Warren Resources Inc. said Tuesday that if it can’t reach an out-of-court agreement with its creditors and noteholders about restructuring its debt, the company will likely have to seek Chapter 11 bankruptcy protection.

The announcement comes after Warren has taken various steps to cut costs over the last year as it grapples with low commodity prices. The company detailed more of those measures on Tuesday, saying it would idle its drilling program and spend no capital this year on new wells.

The small cap producer, which brought online its first two Marcellus Shale wells in Pennsylvania last year, announced last month that it would not make a $7.5 million semi-annual interest payment that was due on its 9% senior unsecured notes (see Shale Daily, Jan. 29; Aug. 18, 2015). It elected instead to utilize the 30-day grace period it has to make that payment to initiate negotiations with noteholders.

“If Warren cannot come to a workable agreement regarding out-of-court restructuring, it will have to seek protection from its creditors through a bankruptcy proceeding in order to preserve and maximize value for its stakeholders,” the company said Tuesday.

CEO James Watt said that while the company is taking steps to cut costs, it must “seek further concessions from our various debt holders and vendors to survive what is anticipated to be a lengthy downturn in commodity prices.” First and second lien creditors, along with investors, held about $453 million in Warren debt and senior unsecured notes at the end of last year. The company had $26.8 million in cash at year’s end.

In October, the company moved its corporate headquarters from New York City to Denver (see Shale Daily, Oct. 1, 2015). It closed the New York office and another in Roswell, NM, and eliminated some staff at those locations in a move to save money. Warren said Tuesday that even with a suspended drilling program and a reduction in its 2016 general and administrative costs and lease operating expenses, projected cash expenses for the year are still expected to exceed revenues.

The company produced 980,000 bbl of oil in 2015 and 28 Bcf of natural gas, compared to 22.8 Bcfe of production in 2014, of which about 70% was gas. Warren also has waterflood oilfield recovery operations in California and coalbed methane assets in Wyoming. It did not detail 4Q2015 production. But it is estimating that oil production this year will decline by 18% and natural gas production will decline by 20% from 2015 volumes.

The company’s year-end 2015 proved reserves also dropped dramatically on lower commodity prices, going from 428.1 Bcfe in 2014 to 241.3 Bcfe.