SM Energy Company and Civitas Resources Inc announced, in a joint statement released Monday, a “$12.8 billion transformational combination delivering superior stockholder value”.
The companies noted in the statement that they have entered into a definitive merger agreement involving an all-stock transaction. Under the terms of the deal, each common share of Civitas will be exchanged for 1.45 shares of SM Energy common stock, the statement revealed, adding that the combined company’s enterprise value of approximately $12.8 billion is inclusive of each company’s net debt.
After closing, the company will continue to trade as SM Energy, according to the statement, which noted that, upon completion of the transaction, SM Energy stockholders will own approximately 48 percent of the combined company and Civitas stockholders will own approximately 52 percent on a fully diluted basis.
At this exchange ratio, and the respective companies’ closing share prices on October 31, 2025, inclusive of net debt, the combined company would have an enterprise value of approximately $12.8 billion, the statement noted. It highlighted that SM Energy will issue approximately 126.3 million shares of common stock as consideration to the holders of Civitas common shares in accordance with the terms of the merger agreement.
“The combined company will have a premier portfolio of approximately 823,000 net acres, with the Permian position being the cornerstone,” the statement said.
“Pro forma full-year 2025 consensus free cash flow generation of more than $1.4 billion enables sustained capital returns, and increased market capitalization enhances trading liquidity with broader investment appeal,” it added.
The statement highlighted “identified and achievable annual synergies totaling $200 million, with upside potential to $300 million”.
“Identified synergies include opportunities across the combined organization consisting of overhead and G&A, drilling and completion and operational costs, and cost of capital,” it added.
“These synergies are expected to accelerate deleveraging and support a sustainable returns strategy”, it continued.
The combination has been unanimously approved by the boards of directors of both companies, according to the statement, which revealed that the transaction is expected to close in the first quarter of 2026. The deal is subject to customary closing conditions, including approvals by SM Energy and Civitas stockholders and regulatory clearances, it noted.
Following the merger, the board of directors will total 11 members and will be comprised of six representatives from SM Energy and five representatives from Civitas, the statement pointed out, adding that the combined company will be headquartered in Denver, Colorado.
Julio Quintana will serve as Non-Executive Chairman of the combined company and Herb Vogel will serve as Chief Executive Officer, the statement highlighted.
“This strategic combination creates a leading oil and gas company with enhanced scale, numerous value-adding synergies, and significant free cash flow, driving superior value to stockholders,” SM Energy Chief Executive Officer Herb Vogel said in the statement.
“Congratulations to the Civitas team on building a leading sustainable energy company in the Permian and DJ basins since its inception in 2021. Their operational excellence and talent are reflected in today’s transaction,” he added.
“Together, we look forward to unlocking stockholder value as a unified organization,” he continued.
SM Energy President and Chief Operating Officer Beth McDonald said in the statement, “this merger combines two premier operators and establishes a company with transformative scale in the highest-return U.S. shale basins”.
“By combining two complementary portfolios, we expect to unlock significant free cash flow to strengthen our balance sheet, accelerate stockholder returns, and position us for sustainable growth through every cycle,” McDonald added.
Civitas Interim Chief Executive Officer Wouter van Kempen said in the statement, “today marks a pivotal moment for Civitas and SM Energy as we announce a merger that unlocks new potential to deliver enhanced stockholder value and achieve outcomes beyond the reach of either company alone”.
“By combining our strong technical teams and complementary assets, we gain scale, sharpen our competitive edge, and strengthen our ability to responsibly produce energy that contributes to energy security and prosperity,” van Kempen added.
“This merger positions us to lead with operational and environmental excellence, generate meaningful synergies, and accelerate value creation,” van Kempen continued.
SM Energy Company describes itself as an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and NGLs in the states of Texas and Utah. Civitas Resources Inc describes itself as an independent exploration and production company “focused on the acquisition, development, and production of crude oil and liquids-rich natural gas from its premier assets in the Permian Basin in Texas and New Mexico and the DJ Basin in Colorado”.
Analyst Take
“With crude persistently below $65 per barrel, a second set of public E&Ps have decided the best route forward is corporate consolidation”.
That’s what Andrew Dittmar, principal analyst at Enverus Intelligence Research (EIR), said in a statement sent to Rigzone analyzing the SM Energy-Civitas deal.
“SM and Civitas are combining to form a public company with an enterprise value approaching $13 billion based on the pre-deal share prices and operations across four basins,” he added.
“The deal follows the August combination of Crescent Energy and Vital Energy, which valued the latter at just over $3 billion,” he continued.
“Corporate M&A may screen more attractive for buyers given a lack of private assets available and higher asking prices in asset M&A markets versus where equity markets are currently valuing public companies,” he noted.
In the analysis, Dittmar went on to state that, “unlike acquisitions from private equity largely geared towards expanding or high grading inventory, these public mergers look focused on achieving synergies to operate more efficiently and deleveraging a company with higher debt”.
“With synergies so key to success in E&P corporate mergers, investors will closely scrutinize that potential,” Dittmar warned.
“A lack of operational overlap is a possible point of concern with just the Midland Basin sharing assets between the two companies and those largely positioned in different parts of the play,” he said.
“That is a general challenge to putting corporate deals together despite more favorable prices for buyers in equity markets relative to M&A asset markets,” Dittmar added.
Dittmar also pointed out in the analysis that the second component of the deal will be deleveraging towards a target of 1.0x net debt.
“Possible levers to accelerate or support deleveraging include reducing activity levels in a weaker commodity price environment or asset sales,” he said.
“Supporting asset sale efforts is a strong appetite for assets from multiple refunded private equity teams looking to build new positions amid limited opportunities,” he added.
“However, it can be challenging for public companies to identify positions that are both likely to draw buyer interest at a favorable valuation and that a company is willing to part with while preserving its hard-won operated inventory,” he continued.
The merger moves fourth quarter 2025 deal activity to just under $10 billion, according to Dittmar, who highlighted that this ties third quarter value with two months left to go.
“As anticipated, gas M&A in the form of JERA’s purchase of Haynesville assets for $1.5 billion from GEP and Williams and now this corporate deal are powering the rebound,” Dittmar said.
“Moving forward, corporate consolidation amid smaller sized oil-focused companies and gas M&A remain the best opportunities for deals,” he added.
“There could also be an uptick in public company non-core asset sales to accelerate deleveraging and navigate lower crude, both from companies that have participated in corporate deals and companies that remain standalone operations,” he noted.
“Market participants seem more comfortable with the outlook for commodity prices and are turning to M&A to position themselves for success, whether that is securing gas supply as prices strengthen or merging oil companies to be better positioned to navigate low crude with synergies and deleveraging,” Dittmar went on to state.
EIR describes itself as a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries.
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