A state-based peridynamic formulation is developed to investigate compaction-driven failure in porous rocks, using Bentheim sandstone as a benchmark material. Experimental evidence indicates a transition from brittle to ductile response under increasing triaxial confinement, which is attributed to progressive pore compaction. To capture this behavior, the peridynamic model is extended and calibrated against hydrostatic compression data to reproduce pore-collapse induced strain hardening. Material heterogeneity is incorporated through Weibull-distributed strength parameters, enabling a stochastic representation of microstructural variability. The model is applied to three-dimensional indentation simulations across multiple specimen sizes. The simulations reproduce key macroscopic responses, including nonlinear force-penetration behavior, indentation pressure evolution, and characteristic failure patterns. Qualitative validation is achieved through comparison with acoustic emission observations, while quantitative agreement is demonstrated for peak loads and penetration trends. Beyond global response measures, the peridynamic framework enables detailed analysis of fracture trajectories, revealing the influence of crack dynamics, specimen geometry, and boundary-induced confinement on crack branching and deflection. The spatiotemporal evolution of compaction is examined by tracking volumetric strain and damage at multiple depths beneath the indenter. An accompanying energy-based analysis demonstrates that grain-scale fragmentation within the compacted zone is energetically consistent with a significant portion of the indentation work, providing mechanistic insight into inelastic dissipation prior to macroscopic failure.