This morning Santos announced a total package of $3.5 billion in capital initiatives, comprising a $2.5 fully underwritten entitlement issue, a $500 million placement with China's Hony Capital, the sale of its interest in the Kipper field for $520 million, and the appointment a new managing director, current Clough CEO Kevin Gallagher.

The results of today's capital dance will see Santos debt reduced by about a third to a more manageable $6.2 billion, and will leave it with cash and undrawn facilities of some $5.5 billion.

Executive chairman Peter Coates, who led the strategic review from its inception in August, said the plan would put the Santos balance sheet "beyond question", slash debt and help start rebuilding the company's fortunes.

With the debt substantially reduced and a strong liquidity position, Santos the additional capital generated from the initiatives announced this morning would materially improve the company's key credit metrics, and expects Standard & Poor's to confirm today its current BBB credit rating.

"I want to make it clear that the capital initiatives announced today mean that Santos is under no pressure to sell further assets," Coates told analysts this morning.

That said, he added that Santos would continue to consider inbound interest in the normal course of duties, "but only where there is a compelling value case for our shareholders and where it is consistent with the company's strategy".

"The review has shown that we can further streamline the business and enhance financial discipline and the board is absolutely committed to pursuing those opportunities," he said.

"We are very confident that the steps taken today will drive better returns for shareholders by strengthening the company's financial position and underscoring the value of its high quality and diverse asset base.

"The outcomes of the strategic review include an invitation to shareholders to participate in the entitlement offer. They can do so in the knowledge of a reinforced balance sheet and ongoing capital discipline to deliver better shareholder returns despite variable oil price environments."

He said that in light of the positive result of the review, the company had formed the view that a 1-for-1.7 accelerated pro rata renounceable offer at a 34.9% discount was appropriate to raise $2.5 billion.

"The directors believe that it is in the interests of all shareholders to unequivocally strengthen the balance sheet at this time through this issue," Coates said.

"We have been mindful of the fact that Santos has a large and supportive retail shareholder base.

"The structure of this offer enables shareholders to either buy shares at an attractive discount through the entitlement offer, or sell their entitlements for value. No shareholder will be forced to buy shares in the offer," he said.

The offer is being supported by Citigroup, Deutsche Bank and UBS, which are running the bookbuild process.

China-based international private equity firm, Hony Capital, is also pouring in money, but at a premium, which Coates said is a "clear vote of confidence" in Santos' management and assets.

Hony will increase its interest in the Adelaide-based oiler from 1.4% to 7.9% by paying $500 million for 73.5 million new shares at a 15% premium to last closing price $5.91, paying $6.80 per share, a 76.6% premium to the offer price of $3.85 per new share under the entitlement offer.

Hony has also provided binding commitments to take up its full pro-rata entitlement under the entitlement offer. It has agreed not to increase its stake in Santos above 9.9% for three months, and will have its shares locked up for 12 months without Santos approval.

There is no blocking stake and it's signed a three-month standstill agreement.

Coates told analysts this morning that the terms of the Hony placement "clearly show how the incomplete indicative proposal from Scepter for outright control of Santos was materially inadequate and opportunistic".

Mitsui, which a decade ago snapped up an interest in the BassGas project from Santos, will once again ride to Santos' rescue, agreeing to pay $520 million from the sale of its 35% interest in Kipper gas field, in Victoria's Gippsland Basin.

Kipper has been developed as a subsea tie-back to existing processing facilities owned by the Gippsland Basin Joint Venture (ExxonMobil 50%, BHP Billiton 50%) and has been developed as part of the Turrum-Tuna development.

"The sale of Kipper realises good value for this asset despite difficult oil and gas market conditions in recent times," Coates said.

"While the capital initiatives announced today mean that Santos is under no pressure to sell further assets, the strategic review attracted significant interest from substantial oil and gas industry operators and investors.

"We expect inbound interest may continue and we will respond accordingly in the normal course. We will only sell assets where there is a compelling value case for our shareholders and it is consistent with the company's strategy," Coates said.

Santos last week agreed to sell its interest in the Stag field to Malaysia's Sona Petroleum for a reported $70 million.

Coates said the renewed Santos would be driven by priority for improved return on capital performance, and has revised its dividend framework to better reflect the company's exposure to oil-linked LNG pricing and the cyclical characteristics of global oil markets.

It will set future dividends as a payout ratio of earnings, probably at least 40% of underlying net profit after tax, with a target of around 5cps this year.

The company has also reaffirmed its capital expenditure reduction to $1.8 billion this year, down $900 million.

Its 2016 guidance is now $1.2 billion is 33% lower than 2015. In 2016 the company expects to produce between 57-63 million barrels of oil equivalent, with full production from Gladstone LNG expected to account for 6-8MMboe.

The company expects to be cashflow positive in 2016, assuming a $US50 per barrel oil price, although it has warned of the potential for non-cash writedowns of up to $3.4 billion over the next few years if the oil price recovery is less robust than its forecasts.

Santos expected to be in a trading halt until midweek to allow the bookbuild.