Centennial Resource Development has agreed to buy Colgate Energy for about $7 billion in one of the largest transactions in the upstream sector so far this year that will create a major pure-play operator in the Permian basin in the US.

Centennial said the proposed “merger of equals” values Colgate at $3.9 billion.

The US independent is using $525 million in cash and 269.3 million shares of company stock to fund the transaction, which includes the assumption of about $1.4