Sea Dragon Energy Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- s. 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) -- exemption from the requirement under Part 8 of NI 51-102 to include financial statements in a business acquisition report -- Filer would have been able to use exemption in s. 8.10(3) to file alternative disclosure except that the transaction is an acquisition of securities of another issuer. Filer will provide alternative disclosure on the basis that the acquisition was in substance an acquisition by the Filer of an interest in oil and gas properties.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations.

Citation: Sea Dragon Energy Inc., Re, 2010 ABASC 112

March 15, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE PROCESS OF EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

SEA DRAGON ENERGY INC.

(THE FILER)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirements to include in a business acquisition report (BAR) certain financial information as required under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) in respect of a significant acquisition made by the Filer, on the condition that the Filer include in the BAR certain alternative financial information as more particularly described below (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer was incorporated under the Canada Business Corporations Act on March 28, 2006. On June 17, 2008, the Filer amended its articles to change its registered office to the Province of Alberta. Its head office is located in Calgary, Alberta.

2. The Filer is an independent international upstream oil and gas corporation whose principal business activities consist of the exploration, development and production of crude oil and natural gas liquids in Egypt.

3. The Filer is a reporting issuer in the provinces of British Columbia, Alberta and Ontario.

4. The common shares of the Filer are listed and posted for trading on the TSX Venture Exchange under the symbol "SDX".

5. In August 2009, the Filer entered into a sale and purchase agreement (the Acquisition Agreement) with Premier Oil Overseas B.V (Premier Overseas) providing for the indirect acquisition (the Acquisition) by the Filer of a 10% working interest in the NW Gemsa Concession, located approximately 300 km south east of Cairo (the Assets). The Acquisition was completed on December 21, 2009.

6. Pursuant to the Acquisition Agreement, the Filer acquired 100% of the issued and outstanding shares of Premier Oil Egypt (NW Gemsa) B.V (Premier Egypt), a wholly-owned subsidiary of Premier Overseas.

7. At the time of the closing of the Acquisition, aside from the Assets, the only assets and liabilities of Premier Egypt were those assets and liabilities that would have accrued to Premier Egypt had it purchased the Assets directly.

8. The acquisition of the Assets by way of the purchase and sale of the issued and outstanding shares of Premier Egypt was made to facilitate the Acquisition in a manner that achieved certain governmental approval efficiencies.

9. The Acquisition constitutes a "significant acquisition" for the Filer within the meaning of Part 8 of NI 51-102. Accordingly, the Filer is required to file a BAR in respect of the Acquisition.

10. The financial year end of the Filer is December 31 and the financial year end of the Premier Egypt is December 31.

11. Pursuant to Item 3 of Form 51-102F4 Business Acquisition Report (Form 51-102F4) and Part 8 of NI 51-102, the Filer would, absent the Exemption Sought, be required to include in its BAR for the Acquisition, subject to the exemptions provided therein:

(a) an income statement, a statement of retained earnings and a cash flow statement of each of the two most recently completed financial years in respect of Premier Egypt, a balance sheet as at the end of each such financial year, and notes to the financial statements;

(b) an auditors' report on the income statement, statement of retained earnings and cash flow statements for the most recently completed financial year in respect of Premier Egypt and the balance sheet as at the end of such financial year;

(c) an income statement, a statement of retained earnings and a cash flow statement of each of the most recently completed interim period and a comparable period in the preceding financial year in respect of Premier Egypt, a balance sheet as at the end of each such periods, and notes to the financial statements;

(d) a pro forma balance sheet of the Filer as at September 30, 2009 that gives effect to the Acquisition as if it had taken place as at such date; and

(e) a pro forma income statement of the Filer for the financial year ended December 31, 2008 and for the three month interim period ended September 30, 2009 in each case giving effect to the acquisition as if it had taken place at December 31, 2008 together with pro forma earnings per share.

12. Section 8.10(3) of NI 51-102 provides an exemption from the financial statement disclosure requirements that would otherwise apply under Part 8 of NI 51-102 if the significant acquisition is of a business that is an interest in an oil and gas property, provided that, among other things: (i) the acquisition is not an acquisition of securities of another issuer; and (ii) the Filer includes in the BAR for the Acquisition, historical operating statements in respect of the Assets and pro forma operating statements of the Filer as required under section 8.10(3)(e) of NI 51-102.

13. All of the conditions set forth in section 8.10(3) of NI 51-102 are satisfied, except for the fact that the Acquisition is an acquisition of securities of another issuer.

14. The Filer does not have access to the source documents required to prepare audited financial statements for Premier Egypt and cannot therefore fulfill the BAR requirements.

15. The Filer is not, to its knowledge, in default of its obligations as a reporting issuer under the securities legislation in any of the provinces in which it is a reporting issuer with the exception of the failure to file a BAR in respect of the Acquisition.

16. The Filer acknowledges that any rights of action available to any person or company or securities regulatory authority against the Filer from the date on which the default occurred until the date of the filing of the BAR in accordance with this decision document are not terminated or altered as a result of this decision.

17. The Filer proposes to include in the BAR to be filed in respect of the Acquisition:

(a) audited operating statement presenting gross revenue, royalty expenses, production costs and operating income for the year ended December 31, 2008;

(b) unaudited operating statement presenting gross revenue, royalty expenses, production costs and operating income for the year ended December 31, 2007;

(c) unaudited operating statements presenting gross revenue, royalty expenses, production costs and operating income for the nine month period ended September 30, 2009 and September 30, 2008, respectively;

(d) unaudited pro forma operating statement presenting gross revenue, royalty expenses, production costs and operating income for the year ended December 31, 2008 giving effect to the Acquisition as if it had taken place at January 1, 2008;

(e) unaudited pro forma operating statement presenting gross revenue, royalty expenses, production costs and operating income for the nine months ended September 30, 2009 giving effect to the Acquisition as if it had taken place at January 1, 2008;

(f) a description of the Assets and disclosure regarding the annual oil and gas production volumes from the Assets, as contemplated in subparagraphs 8.10(3)(e)(iii) and (iv) of NI 51-102; and

(g) information regarding the estimated reserves and future related net revenue attributable to the Assets and estimated oil and gas production volumes therefrom, as contemplated in section 8.10(3)(g) of NI 51-102,

(collectively, the Alternative Financial Disclosure).

18. The Acquisition was, in substance, an acquisition by the Filer of an interest in oil and gas property constituting a business. For certain governmental approval efficiencies, the transaction was structured as a purchase by the Filer of all of the issued and outstanding shares of Premier Egypt rather than the acquisition of the Assets directly from Premier Egypt.

19. The Filer seeks a decision of the Decision Makers under Section 13.1 of NI 51-102 exempting the Filer from the requirements to include in the BAR to be filed in respect of the Acquisition, the financial statements and other information required pursuant to Item 3 of Form 51-102F4, provided that the BAR includes the Alternative Financial Disclosure.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that the Filer includes the Alternative Financial Disclosure in the BAR to be filed in respect of the Acquisition.