SYDNEY (Reuters) - Australian gas producer Santos' shares fell nearly 14% on Thursday after a consortium led by Abu Dhabi National Oil Company scrapped its $18.7 billion bid for the company, saying commercial terms could not be agreed.

While analysts raised concern about a third failed takeover bid for Santos in seven years, investors shrugged it off, saying the company was set to benefit from two projects due to start producing soon in Australia and Alaska.

"They should just get on with managing the business and hopefully the cash flows will come through and be reflected in the share price over time," said Andy Forster, a portfolio manager at Argo Investments, a top 10-shareholder in Santos.

XRG, ADNOC's overseas unit, baulked at proceeding with a deal after it was revealed capital gains tax payments were due soon on Santos' assets in Papua New Guinea, according to a person familiar with the matter.

Santos had expected XRG to make the payments, worth several hundred million dollars, which the consortium objected to, said the person who could not be named as they were not permitted to speak to media.

XRG declined to comment, and Santos said it would not make any comment beyond its statement released early on Thursday.

Santos, Australia's second-largest gas producer, said in the statement it told the XRG consortium on Monday it was willing to finalise a deal at $5.626 a share.

The original offer in June was made at $5.76 a share, worth A$8.89 at the time, but adjusted for Santos' recent dividend payment. Taking into account net debt, the deal valued Santos at about A$36.4 billion ($24.2 billion), which would have made it Australia's largest ever all-cash corporate buyout, according to FactSet data.

Santos shares dropped to A$6.61 in early trading Thursday, their lowest price since June 10, and were heading for their worst day in more than five years. The benchmark S&P/ASX200 was down 0.64%.

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The decline brings Santos back to its trading levels before the bid emerged in June, with the fall blamed on the deal not going ahead, the takeover premium being removed and arbitrage funds selling the stock.

"We're not entirely unhappy with this development," said Romano Sala Tenna, a portfolio manager at Katana Asset Management, which holds Santos shares.

"I don't think it should push ahead with breaking up its core assets as it's entering a really nice phase. It's done the heavy lifting of developing these assets and shareholders will want to start to reap the fruits of that work," he said, referring to Santos' Barossa gas project off northwestern Australia and its Pikka oil project in Alaska.

The question, he said, was what Santos would do next on projects it has put on the backburner, including its Narrabri gas project and El Dorado oil and gas project, both in Australia.

XRG pulled the offer on Wednesday and said "a combination of factors, when considered collectively, have impacted the Consortium's assessment of its indicative offer."

The deal's collapse will now put pressure on Santos' board.

"Another failed transaction creates doubt in the market. It's unlikely Santos remains in its current form in time with investors and management looking for alternative ways to create value," said Adam Martin, an analyst at E&P.

Santos previously rejected a $10.8 billion offer from private equity-backed Harbour Energy in 2018 and walked away from talks with its bigger Australian rival Woodside Energy ( WDS ), to create a possible A$80 billion oil and gas giant.

"Santos has a clear strategy, strong leadership and high-quality growth opportunities across our global portfolio. The board is confident these strengths will deliver long-term value for shareholders," Santos Chair Keith Spence said in the statement.

Jarden, the investment bank, on Thursday downgraded its rating on Santos from overweight to underweight and cut Santos' 12-month price target by 16% from A$8.40 to A$7.05 per share.

($1 = 1.5035 Australian dollars)