Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- s. 14.2 of Form 51-102F5 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) - exemption from the requirement to include in an information circular to be sent to security holders of reporting issuers engaged in a business combination disclosure (including financial statements) with respect to such reporting issuers as prescribed by the form of prospectus, other than a short form prospectus under National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) - both reporting issuers eligible to file short form prospectuses - relief given to permit issuers to provide information required by NI 44-101F1 other than certain information circulars filed in 2006 that are superseded by information circulars filed in 2007.

Applicable Legislative Provisions

NI 51-102 - Continuous Disclosure Obligations.

NI 44-101 - Short Form Prospectus.

Citation: Penn West Energy Trust and Canetic Resources Trust, 2007 ABASC 870

November 26, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO (THE JURISDICTIONS)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

PENN WEST ENERGY TRUST (PENN WEST) AND

CANETIC RESOURCES TRUST (CANETIC)

 

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from Canetic and Penn West for a decision under the securities legislation of the Jurisdictions (the Legislation) that:

(a) Canetic and Penn West be exempt from the requirement under Item 14.2 of Form 51-102F5 to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) to include in an information circular (the Information Circular) to be sent to securityholders of Canetic, disclosure (including financial statements) with respect to Canetic and Penn West as prescribed by the form of prospectus, other than a short form prospectus under National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101 or the Short Form Prospectus Rule), that Canetic and Penn West would be eligible to use for a distribution of securities provided that the Information Circular includes information about Penn West and Canetic as required by the Short Form Prospectus Rule; and

(b) in connection with the foregoing, to exempt Canetic and Penn West from the requirement under Item 11.1(1)(7) of Form 44-101F1 Short Form Prospectus (Form 44-101) to incorporate by reference into the Information Circular:

(i) the joint information circular and proxy statement of Penn West and Petrofund Energy Trust (Petrofund) dated May 23, 2006; and

(ii) the management information circular and proxy statement of Canetic relating to the annual meeting of holders (Canetic Unitholders) of trust units of Canetic (Canetic Units) held on May 9, 2006.

(collectively, the Requested Relief).

Application of Principal Regulator System

2. Under Multilateral Instrument 11-101 Principal Regulator System (MI 11-101) and the Mutual Reliance Review System for Exemption Relief Applications:

(a) the Alberta Securities Commission is the principal regulator for Canetic and Penn West;

(b) Canetic and Penn West are relying on the exemption in Part 3 of MI 11-101 in each of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador, as applicable; and

(c) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

3. Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

4. This decision is based on the following facts represented by Canetic and Penn West:

(a) Each of Canetic and Penn West was formed under the laws of the Province of Alberta and has its head office located in Calgary, Alberta.

(b) The trust units of Canetic are listed and posted for trading on the Toronto Stock Exchange under the trading symbol "CNE.UN" and on the New York Stock Exchange under the trading symbol "CNE".

(c) The trust units of Penn West are listed and posted for trading on the Toronto Stock Exchange under the trading symbol "PWT.UN" and on the New York Stock Exchange under the trading symbol "PWE".

(d) Canetic is a reporting issuer in each of the provinces of Canada and has been a reporting issuer in at least one of these jurisdictions since on or about January 6, 2006.

(e) Penn West is a reporting issuer in each of the provinces of Canada other than Nova Scotia, Newfoundland and Labrador and Prince Edward Island and has been a reporting issuer in at least one of these jurisdictions since on or about May 31, 2005.

(f) To its knowledge, Canetic is not in default of any of its obligations as a reporting issuer pursuant to the applicable securities legislation in any of the provinces in which it is a reporting issuer or its equivalent.

(g) To its knowledge, Penn West is not in default of any of its obligations as a reporting issuer pursuant to the applicable securities legislation in any of the provinces in which it is a reporting issuer or its equivalent.

(h) Penn West and Canetic satisfy the basic qualification criteria as set out in section 2.2 of the Short Form Prospectus Rule.

(i) Penn West has a current AIF and current annual financial statements as defined in section 1.1 of the Short Form Prospectus Rule. Canetic has a current AIF and current annual financial statements as defined in section 1.1 of the Short Form Prospectus Rule.

(j) Penn West and Canetic have each filed (or have been deemed to have filed) the notice required by section 2.8 of the Short Form Prospectus Rule and each such notice has not been withdrawn.

(k) On October 30, 2007, Canetic and Penn West entered into an agreement with respect to a proposed transaction pursuant to which Penn West and Canetic will combine their businesses (the Combination). Pursuant to the Combination, Canetic Unitholders will receive, for each Canetic Unit, 0.515 of a trust unit of Penn West (Penn West Unit), and holders (Penn West Unitholders) of Penn West Units will continue to hold one Penn West Unit for each Penn West Unit held prior to the Combination. In addition, in connection with the Combination, Canetic Unitholders will receive a special cash distribution of $0.09 per Canetic Unit.

(l) The Information Circular detailing the Combination is anticipated to be mailed to Canetic Unitholders in early December of 2007 for a meeting (the Canetic Meeting) expected to take place in mid-January 2008. Closing of the Combination is expected to take place as soon as is practicable after the Canetic Meeting.

(m) On August 31, 2006 Canetic acquired certain natural gas and oil interests from a private company for an aggregate purchase price of approximately $930 million (the Samson Acquisition).

(n) Effective June 30, 2006 Penn West completed a plan of arrangement pursuant to which Penn West acquired Petrofund (the Petrofund Merger). Pursuant to the Petrofund Merger, Penn West indirectly acquired certain oil and gas assets.

(o) Canetic filed a business acquisition report dated November 8, 2006 (the Samson BAR) pursuant to NI 51-102 containing the financial statement and other disclosure in respect of the Samson Acquisition required by Part 8 of NI 51-102.

(p) At the time of the Petrofund Merger, Penn West was not required to complete a business acquisition report in respect of the Petrofund Merger as section 8.1(2) of NI 51-102 provided that a business acquisition report was not required so long as the information and financial statements required by section 14.2 of Form 51-102F5 concerning the Petrofund Merger was contained within the information circular prepared in respect of the Petrofund Merger. Such information was contained in or incorporated by reference into such information circular (the Petrofund Financial Statements).

(q) Form 51-102F5 requires that the Information Circular contain, among other things, a detailed description of the Combination and disclosure (including financial statements) for Penn West and Canetic prescribed by the form of prospectus, other than a short form prospectus under the Short Form Prospectus Rule, that Penn West and Canetic would be eligible to use for a distribution of securities in the Jurisdictions.

(r) The form of prospectus other than a short form prospectus under the Short Form Prospectus Rule that Penn West and Canetic would be eligible to use for a distribution of securities in the Jurisdictions is the form of prospectus prescribed by Ontario Securities Commission Form 41-501F1 Information Required in a Prospectus.

(s) Other than in connection with the Requested Relief, the Information Circular will comply with the applicable requirements of NI 51-102, and will include, among other things, a detailed description of the Combination and the disclosure (including financial statements) for Penn West and Canetic prescribed by Form 44-101F1.

(t) The Information Circular will incorporate by reference all documents of the type described in item 11.1 of Form 44-101F1, and specifically, those filed by Penn West and Canetic after the date of the Information Circular and before the date of the Canetic Meeting.

(u) The Information Circular will contain sufficient information for unitholders of Canetic to make a reasoned decision about whether to approve the Combination.

(v) The Information Circular will incorporate by reference the information circulars relating to Canetic's and Penn West's annual meetings held on May 9, 2007 and June 8, 2007, respectively

(w) The Information Circular will incorporate by reference the Samson BAR and the Petrofund Financial Statements which will comply with items 11.1(1).6 and 11.4(2) of Form 44-101F1, respectively.

Decision

5. The Decision Makers being satisfied that they each have jurisdiction to make this decision and that the relevant test contained under the Legislation has been met, the Requested Relief is granted, provided that:

(a) at the time of filing of the Information Circular, Penn West and Canetic satisfy the basic qualification criteria as set out in section 2.2 of the Short Form Prospectus Rule; and

(b) the Information Circular (and the documents incorporated by reference in the Information Circular) includes information about Penn West and Canetic required by the Short Form Prospectus Rule to be included or incorporated by reference in a short form prospectus.

"Agnes Lau", CA
Associate Director, Corporate Finance
Alberta Securities Commission