Oil and gas producer Santos has rejected a $7.1 billion takeover offer from a syndicate of ultra-high wealth investors including Middle East and Asian ruling families.

In a statement issued to ASX, Santos said that it had received a $6.88 per share offer from the Bermuda-based investment vehicle, Scepter Partners.

The offer represented a 26 per cent premium to its closing price of $5.44 on Wednesday evening.

Santos said the bid was "opportunistic in nature and did not reflect the fair underlying asset value of the company".

"The proposal was also subject to numerous conditions, some of which would be adverse to Santos's continued evaluation of other alternatives in its current strategic review process," the Santos statement said.

The company's share price jumped by as much as 20 per cent on the news, however eased back to be up just 12 per cent at $6.13 in pre-lunch trading.

Santos has been under pressure from tumbling oil prices and mounting debts associated with its 30 per cent stake in the $22 billion GLNG project in Gladstone.

The project — which is the key growth asset in the Santos portfolio — made its first shipment to Asia last week.

The Adelaide-based company unveiled a strategic review in August to "restore value", but a lack of guidance on the timing of the initiative sent the share price tumbling.

Prior to the bid, Santos had lost almost 60 per cent of its value over the past year.

The oil price collapse has caught Santos at a bad time with its debt expected to peak around $9 billion as the value of many of its productive assets are falling.

Analysts have suggested Santos needs to raise about $2 billion — either by asset sales or capital raising — to shore up its balance sheet.

Apart from the GLNG project, Santos has another jewel in its crown, with a 13.5 per cent stake in the successful PNG LNG project operated by Oil Search.

That stake is estimated to be worth about $7 billion.

Scepter describes itself as a standing syndicate of Asian and Gulf ruling families, ultra-high-net-worth industrialists and sovereign wealth funds.

The key investors include the Brunei Royal Family, while Scepter says it currently has $US14 billion in assets and a backing of more than $US100 billion in net worth among its core stakeholders.

It was formed "to acquire large cap assets with a focus in natural resources, infrastructure, real estate and media and telecommunications".

The head of Scepter's bid team, Anthony Steains, said the proposal provided Santos shareholders with an attractive premium and the certainty of cash in the face of significant future uncertainty.

"Scepter's plan would be to build and grow a significant oil and gas business that advanced the presence of Australian companies in Asia," Mr Steains said.

In a statement supporting the bid, Scepter said it planned to install former Santos chief executive officer John Ellice-Flint as executive chairman of a privatised company if successful.