In its 9M'24 unaudited results, Aradel Holdings Plc (ARADEL) grew topline by 29.6% YoY to $274.4 million, driven by an increase in production volumes to 18,567 barrels of oil equivalent per day (boepd) (vs. 14,306 boepd in FY'23) and higher average realised oil price. Production traction was notably broad-based, with crude oil, gas, and refined products expanding by 37.7%, 60.6%, and 17.8%, respectively. The volume growth was largely attributable to the successful implementation of the Alternative Crude Evacuation (ACE) system and the addition of four new wells in the Ogbele oil field (PML 14).
Building on the company's strong 9M'24 performance and its historically robust Q4, we expect that ARADEL will achieve Working Interest (WI) production levels of 18,928 boepd for FY'24 across its oil and gas operations. For refined products, we project output to reach 270 million litres, encompassing Automotive Gas Oil (AGO), Heavy Fuel Oil (HFO), Naphtha, Dual Purpose Kerosene (DPK), and Marine Diesel Oil (MDO). For FY'25E, we anticipate continued volume growth driven by contributions from new and existing assets, particularly the Omerelu oil field (PPL 247), which achieved its first oil in May 2024. Additionally, we expect an enhancement in the company's reserve profile following the recent acquisition of the Olo Main and Olo West fields from TotalEnergies, which should drive higher production volumes over the medium to long term.
Overall, primarily due to the impact of Naira appreciation to N1,537.03/$ as of 07 January 2025 (vs N1,625.13 as of last publication), our 12-month Target Price (TP) of $0.71 now translates to N1,095.30 in Naira terms (vs. N1,258.61 previously). We maintain a BUY rating on the stock while noting that potential volatility in oil prices is a downside risk to our forecasts.
