The confidential merger talks between $61 billion Woodside and $24 billion Santos first came to light in early December.

At the time, analysts said the benefits of a tie-up were largely limited to combining both companies’ LNG assets and reducing some management overheads, giving the combined entity estimated savings between $303 million and $606 million.

They also said it would be difficult for both sets of shareholders to agree on fair value, given Santos’ shareholders were looking for a premium and Woodside’s share price had recently come under pressure.

Santos said in a statement to the ASX that due diligence between the two companies hadn’t revealed enough benefits to support a merger that would be in the best interests of its shareholders.

“Santos has a clear strategy to deliver long-term shareholder value. We have a strong balance sheet and continue to review options to unlock value for shareholders,” the company said.

Santos chief executive Kevin Gallagher told company employees in an internal blog post he was confident Santos’ strategy to backfill and sustain its infrastructure, decarbonise operations and develop low-carbon fuels “is the right strategy at the right time”.

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“We will continue to evaluate options to unlock value for Santos shareholders,” Gallagher said.

The company’s key Barossa project north of Darwin, stymied by legal actions to protect Indigenous cultural heritage, in mid-January won a Federal Court case that allows it to continue laying its export pipeline.

Harriet Kater, from the Australasian Centre for Corporate Responsibility (ACCR), said consolidation is common among big oil and gas companies as the industry declines. The sector is battling the flight of capital to less environmentally harmful investments and the difficult task of decarbonising its operations as the world races to limit the impact of fossil-fuel-induced global warming.

But, she said, “that doesn’t mean every deal makes sense”.

“In the case of Woodside and Santos, investors have struggled to see any strategic rationale for a merger,” Kater said. “The boards of both companies should be prioritising strategies that maximise shareholder value in the face of the energy transition.”

Shareholders will get a chance to question Santos’ board and its chairman Keith Spence – who after six years at the helm is standing for re-election – at the company’s annual general meeting in April.

“The Santos board appears to be rapidly running out of ideas,” Kater said.

For Woodside, she said her organisation had recently published analysis that showed “returning capital to shareholders presents greater upside than pursuing its risky growth portfolio”.