[Editor's note: This story was updated to include the transaction's estimated value at 8:41 a.m. CST July 2.]

Camber Energy Inc. (AMEX: CEI) said June 26 it plans to sell a “substantial portion of its assets” to a proposed buyer affiliated with its former CEO that will clear all of the company’s debt.

Based in San Antonio, Camber is an independent oil and gas company with assets within the Hunton Formation in Central Oklahoma and the Permian Basin’s San Andres Play. Additionally, the company closed on an acquisition of Texas Panhandle assets in March.

Camber signed a non-binding letter of intent to sell its assets with a party affiliated with Richard N. Azar II, Camber’s former CEO and board director, and Donnie B. Seay, a current director, in a transaction valued at $37.4 million by BMO Capital Markets. In exchange, the buyers will assume all of Camber’s debt with its bank, International Bank of Commerce (IBC), totaling about $40 million, according to company filings.

If successful, the sale is expected to extinguish all of Camber’s existing bank debt and significantly enhance the company’s balance sheet, said Louis G. Schott, who took over as Camber’s interim CEO following Azar’s resignation June 21.

“This transaction will position the company to improve its balance sheet by substantially reducing or eliminating its long-term liabilities,” Schott said in a statement. “Once this occurs, the company plans to pursue growth in its remaining assets as well as additional acquisition opportunities.”

Schott added he expects the transaction will help Camber regain compliance with the continued listing standards of the NYSE American.

Azar’s resignation was made in connection with his status as a personal guarantor under Camber’s outstanding $40 million bank loan with IBC, which is currently in default. The company entered the loan in August 2016 as part of a roughly $80.7 million acquisition.

The acquisition included working interests in producing properties and undeveloped acreage in Central Oklahoma’s Hunton Formation and marked Camber’s entry into the Midcontinent region. Camber, at the time operating as Lucas Energy, agreed to acquire the assets from 21 different entities and individuals including Segundo Resources.

As part of the agreement, Camber assumed $30.6 million of debt owed by certain sellers to IBC. Additionally, the sellers had the right to appoint three members to Camber’s board, which included Azar, who was a founding partner of Segundo Resources.

Camber said it will retain certain assets from its proposed asset disposition, including a 12.5% production payment and 3% overriding royalty interest in its Central Oklahoma asset in Okfuskee County as well as assets in Glasscock and Hutchinson counties, Texas.

Camber is also evaluating additional acquisition opportunities to further enhance its growth plans, funding permitting, according to the company press release.

The closing of the transaction is subject to customary closing conditions including negotiation of definitive closing documents, approval of IBC and shareholder approval, among others.

Emily Patsy can be reached at epatsy@hartenergy.com.