US shale producers SM Energy and Civitas will merge in a $12.8 billion deal

Nov. 3 - SM Energy announced on Monday that it will merge with Civitas Resources in a deal worth about $12.8 billion including debt. This will create one of the biggest independent U.S. producers who will have a dominant position within the Permian basin.

The sale is a sign of a rebound in the dealmaking activity in the shale sector as companies look to scale up in order to combat volatility in energy and equity markets.

Investors prefer steady returns and disciplined spending over rapid growth on an uncertain oil markets.

Civitas shareholders get 1.45 SM Energy shares for every Civitas share. This gives them 52% ownership in the combined company. The deal values Civitas shares at $30.29, which is a 5% increase over the closing price of October 31. This gives it an equity value around $2.81 billion.

In premarket trading, shares of SM and Civitas rose by 2.1% and 2.7% respectively.

The combined company is expected to generate more than $1.4 billion of free cash flow in this year. This includes the Permian, Denver-Julesburg and Denver-Julesburg.

The merged company will retain the SM Energy ticker and name, and continue to be headquartered in Denver.

SM Energy anticipates saving up to $300,000,000 annually through reduced overhead and operational costs. The company will prioritize its free cash flow in order to reduce debt and maintain its 20-cent quarterly dividend.

Herb Vogel, CEO of SM Energy, will be the new leader of the combined company. Six directors will come from SM Energy and five from Civitas.

The transaction is expected to be completed in the first quarter 2026. Reporting by Pooja menon, Sumit Saha, and Pranav mathur in Bengaluru. Editing by Sahal Muhammad

(source: Reuters)