HOUSTON, TEXAS (By Isaac Silvestre, Energy Analytics Institute, 20.Nov.2025, Words: 776) — SM Energy Company and Civitas Resources, Inc. announced additional details in connection with their planned merger.
“SM Energy and Civitas Resources will merge in a $12.8bn deal, creating a formidable [exploration & production] E&P company in the Permian, Denver-Julesburg and Uinta basins,” according to East Daley.
“Recent upstream mergers have resulted in reduced drilling as companies prioritize cost savings, and SM/CIVI will follow a similar path,” East Daley said on 20 Nov. 2025 in a research report.
Details around the merger, revealed on 17 Nov. 2025 by SM Energy follow:
Executing the path to superior value
- Management team upon transaction closing. Upon closing of the transaction, a trusted leadership team, with significant industry experience, supported by a world-class technical team, will consist of:
- Beth McDonald, president and chief executive officer
- Wade Pursell, executive vice president and chief financial officer
- Blake McKenna, executive vice president and chief operating officer
- James Lebeck, executive vice president – corporate development and general counsel
- Board of directors upon transaction closing. Upon closing of the transaction, the board of directors will total 11 members and be comprised of six representatives from SM Energy and 5 representatives from Civitas. Julio Quintana will serve as the non-executive chairman. Other members from SM Energy’s current board of directors will include Bart Brookman, Beth McDonald, Ramey Peru, Rose Robeson, and Ashwin Venkatraman. Members from Civitas Resources’ current board of directors will include Morris Clark, Carrie Fox, Billy Helms, Wouter van Kempen, and Howard Willard III.
- Targeted divestiture proceeds of greater than $1bn expected to strengthen balance sheet and Accelerate stockholder return of capital. The company announces a target of at least $1bn of planned divestitures within the first year following the closing of the transaction. This initiative, in addition to identified synergies, is designed to accelerate deleveraging and stockholder return of capital.
- Deeper dive: synergies. Identified and achievable annual expected synergies totaling $200mn, with upside potential to $300mn, are expected to generate meaningful cost savings and margin improvements, enhancing stockholder value. The NPV-10 of the expected synergies is $1.0bn to $1.5bn, representing 22% to 32% of the pro-forma market cap. Synergies across all categories are expected to be actioned in 2026, and at least $200mn will be realized in 2027, with upside for an additional $100mn of potential synergies. Management’s confidence in realizing and maximizing these synergies is underpinned by a commitment to detailed integration planning and proven execution capabilities. Examples are as follows:
- Drilling and completion and operational annual synergies: $100mn–$150mn (2%–3% of total expected category spend). Management has identified opportunities to realize savings in all cost categories across its combined cornerstone Permian assets, along with similar expected savings across its other basins. Applying long-standing and optimized operational processes at Sweetie Peck (since 2006) and RockStar (since 2016) and across the 4 most recent Permian acquisitions from 2023-2025 are expected to result in enhanced capital efficiencies, further amplified by the benefits of doubling in scale. Specifically, in the drilling, completions, and production operations areas, cost benefits are anticipated from optimizing rig and frac fleets (e.g., reduced moves, lower day rates), de-bundling certain services and supplies, integrating supply chains at scale (e.g., OCTG, chemicals), implementing best practices for future wellbore and facility designs, and implementing most recent AI-driven optimization tools (e.g., artificial lift) and remote monitoring across all material acreage positions. Beyond 2027, continuous improvement and new technologies are expected to further reduce well costs and lifting costs, following historical trends.
Additionally, management anticipates improved subsurface development planning to yield stronger individual well performance through optimized lateral placement in stacked pay areas, coupled with enhanced completion designs. SM Energy’s differential geoscience capability has a track record of improving well performance and identifying new undeveloped inventory opportunities. With the merger, these unique capabilities will be applied across an area twice as large with attractive incremental expansion opportunities. - G&A annual synergies: $70mn–$95mn (21%–28% of total expected category spend). Expected to result from a streamlined corporate structure, IT systems integration, office-space consolidation, public company cost savings, and other G&A items.
- Cost of capital annual synergies: $30mn–$55mn (5%–10% of total expected category spend). Expected to include reductions to interest expense upon opportunistic refinancing and debt reduction from synergy-enhanced significant free cash flow generation and planned divestitures.
- Drilling and completion and operational annual synergies: $100mn–$150mn (2%–3% of total expected category spend). Management has identified opportunities to realize savings in all cost categories across its combined cornerstone Permian assets, along with similar expected savings across its other basins. Applying long-standing and optimized operational processes at Sweetie Peck (since 2006) and RockStar (since 2016) and across the 4 most recent Permian acquisitions from 2023-2025 are expected to result in enhanced capital efficiencies, further amplified by the benefits of doubling in scale. Specifically, in the drilling, completions, and production operations areas, cost benefits are anticipated from optimizing rig and frac fleets (e.g., reduced moves, lower day rates), de-bundling certain services and supplies, integrating supply chains at scale (e.g., OCTG, chemicals), implementing best practices for future wellbore and facility designs, and implementing most recent AI-driven optimization tools (e.g., artificial lift) and remote monitoring across all material acreage positions. Beyond 2027, continuous improvement and new technologies are expected to further reduce well costs and lifting costs, following historical trends.
These synergies create a clear path to accelerated deleveraging and enhanced stockholder return of capital.
- Favorable rating agency response. S&P Global Ratings and Fitch Ratings have placed SM Energy on CreditWatch Positive and Rating Watch Positive, respectively, reflecting strong confidence in the post-merger outlook and strengthened credit profile supported by the pro-forma company’s enhanced scale and diversification.
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By Isaac Silvestre reporting from Houston. © 2025 Energy Analytics Institute (EAI). All Rights Reserved.
