SM Energy Amends 10-Q, Details $79M Merger Termination Fee

TL;DR

**SM Energy's merger with Civitas is a high-stakes gamble with significant dilution and a hefty $79M termination fee if it falls apart, making it a risky bet for investors.**

AI Summary

SM Energy Co (SM) filed a 10-Q/A on November 4, 2025, solely to correct a typographical error in the risk factors related to a termination fee under its Merger Agreement with Civitas. The amendment clarifies that SM Energy would be required to pay a termination fee of approximately $79.0 million to Civitas under specific conditions, including a material breach by SM Energy and a subsequent competing transaction within 12 months. The filing also details that SM Energy anticipates issuing approximately 126.3 million shares of its common stock to Civitas stockholders and equity award holders, which could dilute earnings per share and depress the market price. The company expects to complete the merger in the first quarter of 2026, but warns of potential delays due to shareholder and regulatory approvals. SM Energy has incurred non-recurring transaction costs during the three months ended September 30, 2025, and expects these costs to continue into 2026, impacting short-term financial performance. The company also highlighted risks associated with integrating Civitas's business, including potential disruptions, unforeseen liabilities, and the inability to retain key personnel, which could hinder the realization of anticipated merger benefits.

Why It Matters

This amended filing provides crucial clarity on the financial implications of the pending merger with Civitas, specifically the $79.0 million termination fee, which directly impacts SM Energy's financial risk profile. For investors, the potential issuance of 126.3 million new shares represents significant dilution, which could pressure SM's stock price and earnings per share, making future returns less certain. Employees and customers of both companies face uncertainty regarding integration challenges and potential disruptions, while the broader market will watch how this merger, if completed, reshapes the competitive landscape in the energy sector, particularly given the integration risks and the need to retain key personnel.

Risk Assessment

Risk Level: high — The risk level is high due to the potential issuance of approximately 126.3 million new shares, which could significantly dilute existing shareholders and depress the market price. Furthermore, the $79.0 million termination fee represents a substantial financial penalty if the merger fails under specific conditions, adding considerable downside risk to SM Energy's financial condition.

Analyst Insight

Investors should carefully evaluate the potential for significant share dilution from the 126.3 million new shares and the $79.0 million termination fee. Consider reducing exposure or hedging against potential downside if the merger faces further hurdles or fails to deliver anticipated synergies, as integration risks are clearly outlined.

Key Numbers

• $79.0 million — Termination fee (Payable by SM Energy to Civitas under specific merger termination conditions)
• 126.3 million — Shares of common stock (Anticipated issuance by SM Energy to Civitas stockholders and equity award holders in connection with the merger)
• 114,554,192 — Shares of common stock outstanding (As of October 22, 2025, prior to the merger)
• First quarter of 2026 — Expected merger completion (Anticipated timeline for the SM Energy-Civitas merger)
• September 30, 2025 — Quarterly period ended (Period covered by the 10-Q/A filing)
• November 3, 2025 — Original Filing Date (Date of the initial 10-Q filing before amendment)
• November 4, 2025 — Amendment Filing Date (Date the 10-Q/A was filed)

Key Players & Entities

• SM Energy Co (company) — Registrant filing the 10-Q/A
• Civitas (company) — Merger partner with SM Energy Co
• Herbert S. Vogel (person) — Chief Executive Officer of SM Energy Co
• A. Wade Pursell (person) — Executive Vice President and Chief Financial Officer of SM Energy Co
• Alan D. Bennett (person) — Vice President - Controller of SM Energy Co
• SEC (regulator) — Securities and Exchange Commission
• New York Stock Exchange (regulator) — Exchange where SM Energy common stock is registered
• Sarbanes-Oxley Act of 2002 (regulator) — Act requiring certifications from officers

FAQ

Risk Factors

• Merger Termination Fee [high — financial]: SM Energy may be required to pay a termination fee of approximately $79.0 million to Civitas under specific conditions, including a material breach by SM Energy and a subsequent competing transaction within 12 months. This fee represents a significant financial risk if the merger is terminated under these circumstances.
• Shareholder Dilution [high — financial]: SM Energy anticipates issuing approximately 126.3 million shares of its common stock to Civitas stockholders and equity award holders. This substantial issuance could dilute earnings per share and potentially depress the market price of SM Energy's stock.
• Merger Integration Challenges [medium — operational]: Integrating Civitas's business presents risks such as potential disruptions, unforeseen liabilities, and the inability to retain key personnel. These challenges could hinder the realization of anticipated merger benefits and impact operational efficiency.
• Transaction Costs [medium — financial]: SM Energy has incurred and expects to continue incurring non-recurring transaction costs related to the merger into 2026. These costs will negatively impact short-term financial performance.
• Merger Completion Uncertainty [medium — regulatory]: The merger's consummation is subject to conditions like shareholder and regulatory approvals, which may not be satisfied or completed on a timely basis, or at all. This uncertainty could lead to delays or the failure to complete the merger.
• Breach of Merger Agreement [high — legal]: A material breach of the merger agreement by SM Energy could trigger a termination fee payable to Civitas. This highlights the legal and financial ramifications of non-compliance with the agreement's terms.

Industry Context

The oil and gas industry is characterized by significant capital expenditure, commodity price volatility, and increasing regulatory scrutiny. Companies often pursue mergers and acquisitions to gain scale, access new reserves, or achieve operational efficiencies. The current environment may favor consolidation, but integration risks and financing remain critical considerations.

Regulatory Implications

The merger is subject to shareholder and regulatory approvals, indicating potential hurdles in the completion process. Delays or rejections from regulatory bodies could significantly impact SM Energy's strategic plans and financial outlook.

What Investors Should Do

1. Monitor merger progress and regulatory approvals closely.
2. Assess the impact of potential share dilution on EPS.
3. Evaluate the financial risk of the termination fee.
4. Analyze integration risks and their potential impact on synergy realization.

Key Dates

• 2025-11-04: 10-Q/A Filing — Corrected a typographical error in risk factors related to the Civitas merger termination fee.
• 2025-10-22: Shares Outstanding Record — Reported 114,554,192 shares of common stock outstanding prior to the merger.
• 2025-09-30: Quarter End — Period covered by the 10-Q/A filing, during which transaction costs were incurred.
• 2026-01-01: Expected Merger Completion — Anticipated timeline for the SM Energy-Civitas merger, subject to approvals and conditions.

Glossary

10-Q/A

An amended quarterly report filed with the SEC to correct errors or omissions in a previously filed 10-Q. (This filing is an amendment to correct a specific detail about the merger agreement.)

Merger Agreement

A contract outlining the terms and conditions for the combination of two companies. (The filing clarifies a specific clause within the merger agreement with Civitas, particularly regarding termination fees.)

Termination Fee

A penalty paid by one party to another if a contract, such as a merger agreement, is terminated under certain conditions. (SM Energy may owe approximately $79.0 million if the merger with Civitas is terminated due to specific breaches.)

Dilution

The reduction in the value of existing shareholders' equity resulting from the issuance of new shares. (The anticipated issuance of 126.3 million new shares could dilute the earnings per share for SM Energy's current stockholders.)

Non-recurring Transaction Costs

Expenses incurred specifically for a one-time event, such as a merger or acquisition, that are not expected to recur. (SM Energy incurred these costs in Q3 2025 and expects them to continue, impacting profitability.)

Year-Over-Year Comparison

This filing is an amendment to a prior 10-Q, solely to correct a typographical error regarding the merger termination fee. Therefore, direct year-over-year comparisons of key financial metrics are not applicable based on this specific amendment. The primary focus remains on the risks and potential impacts of the pending merger with Civitas, including share dilution and transaction costs.

Key Financial Figures

• $0.01 — ange on which registered Common stock, $0.01 par value SM New York Stock Exchange
• $79.0 million — pay a termination fee of approximately $79.0 million to Civitas if (i) the Merger Agreement

Filing Documents

• sm-20250930.htm (10-Q/A) — 53KB
• exhibit311certificationhvo.htm (EX-31.1) — 3KB
• exhibit312certificationwpu.htm (EX-31.2) — 3KB
• sm-20250930_g1.jpg (GRAPHIC) — 87KB
• 0000893538-25-000147.txt ( ) — 409KB
• sm-20250930.xsd (EX-101.SCH) — 2KB
• sm-20250930_lab.xml (EX-101.LAB) — 29KB
• sm-20250930_pre.xml (EX-101.PRE) — 17KB
• sm-20250930_htm.xml (XML) — 4KB

OTHER INFORMATION

PART II. OTHER INFORMATION

RISK FACTORS

ITEM 1A. RISK FACTORS Risks Related to the Pending Merger The Company's stockholders and Civitas ' stockholders, in each case as of immediately prior to the Merger, will have reduced ownership in the combined company. Based on the number of issued and outstanding shares of Civitas common stock as of October 31, 2025, and the number of issued and outstanding Civitas equity awards currently estimated to be payable in shares of the Company's common stock in connection with the Merger, the Company anticipates issuing approximately 126.3 million shares of Company common stock pursuant to the Merger Agreement. The actual number of shares of Company common stock to be issued pursuant to the Merger Agreement will be determined at the completion of the Merger based on the number of shares of Civitas common stock issued and outstanding immediately prior to such time and the number of issued and outstanding Civitas equity awards payable in shares of Company common stock in connection with the Merger. The issuance of these new shares could have the effect of depressing the market price of the Company's common stock, through dilution of earnings per share or otherwise. Any dilution of, or delay of any accretion to, the Company's earnings per share could cause the price of the Company's common stock to decline or increase at a reduced rate. The consummation of the Merger is subject to a number of conditions that may not be satisfied or completed on a timely basis or at all. Accordingly, there can be no assurance as to when or if the Merger will be completed, and the failure to complete the Merger could have a material adverse effect on our business, financial condition, or results of operations. Although we expect to complete the Merger in the first quarter of 2026, there can be no assurances as to the exact timing of the closing or that the Merger will be completed at all. The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions cont

EXHIBITS

ITEM 6. EXHIBITS The following exhibits are filed or furnished with, or incorporated by reference into this report: Exhibit Number Description 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS) _____________________________________ * Filed with this report. 4

SIGNATURES

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SM ENERGY COMPANY November 3, 2025 By: /s/ HERBERT S. VOGEL Herbert S. Vogel Chief Executive Officer (Principal Executive Officer) November 3, 2025 By: /s/ A. WADE PURSELL A. Wade Pursell Executive Vice President and Chief Financial Officer (Principal Financial Officer) November 3, 2025 By: /s/ ALAN D. BENNETT Alan D. Bennett Vice President - Controller (Principal Accounting Officer) 5

View Full Filing

View this 10-Q/A filing on SEC EDGAR