Australia’s two largest energy companies confirmed Thursday that they’re in preliminary discussions to explore merging in a deal that could create one of the world’s leading LNG exporters. 

Woodside Energy Group Ltd. and Santos Ltd. cautioned, however, that the discussions are in very advanced stages, but no deal is close to being reached. Both companies said the talks are part of ongoing initiatives to create more value for shareholders. They made the comments to address media speculation after the Australian Financial Review first reported the discussions. 

Woodside has a market capitalization of $37 billion, while Santos has a market value of roughly $15 billion. The potential combination of the companies would follow other blockbuster deals announced earlier this year...