BP acquires Archaea in $4.1 billion deal

BP has agreed to buy biogas producer Archaea Energy for about $4.1 billion ($6.5 billion), including debt.

BP will pay $26 per share, a 38% premium over the 30-day average share price ending October 14, Archaea said in a statement on Monday. The Houston-based company will capture waste gas emissions from landfills and farms and become an important part of BP’s bioenergy business, accelerating its growth, according to a statement.

Archaea fits into BP’s “strategic focus on bioenergy,” Archaea Chief Executive Officer and Co-Founder Nick Stork said in a statement. The deal will “increase the role of renewable natural gas in helping customers meet their long-term climate goals.”

Archaea was founded in 2021 when Rice Acquisition merged with two other companies to create the so-called renewable natural gas giant. The environmental benefits of this fuel primarily lie in preventing emissions of methane, a powerful greenhouse gas produced by the decomposition of organic waste under certain conditions.

The company recovers biogas at landfills and farms and processes it into pipeline-quality natural gas. Burning fuel also releases carbon dioxide, but it has less impact on the overall climate than if methane were simply released into the atmosphere.

Under CEO Bernard Rooney, BP has aimed to be at the forefront of major oil companies’ efforts to reduce greenhouse gases and transition to cleaner forms of energy. rice field. He was one of the first companies to commit to net zero emissions by 2050, betting big on offshore wind and electric vehicles.

Surge in oil and gas prices after Russia’s invasion of Ukraine has driven record profits for the industry this year, but companies like BP, TotalEnergies SE and Shell continue to channel some of their cash flow into low-carbon energy. It has said. , a shift away from fossil fuels as the main source of income.

Archaea has a “massive backlog of sites that could be developed into RNG” and the BP acquisition “suggests massive growth,” said Tudor, Pickering, Holt & Co.’s chemicals, refiners and renewables. Matthew Blair, Head of Equity Research for Fuels, said. The target company’s valuation is approximately four times Arcare’s expected profit of $1 billion before adding items such as interest and taxes by 2027, compared to approximately $140 million today To do.