Updated November 16, 2017 17:08:25

Photo: The takeover approach of $4.55 a share valued Santos at almost $9.5 billion. (Reuters)

Oil and gas producer Santos has revealed it rejected a nearly $9.5 billion takeover bid from a US investment firm led by a former top executive of energy giant Royal Dutch Shell.

The company said US-based Harbour Energy offered $4.55 a share for Santos in August to buy the oil and gas producer via a scheme of arrangement.

"The board rejected the approach on the basis that the indicative price was inadequate and the source of funds were uncertain," Santos said in a statement to the Australian stock exchange.

Santos said it was not currently in discussions with Harbour Energy nor had it received another takeover offer from the firm.

Despite that, news of the offer saw Santos shares soar by 13 per cent to $4.95.

Linda Cook, a former Shell executive, is Harbour Energy's chief executive.

She retired from Shell in 2010 after 29 years with the energy giant.

Hock Goh, who is on the board of Santos, is also on the board of Harbour Energy.

Earlier this month, Harbour Energy bought oil and gas fields from Shell in the North Sea off the UK for $US3 billion.

Harbour Energy is run by Washington-based EIG Global Energy Partners, a private equity firm which invests in energy and energy-related infrastructure around the world, and commodities trader, Noble Group.

It had $US17 billion under management at the end of September.

EIG has invested in small local gas producer Senex Energy.

In 2015, Santos rejected a $7.1 billion takeover bid from Bermuda-based Scepter Partners, a syndicate of wealthy investors including Middle East and Asian ruling families.

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Analysts, such as RBC's Ben Wilson, said the bid shows sentiment around the energy sector has definitely turned.

"We think confirmed reports of a previous indicative bid for Santos from Harbour Energy and a possible higher future bid offer further evidence of rapidly improving sentiment towards the back end of the oil curve and to a recovering LNG market driven by strong Chinese demand," he said.

"It also highlights Santos' strategic assets in the form of underutilised assets in the Cooper Basin and within GLNG."

The oil and gas producer has cut debt and costs as part of an effort to turn around its business.

It operates the Gladstone LNG plant in Queensland and is a partner in the PNG LNG project in Papua New Guinea.

Topics: oil-and-gas, takeovers, company-news, australia, adelaide-5000

First posted November 16, 2017 16:25:38