Civitas and SM Energy Ink $12.8B No-Premium Merger
The all-stock "merger of equals" creates a diversified U.S. shale producer, but the deal structure offers no immediate takeover premium for Civitas shareholders.
Civitas Resources and SM Energy have agreed to combine in an all-stock transaction, creating a U.S. oil and gas producer with a combined enterprise value of approximately $12.8 billion. The deal, announced Monday, aims to build a scaled and diversified competitor in the U.S. shale landscape, but its structure as a “merger of equals” with no takeover premium for Civitas shareholders is drawing investor scrutiny.
Under the terms of the definitive agreement, Civitas (NYSE: CIVI) shareholders will receive 1.45 shares of SM Energy (NYSE: SM) common stock for each share they own. Upon closing, existing Civitas stockholders will own approximately 52% of the combined company, with SM Energy stockholders holding the remaining 48%.
The transaction unites two Denver-based operators with complementary assets across several key U.S. basins, including the Permian, Denver-Julesburg (DJ), Eagle Ford, and Uinta. The companies anticipate the combination will generate between $200 million and $300 million in annual synergies through reduced overhead and improved operational efficiencies.
“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 a statement. “Together, we look forward to unlocking stockholder value as a unified organization.”
Civitas Interim Chief Executive Officer Wouter van Kempen called the announcement a “pivotal moment” for both companies. The move is the latest in a wave of consolidation sweeping the U.S. energy sector as producers seek to build scale, cut costs, and secure prime drilling inventory.
However, the lack of an upfront premium for Civitas shares—a common feature in takeovers—suggests a different strategic calculus that has previously been met with skepticism. When rumors of a potential merger first surfaced in October, shares of Civitas fell 5%, while SM Energy’s stock declined over 3%, signaling investor unease with the potential deal structure. The all-stock nature of the transaction means shareholder returns are tied entirely to the future performance of the combined entity and the successful realization of projected synergies.
The new company will boast a pro forma production base of approximately 526,000 barrels of oil equivalent per day, based on second-quarter 2025 figures, and an asset footprint covering roughly 823,000 net acres. Leadership from both companies emphasized that the combined entity’s deep inventory of high-return drilling locations and robust free cash flow—projected to exceed $1.4 billion in 2025 on a pro forma basis—will support a durable capital return program for shareholders.
The combined company will operate under a new name to be announced later and will be headquartered in Denver. The board of directors will be composed of seven members from Civitas and six from SM Energy.