Securities Law & Instruments

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to an oil & gas issuer from the requirement to file a business acquisition report for an acquisition that is significant based on the income test in Part 8 of National Instrument 51-102. Acquisition is not significant under the asset test and investment test in Part 8 of National Instrument 51-102. The application of the income test using the income from continuing operations of the issuer and the acquired business leads to an anomalous result in that the significance of the acquired business is exaggerated out of proportion to its significance on an objective basis and in comparison to the results of the asset test and the investment test. Issuer is of the view that the acquisition is not a significant transaction to it from a business and commercial perspective. The issuer provided additional measures which further demonstrate the insignificance of the acquisition to the filer. The alternative measures include market capitalization, reserve volumes, current production, gross revenues and income from continuing operations excluding depletion, depreciation and accretion and asset impairment charge.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, Part 8, s. 13.1.

Citation: Legacy Oil + Gas Inc., Re, 2010 ABASC 571

December 9, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

LEGACY OIL + GAS INC.

(THE FILER)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Makers) have received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for relief from the requirement to file a business acquisition report for the Acquisition (as defined 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 subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and

(c) this 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 or 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 is a corporation amalgamated under the Business Corporations Act (Alberta) (the ABCA) with its head office located in Calgary, Alberta.

2. The Filer is a reporting issuer in each of the provinces of Canada and to its knowledge, is not in default of any requirements under the securities legislation in any of those jurisdictions.

3. The common shares of the Filer are listed for trading on the Toronto Stock Exchange under the trading symbol LEG.

4. Bronco Energy Ltd. (Bronco) is a corporation incorporated pursuant to the ABCA with its head office located in Calgary, Alberta.

5. Bronco is a reporting issuer in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.

6. The authorized capital of Bronco consists of an unlimited number of class A common shares (Bronco Shares) all of which are held by the Filer and an unlimited number of preferred shares, none of which are issued and outstanding.

7. Pursuant to a plan of arrangement under section 193 of the ABCA on November 4, 2010 the Filer acquired all of the issued and outstanding Bronco Shares and all of the Convertible Secured Subordinated Debentures of Bronco (the Acquisition). The Filer is now the sole securityholder of Bronco.

8. Pursuant to part 8 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), an issuer must file a business acquisition report within 75 days after the date of an acquisition should it be determined that the acquisition was a "significant acquisition". The tests for determining whether an acquisition is a significant acquisition are set out in section 8.3 of NI 51-102, and are referred to as the asset test, the investment test and the income test. An acquisition is considered to be significant if the any of the described tests are met.

9. The Acquisition is not a significant acquisition under the asset test as Bronco's consolidated assets as of December 31, 2009 were only approximately 6% of the consolidated assets of the Filer as of December 31, 2009 and Bronco's consolidated assets as of September 30, 2010 were only approximately 3.6% of the consolidated assets of the Filer as of September 30, 2010.

10. The Acquisition is not a significant acquisition under the investment test as the total consideration paid to the Bronco securityholders with respect to the Acquisition was only approximately 5% of the consolidated assets of the Filer as of December 31, 2009 and approximately 2.1% of the consolidated assets of the Filer as of September 30, 2010.

11. The Acquisition would be a significant acquisition under the income test, which requires comparison of income from continuing operations from the Filer and Bronco. The application of the income test using the income from continuing operations of the Filer and Bronco leads to an anomalous result in that the significance of the acquired business is exaggerated out of proportion to its significance on an objective basis and in comparison to the results of the asset test and the investment test.

12. A comparison of the Filer's proportionate share of the operating income of Bronco to its own operating income for the 12 months ending September 30, 2010 would not result in the Acquisition being considered significant, more accurately reflects the significance of the Acquisition from a business and commercial perspective and its results are generally consistent with the other tests of significance in subsection 8.3(2) of NI 51-102.

13. The Filer is of the view that the Acquisition is not a significant transaction to it from a business and commercial perspective.

14. The Filer has provided the Decision Makers with additional measures which further demonstrate the insignificance of the Acquisition to the Filer. The alternative measures include market capitalization, reserve volumes, current production, gross revenues and income from continuing operations excluding depletion, depreciation and accretion and asset impairment charge.

Decision

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

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.

"Blaine Young"
Associate Director, Corporate Finance