Santos executive James Baulderstone is confident in the strength of the energy producer's assets. Photo: Philip Gostelow

Embattled energy producer Santos says the sharp fall in its share price is unjustified, arguing strong interest in asset sales has given it confidence the company will recover once oil prices start to lift.

The value of the Adelaide-based company has plummeted by â…” in the last 12 months to just $4.8 billion from more than $13 billion.

But Santos' vice president for corporate development James Baulderstone said he expects volatility in the market to settle as the sales process highlights the strength of its assets. 

Santos's 13.5 per cent stake in the Papua New Guinea LNG project is worth about $6.5 billion alone while its Cooper Basin assets could fetch nearly $3 billion.

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"The market is very jittery and I think people have left the industry because they're worried about volatility. But that means that there's an incredible number of stocks now which are massively undervalued – both in Australia and globally," Mr Baulderstone told Fairfax Media.

"Santos has fundamentally good assets which the market is just not valuing and our job - and the reason for the strategic review – is to focus the market back on the value of our assets."

Santos shareholders have grown nervous about a costly debt-fuelled expansion into liquefied natural gas given the slump in the price of oil from $US115 a barrel last June to current six-year lows of $US47 a barrel.

Santos is due to deliver the first gas from its $US18.5 billion ($25.7 billion) GLNG project in Queensland in the next few weeks with the company confident it will deliver strong cashflow even at current oil prices and help to pay off an $8.8 billion debt mountain.

"We're caught in a situation at the moment where we have a large capital programme because of LNG build, debt, a low revenue number and the market is worried," he said.

"Once GLNG starts up, it starts generating cash even at today's low oil prices. That cash can go in and start to pay that debt sooner rather than later."

Citigroup has previously estimated Santos would need to sell $2 billion to $3 billion of assets – or raise that amount in new equity – to bring gearing down to a more comfortable 30 per cent to 35 per cent by 2017.

While oil prices have remained below $US50 a barrel since April, several potential takeover deals in the sector have been tabled on the expectation oil will rebound strongly over the next few years.

Royal Dutch Shell's $US70 billion offer for BG Group, under review by Australia's competition regulator, is banking on a rebound in crude to $US90 a barrel to make the deal work while Woodside Petroleum's $11.6 billion offer for Oil Search requires a $US75 a barrel oil price to justify a transaction.

"I do believe the cycle has undershot at the moment," Mr Baulderstone said. "The Shell/BG merger and Woodside-Oil Search starts to remind people that these companies are bidding at reasonable oil prices. People are saying it's not going to be a $US40 oil price environment forever. It will come back, it's a question of when."

Santos has shown little appetite to raise fresh equity, instead launching a sales process for its assets as part of a strategic review being led by Mr Baulderstone and executive chairman Peter Coates.

"We've been very happy with the level and quality of indicative proposals we are receiving," Mr Baulderstone said.

Woodside Petroleum, rebuffed by Oil Search earlier in September, is an obvious participant while France's Total and Japan's Inpex Corporation could be other potential buyers.

Santos and Oil Search were singled out by Bernstein Research on Monday for their cost cutting initiatives with capital expenditure falling sharply as their foundation LNG projects come online.

Bernstein said an average of 30 per cent cuts across the Asia Pacific energy sector so far this year beat its expectations and was well ahead of European oil majors, which have on average only managed to trim costs by 15 per cent.

However, research consultancy Wood Mackenzie warned that many oil and gas producers would fail to meet an industry wide target of a 30 per cent cut and needed to look at structural changes to reduce costs.

"The winners, therefore, are likely to be operators with a strong pipeline of near-term projects close to sanction, which are able to take advantage of the trough in costs through 2015-16," Wood Mackenzie said in a research note.