* Santos invites bids amid strategic review
* CEO Knox to be replaced as Gladstone LNG starts up
* Half-year profit dives 88 percent, misses forecasts
* Shares up 2 pct after plumbing 12-year low (Adds CEO, fund manager comments)
By Sonali Paul
MELBOURNE, Aug 21 (Reuters) - Australia's Santos Ltd STO.AX put its assets on the block after being approached by unnamed parties and moved to replace its chief executive, just as its flagship $18.5 billion Gladstone liquefied natural gas project is set to start up.
Santos on Friday appointed Peter Coates as executive chairman following a one-third slide in its share price this year, and said it was looking for a successor for Managing Director David Knox.
Coates will lead a strategic review, with Deutsche Bank (XETRA:DBKGn) and Lazard advising, with Santos saying parties had expressed interest in some of its assets and "strategic initiatives".
The company said it expected more interest after Friday's announcement.
"No options will be ruled out from consideration," Coates said in a statement.
Santos' shares slid 8 percent in early trade to a 12-year low of A$5.18, but recovered to trade up 2.5 percent.
Knox declined to comment on any of the approaches and gave no deadline for Coates' review, but said it was urgent, given the impact of falling oil prices on Santos' shares.
"You can be absolutely assured he's going to turn over every stone and drive this with real pace and vigour over the coming months," Knox told analysts on a conference call.
Santos has been under pressure to shore up its balance sheet since oil prices began sliding last year and has opted to slash costs and rather than sell new shares to boost its funding, spooking investors.
Its net debt of A$8.8 billion is now well above its A$5.7 billion market value.
"The investment thesis for Santos is based on higher oil prices. I can place that bet with lower risk through other vehicles, given the significant amount of debt they've got and that equity holders take on the losses if the strategy is wrong," said Paul Phillips, a partner at Perennial Growth Management.
Santos had been counting on output from its share of the Papua New Guinea LNG project, which began exporting last year, and a late-September start-up for the Gladstone LNG project to boost its coffers, but weak oil-linked LNG prices have hammered earnings.
On Friday it reported a worse-than-expected 88 percent slide in underlying net profit for the six months to June to A$32 million ($23 million).
It cut its interim dividend by a quarter to 15 cents a share.
Gladstone LNG is one of the world's first three coal seam gas-to-LNG projects, all in Australia's Queensland state and all starting up just as oil prices have sunk to 6-1/2 year lows.
($1 = 1.3633 Australian dollars)