U.S. shale producers SM Energy, Civitas to merge in US$12.8 billion deal

SM Energy and Civitas Resources said on Monday they will merge in a deal valued at about US$12.8 billion, including debt, creating one of the largest independent U.S. oil producers that will hold a dominant position in the Permian Basin.

The sale signals a recovery in dealmaking in the shale industry as companies seek scale to tackle volatility in the energy and equity markets.

U.S. shale producers are turning to mergers as investors favor disciplined spending and steady shareholder returns over rapid growth in an uncertain oil market.

Civitas shareholders will get 1.45 shares of SM Energy for each Civitas share, giving them about 52 per cent ownership of the combined company. This values Civitas at about $30.29 per share, a five per cent premium to its closing price on Oct. 31, and gives the deal an equity value of roughly $2.81 billion, according to Reuters calculations.

Shares of SM rose 2.1 per cent and that of Civitas climbed 2.7 per cent in premarket trading.

The combined company will hold about 823,000 net acres across top U.S. shale basins, including Permian and Denver-Julesburg (DJ), and is expected to generate over $1.4 billion in free cash flow this year.

The merged firm will keep the SM Energy name and ticker, and remain headquartered in Denver.

SM Energy expects to save about $200 million annually, and potentially up to $300 million, through lower overhead and operating costs. The company plans to prioritize free cash flow to cut debt and to maintain its quarterly dividend of 20 cents per share.

SM Energy CEO Herb Vogel will lead the combined company. Its 11-member board will include six directors from SM and five from Civitas.

The deal is expected to close in the first quarter of 2026.

(Reporting by Pooja Menon, Sumit Saha and Pranav Mathur in Bengaluru; Editing by Sahal Muhammed)