The dramatic development overshadowed Newcastle's 21-16 loss to St George Illawarra at WIN Stadium - the Knights' fourth consecutive defeat.

Ponga is contracted to the Knights for another two seasons but has a free-agency clause in his deal that allows him to negotiate with rival clubs until June 1.

He recently held talks with master coach Wayne Bennett and other officials from new franchise the Dolphins, who are set to enter the NRL next year. There has has been speculation that the Knights had subsequently tabled a five-season extension, but News Corp reported on Sunday that they had "pulled" their offer, apparently through frustration about how Ponga's father Andre, who acts as his agent, has handled negotiations.

The report indicated that if Ponga was to leave Newcastle, the club would try to replace him with Melbourne five-eighth Cameron Munster.

The Newcastle Herald contacted Knights CEO Phil Gardner to confirm or deny the report, but he replied: "No comment on contract negotiations."

Knights coach Adam O'Brien said at the post-match press conference that, as far as he was aware, negotiations were still in process and Ponga's future was "tracking along".

O'Brien said he thought the report that Ponga's contract offer had been withdrawn was "ridiculous".

"As head coach, it's never, ever been brought up to me once ... it's absolutely news to me," he said.

"Our CEO isn't even in the country. He's in Hawaii.

"But I did wake up to Munster is coming here too. So we're keeping him [Ponga] and Munster.

"Bloody hell."

Newcastle coaching consultant Andrew Johns, commentating on Channel Nine, said: "I don't believe it, simple as that. I know the Knights are trying to keep Kalyn at all costs ... I don't know where these reports are coming from."

The saga did not appear to impact on Ponga's performance.

He scored one try and created another and was easily Newcastle's most dangerous player in a hard-fought battle between two equally desperate teams.

Since opening their season with wins against Sydney Roosters and Wests Tigers, the Knights have fallen in a hole and now face back-to-back home games against Parramatta and Melbourne.