Sabine Oil & Gas Corp (OTCMKTS:SOGC) Files for Bankruptcy

Following a couple of months of relatively smooth sailing through calmer waters, yesterday Sabine Oil & Gas Corp (OTCMKTS:SOGC) took a massive nose dive. The stock resumed trading with a gap down and went in free fall, to stop a whopping 65% down by the closing bell. This was all precipitated by SOGC filing for Chapter 11 bankruptcy.

SOGC was formerly trading on the NYSE, which explains the share prices visible on a two-year chart. Previously trading as Forest Oil Corp under the FST ticker symbol, SOGC was delisted from the exchange due to failing to maintain required closing price levels, as well as a reverse merger, which in effect helped a private entity turn publicly traded using FST as a vehicle, without following regular ‘going public’ procedure. The NYSE regulatory body considered the move a ‘backdoor listing’ and pointed it out as another reason to delist the company.

The company claims to have spent multiple months trying to figure out some sort of restructuring plan that does not involve court proceedings as free-falling oil prices edged it closer to bankruptcy. Despite a number of last-ditch measures such as selling assets and cutting staff, SOGC did not quite succeed.

The signs were there for a while, even though in early May the company stated it was ready to continue “business in the normal course”. Just ten days later, SOGC announced a forbearance agreement to its second lien term loan facility, which was followed by an immediate analyst downgrade. In mid-June the company announced its decision not to make an interest payment on one of its senior notes due in 2019.

SOGC is entering bankruptcy court today. How the market will react beyond the initial jolt remains to be seen.