Securities Law & Instruments

Headnote

Ontario Only Exemptive Relief Application -- relief granted from the requirement to include certain financial statements in an information circular relating to significant acquisitions of oil and gas properties.

Applicable Ontario Statutory Provisions

OSC Rule 54-501 -- Prospectus Disclosure, s. 3.1.

IN THE MATTER OF

THE SECURITIES ACT R.S.O. 1990, CHAPTER S.5, AS AMENDED

AND

IN THE MATTER OF

RULE 54-501 -- PROSPECTUS DISCLOSURE

IN CERTAIN INFORMATION CIRCULARS

("RULE 54-501")

AND

IN THE MATTER OF

VIRACOCHA ENERGY INC. AND 1100974 ALBERTA INC.

 

EXEMPTION

(Section 3.1 of Rule 54-501)

WHEREAS the Ontario Securities Commission (the "Commission") has received an application under section 3.1 of Rule 54-501 from Viracocha Energy Inc. ("Viracocha") and 1100974 Alberta Inc. ("Exploreco V") (Exploreco V together with Viracocha, the "Filers") for an exemption from Part 2 of Rule 54-501 to the extent that it requires the information circular of Viracocha (the "Information Circular"), to be provided to its shareholders in connection with a proposed plan of arrangement (the "Plan of Arrangement") under Section 193 of the Business Corporations Act (Alberta) ("ABCA"), among Viracocha, Exploreco V, Provident Energy Trust and Provident Energy Ltd., to include certain audited financial statements, as required under Part 6 of OSC Rule 41-501 (the "Financial Statement Requirements").

AND WHEREAS the Filers have represented to the Commission that:

1. Viracocha was incorporated under the ABCA on April 19, 2000 as a private company. It amended its Articles on August 4, 2000 to remove the private company restrictions.

2. Viracocha is a reporting issuer in Alberta, British Columbia and Ontario and its shares have been listed on the TSX since October 8, 2002

3. Exploreco V was incorporated under the ABCA on April 5, 2004 for the purposes of completing the Plan of Arrangement. Exploreco V has two (2) outstanding common shares, owned by Robert Zakresky and Robert Jepson respectively, each of whom are senior officers and directors of both Viracocha and Exploreco V.

4. Pursuant to the proposed Plan of Arrangement, Viracocha shareholders will receive, pursuant to a series of transactions, for each Viracocha share, one-tenth of one common share of Exploreco V plus, at their election, either 0.248 of one Provident Energy Trust Unit or one exchangeable share of Provident Energy Ltd., subject to an aggregate maximum of 1,325,000 exchangeable shares.

5. Under the Plan of Arrangement, Provident Energy Trust will acquire all of the issued and outstanding shares of Viracocha and certain assets of Viracocha (the "Exploration Assets") will be conveyed to Exploreco V which will be considered a "significant probable acquisition" for Exploreco V under OSC Rule 41-501.

6. On September 30, 2003, Viracocha acquired certain assets from Hunt Oil Corporation Canada which constituted a "significant acquisition" in accordance with OSC Rule 41-501.

7. Viracocha is preparing the Information Circular for its meeting (the "Meeting") to be held on or about May 27, 2004 where its shareholders will be given the opportunity to vote on the Plan of Arrangement.

8. The Plan of Arrangement requires the approval of at least 66 2/3% of the shareholders of Viracocha present in person or by proxy at the Meeting.

9. Shareholders will be granted a right of dissent under Section 191 of the ABCA in respect of the Plan of Arrangement.

10. Viracocha and Exploreco V propose that the Information Circular contain the following financial statements in accordance with the suggested alternative disclosure under Section 3.3 of the Companion Policy to OSC Rule 41-501 (the "Included Financial Disclosure"):

(a) in respect of the Hunt Assets :

(i) Audited Statements of Revenue and Operating Expenses in respect of the Hunt Assets for each of the years in the two-year period ended December 31, 2003;

(ii) a proforma income statement for Viracocha for the year ended December 31, 2003 including a compilation report combining the Hunt Assets as if such acquisition had occurred on January 1, 2003; and

(iii) proforma earnings per share based upon the statement referred to in (ii) directly above.

(b) In respect of the Exploration Assets:

(i) Audited Statements of Revenues and Operations in respect of the Exploration Assets for each of the years in the three-year period ended December 31, 2003,

(ii) a proforma financial statement of Exploreco V as at December 31, 2003, including a compilation report, proforma consolidated Statement of Operations, proforma consolidated balance sheet and notes;

(iii) an audited opening balance sheet for Exploreco V;

(iv) proforma earnings per share based upon the statement referred to in (ii) directly above.

11. Without the exemption granted by this Decision, Rule 54-501 and Part 6 of OSC Rule 41-501 would require the inclusion in the Information Circular of full financial statements in respect of the Hunt Assets and the Exploration Assets, including audited statements of income, retained earnings and cash flow for a two-year period and a full proforma income statement in respect of the Hunt Assets and audited statements of income, retained earnings and cash flow for a three-year period and full proforma income statements and a full proforma balance sheet in respect of the Exploration Assets and the audited balance sheet in respect of the Exploration Assets for the two year period ended December 31, 2003.

12. Representatives of Exploreco V have had preliminary discussions with TSX staff in respect of the Plan of Arrangement including the creation of Exploreco V. It is currently anticipated that Exploreco V's common shares, upon completion of the Plan of Arrangement, will be listed and posted for trading on the TSX.

AND WHEREAS the Director is satisfied that it would not be prejudicial to the public interest to grant the exemption relief requested;

THE DECISION of the Director under Section 3.1 of Rule 54-501 is that the Filers are exempt from Part 2 of Rule 54-501 to the extent that it imposes the Financial Statement Requirements with respect to the Hunt Assets and the Exploration Assets provided that the Filers include the Included Financial Disclosure in the Information Circular.

April 27, 2004.

"Kelly Gorman"