May 16, 2013
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
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) that upon the Filer listing its American depositary shares, represented by American depositary receipts (ADRs), for trading on the Toronto Stock Exchange (the TSX), the Filer will be exempted from the requirements of National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101) (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; and
(b) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions or in Multilateral Instrument 11-102 Passport System have the same meaning if used in this decision, unless otherwise defined herein.
This decision is based on the following facts represented by the Filer:
1. The Filer is a Hong Kong limited liability company with its registered office in Hong Kong.
2. The Filer is an upstream company specializing in the exploration, development and production of oil and natural gas.
3. The Filer's ordinary shares are listed and posted for trading on the Hong Kong Stock Exchange (the HKSE) and its ADRs are listed and posted for trading on the New York Stock Exchange (the NYSE).
4. As at April 12, 2013, there were 44,646,305,984 ordinary shares of the Filer issued and outstanding, of which 28,772,727,273 (or approximately 64.45%) were held, directly or indirectly, by China National Offshore Oil Corporation, a People's Republic of China state-owned enterprise. As at March 4, 2013, 10,374,921 ADRs were issued and outstanding, representing approximately 2.3% of the Filer's issued and outstanding ordinary shares.
5. The Filer is not a reporting issuer in any Canadian jurisdiction and is not, to its knowledge, in default of any requirements under the Legislation. None of the Filer's securities are listed and posted for trading in Canada. The Filer has never issued any securities to the public in Canada either by way of private placement or public financing.
6. None of the executive officers and directors of the Filer is a resident of Canada and the Filer's business is presently administered primarily outside of Canada.
7. The Filer's ADRs are registered under section 12(b) of the 1934 Act and the Filer is required to file reports under section 13 or 15(d) of the 1934 Act.
8. The Filer is in compliance with all requirements imposed by the SEC, the 1933 Act, the 1934 Act, the United States Sarbanes-Oxley Act of 2002 and the rules of the NYSE (collectively, the US Rules).
9. The Filer is a "foreign private issuer" under the US Rules.
10. The Filer prepares disclosure with respect to its oil and natural gas activities in accordance with the applicable US Rules (the Oil and Gas Disclosure).
11. On July 23, 2012, the Filer entered into an arrangement agreement with Nexen Inc. (Nexen) providing for a plan of arrangement under section 192 of the Canada Business Corporations Act pursuant to which the Filer acquired, among other things, all of the outstanding common shares of Nexen for US$27.50 per share in cash (the Arrangement). On February 25, 2013, the Arrangement was completed.
12. Nexen was a reporting issuer under the securities legislation of each of Alberta, Ontario, British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador and its common shares, among other securities, were listed and posted for trading on the TSX and the NYSE. Nexen ceased to be a reporting issuer on April 24, 2013.
13. Following completion of the Arrangement, the common shares of Nexen were delisted from the TSX and the NYSE. It is the Filer's current intention to list its ADRs on the TSX.
14. The ADRs that are expected to be listed on the TSX are the same instruments which are listed on the NYSE. The listing of the ADRs will not result in a new issuance of ordinary shares of the Filer and will not generate additional funds for the Filer.
15. Concurrently with the listing of the ADRs on the TSX, the Filer will become subject to the ongoing continuous disclosure requirements under the applicable securities laws of each of the provinces of Alberta and Ontario and, specifically, the disclosure requirements of NI 51-101.
16. The Filer will qualify as an "SEC foreign issuer" (an SEC Foreign Issuer) under National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102) and will rely on and comply with the exemptions from Canadian continuous disclosure requirements afforded to SEC Foreign Issuers under Part 4 of NI 71-102.
17. Fewer than 8.0% of the number of registered and beneficial holders of ADRs are residents of Canada and less than 3.1% of the outstanding ADRs are held by residents of Canada.
18. Fewer than 8.0% of the number of registered and beneficial holders of ordinary shares (including ordinary shares represented by ADRs) of the Filer are residents of Canada and less than 0.55% of the outstanding ordinary shares (including ordinary shares represented by ADRs) of the Filer are held by residents of Canada.
19. The ordinary shares of the Filer represented by ADRs that the Filer intends to list on the TSX (including ADRs reserved for issuance) represent, in aggregate, approximately 2.3% of the Filer's issued and outstanding ordinary shares.
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:
(a) the Filer continues to be an SEC Foreign Issuer and complies with the disclosure requirements of the US Rules in connection with its oil and gas activities without relying on a legislative or other exemption from the US Rules available to foreign private issuers in relation to such disclosure;
(b) the Filer issues in Canada, and files on SEDAR, a news release stating that it will provide Oil and Gas Disclosure prepared in accordance with the US Rules rather than in accordance with NI 51-101;
(c) the Filer files the Oil and Gas Disclosure with the securities regulatory authority or regulator in each of the Canadian jurisdictions in which the Filer is a reporting issuer as soon as practicable after the Oil and Gas Disclosure is filed pursuant to the US Rules;
(d) fewer than 10% of the number of registered and beneficial holders of ordinary shares of the Filer (including ordinary shares represented by ADRs) are residents of Canada;
(e) less than 10% of the outstanding ordinary shares of the Filer (including ordinary shares represented by ADRs) are held by residents of Canada;
(f) fewer than 10% of the number of registered and beneficial holders of any new class or series of securities issued by the Filer are residents of Canada; and
(g) less than 10% of any new class or series of securities issued by the Filer are held by residents of Canada.
For the Commission: