Nigeria upstream financing: what indigenous operators are paying for capital
A credit view of Seplat Energy and Aradel Holdings after the IOC exits · Chiagoziem (Chi) Anyanwu, Lagos
Thesis. Nigeria's indigenous operators financed the IOC exits with debt priced from SOFR + 4.5% to SOFR + 12%. A 2026 price windfall let both delever fast and bought real covenant headroom. The next test is whether that headroom survives lower prices, growth capex and acquisition obligations.
4.5–12%Floating-rate margins over SOFR across the two borrowers
3.06xSeplat leverage in the severe case at end-2025 debt, vs a 3.0x covenant
$1,068.5mAradel contingent consideration, beside $68.7m net debt
−88%Seplat EBITDA at $50 oil and 25% lower volumes
Key findings
- The price of capital tracks track record and structure. Seplat's revolver costs SOFR + 4.5%; Aradel's acquired Standard Chartered junior debt costs SOFR + 12%.
- Prices did most of the work. At $50 oil and 25% lower volumes, Seplat's leverage reaches 1.69x today, but would have been 3.06x at end-2025 debt.
- Headline net debt understates Aradel. Its $68.7m net debt excludes $1,068.5m of contingent consideration; including it, leverage is c.0.55x, not 0.03x.
Two routes through the IOC exits
Seplat bought ExxonMobil's onshore business (now SEPNU) in December 2024. It funded completion with a $350m revolver and a $300m advance payment facility lent by ExxonMobil's own finance arm. In effect, the seller financed part of its own exit. Production rose from 47.8 kboepd in FY2023 to 131.5 kboepd in FY2025, yet leverage fell to 0.53x.
Aradel took a different route. Its borrowings rose 20.8x in one year, mostly debt absorbed through the ND Western and Renaissance transactions, completed on 31 December 2025. It went from net cash to 1.51x net debt to EBITDA in two years, and refining fell from 30% of revenue in 2025 to 5% in H1 2026 as the acquired fields came on stream.
2026 deleveraging was price-driven. By June 2026 Seplat's net debt was $370.7m (0.25x) and Aradel's $68.7m, as realised oil prices of $90 to $94/bbl lifted cash flow.
Exhibit 1: Net debt / adjusted EBITDA
| FY2023 | FY2025 | H1 2026 |
|---|
| Seplat | 0.68x | 0.53x | 0.25x |
|---|
| Aradel | Net cash | 1.51x | 0.03x |
|---|
What the pricing tells us
Capital is available; the price tells you who is trusted. S&P upgraded Nigeria to 'B' from 'B-' on 15 May 2026, its first upgrade in 14 years, and lifted Seplat to B+ the same month.
Exhibit 2: Floating-rate margins over SOFR
Seplat RCF (2026)4.5%
Aradel: IFC5.5%
Aradel: Stanbic IBTC6%
Seplat senior RBL6.5%
Aradel: Std Chartered senior9%
Aradel: Std Chartered junior12%
- The proven operator is getting cheaper money. Seplat refinanced its reserve-based loan in September 2025 at SOFR + 6.5%, down from SOFR + CAS + 8%. In January 2026 it upsized its revolver to $400m at SOFR + 4.5%, undrawn at June.
- The newcomer pays for scale. Standard Chartered now holds $885.2m of Aradel's $1,314.1m gross debt, at SOFR + 9% senior and SOFR + 12% junior, versus SOFR + 5.5% on its IFC loan.
- Bond markets are open, but not cheap. Seplat refinanced its $650m Eurobond in March 2025; the coupon rose from 7.75% to 9.125%.
- No near-term refinancing wall. Seplat's Eurobond runs to 2030 and its revolver to 2029. Aradel cut gross debt 5.9% in H1 2026, against $1,245.4m of cash.
What could go wrong
- Evacuation. A 38-day Trans Forcados outage cut Seplat's onshore output to 50.7 kboepd in Q1 2026, and damage to the Oso-BRT pipeline in June shut offshore gas and NGLs into Q3.
- Price dependency. Aradel's EBITDA now covers finance costs 4.3x, down from 12.5x in FY2025. Reserve-based loans add a second channel: borrowing bases are redetermined on current price decks, so falling prices can shrink available debt just as cash flow drops.
- Quota and currency. Nigeria's crude output is at its 1.50m bpd OPEC quota, so growth must come from gas, condensate or market share, and dollar debt meets naira-priced domestic sales.
Exhibit 3: Downside test. Both pass today; Seplat would not have at end-2025 debt
| Scenario | Oil | Volumes | Seplat EBITDA $m | Seplat ND/EBITDA | Aradel EBITDA $m | Aradel ND/EBITDA (incl. contingent) |
|---|
| Base (H1 2026 ann.) | $94.13 / $90.40 | H1 2026 | 1,877.2 | 0.20x | 2,052.7 | 0.03x (0.55x) |
|---|
| Moderate | $65 | −10% | 834.3 | 0.44x | 1,223.8 | 0.06x (0.93x) |
|---|
| Severe | $50 | −25% | 219.7 | 1.69x (1.35x with puts) | 678.2 | 0.10x (1.68x) |
|---|
Memo: Seplat severe case at FY2025 net debt ($673.3m) = 3.06x, against a 3.0x covenant. Author calculations; net debt held at June 2026.
What it means for lenders
- Size to the stress price, not spot. In the severe case Seplat's EBITDA falls 88%. Facilities sized at $90 oil would not survive that.
- Require hedging floors. Seplat's 2026 puts lift severe-case EBITDA by about $55m.
- Count everything debt-like. Aradel's $1,068.5m contingent consideration and $992.9m decommissioning provision rank alongside its bank debt in a downside.
- Watch distributions. Seplat plans $410m of 2026 dividends, including $140m from the NNPC stake sale.
- Price. My inference: spreads should narrow toward SOFR + 4.5% only for operators that hold production through outages, sign contracted gas offtake, stay under 1.0x leverage in a downside and refinance cleanly.
The operators that keep repaying when prices fall will set the cost of capital for everyone behind them.
Built from Seplat and Aradel annual reports and H1 2026 filings on the Nigerian Exchange. Full PDF with appendix (Aradel EBITDA reconciliation, net debt two ways) and the Excel model available on request. Independent research for discussion; not investment advice.