Oil Search Ltd., which has operations in Alaska and Papua New Guinea, has rejected a takeover bid by Australian independent Santos Ltd. that valued the combined entity at A$22 billion ($16.11 billion).

The deal would have given Santos a foothold in the Papua New Guinea liquefied natural gas (LNG) scene, considered some of the lowest-cost projects in the world. Oil Search is a partner in the ExxonMobil-operated PNG LNG project as well as the TotalEnergies SE-led Papua LNG development, which is expected to reach a final investment decision in 2023.

Santos would have also gained Oil Search’s operating stake in the Pikka Unit on the North Slope of Alaska, which contains the massive Nanushuk conventional oil play.

Santos revealed on Tuesday its offer had been rejected, the same day Oil Search said it had recently received “a confidential non-binding and indicative change of control proposal.” In a notice to the Australian Stock Exchange, Oil Search said it had “carefully assessed” the offer with its financial and legal advisers, but found it to not be in “shareholders’ best interests on the terms and value proposed.”

But Santos claimed the potential transaction would create an “unrivaled champion of size and scale,” bigger than Australian heavyweight Woodside Petroleum Ltd., according to the proposal.

“The combination would create greater alignment in Papua New Guinea supporting the development of key projects including Papua LNG, deliver new jobs and help support the local economy,” Santos said. 

Santos said its offer had implied a transaction price of A$4.25 per share, representing a 12.3% premium to Oil Search’s June 24 closing price. The combination would have given Oil Search shareholders 37% of the pro-forma company, with Santos holding 63%. 

The news comes as Oil Search navigates a corporate crisis. The company said Monday that Managing Director Keith Wulff was resigning for “health reasons.” Wulff “has been managing a long-term medical condition which has recently deteriorated.”

But it also said the move followed an investigation into Wulff’s behavior at work. The board of directors believed Wulff “had behaved in a manner inconsistent with the standards expected by the board in relation to his management style,” Oil Search said.

Oil Search said Monday it had appointed recently hired CFO Peter Fredericsen as acting CEO while a search for a permanent chief takes place.

“This period has been marked by extreme challenges including global lockdowns associated with the Covid-19 pandemic, a plunge in oil prices, crisis measures to protect the company’s financial position and developing a clear strategy to steer a path to a sustainable future through the energy transition,” Chairman Rick Lee said.

“It is a tribute to all staff that Oil Search is now in a solid position with record levels of production in PNG, a strengthened balance sheet and our Alaskan development plans meeting milestone targets.”