Civitas Eyes Strategic Merger With SM Energy Amid Permian Boom

Per Bloomberg, Civitas Resources, Inc. CIVI, which has been exploring strategic options including a possible sale, is reportedly in advanced talks with SM Energy Company SM for a merger of equals. The proposed deal, still under discussion, could create a combined entity valued at more than $14 billion, including debt, one of the largest oil and gas mergers of the year.

Civitas, currently carrying a Zacks Rank #5 (Strong Sell), was formed in 2021 through the merger of Bonanza Creek Energy and Extraction Oil & Gas — a product of industry consolidation. Since then, the company has expanded into one of the largest independent shale producers in the United States, fueled by a series of strategic bolt-on acquisitions — including Crestone Creek Resources, Vencer Energy and Bison Oil & Gas — as well as asset purchases from Hibernia Energy III and Tap Rock Resources.

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Consolidation Accelerates in Permian & Beyond

Recently, the Mergers and Acquisitions (M&A) activity of mid-sized operators to pursue scale and efficiency in the Permian and beyond is gaining momentum. The abovementioned announcement adds to the ongoing trend of shale consolidation, following a series of major M&A deals in recent years — most notably EOG Resources, Inc.’s EOG $5.6 billion acquisition of Encino and Viper Energy, Inc.’s VNOM $4.1 billion purchase of Sitio Royalties over the past two quarters. In recent months, Crescent Energy’s $3.1 billion acquisition of Vital Energy further emphasized the ongoing trend. A Civitas-SM Energy tie-up would unite two well-positioned public players in the basin, expanding their footprint and operational leverage.

Complementary Assets Across Key U.S. Basins

Civitas, valued at about $3.2 billion, operates across roughly 141,000 net acres in the Permian, while SM Energy’s 110,000-acre position lies in the prolific Midland Basin. Beyond the Permian, SM’s assets span the Eagle Ford shale in South Texas and Utah’s Uinta Basin, while Civitas maintains a strong hold in Colorado’s Denver-Julesburg Basin.

Reshaping Portfolios & Leadership

Civitas has been streamlining operations through asset sales to reduce debt, including divesting lower-margin properties in Colorado. The company recently underwent a leadership change, with Wouter van Kempen stepping in as interim CEO in August, signaling a strategic reset as it considers transformational opportunities like the SM Energy merger.

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This article originally published on Zacks Investment Research (zacks.com).

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