BP PLC said that it reached an agreement to acquire American biogas producer Archaea Energy Inc. for $3.3 billion plus debt as it pins hopes on increasing demand for renewable fuel. The British oil major stated on October 17, 2022 that its largest transaction since purchasing US shale assets in 2018–the acquisition of Houston-based Archaea–would increase the company's clean-energy portfolio. Even as it continues to focus on its main business of producing oil and gas, BP, similar to other major oil companies, is investing more resources in lower-carbon energy.
The oil giant's extensive global trade network and financial resources and American government tax rebates for renewable energy investment, would be advantageous to investors. The total revenue of BP PLC and Archaea Energy Inc. increased significantly in 2022 over that in 2021, according to GlobalData. Through the Archaea agreement and other BP activities, including the UK, BP intends to enhance its biogas production from 10,000 equivalent barrels of oil per day to 70,000 equivalent barrels per day by 2030. Archaea generates enough renewable natural gas each day equivalent to 6,000 barrels of oil. It will function as a subsidiary of BP. According to BP, the agreement with Archaea will increase its biogas-related earnings before taxes and other considerations by a factor of two to $2 billion annually by 2030.
BP decided to acquire Archaea for $26 per share, which is 38% more than the American company's 30-day weighted share price. The overall cost of the acquisition, which includes BP's debt assumption of $800 million from Archaea, is $4.1 billion. BP made significantly fewer deals in 2022 than in 2021, according to GlobalData.
The oil and gas industry’s recovery from the COVID-19 pandemic, and the Russia-Ukraine conflict led to an increase in demand for energy. An increase in oil prices is encouraging companies to expand their footprint in key shale locations through M&A activity. BP purchased 10 businesses, five of which were in the last five years. The largest acquisition made by BP so far cost it $48.2 billion when it bought Amoco. In 2012, when it sold Atlantic Richfield Company to Andeavor for $2.5 billion, it made the largest sale. Oil and gas exploration (23%) and energy services and equipment (23%) are the two industries that the company primarily focuses on.
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