Adelaide headquartered Santos, with more than 3000 employees, confirmed on Thursday night that “it has engaged in preliminary discussions with Woodside regarding a potential merger”.

“Santos continuously reviews opportunities to create and deliver value for shareholders,” a statement said.

“The consideration of any merger is at an early stage and there is no agreement between the parties. There is no certainty that any transaction will eventuate from these discussions.

“Santos will continue to update the market in accordance with its continuous disclosure obligations.”

After the announcement, Energy and Mining Minister Tom Koutsantonis said the state government “will do everything it can to ensure South Australian jobs are protected and that companies headquartered in South Australia remain in South Australia”.

Business SA chief Andrew Kay also raised concerns about the move, saying Santos was “the biggest game in town” and if a merger went ahead the “effects to businesses in the supply chain could be quite severe”.

“As a predominantly small business state we never like to lose the big beacon businesses and Santos is obviously the biggest game in town,” Kay said.

“While it is very early days in the negotiations, we are seeing a trend globally where energy companies are merging and this merger would be in keeping with that trend.”

Santos also invests heavily in the state, including as the major sponsor of the Tour Down Under cycling race.

Kay said the company employed large numbers of South Australians and also acted as a “beacon for investment” and a beacon for attracting global talent to the state.

Kay said that if a merger went ahead, job losses would follow.

“There’s no questions that a merger such as this, they would be looking for more efficiencies and there would be duplications of roles,” he said.

Santos was founded in 1954 as the South Australia Northern Territory Oil Search and has extensive operations in the Cooper Basin and globally. The InDaily SA Business Index lists Santos as its perennial top company with revenue at $10,554,994,335.

Santos operates across Australia, Papua New Guinea, Timor-Leste and the United States and recorded a $3 billion after-tax profit in 2022, but profits and revenue fell for the first half of 2023.

In the last quarter, Santos oil production fell by 13 per cent and net profit was down 32 per cent to $1.2 billion, while revenue took a 21 per cent tumble to $4.6 billion.

Santos is led by managing director and chief executive officer Kevin Gallagher, who was previously in the running for the top job at Woodside but was reportedly kept at Santos with a large monetary incentive.

A merger would deal another blow to the South Australian mining and energy sector after Adelaide-headquartered OZ Minerals was swallowed up by global mining giant BHP earlier this year.

BHP said “most of” OZ Minerals’ 660 South Australian workers will be kept on after an overwhelming “yes” vote to sell the highly successful company to the mining giant for $9.6 billion was approved.

Analysts have reportedly said a merger between Santos and Woodside could make Woodside an $80 billion “BHP of energy”, with oil and gas exploration and projects around the globe.

Gallagher addressed shareholder concerns over falling profits at the company’s annual general meeting in November by saying management was “assessing a range of alternative structural options with a view to unlocking value”.

The company is embroiled in court cases over its $5 billion Barossa gas export pipeline in the Timor Sea and gas auction reporting breaches.

South Australian Chamber of Mines and Energy chief executive officer Rebecca Knol declined to comment on the merger discussions.

In the past year, Santos has been a high-profile target for climate change activists. Extinction Rebellion has held protests outside the company’s city headquarters and at the company’s Annual General Meeting.

Four climate change protesters were arrested in May after allegedly throwing paint at the Santos building.

At an investor day in Sydney last month, Gallagher reaffirmed the company’s strategy to “deliver long-term shareholder value, provide reliable, affordable energy for customers and achieve net-zero emissions by 2040”.

“Energy security is a top priority for the giant energy-consuming economies in our region,” he said.

“We cannot turn off the taps on oil and gas before replacement technologies are technically feasible, affordable and available. Oil and Gas will be required for many decades to come.

“Therefore, a meaningful decarbonisation strategy must include pathways to abate emissions from these fuels. Our strategy includes a strong focus on abatement through large-scale carbon capture and storage, and technologies such as direct air capture.”

News of merger talks saw Santos and Woodside claw back losses of over two per cent on the ASX, to finish up 0.7 per cent and 0.4 per cent respectively.