Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the requirements of paragraph 2.2(d) of National Instrument 44-101 Short Form Prospectus Distributions requiring an issuer to have current annual financial statements and a current Annual Information Form in order to be eligible to file a short form prospectus -- issuer has filed a long form prospectus including operating statements and other disclosure in respect of a probable acquisition of oil and gas assets -- having done so issuer was similar to issuers that rely on subsection 2.7(1) of NI 44-101

Applicable Legislative Provisions

National Instrument 44-101 Short Form Prospectus Distributions, s. 2.2(d).

Citation: Argent Energy Trust, Re, 2012 ABASC 425

October 3, 2012

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
ARGENT ENERGY TRUST
(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 Paragraph 2.2(d) of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) (the Exemption Sought), which requires the Filer to have a current annual information form (AIF) and current annual financial statements in at least one jurisdiction in which the Filer is a reporting issuer, in order to qualify to file a short form prospectus under NI 44-101 (the AIF and Annual Financial Statement Requirement).

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 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, 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, MI 11-102 or NI 44-101 have the same meanings if used in this decision, unless otherwise defined herein.

Representations

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

1. The Filer is an unincorporated limited purpose open-ended trust established pursuant to the trust indenture made as of January 31, 2012, as amended and restated as of May 9, 2012, under the laws of the Province of Alberta. The Filer qualifies as a "mutual fund trust" under the Income Tax Act (Canada).

2. The principal and head office of the Filer is located in Calgary, Alberta.

3. The financial year end of the Filer is December 31.

4. The Filer is a reporting issuer in each of the provinces of Canada and, to its knowledge, the Filer is not in default of securities legislation in any such jurisdiction in Canada in which it is a reporting issuer.

5. On August 1, 2012, the Filer filed and obtained a receipt for a final long form prospectus (the IPO Prospectus) in connection with its initial public offering of its units (the IPO).

6. The net proceeds of the IPO, plus an advance under credit facilities, were used by the Filer to acquire, through its subsidiaries, operated interests in certain oil and natural gas assets located in Texas (the Denali Assets). As at the date hereof, the Denali Assets comprise the principal undertaking of the Filer.

7. Annual and interim financial statements in respect of the Denali Assets, as required by Items 32.1, 32.2 and 32.3 of Form 41-101F1 Information Required in a Prospectus (Form 41-101F1), did not exist and the Filer was granted exemptive relief from such requirements in connection with the IPO.

8. The IPO Prospectus instead included the following information:

(a) audited consolidated statement of financial position as at June 30, 2012 and the consolidated statements of comprehensive loss, changes in unit holders' equity and cash flows from the date of establishment on January 31, 2012 to June 30, 2012;

(b) audited operating statements for the Denali Assets presenting gross revenues, royalties and production taxes and operating expenses for the years ending December 31, 2011, 2010 and 2009 and unaudited operating statements presenting gross revenues, royalties and production taxes and operating expenses for the three month periods ended March 31, 2012 and 2011 (the Operating Statements);

(c) disclosure for the Denali Assets consisting of:

(i) a description of the property or properties and the interest acquired by the issuer;

(ii) disclosure of the annual oil and gas production volumes from the business;

(iii) the estimated reserves and related future net revenue attributable to the business, the material assumptions used in preparing the estimates and the identity and relationship to the issuer or to the vendor of the person who prepared the estimates; and

(iv) the estimated oil and gas production volumes from the business for the first year reflected in the estimated disclosure in (iii) above;

(d) disclosure of the decommissioning liabilities assumed as part of the acquisition of the Denali Assets, including the discounted and undiscounted amount of the liabilities and any necessary detail to support an understanding of the nature of the liability and the basis for measurement; and

(e) National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities reporting in the form of Forms 51-101Fl (as at December 31, 2011), 51-101F2 and 51-101F3.

(collectively, the Alternative Financial Disclosure).

9. Except for not meeting the AIF and Annual Financial Statement Requirement, the Filer would otherwise be qualified to file a prospectus in the form of a short form prospectus pursuant to NI 44-101.

10. The Filer may wish to file a short form prospectus or short form prospectuses under NI 44-101 prior to the point at which it will meet the AIF and Annual Financial Statement Requirement.

11. Under Subsection 2.7(1) of NI 44-101, an issuer that is not exempt from the requirement in the applicable CD rule to file annual financial statements but has not yet been required under the applicable CD rule to file same, and has filed and obtained a receipt for a final prospectus that included the issuer's or each predecessor entity's comparative annual financial statements for its most recently completed financial year or the financial year immediately preceding its most recently completed financial year (together with the auditor's report accompanying those financial statements), is exempt from the AIF and Annual Financial Statement Requirement (the New Reporting Issuer Exemption).

12. The Filer has not been exempted from the requirement of the applicable CD rule to file annual financial statements and the Filer has not yet been required under the applicable CD rule to file same.

13. The Filer does not meet the criteria of the New Reporting Issuer Exemption because the issuer's financial statements included in the IPO Prospectus were not of the issuer's most recently completed financial year or the financial year immediately preceding its most recently completed financial year, and furthermore the Operating Statements and other disclosure were not of a predecessor entity.

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:

(a) the Filer is not exempt from the requirement in the applicable continuous disclosure rule to file annual financial statements within the prescribed period after its financial year end;

(b) the Filer has not yet been required under the applicable continuous disclosure rule to file annual financial statements; and

(c) the Filer includes or incorporates by reference in a preliminary short form prospectus and short form prospectus if either is filed prior to the filing of annual financial statements of the Filer and an AIF under the applicable continuous disclosure rule (i) all of the financial statements and Alternative Financial Disclosure included in the IPO Prospectus, and (ii) the information that would otherwise have been required to have been included in a current AIF.

"Cheryl McGillivray"
Manager, Corporate Finance