SCHEDULE: Kimmeridge Backs Civitas-SM Energy Merger

Kimmeridge Energy Management Company, LLC has filed a Schedule 13D, disclosing its beneficial ownership in Civitas Resources, Inc. and its agreement to vote in favor of the proposed merger with SM Energy Company.

Summary

• Kimmeridge Energy Management Company, LLC (the "Reporting Person") filed a Schedule 13D regarding its beneficial ownership of Common Stock in Civitas Resources, Inc. (the "Issuer").
• The Reporting Person beneficially owns 5,011,771 shares of Common Stock, representing 5.9% of the outstanding shares as of October 31, 2025.
• This ownership is based on 85,303,179 shares outstanding as of October 31, 2025, as reported in the Merger Agreement.
• The aggregate purchase price for the shares reported was $82,111,737, funded by the working capital of the Kimmeridge Funds.
• On November 2, 2025, Civitas Resources, Inc. entered into a Merger Agreement with SM Energy Company and its subsidiary, Cars Merger Sub, Inc., for a two-step merger where Civitas will become a wholly-owned subsidiary of SM Energy, and then merge into SM Energy.
• In connection with the merger, Kimmeridge Chelsea, LLC (an affiliated fund) entered into a Voting Agreement on November 3, 2025, committing to vote its beneficially owned shares in favor of the merger-related matters.
• The Voting Agreement has specific termination conditions, including the effective time of the merger, termination of the Merger Agreement, mutual consent, a Company Adverse Recommendation Change, or any material adverse modification to the Merger Agreement without Kimmeridge Chelsea's consent.
• Transactions within the past 60 days include sales of 150,000 shares at $34.31 on 10/03/2025, 10,745 shares at $34.81 on 10/06/2025, and 1,000,002 shares at $34.00 on 10/31/2025 (delivery pursuant to put options).
• As of September 30, 2025, the Reporting Person was a Schedule 13G filer, beneficially owning 6,172,518 shares, representing 6.7% of outstanding shares.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While Kimmeridge is selling some shares, their commitment to vote in favor of the merger indicates strategic alignment with a significant corporate event. The reduction in stake could be part of portfolio rebalancing or option exercise, not necessarily a negative outlook on the merger itself. The primary purpose is to disclose beneficial ownership and voting agreement related to a merger.

Positives

• Kimmeridge Energy Management Company, LLC has committed to support the merger between Civitas Resources, Inc. and SM Energy Company through a Voting Agreement.
• The acquisition of securities was for investment purposes, indicating confidence in the underlying asset or the merger outcome.

Negatives

• Kimmeridge has reduced its beneficial ownership percentage from 6.7% as of September 30, 2025, to 5.9% as of October 31, 2025.
• Recent transactions include significant sales of shares, including 1,000,002 shares delivered pursuant to put options on October 31, 2025, at $34.00 per share.

Risks

• The Voting Agreement can terminate under several conditions, including the termination of the Merger Agreement, a Company Adverse Recommendation Change, or material adverse modifications to the Merger Agreement without Kimmeridge Chelsea's consent, which could impact the certainty of the merger.
• The Reporting Person may increase or decrease its position in the Issuer, or enter into transactions to increase or hedge economic exposure, which could introduce volatility or uncertainty regarding its long-term commitment.

Future Outlook

The Reporting Person intends to continuously review its investments in Civitas Resources, Inc. and may adjust its position by purchasing or selling securities, including through derivative instruments or Rule 10b5-1(c) plans, based on various factors such as the Issuer's financial position, strategic direction, market conditions, and other investment opportunities. It may also formulate new plans or proposals regarding its investment.

Management Comments

• The Reporting Person acquired the securities reported herein for investment purposes.

Industry Context

This filing relates to the ongoing consolidation within the oil and gas exploration and production (E&P) sector, where companies are seeking scale and operational efficiencies through mergers and acquisitions. Kimmeridge Energy Management Company, as an investment adviser specializing in the energy sector, is actively participating in this trend by supporting strategic transactions like the Civitas-SM Energy merger.

Stakeholder Impact

• Shareholders of Civitas Resources, Inc.: The Voting Agreement from a significant shareholder like Kimmeridge provides additional support for the proposed merger, potentially increasing the likelihood of its approval.
• Shareholders of SM Energy Company: The merger, if completed, will result in Civitas becoming a wholly-owned subsidiary of SM Energy, impacting SM Energy's operational scale and financial profile.

Next Steps

• The First Company Merger (Merger Sub into Civitas Resources, Inc.) will occur.
• Immediately following, the Second Company Merger (Civitas Resources, Inc. into SM Energy Company) will occur, with SM Energy continuing as the surviving corporation.
• Kimmeridge Chelsea will vote its shares in favor of the matters related to the Mergers, subject to the terms of the Voting Agreement.
• The Reporting Person will continue to review its investment in Civitas Resources, Inc. and may adjust its position.

Key Dates

Recommendation

The filing primarily details a significant shareholder's beneficial ownership and their commitment to vote in favor of a pending merger. While the shareholder has reduced its stake, the overall context is the support for a strategic transaction. For investors, the immediate action would be to hold and await the outcome of the merger, as the filing itself doesn't provide new operational or financial performance data for Civitas, but rather a procedural update on a major corporate event. The previous sales by Kimmeridge could be seen as a slight negative, but the voting agreement is a positive for merger certainty. Therefore, a "hold" recommendation is appropriate until the merger's completion or further material information emerges.

Keywords

Kimmeridge Energy, Civitas Resources, SM Energy, Merger Agreement, Schedule 13D, Voting Agreement, Beneficial Ownership, Oil and Gas, Energy Sector, Investment Adviser