(Adds details, analysts' comment, share prices)
By Karolin Schaps
LONDON, Nov 24 (Reuters) - Rockhopper has made a 57.1 million pound ($86.5 million) takeover offer for rival Falkland Oil and Gas, the companies said on Tuesday in a deal that could breathe fresh life into Falklands' exploration which has been hit by weak oil prices.
The all-share offer, which has been approved by directors of both companies, will require Rockhopper to issue nearly 160 million new shares and will give FOGL shareholders around 35 percent of the joint company.
The deal will reinvigorate drilling plans in the Falklands basin, a resource-rich area in the southern Atlantic where exploration remains controversial due to ongoing tensions between Britain and Argentina over the sovereignty of the islands.
The takeover comes just days after Argentina saw a change in leadership as conservative challenger Mauricio Macri won a presidential election on Sunday.
The deal will increase Rockhopper's acreage in the Northern Falklands Basin, home to Premier Oil's giant Sea Lion field where progress has slowed due to weak oil prices.
Premier Oil previously said it would soon start partnership discussions with potential co-investors in Sea Lion and a reshuffle in ownership through Tuesday's deal should make investments more attractive.
"Despite the possible funding concerns over Sea Lion, the deal should reinvigorate interest in the basin," said analysts at Cenkos Securities.
"We see the deal as being strategically sensible and good for both sets of shareholders."
Shares in FOGL were up 4.2 percent at 0829 GMT, while Rockhopper shares were down 1.4 percent.
FOGL Chief Executive Tim Bushell and Chairman John Martin will be joining the Rockhopper board as non-executive directors, the companies said.
FOGL's finances have been under scrutiny after it announced an unsuccessful well drilled at Humpback in the Falklands in late October. Rockhopper said on Tuesday FOGL's cash position was around $8.6 million and debt at $15 million.
The deal is expected to close in the first quarter of 2016.
$1 = 0.6604 pounds Editing by David Holmes and Jason Neely