What happened

Shares of Archaea Energy (LFG) surged on Monday after the renewable natural gas (RNG) producer struck a deal to be acquired by British oil giant BP (BP 0.08%). By the close of trading, Archaea Energy's stock price was up 54%.

So what

Under the terms of the deal, BP will purchase Archaea Energy for roughly $4.1 billion, including its net debt of $800 million. The $26-per-share transaction price represents a premium of about 38% to Archaea's volume-weighted average stock price over the prior 30-day period. The deal is expected to close by the end of 2022, subject to regulatory and shareholder approval.

BP intends to use its bountiful financial resources to accelerate the growth of Archaea's leading RNG production platform. The two companies also intend to market Archaea's renewable energy to BP's customers that are striving to progress toward their increasingly crucial decarbonization goals.

"BP is a world-class partner and a strong fit for Archaea, with a strategic focus on bioenergy and an operational history in the RNG value chain that is fully aligned with ours and our partners," Archaea CEO Nick Stork said in a press release.

Now what

Archaea partners with farmers and landfill owners to build and operate RNG facilities that produce low-carbon fuel from waste emissions. These facilities harvest biogas that would otherwise be flared or vented. It's a promising area of the rapidly expanding renewable energy market. BP estimates that global demand for biogas will increase more than 25-fold from 2019 to 2050.