Australian-based oil and gas exploration and production company AWE Ltd said it rejected the initial takeover proposal from Senex Energy amounting to AU$752 million or $674 million, Bloomberg reported. AWE said the offer undervalued its shares. AWE has shale fields in Australia as well as an oil project in Indonesia. Senex explores for and acquires crude oil and natural gas, Bloomberg data showed.

At AU$1.44 a share, the offer of Senex was 22% more than the AU$1.185 closing price of AWE on December 12. The report said Brisbane-based Senex also withdrew its bid.

According to the report, AWE is headed for its largest gain in Sydney in over two years after it resumed trading today. It rose 8.4% to AU$1.285 as of 10:19 am in Australia, the biggest rise since October 2011. Senex, meanwhile, declined 4.6% to 73.5 cents.

AWE intends to increase its output two times and its cashflow three times by 2017. Its shale gas assets are located in Western Australia's Perth Basin while an estimated 101 million barrels of recoverable oil is found in its project in Indonesia. It also has oil and gas projects in the Cooper Basin in Australia as well as a coal-bed methane on the east coast.

The report also quoted Ord Minnett Ltd oil and gas analyst John Young's note which said, "We do not think that there is necessarily a compelling fit between AWE's and Senex's businesses."

Citing a statement from AWE, the report said Senex had offered 1.9% of its shares for each share of AWE. Had the offer been accepted, the shareholders of Senex would have gotten 53% of the merged firm while AWE stakeholders would have gotten only 47%.

AWE said, "While the board of AWE recognizes the potential to add shareholder value through material M&A transactions, it remains confident of the company's ability to create further value for shareholders through the ongoing commercialization of AWE's existing portfolio of opportunities."