BP intends to acquire Archaea Energy, a major producer of renewable natural gas from waste, in a deal that could close by the end of this year pending regulatory approval.
The transaction is being valued at approximately $4.1 billion based on a price of $26 per share and $800 million of net debt. Once the deal is finalized, Archaea is expected to operate as a subsidiary within BP.
Texas-based Archaea currently operates 50 RNG and landfill gas-to-energy projects in the U.S., with more than 80 other projects in development.
“In a very short period of time, we have rapidly become a leading RNG platform in the U.S., and today’s announcement will further enable this business to realize its full potential,” said Archaea CEO and co-founder Nick Stork in a statement. “BP is a world-class partner and a strong fit for Archaea, with a strategic focus on bioenergy and an operational history in the RNG value chain that is fully aligned with ours and our partners’.”
Archaea’s list of projects includes the Lightning Renewables joint venture with Republic Services, valued at more than $1 billion, which includes at least 40 landfill projects. In BP’s announcement, Republic CEO Jon Vander Ark said this transaction will help accelerate those efforts and “provides additional opportunities to work together on other decarbonization and environmental services initiatives.”
The company was founded in 2018 by a group that included the leadership of Pennsylvania-based Noble Environmental. Archaea went public in September 2021 following a special purpose acquisition company transaction that combined it with Aria Energy. It has continued to grow through further deals, such as the recent acquisition of INGENCO.
During their latest earnings call in August, Archaea executives were bullish about the company’s financial potential giving rising investment in RNG and the added boon of updated federal tax credits in the Inflation Reduction Act. At the time, they anticipated selling up to 11.4 mmBtu of RNG this year.
Archaea is touting this deal as a way to reach more customers for RNG from waste sites through BP’s platform. BP anticipates the transaction will increase its own biogas supply volumes by 50% at the time of closing and will double its expected earnings from biogas (before interest, taxes, depreciation and amortization) to an estimated $2 billion by 2030.
“Archaea is a fantastic fast-growing business, and BP will add distinctive value through our trading business and customer reach. It will accelerate our key bioenergy growth engine, creating a real leader in the biogas sector, and support our net zero ambition,” said CEO Bernard Looney in a statement. "Investing with discipline into the energy transition, creating further value through integration — this is exactly what BP’s transformation into an integrated energy company is all about.”
According to BP — one of the world’s largest oil and gas companies, and a sizable contributor to greenhouse gas emissions — this deal will further “support customers’ decarbonization goals” and help the company “reduce the average carbon intensity of the energy products it sells.” BP already has an existing biogas business, which has invested in anaerobic digesters for dairy waste. Earlier this month, the company also announced a 10-year offtake agreement with food waste recycler Divert.
