8-K: Civitas Resources Amends Executive Severance Plan Ahead of SM Energy Merger

Civitas Resources, Inc. has approved an amended executive change in control and severance plan, contingent on the closing of its pending merger with SM Energy Company.

Summary

• The Compensation Committee of Civitas Resources, Inc. approved the Ninth Amended and Restated Executive Change in Control and Severance Plan (the Amended Plan) on December 1, 2025.
• The Amended Plan will become effective immediately prior to the closing of the pending merger between SM Energy Company and Civitas Resources, Inc. (the SM Merger).
• If the SM Merger does not occur, the Amended Plan will not take effect, and the Eighth Amended and Restated Executive Change in Control and Severance Plan, effective January 21, 2022, will remain in effect.
• Key changes in the Amended Plan include a 30-month change in control protection period for Tier 1-4 Executives.
• COBRA payments will be paid in a lump sum on the first business day 60 days following an Eligible Individual's termination date.
• Cash severance for Tier 1-3 Executives will be calculated as a multiple of the sum of their base salary and a deemed target annual bonus equal to 100% of their base salary.
• Severance benefits for Tier 1 Executives post-Change in Control include a lump sum cash payment equal to 300% of the sum of their Base Salary and Target Annual Bonus, plus 24 months of Monthly COBRA Amount.
• Severance benefits for Tier 2 Executives post-Change in Control include a lump sum cash payment equal to 250% of the sum of their Base Salary and Target Annual Bonus, plus 18 months of Monthly COBRA Amount.
• Severance benefits for Tier 3 Executives post-Change in Control include a lump sum cash payment equal to 200% of the sum of their Base Salary and Target Annual Bonus, plus 18 months of Monthly COBRA Amount.
• Severance benefits for Tier 4 Executives post-Change in Control include a lump sum cash payment equal to the sum of their Base Salary and Annual Bonus, plus 12 months of Monthly COBRA Amount.
• Severance benefits for Tier 5 Key Employees post-Change in Control are formula-based, including a lump sum cash payment and a formula-based COBRA amount (up to 12 months).
• Receipt of severance obligations is conditional upon the Eligible Individual tendering their resignation from the Board (if applicable) and executing an irrevocable General Release within 60 days of the Date of Termination.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. It's a standard corporate governance update in anticipation of a merger, providing enhanced benefits for executives, which is positive for them but represents a potential increased cost for the company. The filing itself doesn't contain operational or financial performance news.

Positives

• Enhanced change in control protection period of 30 months for Tier 1-4 Executives provides greater security.
• Lump sum COBRA payments on the first business day 60 days post-termination offer immediate financial support.
• Increased cash severance calculation for Tier 1-3 Executives, based on 100% of base salary as a deemed target annual bonus, provides more substantial payouts.
• The plan ensures that executives receive defined benefits in the event of a qualifying termination following a change in control, providing clarity and incentive for retention during the merger process.

Negatives

• The amended plan could lead to significantly higher severance costs for the company in the event of a change in control and subsequent executive terminations.
• Increased severance packages may be viewed negatively by some shareholders as they represent a potential increase in liabilities without direct operational benefit.

Risks

• The expected timing and likelihood of completion of the Transaction (SM Merger) are uncertain, including the timing, receipt, and terms of required governmental and regulatory approvals.
• There is a risk that anticipated benefits from the Transaction could be reduced or the parties may abandon the Transaction.
• The ability to successfully integrate the businesses of SM Energy and Civitas Resources is not guaranteed.
• The occurrence of any event, change, or other circumstances could give rise to the termination of the Merger Agreement.
• Stockholders of SM Energy or Civitas may not approve the Transaction.
• The parties may not be able to satisfy the conditions to the Transaction in a timely manner or at all.
• The Transaction could disrupt management time from ongoing business operations.
• Announcements relating to the Transaction could have adverse effects on the market price of SM Energy's or Civitas' common stock.
• The Transaction and its announcement could adversely affect the ability of SM Energy and Civitas to retain customers and key personnel, and maintain relationships with suppliers and customers.
• The pending Transaction could distract management of both entities and incur substantial costs.
• Problems may arise in successfully integrating the businesses, potentially leading to the combined company not operating as effectively and efficiently as expected.
• The combined company may be unable to achieve synergies or it may take longer than expected to achieve those synergies.

Future Outlook

The effectiveness of the Ninth Amended and Restated Executive Change in Control and Severance Plan is contingent upon the closing of the pending merger with SM Energy Company. The company anticipates the transaction will occur, but acknowledges various risks and uncertainties that could cause actual results to differ materially, including regulatory approvals, integration challenges, and potential impacts on stock price and personnel retention.

Management Comments

• The Compensation Committee of the Board of Directors of Civitas Resources, Inc. approved the Civitas Resources, Inc. Ninth Amended and Restated Executive Change in Control and Severance Plan.

Industry Context

This announcement is directly related to the ongoing consolidation trend within the oil and gas industry, specifically highlighting the preparatory steps Civitas Resources is taking in anticipation of its merger with SM Energy Company. Such amendments to executive compensation plans are common during significant corporate transactions like mergers, aiming to retain key talent and provide clarity on severance terms post-acquisition.

Corporate Governance

Stakeholder Impact

• **Shareholders:** Potential increase in future severance liabilities for the company, which could impact shareholder value. The merger itself, which this plan is contingent upon, is a significant event for shareholders.
• **Executives (Eligible Individuals):** Significantly enhanced severance and change in control benefits, providing greater financial security and retention incentives during the merger transition.
• **Employees:** No direct impact on general employees mentioned, but the plan defines tiers of executives and key employees, indicating differentiated treatment.

Next Steps

• Closing of the pending merger between SM Energy Company and Civitas Resources, Inc.
• Filing of a registration statement on Form S-4 by SM Energy with the SEC, including a joint proxy statement/prospectus for stockholder approval.
• Stockholders of SM Energy and Civitas Resources will need to approve the Transaction.

Key Dates

Keywords

Executive Compensation, Change in Control, Severance Plan, Merger Agreement, SM Energy, Civitas Resources, Corporate Governance, SEC Filing, 8-K, Executive Benefits