As part of its bioenergy business expansion plan, bp has agreed to acquire Archaea Energy Inc., a leading producer of renewable natural gas (RNG) in the US. The agreed acquisition, which is subject to regulatory and Archaea shareholder approval, will be for $3.3 billion in cash as well as around $800 million of net debt.
Bioenergy is one of five strategic transition growth engines that bp intends to grow rapidly through this decade. bp expects investment in its transition-growth businesses to reach more than 40% of its total annual capital expenditure by 2025, aiming to grow this to around 50% by 2030.
Through Archaea’s acquisition, bp hopes to expand its presence in the US biogas industry, enhancing its ability to support customers’ decarbonization goals and also progressing its aim to reduce the average carbon intensity of the energy products it sells. bp aims to reduce that carbon intensity to net zero by 2050 or sooner. Also read: bp and Eni JV Azule Energy Starts Angola Operations
“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. And, importantly, we're doing this while remaining focused on the disciplined execution of our financial frame. 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,” said bp CEO Bernard Looney.
Based in Houston, Texas, Archaea Energy is a leading RNG producer, operating 50 RNG and landfill gas-to-energy facilities across the US, producing around 6,000 barrels of oil equivalent a day (boe/d) of RNG. At closing, its production would be expected to provide an immediate 50% increase to bp’s
biogas supply volumes. Also read: ADNOC, bp and Masdar Forge Clean Energy Partnership
Regarding the agreement, Nick Stork, CEO of Archaea Energy, said, “Archaea has become one of the largest and fastest growing RNG platforms in the US and the announcement will further enable this business to realize its full potential. bp is a world-class partner with an operational history in the RNG value chain that is fully aligned with ours and our partners’, and I look forward to our hard-working team joining the bp organization to help achieve their bioenergy goals.”
bp has agreed to acquire Archaea for $3.3 billion in cash, or $26 per share, representing a 38% premium to Archaea’s 30-day volume-weighted average share price. Together, with around $800 million in net debt, the total enterprise value is $4.1 billion. Subject to regulatory approval and Archaea shareholder approval, bp is targeting acquisition completion by the end of 2022.
Also read: Gap in Global Collaboration Can Delay Green Transition by Decades, Notes IEA
