Oil and gas producers SM Energy and Civitas Resources will combine in a $12.8 billion merger of near equals that will expand SM as a major producer in the booming Permian Basin.
The two Denver-based energy players said Nov. 3 they are combining forces as the oil and gas industry continues to consolidate, and the most prized assets are the needed inventory and scale to continue drilling wells for decades to come. The merger is the biggest U.S. oil and gas acquisition since crude oil prices plunged in the beginning of April following the onset of tariffs and increased production from OPEC.
The deal also will create one of the biggest oil and gas companies led by a woman: The combined entity will be led by SM president and COO Beth McDonald, with SM CEO Herb Vogel set to retire in March.
Neal Dingmann, an energy analyst at William Blair, said in a note: “While we think the Permian position has the ability to drive synergies and that there should be material debt refinancing gains, a merger like this with a lack of overlap across the remaining assets signals a continued need in the E&P (exploration and production) space for inventory anywhere it can be obtained.”
SM Energy focuses primarily on West Texas’s Permian Basin, South Texas’s Eagle Ford Shale, and Utah’s emerging Uinta Basin. Civitas is concentrated in the Permian and Colorado’s DJ Basin.
SM Energy has maintained a steady growth mode of late after expanding into Utah by acquiring XCL Resources last year, while Civitas has struggled, cutting ties with CEO Chris Doyle in August.
While SM is acquiring Civitas, Civitas shareholders actually will own 52% of the combined company after the all-stock deal. At the close of business on Oct. 31, SM held a $2.4 billion market cap compared with Civitas’s $2.67 billion value. The deal holds a $12.8 billion enterprise value, including debt. However, SM board members will hold six board seats in the combined company while Civitas will have five seats. SM chairman Julio Quintana will continue as chair after the merger, which is expected to close in the first quarter of 2026.
“This merger combines two premier operators and establishes a company with transformative scale in the highest-return U.S. shale basins,” McDonald said in the announcement. “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.”
Activist investor Kimmeridge was Civitas’s founding backer when it was created in 2021 through a series of mergers. Kimmeridge remains a major shareholder and has pushed for more industry consolidation in oil and gas.
“The step change in scale coupled with identified operational synergies should enhance long-term value to all shareholders for years to come,” said Kimmeridge cofounder and managing partner Ben Dell in a statement.
SM, founded more than 115 years ago as the St. Mary Parish Land Co. in southern Louisiana, also is the only oil company named after the mother of Jesus.