Sabine and Forest announced an all-stock transaction that would combine their assets in East Texas, including the Eagle Ford shale basin.
Sabine shareholders will hold a 73.5 percent stake in the parent company Sabine Oil & Gas Corp., which will have headquarters in Houston.
In April, the U.S. Energy Information Administration said it expected a net increase of 71,000 barrels of oil per day from shale basins in the country. The Eagle Ford shale area in Texas is expected to lead in terms of oil production with a 2.3 percent increase from April to May.
Combined, Sabine and Forest produce an estimated 345 million cubic feet equivalent, of which 65 percent is natural gas.
The new business entity will be lead by Sabine's current management team. Forest Oil will remain in existence as a Sabine subsidiary.