bp's $4.1 Billion Purchase of Archaea Energy to Catalyze Company's Bioenergy Transition

bp has fully embraced its biogas transition strategy with the purchase of Houston-based renewable national gas (RNG) producer Archaea Energy.

In a $4.1 billion deal that includes $3.3 billion in cash and $800 million in net debt, bp has amplified investment into bioenergy, one of its five "strategic transition growth engines."

"Our biogas team is already one of the leading suppliers of renewable natural gas in North America," stated Dave Lawler, chairman and president of bp America, in a statement. "This deal accelerates our ability to deliver cleaner energy, generate significant earnings in a fast-growing sector and help reduce emissions. This could help bp take a significant stride toward our net zero ambition."

The oil and gas company's strategic growth engines comprise of bioenergy, convenience, EV charging, renewables and hydrogen. Within these sectors, bp aims to reach more than 40 percent of its total annual capital expenditure by 2025, aiming to grow it to around 50 percent by 2030.

bp chief executive Bernard Looney spoke about the synergies and value the acquisition creates for the company's trading business and customer capabilities.

"It will accelerate our key bioenergy growth engine, creating a real leader in the biogas sector, and support our net zero ambition," he added. "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."

For Phoenix-based Republic Services, the purchase of Archaea only aids in the joint venture between the two entities. The partnership, which was solidified in May 2022, allows Archaea to develop, engineer, construct and operate RNG facilities placed at Republic's landfills in 19 states. 

With the first project construction slated to begin in late 2022, both companies expect the 39 projects planned to generate more than 12.5 million MMBtu of RNG on an annual basis.

Speaking of bp's acquisition, Jon Vander Ark, Republic Services CEO and president, stated: "The acquisition of Archaea by bp allows us to accelerate decarbonization through our innovative joint venture with Archaea. With our shared focus on sustainability, this joint venture provides additional opportunities to work together on other decarbonization and environmental services initiatives." 

With the purchase, bp now has the capacity to expand its biogas initiatives in the US and on a global scale - most notably the UK and Germany.  The company expects that Archaea's production and pipeline "has the potential to take bp's biogas supply volumes to around 70,000 boe/d globally by 2030."

It added that the rising biogas demand in North American enables opportunities for growth into areas such as LNG, renewable hydrogen and power for EV charging.

Once integration is complete, bp expects EBITDA to grow from $140 million to more than $500 million by 2025, reaching $1 billion by 2027 and double-digit returns. The Archaea acquisition is expected to close by the end of 2022.