OSH Oil Search Limited

MELBOURNE, Australia—Woodside Petroleum Ltd. abandoned its attempt to create a regional oil-and-gas champion with the purchase of rival Oil Search Ltd.

In a brief statement Tuesday, the energy company said it had withdrawn its proposal to merge with Oil Search through an all-stock takeover offer that valued the Papua New Guinea-based company at 11.64 billion Australian dollars (US$8.46 billion).

Oil Search had already rebuffed Woodside's offer—made in early September—arguing that it was "highly opportunistic" and grossly undervalued the target's growth potential.

Woodside Chief Executive Peter Coleman had previously said the offer was fair and fully priced. However, the company was silent on what its next steps might be, raising concerns among some investors that it might increase the offer price.

On Tuesday, the Perth-based company said it wasn't pursuing any alternative transactions to combine the two businesses. It didn't elaborate, but the implication is that it wasn't discussing any other form of arrangement that would merge the companies' operations.

Oil Search's main asset is a 29% stake in a US$19 billion liquefied-natural-gas project in Papua New Guinea known as PNG LNG, which is led by Exxon Mobil Corp. It is also involved in other gas fields in the poor South Pacific nation, including a project being developed in partnership with Total SA of France.

For Woodside, the deal would have increased its bet on natural gas and the continuing growth in Asia's appetite for cleaner-burning fuels at a time of low prices.

It was also viewed by some analysts as an answer to Woodside's struggle to expand its reserves and production levels after repeated delays to an investment decision on the massive Browse LNG project off Australia's coast, and last year's call to abandon a planned US$2.5 billion investment in the Leviathan natural-gas discovery off Israel's coast.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

December 07, 2015 20:45 ET (01:45 GMT)

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