Two Houston-based exploration and production companies have filed for Chapter 11 bankruptcy protection after launching strategic reviews that found restructuring would be the best option as the industry confronts another volatile commodity cycle.

Halcon Resources Corp. filed last week in the U.S. Bankruptcy Court for the Southern District of Texas, followed by Sanchez Energy Corp., which filed in the same court over the weekend.

Sanchez, which is focused primarily on the Eagle Ford Shale of South Texas, hired a financial adviser late last year to explore strategic alternatives. At the time, the company cited volatile oil and gas prices, along with operational challenges that led to consistent production declines. Those carried over into this year, when the company reported a 4.6% year/year decrease in first quarter production, which came in at 76,267 boe/d.

Sanchez also has assets in the Tuscaloosa Marine Shale of Mississippi and Louisiana, but only 50 of its more than 2,000 gross wells are in the play. The operator said it has enough liquidity, including cash on hand and $175 million in debtor-in-possession (DIP) financing from some of its senior lenders, to continue operating normally during the restructuring process.

The company listed more than $2 billion of total debt in its filing.  GSO Capital Partners LP is sponsoring the plan and would receive a certain percentage of equity. 

Sanchez reported a net loss of $67.3 million (minus 98 cents/share) in the first quarter, compared with a net loss of $5 million (minus 30 cents) in the year-ago period. The company has not yet reported second quarter results.

Permian Basin pure-play operator Halcon, meanwhile, said its prepackaged plan would help it to eliminate more than $750 million in debt and reduce annual interest expense by more than $40 million. Under the plan, senior noteholders would receive 91% of the common stock in the reorganized company. The company last filed for bankruptcy in 2016.

Earlier this year, Halcon said it was exploring its strategic options, including a potential sale or merger. The company announced the review shortly after long-time CEO Floyd Wilson and other corporate officers left the company.

Halcon has received $35 million of DIP financing to help it operate during the bankruptcy, and it could raise up to $165 million when it issues new equity following the proceedings, which are expected to end in October.

Halcon produced 18,055 boe/d in the second quarter, compared with volumes of 12,709 boe/d in 2Q2018. Net losses in 2Q2019 totaled $640.9 million (minus $4.03/share), compared with year-ago net income of $16.3 million.