SM Energy and Civitas Resources will be merging in an all-stock transaction, including net debt, valued at $12.8 billion. 

The combined company will hold about 823,000 net acres across popular U.S. shale basins, which will be primarily focused on the Permian Basin and expansion in the Denver-Julesburg Basin, and is expected to produce over $1.4 billion in free cash flow for this year, SM Energy said. 

As part of the acquisition, SM Energy stockholders will own about 48% of the combined company at the closing of the deal, and Civitas shareholders will receive 1.45 shares of SM Energy common stock. 

The combined entity will create a new shale giant that will continue to function as SM Energy. Additionally, the company will be headquartered in Denver, and the transaction is expected to close in the first quarter of next year.   

Following the acquisition, SM Energy will hold control of the new 11-board of directors, which consists of six directors from SM Energy and five from Civitas.  SM Energy’s director Julio Quintana, will serve as non-executive chairman, SM Energy said. 

SM Energy’s CEO Herb Vogel will lead the combined company; meanwhile, the CEO transition to Elizabeth McDonald remains “on track.” Vogel is expected to retire from his position as CEO of SM Energy on March 1, 2026. 

As of early September, McDonald has been appointed as president and COO. SM Energy’s board of directors plans to promote McDonald to CEO and president, following Vogel’s retirement. 

“This merger combines two premier operators and establishes a company with transformative scale in the highest-return U.S. shale basins,” McDonald said. “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.” 

In its third-quarter earnings, Civitas Resources posted a net income of $177 million, operating cash flow of $860 million, and adjusted free cash flow of $254 million.