Today’s brutal oil and gas climate, which has forced spending cuts, mergers and layoffs amid lower oil and gas prices, has claimed another casualty—Sabine Oil & Gas.

The company, which merged with Forest Oil Corp. last year, is the latest oil and gas company to seek Chapter 11 bankruptcy protection. Saddled with more than $2 billion of debt, the news comes less than a week after the Houston-based company amended a forbearance agreement that gave it more flexibility during debt-related discussions with creditors.

“Like many other exploration and production companies, Sabine’s operations have been significantly impacted by the recent and dramatic decline in oil prices, the continued low prices of natural gas, and general uncertainty in the energy market,” the company said. “These macro-economic factors, coupled with Sabine’s substantial debt obligations, resulted in the company’s decision to explore strategic restructuring alternatives to reduce its debt and achieve a sustainable capital structure.”

Oil prices have essentially been sliced in half amid an abundant global supply of oil with not enough demand to keep up with the high pace of production, especially from shale plays in the U.S.

Sabine’s $1 billion acquisition of Forest Oil last year, which created one of the largest energy producers in East Texas, was seen as an opportunity for shareholders of the struggling Forest to take part in the upside potential gained from a larger company with better capital, Forest CEO Patrick McDonald said when the acquisition was announced.

Prior to the merger with Sabine, Forest had been struggling under heavy debt as it sought to enter the various shale plays as they came along, often entering them later in the cycle and paying for second-tier assets. It was heavily gas-weighted, and was hurt by the decline in gas prices. Then it struggled to make the transition to a more oily asset position.

Forest Oil To End 98-Year Run In Merger With Sabine Oil & Gas

Focused onshore in the U.S., Sabine Oil & Gas, owned by private equity firm First Reserve, operates core areas in Texas. The acquisition boosted the combined company’s proved reserves to an estimated 1.5 trillion cubic feet equivalent with about 272,000 acres total in East Texas and the Eagle Ford.

But today’s market conditions proved to be too much for the restructured company to handle.

Earlier this year Sabine and Forest were sued, accused of making the deal to avoid repaying $580 million in debt. At the time Sabine said it was considering alternatives to its capital structures following legal action by bondholders who sought $584 million. It hired financial advisor Lazard and legal advisor Kirkland & Ellis LLP for guidance.

Sabine/Forest Schemed To Avoid Debt, Lawsuit Says

Hart Energy reported in March that lender Wilmington Savings Fund Society accused Forest of setting out to sell just about all of its assets because the 98-year-old company could not afford to make debt payments. In the suit, the lender claimed Forest tried to get around the “change of control” provision on its debt through a scheme. A default and acceleration notice was issued to Sabine after it acquired Forest.

Sabine disputed the accusations in regulatory filings.

The latest 8-K filing, dated July 9, with the U.S. Security and Exchange Commission showed Sabine had a cash balance of about $276.9 million as of May 8. The amount, Sabine said, provides substantial liquidity to fund its current operations. That was reiterated in the bankruptcy announcement July 15.

The action is a step forward in Sabine’s efforts to strengthen its capital structure, Sabine CEO David Sambrooks said.

“We have taken this action to establish a sustainable capital structure and make Sabine a stronger company going forward,” Sambrooks said. “We believe this will provide an orderly path to restructuring our debt and will position Sabine for profitability and long-term success. We intend to move through the process as quickly as possible.”

The company said it expects to conduct business as usual during the restructuring process with no expected impact on daily operations.

“Undertaking this process provides an orderly path forward to better align the company’s balance sheet with changing market dynamics,” Sambrooks added. “We remain committed to maintaining operational excellence and executing within our current strategy—and importantly, we fully expect to continue operating in the ordinary course.”

Sabine is not the only company that has drained its resources amid the shale boom.

Quicksilver Resources filed for bankruptcy in February. American Eagle Energy Corp., BPZ Resources, Dune Energy and Saratoga Resources have also sought refuge in bankruptcy court.

Sabine filed its petitions for Chapter 11 relief in U.S. Bankruptcy Court, Southern District of New York. The filing shows the company has between 25,001 and 50,000 creditors, and has assets worth more than an estimated $1 billion with just as much in liabilities.

A hearing date is scheduled for 11 a.m. July 16.

Sabine said it “continues to engage in constructive discussions with its lenders and debt holders” concerning the financial restructuring plan.

Velda Addison can be reached at vaddison@hartenergy.com or via Twitter @veldaaddison.