The S&P/ASX 200 index slipped 0.2 per cent or 9.4 points to 6032.5 at the close of trade. The benchmark declined 0.7 per cent on Tuesday.
Santos on Tuesday ended talks with Harbour Energy and rebuffed its bid, saying it undervalued the firm in the context of the recent surge in oil prices.
The decision sent the Adelaide-based company's shares tumbling 8.4 per cent on Wednesday, its biggest one day fall in nearly one and a half years.
The news, paired with a fall in oil prices on Wednesday on fears of more OPEC supply, led to weakness in the wider sector, with the energy index slumping 2.3 per cent to a two-week low.
Healthcare stocks were also under pressure, with CSL Ltd slipping 1.1 per cent, while Healthscope slid 2.1 per cent.
Meanwhile, financials registered a fifth straight day of losses, with Commonwealth Bank of Australia dipping 0.6 per cent, while AMP Ltd dropped 2.2 per cent.
The fall was capped by a rise in real estate stocks, with Goodman Group Pty Ltd jumping 2.4 per cent to a near ten-year high.
Across the Tasman sea, New Zealand's benchmark S&P/NZX 50 index fell 0.7 per cent or 60.09 points to finish the session at 8,553.23.
Consumer staples led the declines, with A2 Milk Company Ltd diving 4.4 per cent, while Fonterra slumped 6.8 per cent to a near two-year low.