Centennial Resource Development Inc. and Colgate Energy Partners III LLC have agreed to a merger of equals, the companies said on Thursday, creating a $7 billion Permian Basin-focused US oil and gas producer.

The deal comes when global crude prices have surged after sanctions on big producer Russia following its invasion of Ukraine, helping create attractive corporate valuations after years of financial underperformance.

Reuters reported in December that the private equity owners of Colgate Energy were preparing to float the shale oil producer on the stock market at a valuation approaching $4 billion.

Shares of Centennial, founded by shale pioneer Mark Papa, rose 4 percent to $7.79 in premarket trade.

The company last year was seeking buyers for properties covering about 6,000 net acres in the southern Delaware basin of Texas, according to the company managing the sale.

The deal will create the largest exploration and production company focused on the Delaware Basin, the westernmost shale field within the Permian, the companies said on Thursday, with current production of about 135,000 barrels of oil equivalent per day.

The deal is expected to close in the second half of 2022, following which existing Centennial shareholders will own about 53 percent of the combined company and existing Colgate owners the rest.

The merger values Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash and the assumption of about $1.4 billion of Colgate’s outstanding net debt.