Aradel, Seplat, Oando report diverging earnings as tax costs surge

Nigeria’s leading listed oil and gas companies delivered robust operating performances in the first half of 2026, but soaring tax obligations significantly reduced earnings, highlighting the growing impact of the country’s petroleum tax regime on corporate profitability.

A review of the half-year financial statements of Aradel Holdings Plc, Seplat Energy Plc and Oando Plc shows that while Aradel and Seplat generated combined pre-tax profits of about N1.54 trillion, approximately N1.13 trillion—or 73 per cent—was absorbed by income tax expenses before profits reached shareholders.

Aradel recorded a pre-tax profit of N752.7 billion for the six months ended June 2026 but incurred a current tax charge of N748.1 billion, representing 99.4 per cent of its earnings before tax.

Although deferred tax adjustments reduced the total tax expense recognised in its financial statements, the figures underscore the scale of the company’s tax obligations following a major expansion of its upstream operations.

The sharp increase follows Aradel’s acquisition of an additional 40 per cent stake in ND Western Limited on December 31, 2025, raising its ownership to 81.67 per cent and making the company a subsidiary.

The acquisition also increased Aradel’s effective interest in Renaissance Africa Energy Company Limited from 33.3 per cent to 53.3 per cent, significantly expanding its production base, earnings and corresponding tax liabilities.

As a result, Aradel’s current tax charge surged from N39.7 billion in the first half of 2025 to N748.1 billion during the same period this year. Seplat also reported a substantial tax burden despite posting strong operational growth.

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The company generated a pre-tax profit of $574.9 million while recording a current tax charge of $475.6 million—equivalent to 82.7 per cent of pre-tax earnings.

Converted at an exchange rate of N1,377 to the dollar, Seplat’s current tax stood at approximately N654.8 billion against pre-tax earnings of about N790.4 billion. Following deferred tax adjustments, its total tax expense amounted to roughly N564.9 billion.

Seplat attributed part of its tax profile to changes introduced under the Petroleum Industry Act (PIA), with most of its onshore assets transitioning from the former Petroleum Profits Tax regime to the PIA’s combined tax structure.

The company reported a profit after tax of N68.56 billion despite posting a pre-tax loss, largely because it recognised an income tax credit of N101.4 billion arising mainly from the reversal of Companies Income Tax provisions relating to the 2023–2025 financial years.

The tax credit was heavily concentrated in the first quarter, when Oando recognised approximately N114.8 billion in tax credits before recording a tax expense of about N13.4 billion in the second quarter.

The NGX Oil and Gas Index has emerged as the Nigerian Exchange’s best-performing sector in 2026, gaining 96.32 per cent year-to-date as of July, outperforming the NGX All-Share Index, Industrial Index and Banking Index.

Aradel’s share price has appreciated by 127.88 per cent this year, lifting its market capitalisation to about N6.63 trillion and adding approximately N3.72 trillion in market value.

Seplat’s market value has risen by 99.45 per cent to about N6.82 trillion, representing an increase of roughly N3.40 trillion.

Seplat realised an average oil price of $94.13 per barrel, while both Aradel and Seplat posted substantial increases in pre-tax earnings, with Aradel’s rising by 293.5 per cent and Seplat’s by 74.06 per cent.