Two US shale producers, SM Energy and Civitas Resources, agreed this week to an all-stock merger that will create a company worth $12.8bn, inclusive of each company’s net debt.

Under the deal, each common share of Civitas will be exchanged for 1.45 shares of SM Energy common stock, the companies said in a November 3 announcement. This will result in SM Energy stockholders owning roughly 48% of the combined company, while Civitas shareholders will own about 52%. Reuters reported that according to its calculations, this values Civitas at $30.29 per share – representing about a 5% premium to its closing price on October 31 – for an equity value of $2.81bn.

The move comes as no surprise, after Bloomberg reported in early October that Civitas had been considering a sale and exploring a merger with SM Energy. However, Reuters said this week that the premium announced in the deal did come as a surprise after prior reports had suggested the merger could be a no-premium transaction.

"We were surprised by the relative premium that CIVI shares received," an RBC Capital Markets analyst, Scott Hanold, was quoted by Reuters as saying, citing Civitas' higher leverage and less concentrated acreage.

The combined company will own around 823,000 net acres (3,331 square km), with Civitas contributing roughly 498,000 net acres (2,015 square km) while SM Energy contributes about 325,000 net acres (1,315 square km). The combined company’s size will make it a top 10 US independent oil-focused producer, SM Energy and Civitas said in their announcement.

The new entity will have assets across the Permian, Denver-Julesburg (DJ) and Uinta basins, as well as in the Eagle Ford shale. This makes it the latest transaction that will see shale producers with assets beyond the Permian Basin consolidating. Acreage in the core of the Permian has become increasingly scarce, with fewer consolidation opportunities available and companies starting to look at opportunities on a US-wide basis.

"This merger combines two premier operators and establishes a company with transformative scale in the highest-return US shale basins,” stated SM Energy’s president and chief operating officer, Beth McDonald.

The transaction is anticipated to close in the first quarter of 2026.