AUSTRALIA-listed oil explorer Pryme Energy has raised $4 million through a renounceable rights issue, giving it funds for a Texas-focused drilling campaign.

The company had planned to raise about $5.2 million through the rights issue, which was to see three new shares issued at one cent each for every two held, as well as one free option for every two shares subscribed.

But shareholders only subscribed for 60.5 million new shares and 30.2 million options, raising $604,998.

Patersons Securities, which had underwritten the deal, subscribed for an additional 339.5 million shares and 169.7 million options to bring the total amount raised to $4 million.

There were about 116.7 million shortfall shares and 58.3 million shortfall options under the rights issue.

Pryme said it would use funds raised to pursue the Capitola drilling campaign, pay the costs of the rights issue and contribute to its working capital costs.

Located in the Eastern Shelf of the Permian basin, just north of the town of Sweetwater, Texas, the Capitola oil project contains a number of shallow, stacked formations to depths of 6,000 feet, with established production history from vertical wells.

Pryme plans to start drilling its first two Capitola wells in mid-September, with the company to eventually earn a 75 per cent working interest and 56.25% net revenue interest in 3,777 hectares of oil and gas leases with multiple objectives.

To do this, Pryme must drill nine vertical wells and one horizontal well into the stacked formations in a phased drilling program through to February 2016.

The commitment to drill wells and the payment of cash through to February 2016 is at the sole discretion and option of Pryme aligning payments to the vendor to the success of the project, the company has said.