BY Richard Summerfield
In the latest deal in the ongoing consolidation of the US shale industry, Permian Basin explorer SM Energy Co. has agreed to acquire rival Civitas Resources Inc. in an all-stock transaction worth around $2.8bn.
Under the terms of the deal, Civitas shareholders will receive 1.45 shares of SM Energy for each Civitas share held, giving them about 52 percent ownership of the combined company. This values Civitas at about $30.29 per share, a 5 percent premium to its closing price on 31 October, and gives the deal an equity value of roughly $2.81bn. The combined company’s enterprise value will be around $12.8bn, inclusive of each company’s net debt.
Upon completion, which is expected in the first quarter of 2026, the combined company will have a premier portfolio of approximately 823,000 net acres, with the Permian position being the cornerstone. The company will also have a pro forma full-year 2025 consensus free cash flow generation of more than $1.4bn, which will enable sustained capital returns, and increased market capitalisation which will enhance trading liquidity with broader investment appeal.
SM Energy expects to save about $200m annually, and potentially up to $300m, through lower overhead and operating costs. The company plans to prioritise free cash flow to cut debt and to maintain its quarterly dividend of 20 cents per share.
“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,” said Herb Vogel, chief executive of SM Energy. “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. Together, we look forward to unlocking stockholder value as a unified organization.”
“This merger combines two premier operators and establishes a company with transformative scale in the highest-return US shale basins,” said Beth McDonald, president and chief operating officer of SM Energy. “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.”
“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,” said Wouter van Kempen, interim chief executive of Civitas. “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. This merger positions us to lead with operational and environmental excellence, generate meaningful synergies, and accelerate value creation.”
Mr Vogel will lead the combined company, post-close. The company’s 11-member board will include six directors from SM and five from Civitas.
News: US shale producers SM Energy, Civitas to merge in $12.8 billion deal