Forest Oil Corp.’s (NYSE: FST) emblematic “yellow dog” derrick lantern, the earliest source of light for night drilling and the longtime symbol of the company, is being shuttered.

Private E&P Sabine Oil & Gas LLC and Forest announced May 6 that the Denver company’s 98-year history will end later this year when it merges with Houston’s Sabine in the third- or fourth-quarter of 2014.

Under the merger agreement, Sabine and Forest will combine their businesses in an all-stock transaction to create one of the largest East Texas players. The deal is subject to approval by Forest’s shareholders.

The combined company could well be the “first East Texas pure play,” David Sambrooks, Sabine’s president and CEO, said in a conference call. “It’s starting to look like East Texas is on the right side of the pipeline.”

The combined companies will also have a sizable Eagle Ford position and acreage in the Granite Wash, Permian and Arkoma positions that give the company development and monetization options.

The combined entity, to be called Sabine Oil & Gas Corp., will be a newly formed parent company expected to list on the New York Stock Exchange under the symbol “SABO.”

Sambrooks, former vice president and general manager at Devon Energy Corp., said, “We look forward to our return to the public side.”

Patrick R. McDonald, president and CEO of Forest said the transaction creates a great opportunity for Forest shareholders to participate in the upside potential gained from a larger and better capitalized company.

“Forest’s asset portfolio is an excellent complement with Sabine’s asset portfolio and we have confidence that Sabine’s management team is equipped to deliver exceptional shareholder value through the enhanced opportunities that are embedded in Forest’s assets,” he said.

In addition to a top-tier 207,000 net acreage position in East Texas, the combination of the companies creates a 65,000 net acreage position in the Eagle Ford.

Forest’s acreage is subject to a Schlumberger agreement in which the service company receives a 50% working interest in Forest’s Eagle Ford assets in exchange for a $90 million drilling carry. About $29 million of carry remained as of Dec. 31.

The complementary nature of Sabine’s and Forest’s assets present opportunities to generate savings through operating synergies, benefits of scale and optimized capital allocation, Sambrooks said.

The combined company will have estimated proved reserves of 1.5 trillion cubic feet equivalent, 71% gas, as of Dec. 31. Estimated daily production will be 345 million cubic feet equivalent (MMcfe), 65% gas, for 2014.

Sambrooks said the new company will have the liquidity to fund its drilling program through 2015 without accessing capital markets. Sabine is backed by private equity firm First Reserve.

After completion of the merger, Sabine unit holders will own approximately 73.5% of the new entity and Forest shareholders will own about 26.5%. The new company will be headquartered in Houston and led by Sabine’s current executive management team.

The transaction is expected to be tax-free to Forest’s shareholders.

For Forest, the merger ends a long struggle for a company founded in 1916 in Pennsylvania, incorporated in 1924 and publicly traded since 1969. The company later relocated to Denver.

In the first quarter of 2014, Forest reported a net loss of $21 million, or $(0.18) per diluted share, compared to net earnings of $106 million, or $0.89 per share in the fourth quarter of 2013. In the first quarter of 2013, the company reported a net loss of $68 million a share or ($0.59).

In October, the company sold about half of its reserves in Texas for $1 billion, receiving more than half of its then market capitalization of $694 million. The company planned at the time to focus more on the Eagle Ford. In 2013, the company also sold Permian Basin acreage and South Texas properties.

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