U.S. oil producer Mesquite Energy, which emerged from a contentious bankruptcy last year, is considering a sale of its Catarina Ranch assets in the Eagle Ford region of South Texas, according to three people familiar with the matter.

Divestiture of the assets, spread over 100,000 acres according to Mesquite’s filings, could be a prelude to a sale of the company, one of the people said.

The company, known as Sanchez Energy before its bankruptcy filing, is yet to begin marketing Catarina Ranch, and it could take another month or more to kick-start the process, one of the people said.

Several oil producers have exited the Eagle Ford region to concentrate on the neighboring Permian Basin as they focus on the most profitable locations.

Ovintiv Inc. said in March it would sell its Eagle Ford assets to Validus Energy for $880 million, while Reuters reported that privately owned EP Energy is in talks to sell its assets. Chesapeake Energy Corp. has also considered a sale of its holdings in the region.

Mesquite could still decide to retain the Catarina Ranch assets and no final decision has been made, the people cautioned, requesting anonymity while discussing confidential talks.

The Houston-based company, which has over 400,000 gross acres in South Texas, did not respond to Reuters’ requests for comment.

Sanchez filed for bankruptcy in August 2019, blaming low oil prices and the over $2 billion debt it took on to expand through acquisitions.

The restructuring process was marked by a bitter inter-creditor dispute, which is proceeding despite the company's emergence from bankruptcy, and legal battles with former partners Gavilan Resources and Occidental Petroleum Corp. over contracts and other obligations.

On emerging from bankruptcy in July 2020, Sanchez removed founder Tony Sanchez III as CEO and rebranded itself as Mesquite, dropping the founding family’s name.

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