By Dipo Olowookere
The A+(NG)/A1(NG) national scale long-term and short-term issuer ratings of Aradel Holdings Plc have been upgraded by CGR Ratings to AA-(NG)/A1+(NG).
A statement from the rating agency disclosed that the upgrade followed the energy company’s improved operating performance.
Aradel Holdings, which trades its securities at the second-tier stock exchange in Nigeria, the NASD over-the-counter (OTC) Securities Exchange, intends to move to the country’s flagship bourse, the Nigerian Exchange (NGX) Limited.
Trading in its shares at the alternative stock market was last week suspended ahead of its listing on the NGX after a split stock exercise to recalibrate its nominal value to 50 Kobo ordinary share from N10 ordinary share.
GCR, which gave the organisation a stable outlook, explained that the upgrade “reflects [the company’s] sustained and robust earnings growth and cash generation, which have supported stronger leverage metrics and aided internal funding of expansion projects without recourse to additional debt.”
“However, the ratings are limited by the group’s modest competitive positioning relative to the larger oil and gas companies within the sector,” it noted.
In the note obtained by Business Post, the rating firm stated that, “Our assessment of Aradel Holdings’ competitive position is anchored on the group’s diversified business operations across the oil and gas value chain, which has supported consistent improvement in its operating performance and cash flow generation.
“A supportive competitive strength is its refining business, with capacity utilisation rate increasing to 42.0 per cent in 2023 from 24.0 per cent reported in the prior year.
“However, the group remains a mid-sized player when compared with the major international oil companies operating within the Nigerian oil and gas industry.”
It was stated that Aradel Holdings has reported strong improvement in its operating performance over the review period, bolstered by the continuous investment in its drilling operations, significant reduction in oil theft through its Alternative Crude oil Evacuation System, notable growth in gas delivery volumes as well as increased productivity in its refining business.
The rating agency noted that although the energy firm’s revenue generation is inherently susceptible to fluctuations in international oil prices, the strong momentum is expected to be sustained for the full year 2024 and 2025 on the back of increased production from its existing and new wells as well as improvement in gas and refinery businesses.