Seeking Alpha • Nov 10

Archaea Energy  GAAP EPS of -$0.18, revenue of $105M

Archaea Energy press release (NYSE:LFG): Q3 GAAP EPS of -$0.18. Revenue of $105M (+12109.3% Y/Y).

Seeking Alpha • Oct 20

Archaea Energy: BP Bags A Bargain

Summary Archaea has quickly become a technological and low-cost leader in the fast-growing RNG industry. Archaea has grown so quickly that its cash runway has been reduced. BP can use Archaea to further its transition to clean energy and win the race amongst major oil companies to do this. When BP p.l.c. (BP) and Archaea Energy (LFG) announced the takeover, I was writing my fourth article on Archaea. It was going to be called "Growth, Growth and More Growth," following on from my article "Archaea: Grade A For Execution," the series having started with my first article, "Rice Acquisition: The Rice Brothers Are Offering A New SPAC, And I Am Buying." In that first article, I gave a fair value (DCF calculated) of $69 per share for Archaea, and BP is buying the company for $26 per share. This article will examine the rationale behind the deal, why BP wants to buy, and why the Archaea directors want to sell. Is it a good deal for BP, and are the shareholders of Archaea getting a reasonable price? Archaea 2022: Growth, Growth, and More Growth The Rice brothers (it might be worth reading my first article to understand the Rice brothers and their history) brought their SPAC deal to the market in 2021, and they crushed the 2022 forecasts they gave at that time. At IPO, they were discussing new sites in single figures; in the latest Q2 guidance, they started to talk in thousands. Comparing the forecasts for the full year 2022 in the Q2 earnings call with those given in the SPAC prospectus is illuminating. LFG Change in production forecast (Author (Q2 earnings and IPO prospectus)) This growth has been achieved through technical excellence and acquisitions (Operational sites: 46 are Archaea, 40 sites from the Lightening JV, and 14 from NextGen Power Holdings acquisition.) This speed of growth has significant Capex and, therefore, debt implications. At IPO, LFG forecasted a Capex of $225m in 2022, falling to $66 million by 2025. They are now indicating $345m in 2022 and have committed to investing $1.1 billion in the Lightning Renewables joint venture with Republic Services (RSG) alone. Debt has surged to $580 million, and a $1 billion credit line is in place, with only $213 million of cash on hand. My model suggests that Archaea now has less than 18 months of cash runway. CEO Nick Stork talked at length at the Q2 2022 earnings release about the future Capex requirements of Archaea. During the quarter, Archaea won three contracts to capture RNG at government-owned landfill sites bringing the backlog of sites to 91. The average landfill site installation costs $21 million, meaning that Archaea could be looking at short-term Capex requirements in the region of $1.9 billion, quite different from the $440 million forecast at IPO. This speed of growth reflects two things: Firstly, a change in the market dynamics as RNG becomes more mainstream as a fuel for heavy-duty trucking and more government agencies move to cut their emissions. Secondly, Archaea's ability to win contracts at the tender stage. The Archaea team is developing a reputation as the industry-leading experts in this field. Archaea Execution: Best In Class Archaea now operates the world's largest landfill RNG site, “Assai,” and holds the world record for daily production at any industry site (Q2 earnings call), a level of production it meets regularly. The Assai site was a big part of the SPAC picture and was brought online on schedule and on budget. Aria was one of the companies combined in the 2021 SPAC, and its sites are being upgraded with the advanced technical expertise of the new company. Archaea technology is proving that it can significantly increase the output and earnings power of existing RNG facilities. Archaea has identified specific improvements that can be made, including Nitrogen rejection systems and CO2 separation systems that can double the earnings power of these legacy assets. Archaea is leveraging its expertise to upgrade and right-size the systems to deliver its best-in-class operational efficiency. Archaea now has a reputation as the industry leader for large-scale landfill RNG production and redeveloping existing facilities; this is a key reason it is winning tenders to develop new sites. Transformational Technology The V1 Archaea has developed technology to reduce the set-up cost of new Landfill sites by 40%. Its latest product, the V1, is a revolution in methane capture. In the latest earnings call, Nick Stork said that Archaea produced the first models of all components of the V1. In the presentation, we had the first photographs of the finished product. The V1 first Photo (Archae Investor Presentation Q2) The V1 is a single unit, sled based, that can replace the previous bespoke systems; this slide from the investor presentation explains the system and where savings were made. v1 product spec (Investor slide show Q2 2022) The V1 reduces costs by around 45%, implying an average landfill cost of $8 million and a dairy installation cost of $4 million. This reduction in cost means that the V1 can profitably recover RNG from more than 1,000 landfill sites in the US alone (figure from earnings call). The V1 is not patent protected; however, it does provide a unique standardized and modular design providing a significant competitive advantage over the competition. Having proved their technical expertise and operational excellence, this new product significantly increases Archaea's potential. It might cost as much as $8 billion to capture that potential, and it would appear to be beyond the financial reach of Archaea. Archaea The Conclusion The Rice brothers have turned Archaea into an industry-leading landfill RNG company; they have developed a new technology that makes more sites profitable and the techniques to increase the profitability of older legacy sites. The demand for RNG is growing fast, and to make the most of the opportunity, they need cash and lots of it. Enter BP. BP Performing whilst transforming. Bernard Looney became the Chief Executive of BP in 2020. He has since made it clear that he intends to transform BP into a clean energy company, and he is betting big that he can beat the other majors to this goal. Looney announced that he aims to cut BP's oil production by a million barrels a day (about 40% of current production) as he tries to win a race towards a clean energy future. The scale of this venture is staggering; BP will be transformed. It aims to increase its electricity output to 50 gigawatts, an increase of 2,000%. Looney is offloading fossil fuel assets at quite a pace to fund this transition; $ 15 billion has already been raised by disposing of assets in Oman, Alaska, and the North Sea. BP's entire petrochemical operation was sold off, a division that was producing $400 million a year. In the 2021 annual report, BP wrote that it would spend 40-50% of its Capex on biofuels (p16); it is a big commitment, and Archaea fits perfectly. BP is having a good year; the share price is up significantly and it maintains its strong balance sheet. BP Share Price (Author EW path) This chart shows my BP chart (it is in British pennies, so 462.11 represents GBP4.62 from the London Stock Exchange); it is not a company I regularly track (I hold it in my long-term pension fund and do not actively trade it, for UK investors it is in my ISA), so the EW count is not so precise. However, the trend is clear, and although a pullback may be underway, I think a substantial wave ((III)) higher is not far away. Bp Balance Sheet summary (Simply Wall St) Wall Street Analysts give a consensus 1-year price forecast of GBP7, some 30% higher than today's value. BP is transforming its operations by growing in three areas: electric charging stations, wind and solar electricity plus natural gas and hydrogen. They are growing all of these divisions in the US, Europe, and Asia. Progress is significant in all areas. Bp clean energy progress (2021 Annual report) The Archaea takeover is a part of this plan. As this transition takes place, BP is shedding jobs: more than 10,000 in the last three years, about 15% of its workforce. BP will be able to use the Archaea technology and its expertise to maximize its value and extend its use outside of the US to Europe and India, both of which are large BP customers with a large number of landfill sites currently not having methane collected. The technical expertise and experience, along with their unique V1 combined with a large backlog, will give BP a moat around its operation; the long-term nature of Archaea's contracts ensures that the operation will be profitable for decades to come. BP has several joint ventures for the production of RNG, the first with ARIA (part of Archaea and soon to be a BP company) the second is with Clean Energy Fuels (CLNE). CLNE appears to focus on RNG production from dairy farms, whereas Archaea focuses more on landfill sites. CLNE has a market cap below $1.5 billion and hopes to achieve a production level of 29 million gallons of RNG in 2022. 1 gallon of LNG contains 69,000 MMBtu. Using these figures puts CLNE's projected production at 2 MMBtu which is less than a fifth of the output at Archaea. The BP/CLNE joint venture has said it will move forward with projects at dairy farms in South Dakota and Iowa, with estimated additional production of 7 million gallons.

Seeking Alpha • Aug 24

Archaea Energy: A Unique Energy Player That's Worth A Good Look

Summary Archaea Energy is an innovative energy business that is tackling a very niche market. Archaea is difficult to value today, but it's growing rapidly and its long-term outlook appears promising. All things considered, LFG stock seems to be a great prospect for energy-oriented investors to consider. Most people who think about natural gas certainly view it as a non-renewable energy that the world hopes to eventually wean itself off of. Having said that, the picture is far more complicated than that. In addition to traditional natural gas, there's also something known as RNG, or renewable natural gas. And one company dedicated to its production and sale is Archaea Energy (LFG). At this point in time, the enterprise is still small compared to many other energy companies. But it's undergoing significant change at a rapid pace. If the company can truly achieve what it has started out to do, then it's not unthinkable that further upside could be around the table before too long. With the path for the company looking straightforward, and shares already priced at reasonable levels for such a rapidly growing business, I cannot help but to rate the enterprise a 'buy' at this moment. Archaea Energy - A player in renewable natural gas As I mentioned already, Archaea Energy is a company that's focused on the production and sale of RNG. Unlike traditional natural gas, the natural gas that Archaea Energy produces primarily comes from landfill-sourced biogas that is collected and processed so that impurities can be removed. The reason why biogas is referred to as renewable is because, unlike coming from deposits within the earth, it is sourced from landfills, livestock farms, wastewater resource recovery facilities, organic waste operations, and even forest and wood products. But as I mentioned already, the landfill-sourced biogas is what Archaea Energy specializes in. At first glance, this may be viewed as a very niche area. But the opportunity seems to be massive. According to the EPA, there are an estimated 2,600 landfills across the US, with roughly 500 of them having operational gas collecting and processing facilities. Some even have multiple such facilities, leading to an estimated 550 locations nationwide. Of course, not all of these are useful for Archaea Energy's purpose. In fact, only 72 of these facilities are focused on RNG, while the remainder are focused on taking landfill gas and turning it directly into electricity. This is an area that Archaea Energy sees particular promise in, essentially helping to convert these landfill gas-to-electric facilities into RNG production facilities. And naturally, the landfills that do not yet have any such facility also make for attractive targets. In addition to generating revenue off of the production and sale of RNG, the company also generates revenue off of the sale of RINs, or renewable identification numbers. These are credits used for compliance, with the particular numbers assigned to each gallon of renewable fuel that's produced. The company also is involved in other similar schemes that it refers to as environmental attributes. And finally, a significant chunk of its revenue comes from the production of power, with revenue there generated by selling renewable electricity and the environmental attributes that are specific to that activity. As a value-oriented investor, I like to put a great deal of emphasis on the fundamental condition of any company that I research. But firms like Archaea Energy prove to be exceptionally difficult. This is because of two reasons. First and foremost, this is a fairly small player that has had, up until very recently, almost no revenue and that has been generating significant net losses and cash outflows. Second, it is undergoing significant rapid change that should create great upside potential if all goes according to plan. Neither of these conditions are very conducive for value analysis. At the same time, however, some discussion of the company's fundamental past should prove illustrative. Author - SEC EDGAR Data Back in 2021, Archaea Energy generated only $77.1 million in sales. Those small for a business with a $2.36 billion market capitalization as of this writing, it's significantly higher than the $6.5 million generated one year earlier. This massive increase in sales was driven by a variety of factors. But the single largest, by far, involved the commencement of commercial operations in April of 2021 at its Boyd County facility, the purchase of PEI power assets, and the acquisition of a firm called Aria. All of this alone requires some further detail. Specifics regarding the formation of the enterprise that exists today have been covered in great detail by other authors, such as here and here. Odds are if you are familiar with Archaea Energy, you already have some background on that matter. In short, however, the company has really truly formed as a result of the combination of several other properties. These combinations resulted in, by the end of the 2021 fiscal year, the business owning, either on a wholly owned basis or through joint ventures, a portfolio of 29 landfill gas recovery and processing facilities spread across 18 states. That included 11 operated facilities that produce pipeline quality RNG and 18 facilities that focused on renewable electricity production. On the bottom line, the picture for the company looks quite dubious. Last year, it generated a loss of $18.7 million. That compared to the $2.5 million loss incurred in 2020. Operating cash flow went from negative $5.8 million to negative $28.1 million, while EBITDA turned from negative $2.1 million to negative $10.1 million. Author - SEC EDGAR Data To see what I mean by referring to the company as a rapidly growing enterprise, we need only look at its most recent financial performance. In the second half of the 2022 fiscal year, sales came in strong at $134.1 million. $77.2 million of this was generated in the second quarter alone. Although this rapid increase in sales compared to the $6.8 million generated in the first half of 2021 and the $5.1 million generated in the second quarter of 2021 alone, might be viewed as extreme, it's worth noting that sales in the second quarter missed analysts' expectations by $2.28 million. According to management, this significant increase in revenue was driven largely by the company's acquisitions, activities that ultimately resulted in significant increases in energy sold. In the second quarter of this year, for instance, the firm sold 1,755,145 MMBtu of RNG, while electricity sold totaled 142,977 MWh. The same time one year earlier, these numbers were 47,592 MMBtu and 47,847 MWh, respectively. The acquisition of Aria contributed $48.1 million of the sales increase for the company in the second quarter, comprising the largest chunk of the company's expansion. Author - SEC EDGAR Data On the bottom line, meanwhile, the company did post some interesting results. Net income came in positive at $22 million during the second quarter, pushing profitability for the first half of the year as a whole up to $3.5 million. On a per-share basis, the company generated a profit of $0.27. That beat analysts' expectations by $0.24 per share. But if we look at the picture from an adjusted basis, the company did miss expectations by $0.12 per share. Operating cash flow in the latest quarter went from negative $5.1 million to positive $38.2 million, while in the first half it rose from negative $7.5 million to positive $56.7 million. Meanwhile, EBITDA turned from negative $7 million to positive $50.2 million, while for the first half of the year it went from negative $9.5 million to positive $32.2 million. Archaea Energy All of this is important for investors to know. But given the rapid change management is pushing, what's more important is where the company seems to be going. Through various acquisitions and continued organic growth, the company is truly focused on transforming itself. There are multiple things that could be brought up along these lines to illustrate what I mean. For instance, this year alone, the company is working to optimize its existing asset base through the deployment of $100 million spread across no fewer than 11 of its different projects. That alone is forecasted to add $103 million in EBITDA to the company. Its activities involve improved plant design for its RNG facilities aimed at reducing RNG development costs by 45% compared to industry averages. More details about this can be seen in the image below. Archaea Energy Another big catalyst for the company is its joint venture with Republic Services (RSG), which is certainly one of the largest waste-oriented firms out there. This particular joint venture, known as Lightning Renewables, will result in $1.1 billion being used to develop RNG facilities at 39 landfill sites owned or operated by Republic, with Archaea Energy ultimately owning 60% of the joint venture entity. Of course, this is an evolving relationship. In July of this year, the entity in question purchased an additional site at Fort Wayne for $38 million. It's also important to note that, as of the end of the latest quarter, Archaea Energy has already made its initial capital contribution of $222.5 million to the joint venture, an amount that included its share of the Fort Wayne acquisition. Also, in July of 2022, Archaea Energy completed the acquisition of NextGen Power Holdings in a deal that ultimately added 14 landfill gas to electric plants to the company's asset platform and that will allow it to develop 11 RNG development projects at sites moving forward. Archaea Energy Management has big plans for the future as well. For starters, the company hopes to engage in RNG development projects in 2023. They are also hoping to reduce costs in a way that should add $20 million or more in additional EBITDA to their bottom line. And they want to pave the way, from an organic perspective, to $1 billion or more in annualized EBITDA. Right now, the company already sees a path, 6 to 8 years out into the future, of $600 million in EBITDA per annum. That's 50% higher than what the company's prior projected timeline implied in March of this year. But of course, this will take time and capital. For the 2022 fiscal year, the company is expecting EBITDA of between $132.5 million and $147.5 million. That should be based on RNG production sold of between 10.4 million MMBtu and 11.4 million MMBtu. For 2022, the company hopes for EBITDA to be even higher at $200 million or more.

Seeking Alpha • Aug 16

Archaea Energy  GAAP EPS of -$0.18, revenue of $77.22M, updates FY guidance

Archaea Energy press release (NYSE:LFG): Q2 GAAP EPS of -$0.18. Revenue of $77.22M (+1405.3% Y/Y). Adjusted EBITDA of $30.1M Produced and sold 2.04 million MMBtu of RNG for the three months ended June 30, 2022 and 3.58 million MMBtu of RNG for the six months ended June 30, 2022. Produced and sold 159 thousand MWh of electricity for the three months ended June 30, 2022 and 324 thousand MWh of electricity for the six months ended June 30, 2022. Increased full year 2022 Adjusted EBITDA guidance range to $132.5 million – $147.5 million from $125M-$145M. Increased full year 2022 capital expenditures (excluding acquisition costs) guidance range to $325 million – $365 million, from $255 million – $285 million previously, to begin development on recent additions to the Company’s development backlog. Reaffirmed full year 2022 electricity production sold guidance of 850 thousand – 950 thousand MWh. Updated full year 2022 RNG production sold guidance range to 10.4 million – 11.4 million MMBtu.

Seeking Alpha • Mar 23

Archaea: Grade A For Execution

Archaea reported its first full year of results, it beat production targets and expanded its backlog. Heavy investment and R&D has led to Version 1, a route to reduced cost and timeframe for RNG site development. I am increasing my valuation of this company to $6 billion against a current market cap of $2.4 billion.

Seeking Alpha • Oct 28

Archaea Energy: Merger Complete

Wall Street analysts started coverage, and they are 100% Bullish. Revenue increased more than 100% in the first six months of 2021. A number of issues have been resolved and new board members bring opportunities with them.

Snowflake Score
Valuation	0/6
Future Growth	2/6
Past Performance	0/6
Financial Health	3/6
Dividends	0/6

Historical stock prices
Current Share Price	US$26.00
52 Week High	US$26.11
52 Week Low	US$12.59
Beta	1.13
1 Month Change	0.31%
3 Month Change	44.36%
1 Year Change	49.43%
3 Year Change	n/a
5 Year Change	n/a
Change since IPO	153.41%

	LFG	US Oil and Gas	US Market
7D	0.08%	6.8%	0.6%
1Y	49.4%	39.0%	20.1%

LFG volatility
LFG Average Weekly Movement	15.9%
Oil and Gas Industry Average Movement	6.0%
Market Average Movement	7.1%
10% most volatile stocks in US Market	16.3%
10% least volatile stocks in US Market	3.1%

LFG fundamental statistics
Market cap	US$3.14b
Earnings (TTM)	-US$28.35m
Revenue (TTM)	US$285.98m

LFG income statement (TTM)
Revenue	US$285.98m
Cost of Revenue	US$176.47m
Gross Profit	US$109.51m
Other Expenses	US$137.86m
Earnings	-US$28.35m

Earnings per share (EPS)	-0.34
Gross Margin	38.29%
Net Profit Margin	-9.91%
Debt/Equity Ratio	82.6%

Data	Last Updated (UTC time)
Company Analysis	2022/12/29 21:46
End of Day Share Price	2022/12/27 00:00
Earnings	2022/09/30
Annual Earnings	2021/12/31

Package	Data	Timeframe	Example US Source ^*
Company Financials	10 years	Income statement Cash flow statement Balance sheet	SEC Form 10-K SEC Form 10-Q
Analyst Consensus Estimates	+3 years	Forecast financials Analyst price targets	Analyst Research Reports Blue Matrix
Market Prices	30 years	Stock prices Dividends, Splits and Actions	ICE Market Data SEC Form S-1
Ownership	10 years	Top shareholders Insider trading	SEC Form 4 SEC Form 13D
Management	10 years	Leadership team Board of directors	SEC Form 10-K SEC Form DEF 14A
Key Developments	10 years	Company announcements	SEC Form 8-K

Analyst	Institution
Theresa Chen	Barclays
Richard Tullis	Capital One Securities, Inc.
Hamzah Mazari	Jefferies LLC

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Recent News & Updates

Archaea Energy Inc. Announces Board Changes

High number of new and inexperienced directors

Third quarter 2022 earnings released: US$0.18 loss per share (vs US$0.13 loss in 3Q 2021)

Archaea Energy&nbsp; GAAP EPS of -$0.18, revenue of $105M

Archaea Energy Inc. to Report Q3, 2022 Results on Nov 10, 2022

Archaea Energy: BP Bags A Bargain

Recent updates

Archaea Energy Inc. Announces Board Changes

High number of new and inexperienced directors

Third quarter 2022 earnings released: US$0.18 loss per share (vs US$0.13 loss in 3Q 2021)

Archaea Energy&nbsp; GAAP EPS of -$0.18, revenue of $105M

Archaea Energy Inc. to Report Q3, 2022 Results on Nov 10, 2022

Archaea Energy: BP Bags A Bargain

BP Products North America Inc. agreed to acquire Archaea Energy Inc. (NYSE:LFG) for $3.2 billion.

Archaea Energy: A Unique Energy Player That's Worth A Good Look

Archaea Energy Inc. Re-Affirms Sales Guidance for the Full Year 2022

Second quarter 2022 earnings: EPS exceeds analyst expectations while revenues lag behind

Archaea Energy Inc. Appoints Brian Mccarthy as Chief Financial Officer

Archaea Energy&nbsp; GAAP EPS of -$0.18, revenue of $77.22M, updates FY guidance

Archaea Energy Inc. to Report Q2, 2022 Results on Aug 16, 2022

First quarter 2022 earnings: EPS and revenues miss analyst expectations

High number of new and inexperienced directors

Archaea Energy Inc. to Report Q1, 2022 Results on May 10, 2022

Archaea Energy Inc., Annual General Meeting, May 18, 2022

Archaea: Grade A For Execution

Archaea Energy Inc. to Report Q4, 2021 Results on Mar 17, 2022

Archaea Energy Inc. Announces Executive Changes

Archaea Energy: Merger Complete

Less than half of directors are independent

Less than half of directors are independent

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About the Company

Archaea Energy Inc. Fundamentals Summary

Earnings & Revenue

Company Analysis and Financial Data Status

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Analysis Model and Snowflake

Industry and Sector Metrics

Analyst Sources

Archaea Energy GAAP EPS of -$0.18, revenue of $105M

Archaea Energy GAAP EPS of -$0.18, revenue of $105M

Archaea Energy GAAP EPS of -$0.18, revenue of $77.22M, updates FY guidance