Sabine Files Bankruptcy in New York as Oil Prices Fall
by Linda SandlerDouglas Wong
July 15, 2015 — 5:05 AM EDT Updated on July 15, 2015 — 11:36 AM EDT
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Sabine Oil & Gas Corp., the exploration and production company that merged with Forest Oil Corp. last year, filed for bankruptcy after the price of crude plunged.
The company said in a statement that it’s discussing a consensual financial restructuring plan with lenders and debtholders. Aiming for a quick exit from court, it set a Nov. 12 deadline for the proposal to be filed.
Sabine is the latest casualty of the energy slump, joining American Eagle Energy Corp., Dune Energy Inc. and Quicksilver Resources Inc. in bankruptcy this year. It has sold assets, cut expenses for drilling and new wells and frozen wages to cope with the decline in energy prices, according to court filings.
“Given the severity of the current market conditions and their impact on the company’s cash flow situation, the company has been unable to right-size its balance sheet through cost-cutting and self-help measures alone,” Chief Financial Officer Michael Magilton said in court papers.
The company had about $2.5 billion in assets and $2.9 billion in liabilities as of May 31, according to a Chapter 11 filing Wednesday in New York.
Suit Filed
Sabine’s first action after the filing was to sue one group of creditors to recover assets for another. The assets were shuttled around in the December 2014 merger with Forest Oil, at a time when both companies were already struggling as lower energy prices eroded the value of their assets.
Sabine blamed unnamed hedge funds for delaying a merger that looked better earlier in the year. The funds were betting against Forest Oil bonds, anticipating a profit if the deal didn’t close, it said. At the same time, they bought Forest Oil shares so they could vote them against the merger, Sabine said.
Problems with Forest Oil’s financial controls presented another delay, when an accounting regulator inspected an audit of 2013 results, spurring Ernst & Young to take a second look at past financial reports.
Meanwhile, West Texas Intermediate crude oil prices fell from $103 a barrel in July to $93 in September and $55 in December, it said.
Sabine went ahead with a revised merger at a time when both companies were insolvent, for fear Forest Oil would sue if they didn’t combine, according to the lawsuit.
Forest Oil was founded in 1916 in Pennsylvania and went public in 1969. Sabine, with offices in Houston, was founded as a Delaware company in 2007.
The case is in re Sabine Oil & Gas Corp., 15-11835, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
