.

Falade expressed optimism that resolving the disagreement would reduce future earnout charges and provide relief to the company’s bottom line.

Aradel Holdings is an indigenous integrated energy company operating across Nigeria’s upstream, midstream and downstream oil and gas sectors.