Premier Oil wants to buy the North Sea assets of the troubled Canadian exploration group Oilexco for $505m (£347m) in cash.
The deal will be funded in part by a £171m rights issue offering Premier investors four new shares at 485p for every nine held, a discount of 49 per cent on Tuesday's closing price. The rest will come from new debt facilities.
Oilexco, which is listed in London and Toronto, has been hit by plummeting oil prices and the scarcity of credit finance. The group abandoned an attempt to raise $186m in bond and shares in November and put its UK arm into receivership in January after its banks said they were no longer willing to advance funds.
Premier will acquire Oilexco North Sea Ltd free of debt and infrastructure commitments. The deal will add 13,700 barrels of oil equivalent (boe) to Premier's daily production this year, and some 60 million boe to the group's reserves.
The announcement of the proposal pushed Premier's shares up by more than 10 per cent to 1,055p yesterday.