SM Energy and Civitas Resources agree to $12.8 billion all-stock merger

SM Energy Company (NYSE: SM) and Civitas Resources Inc. (NYSE: CIVI) announced they have entered into a definitive merger agreement for an all-stock transaction with a combined enterprise value of approximately $12.8 billion.

Under the terms of the agreement, each Civitas share will be exchanged for 1.45 shares of SM Energy common stock. Following completion, SM Energy stockholders will own approximately 48% of the combined company while Civitas stockholders will own approximately 52% on a fully diluted basis.

The combined company will operate approximately 823,000 net acres across U.S. shale basins, with the Permian position as the cornerstone. Pro forma second quarter 2025 production totaled 526 thousand barrels of oil equivalent per day, with pro forma full-year 2025 consensus free cash flow expected to exceed $1.4 billion.

The companies project annual synergies of approximately $200 million, with potential upside to $300 million. These synergies are expected to come from overhead and general administrative costs, drilling and completion expenses, operational costs, and cost of capital improvements.

Herb Vogel will serve as chief executive officer of the combined company, with the previously announced transition to Beth McDonald remaining on track. The combined company will be headquartered in Denver, Colorado, and continue trading as SM Energy on the New York Stock Exchange.

The board of directors will include 11 members, with six representatives from SM Energy and five from Civitas. Julio Quintana will serve as non-executive chairman.

The combined company plans to maintain a quarterly fixed dividend of $0.20 per share and prioritize free cash flow for debt reduction, targeting 1.0x net leverage by year-end 2027 at $65 per barrel West Texas Intermediate and $3.50 per million British thermal units Henry Hub pricing.

The transaction has received unanimous approval from both companies' boards of directors and is expected to close in the first quarter of 2026, subject to stockholder approvals and regulatory clearances.

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