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ARCHAEA ENERGY INC.

(LFG)
Delayed Nyse  -  04:00:01 2022-12-27 pm EST
26.00 USD   -.--%
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2022Archaea Energy Inc. : Termination of a Material Definitive Agreement, Completion of Acquisition or Disposition of Assets, Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing, Material Modification to Rights of Security Holders, Changes in Control or Regis..
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2022Archaea Energy Inc. Announces Board Changes
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Archaea Energy Inc. Reports Results for the Three and Nine Months Ended September 30, 2022

11/10/2022 | 04:51pm EST

Archaea Energy Inc. (“Archaea,” “the Company,” or “we”) (NYSE: LFG), one of the largest producers of renewable natural gas (“RNG”) in the U.S., today announced financial and operating results for the three and nine months ended September 30, 2022.

FINANCIAL HIGHLIGHTS

  • Revenue of $105.0 million and net equity investment income of $2.9 million for the three months ended September 30, 2022 and revenue of $239.1 million and net equity investment income of $7.1 million for the nine months ended September 30, 2022.
  • Net loss1 of $24.2 million for the three months ended September 30, 2022 and $24.8 million for the nine months ended September 30, 2022.
  • Net loss per Class A Common Share (basic) of $0.18 for the three months ended September 30, 2022 and $0.15 for the nine months ended September 30, 2022.
  • Produced and sold 2.42 million MMBtu of RNG for the three months ended September 30, 2022 and 6.00 million MMBtu of RNG for the nine months ended September 30, 2022.2
  • Produced and sold 260 thousand MWh of electricity for the three months ended September 30, 2022 and 584 thousand MWh of electricity for the nine months ended September 30, 2022.2

PENDING MERGER

In October, the Company announced that it has agreed to be acquired by bp (NYSE: BP) for $26 per share in cash, or a total enterprise value of approximately $4.1 billion, including approximately $800 million of net debt. Subject to regulatory approvals and Archaea shareholder approval, the parties are targeting closing the transaction (“the Merger”) by the end of 2022. In light of the transaction, the Company will not be hosting an earnings conference call or webcast to discuss its financial results and the Company will not be providing guidance for the fourth quarter or fiscal year 2022.

SUMMARY AND REVIEW OF FINANCIAL RESULTS

The following results for the three months and nine months ended September 30, 2022 are presented on a consolidated basis.

($ in thousands)

Three Months Ended September 30, 2022

 

Nine Months Ended September 30, 2022

Revenue

$

104,993

 

 

$

239,109

 

Equity Investment Income, Net

 

2,945

 

 

 

7,067

 

Net Loss1

 

(24,235

)

 

 

(24,783

)

 

 

 

 

RNG Production Sold2 (MMBtu)

 

2,418,057

 

 

 

5,995,854

 

Electricity Production Sold2 (MWh)

 

259,960

 

 

 

584,346

 

RNG production sold for the three months and nine months ended September 30, 2022 was positively impacted by incremental production from the Assai and Soares RNG facilities which were completed in December 2021 and January 2022, respectively, and increased uptime, methane recovery, and RNG production from certain plant optimization initiatives. RNG production sold for the nine months ended September 30, 2022 was also negatively impacted by downtime at certain facilities related to winter weather and maintenance activities during the first quarter.

Electricity production sold for the three months and nine months ended September 30, 2022 was positively impacted by efficiency improvements across the Company’s asset portfolio and incremental production from the INGENCO3 power assets after the acquisition closed in July 2022. Electricity production sold for the nine months ended September 30, 2022 was also negatively impacted by winter seasonality in the first quarter.

Revenues for the three months and nine months ended September 30, 2022 were positively impacted by RNG production from Assai, incremental electricity production from the INGENCO power assets, and strong market pricing of Environmental Attributes4, natural gas, and electricity.

Net loss for the three months and nine months ended September 30, 2022 was primarily driven by increased general and administrative expense, higher cost of energy due to higher gas costs, electric utility costs, and employee costs, as well as higher royalties due to higher energy revenues, partially offset by strong market pricing of Environmental Attributes, natural gas, and electricity. Expenses for the three months ended September 30, 2022 included $10.7 million for non-recurring legal and professional fees and other non-recurring costs primarily associated with the Merger, the formation of Lightning Renewables, LLC, and the acquisition of INGENCO. Net loss for the three months ended September 30, 2022 was also driven by losses from changes in fair value of warrant derivatives, and net loss for the nine months ended September 30, 2022 was also partially offset by gains from changes in fair value of warrant derivatives.

ACCOUNTING TREATMENT OF LIGHTNING RENEWABLES, LLC

The Company has determined that Lightning Renewables, LLC is a variable interest entity (“VIE”) and the Company is the primary beneficiary; therefore, the Company consolidates Lightning Renewables, LLC. The ownership interests of Lighting Renewables, LLC not owned by the Company are reflected as nonredeemable noncontrolling interests.

LIQUIDITY AND CAPITAL INVESTMENTS

As of September 30, 2022, Archaea had cash and cash equivalents of $299.5 million including cash of $191.4 million of the Lightning Renewables, LLC VIE, restricted cash of $19.2 million, and $278.9 million of available borrowing capacity under the revolving credit facility after taking into consideration outstanding letters of credit.

Capital Investments

Total cash used in investing activities was $366.3 million for the three months ended September 30, 2022. Archaea spent $98.0 million on development activities and $267.5 million, net of cash acquired, primarily related to the acquisition of INGENCO and other landfill gas right assets. Development activities in the three months ended September 30, 2022 were related to supply chain purchases, deposits on long-lead equipment and subcomponents, and construction and optimization across the Company’s various plants and projects in development. The Company also made contributions to equity method investments totaling $2.8 million and received return of investment in equity method investments of $2.1 million.

Total cash used in investing activities was $499.9 million for the nine months ended September 30, 2022. Archaea spent $225.9 million on development activities and $274.6 million, net of cash acquired, primarily related to the acquisition of INGENCO and other landfill gas right assets. Development activities in the nine months ended September 30, 2022 were related to supply chain purchases, deposits on long-lead equipment and subcomponents, and construction and optimization across the Company’s various plants and projects in development. The Company also made contributions to equity method investments totaling $10.8 million and received return of investment in equity method investments of $9.5 million.

1. Unless otherwise specified, net income (loss) as shown herein is before net income (loss) attributable to both nonredeemable and redeemable noncontrolling interest. For information regarding net income (loss) attributable to Class A Common Stock, please see the Consolidated Statements of Operations included in this release.
2. Volumes produced and sold include production from the Company’s wholly-owned facilities and its proportionate share of production from its equity method investment facilities.
3. NextGen Power Holdings LLC and its subsidiaries.
4. Environmental Attributes refer to federal, state, and local government incentives in the United States, provided in the form of RINs, Renewable Energy Credits, Lower Carbon Fuel Standard credits, renewable thermal certificates, rebates, tax credits, and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy.

ABOUT ARCHAEA

Archaea Energy Inc. is one of the largest RNG producers in the U.S., with an industry-leading platform and expertise in developing, constructing, and operating RNG facilities to capture waste emissions and convert them into low carbon fuel. Archaea’s innovative, technology-driven approach is backed by significant gas processing expertise, enabling Archaea to deliver RNG projects that are expected to have higher uptime and efficiency, faster project timelines, and lower development costs. Archaea partners with landfill and farm owners to help them transform potential sources of emissions into RNG, transforming their facilities into renewable energy centers. Archaea’s differentiated commercial strategy is focused on long-term contracts that provide commercial partners a reliable, non-intermittent, sustainable decarbonizing solution to displace fossil fuels.

Additional information is available at www.archaeaenergy.com.

FORWARD-LOOKING STATEMENTS

This release contains certain statements that may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “should,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other similar words. Forward looking statements are based on current expectations, estimates, projections, targets, opinions and/or beliefs of Archaea, and such statements involve known and unknown risks, uncertainties and other factors.

The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward looking statements include, but are not limited to: (a) the risk that the pending merger may not be completed in a timely manner or at all, which may adversely affect Archaea’s business and the price of Archaea’s Class A Common Stock; (b) the failure to satisfy any of the conditions to the consummation of the pending merger, including the receipt of certain regulatory approvals and stockholder approval; (c) the occurrence of any event, change, or other circumstance or condition that could give rise to the termination of the merger agreement; and (d) other risks and uncertainties described in Archaea’s Annual Report on Form 10-K for the year ended December 31, 2021, including those under “Risk Factors” therein, Archaea’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 and other documents filed or to be filed by Archaea with the Securities and Exchange Commission.

Forward-looking statements should not be relied upon as representing Archaea’s views as of any subsequent date. Archaea does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

(Financial Tables and Supplementary Information Follow)

ARCHAEA ENERGY INC.

Consolidated Statements of Operations (Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands, except shares and per share

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues and Other Income

 

 

 

 

 

 

 

Energy revenue

$

98,377

 

 

$

10,916

 

 

$

222,528

 

 

$

13,975

 

Other revenue

 

3,894

 

 

 

865

 

 

 

8,322

 

 

 

4,588

 

Amortization of intangibles and below-market contracts

 

2,722

 

 

 

205

 

 

 

8,259

 

 

 

205

 

Total Revenues and Other Income

$

104,993

 

 

$

11,986

 

 

$

239,109

 

 

$

18,768

 

Equity Investment Income, Net

 

2,945

 

 

 

879

 

 

 

7,067

 

 

 

879

 

Cost of Sales

 

 

 

 

 

 

 

Cost of energy

 

63,253

 

 

 

9,478

 

 

 

138,531

 

 

 

12,625

 

Cost of other revenues

 

3,109

 

 

 

615

 

 

 

7,049

 

 

 

2,976

 

Depreciation, amortization and

 

16,972

 

 

 

3,142

 

 

 

43,191

 

 

 

4,077

 

Total Cost of Sales

 

83,334

 

 

 

13,235

 

 

 

188,771

 

 

 

19,678

 

General and administrative expenses

 

30,478

 

 

 

11,889

 

 

 

75,714

 

 

 

22,933

 

Operating Income (Loss)

 

(5,874

)

 

 

(12,259

)

 

 

(18,309

)

 

 

(22,964

)

Other Income (Expense)

 

 

 

 

 

 

 

Interest expense, net

 

(10,575

)

 

 

(1,586

)

 

 

(16,941

)

 

 

(1,606

)

Gain (loss) on warrants and derivative contracts

 

(7,605

)

 

 

(10,413

)

 

 

10,575

 

 

 

(10,413

)

Other income (expense)

 

(124

)

 

 

81

 

 

 

78

 

 

 

377

 

Total Other Income (Expense)

 

(18,304

)

 

 

(11,918

)

 

 

(6,288

)

 

 

(11,642

)

Income (Loss) Before Income

 

(24,178

)

 

 

(24,177

)

 

 

(24,597

)

 

 

(34,606

)

Income tax expense

 

57

 

 

 

 

 

 

186

 

 

 

 

Net Income (Loss)

 

(24,235

)

 

 

(24,177

)

 

 

(24,783

)

 

 

(34,606

)

Net income (loss) attributable to nonredeemable noncontrolling interests

 

(2,020

)

 

 

(335

)

 

 

(2,020

)

 

 

(589

)

Net income (loss) attributable to Legacy Archaea

 

 

 

 

(8,569

)

 

 

 

 

 

(18,744

)

Net income (loss) attributable to redeemable noncontrolling interests

 

(7,224

)

 

 

(8,262

)

 

 

(11,295

)

 

 

(8,262

)

Net Income (Loss) Attributable to Class A Common Stock

$

(14,991

)

 

$

(7,011

)

 

$

(11,468

)

 

$

(7,011

)

Net income (loss) per Class A common share:

 

 

 

 

 

 

 

Basic (1)

$

(0.18

)

 

$

(0.13

)

 

$

(0.15

)

 

$

(0.13

)

Diluted (1)

$

(0.18

)

 

$

(0.13

)

 

$

(0.18

)

 

$

(0.13

)

Weighted average shares of Class A Common Stock outstanding:

 

 

 

 

 

 

 

Basic (1)

 

81,044,814

 

 

 

52,847,195

 

 

 

76,034,987

 

 

 

52,847,195

 

Diluted (1)

 

81,044,814

 

 

 

52,847,195

 

 

 

78,542,786

 

 

 

52,847,195

 

(1) Class A Common Stock is outstanding beginning September 15, 2021 due to the reverse recapitalization transaction described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

ARCHAEA ENERGY INC.

Consolidated Balance Sheets (Unaudited)

 

(in thousands, except shares and per share data)

September 30, 2022

 

December 31, 2021

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents ($191,404 related to VIE)

$

299,467

 

 

$

77,860

 

Restricted cash

 

19,225

 

 

 

15,206

 

Accounts receivable, net ($40 related to VIE)

 

47,255

 

 

 

37,010

 

Inventory

 

19,084

 

 

 

9,164

 

Prepaid expenses and other current assets ($105 related to VIE)

 

34,956

 

 

 

21,225

 

Total Current Assets

 

419,987

 

 

 

160,465

 

Property, plant and equipment, net ($103,359 related to VIE)

 

596,112

 

 

 

350,583

 

Intangible assets, net ($217,117 related to VIE)

 

999,787

 

 

 

638,471

 

Goodwill

 

47,833

 

 

 

29,211

 

Equity method investments

 

260,111

 

 

 

262,738

 

Operating lease right-of-use assets

 

6,639

 

 

 

 

Other non-current assets

 

16,573

 

 

 

9,721

 

Total Assets

$

2,347,042

 

 

$

1,451,189

 

LIABILITIES AND EQUITY

 

 

 

Current Liabilities

 

 

 

Accounts payable - trade ($21,186 related to VIE)

$

31,777

 

 

$

11,096

 

Current portion of long-term debt, net

 

24,120

 

 

 

11,378

 

Current portion of operating lease liabilities

 

1,239

 

 

 

 

Accrued and other current liabilities ($632 related to VIE)

 

93,694

 

 

 

46,279

 

Total Current Liabilities

 

150,830

 

 

 

68,753

 

Long-term debt, net

 

887,824

 

 

 

331,396

 

Derivative liabilities

 

53,349

 

 

 

67,424

 

Below-market contracts

 

132,626

 

 

 

142,630

 

Asset retirement obligations

 

9,656

 

 

 

4,677

 

Long-term operating lease liabilities

 

5,657

 

 

 

 

Other long-term liabilities

 

2,553

 

 

 

5,316

 

Total Liabilities

 

1,242,495

 

 

 

620,196

 

Commitments and Contingencies

 

 

 

Redeemable Noncontrolling Interests

 

703,339

 

 

 

993,301

 

Equity

 

 

 

Stockholders’ Equity

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding

 

 

 

 

 

Class A Common Stock, $0.0001 par value; 900,000,000 shares authorized; 81,592,637 shares issued and outstanding as of September 30, 2022 and 65,122,200 shares issued and outstanding as of December 31, 2021

 

8

 

 

 

7

 

Class B Common Stock, $0.0001 par value; 190,000,000 shares authorized; 39,052,668 shares issued and outstanding as of September 30, 2022 and 54,338,114 shares issued and outstanding as of December 31, 2021

 

4

 

 

 

5

 

Additional paid in capital

 

304,296

 

 

 

 

Accumulated deficit

 

(173,788

)

 

 

(162,320

)

Total Stockholders’ Equity

 

130,520

 

 

 

(162,308

)

Nonredeemable noncontrolling interests

 

270,688

 

 

 

 

Total Equity

 

401,208

 

 

 

(162,308

)

Total Liabilities, Redeemable Noncontrolling Interests and Equity

$

2,347,042

 

 

$

1,451,189

 

Parenthetical references reflect amounts as of September 30, 2022 for the Lightning Renewables, LLC VIE.


ę Business Wire 2022
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Managers and Directors
Richard Walton President & Director
Brian McCarthy Chief Financial Officer & Director
Derek Kramer Chief Technology Officer
Nicholas Stork Director
Damian Bilbao Director
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