Mergers & Acquisitions

BP to acquire Archaea Energy for $4.1B

BP North America, with offices in Houston, has announced plans to acquire Archaea Energy Inc., a renewable natural gas (RNG) company that also is based in Houston. The acquisition, subject to regulatory and Archaea shareholder approval, would be for about $4.1 billion, including $800 million of net debt.

According to Archaea, the cash consideration represents a 38 percent premium to the company’s volume-weighted average share price for the 30-day period ending Oct. 14. The parties say they hope to close the acquisition by the end of 2022. Upon its completion, Archaea would operate as a subsidiary within BP and become part of the larger global organization. Nick Stork would continue to lead Archaea as CEO.

“Archaea is a fantastic, fast-growing business, and BP will add distinctive value [to the company] through our trading business and customer reach,” says BP CEO Bernard Looney. “It will accelerate our key bioenergy growth engine, creating a real leader in the biogas sector, and support our net-zero ambition,” he adds.

Bioenergy is one of five strategic transition growth engines that BP says it intends to focus on throughout this decade. The company says it expects investment in its transition-growth businesses to reach more than 40 percent of its total annual capital expenditure by 2025 and 50 percent by 2030.

Both BP and Archaea are partners in the Mavrix joint venture, a company that owns RNG production facilities in Michigan, Oklahoma and Tennessee.

Archaea has a development pipeline of more than 80 projects that underpin the potential for fivefold growth in RNG production by 2030.

Earlier this year, Archaea announced a joint venture with Phoenix-based Republic Services to develop 40 RNG projects across the U.S. The joint venture will convert landfill gas into pipeline-quality RNG that can be used for various applications to displace conventional natural gas.

Acquiring Archaea would expand BP’s presence in the U.S. biogas industry, enhancing its ability to support customers’ decarbonization goals. It also would expedite BP’s aim to reduce the average carbon intensity of its energy products. The company says it aims to reduce its carbon intensity to net zero by 2050 or sooner.

Alongside BP’s existing portfolio’s growth, the addition of Archaea could take its biogas supply volumes to about 70,000 boe/d globally by 2030.