Anderson Energy Ltd. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- 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 provide the financial statement disclosure in a business acquisition report (BAR) - Filer would have been able to use exemption in s. 8.10(3) to file alternative disclosure except that the transaction was structured for tax reasons as an acquisition of securities of a company incorporated for the specific purpose of acquiring the oil and gas properties and related assets from the vendor.

Citation: Anderson Energy Ltd., 2007 ABASC 833

November 9, 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

ANDERSON ENERGY LTD.

(the Filer)

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 the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirement to include in a business acquisition report (BAR) certain financial information 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 Requested Relief).

Principal Regulator System

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

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

(b) the Filer is relying on the exemption in Part 3 of MI 11-101 in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; 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 the Filer:

(a) The Filer is a corporation incorporated under the Business Corporations Act (Alberta). Its head office is located in Calgary, Alberta.

(b) The Filer is an independent oil and gas company engaged in the business of exploring for, developing, and producing petroleum and natural gas reserves in Alberta and British Columbia.

(c) The Filer is a reporting issuer in each of the provinces of Canada and is not, to its knowledge, in default of its obligations as a reporting issuer under the securities legislation of such provinces.

(d) On July 25, 2007, the Filer entered into a share purchase and sale agreement (as amended, the Acquisition Agreement) with Pengrowth Corporation (the Vendor) providing for the indirect acquisition (the Acquisition) by the Filer of certain oil and gas properties and related assets (the Assets). The Acquisition was completed on September 1, 2007.

(e) Pursuant to the Acquisition Agreement, the Filer acquired 100% of the issued and outstanding shares (the AcquisitionCo Shares) of 3210770 Nova Scotia Company (AcquisitionCo), a corporation incorporated for the purpose of facilitating the Acquisition.

(f) Subsequent to the entering into of the Acquisition Agreement and prior to the closing of the Acquisition, the Vendor indirectly transferred the Assets to AcquisitionCo. AcquisitionCo initially held a partnership interest in the Assets and ultimately held the Assets directly. Accordingly, at the time the Acquisition was completed the Assets were held directly by AcquisitionCo.

(g) The indirect transfer of the Assets from the Vendor to AcquisitionCo was made for the purpose of facilitating the Acquisition in a manner that achieved certain tax and commercial efficiencies for the Vendor.

(h) The Acquisition constitutes a "significant acquisition" for the Filer within the meaning of Part 8 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102). Accordingly, the Filer is required under section 8.2 of NI 51-102 to file a BAR in respect of the Acquisition.

(i) The required content of the BAR is prescribed in Form 51-102F4.

(j) Pursuant to Item 3 of Form 51-102F4 and Part 8 of NI 51-102, the Filer would, absent the Requested Relief, be required to include in its BAR for the Acquisition, subject to the exemptions provided therein:

(i) audited financial statements as at and for the financial year ended December 31, 2006 in respect of the Assets, together with notes thereto;

(ii) unaudited financial statements as at and for the financial year ended December 31, 2005 in respect of the Assets, together with notes thereto;

(iii) unaudited financial statements as at and for the six-month interim periods ended June 30, 2007 and 2006 in respect of the Assets;

(iv) a pro forma balance sheet of the Filer as at June 30, 2007 giving effect to the Acquisition as if it had taken place as at such date; and

(v) pro forma income statements of the Filer for the financial year ended December 31, 2006 and for the six-month interim period ended June 30, 2007, in each case giving effect to the Acquisition as if it had taken place at January 1, 2006, together with pro forma earnings per share.

(k) Subsection 8.10(3) of NI 51-102 provides an exemption (the O&G Property 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, the acquisition is not an acquisition of securities of another issuer and the issuer includes in the BAR certain alternative financial disclosure in respect of the interests acquired.

(l) All of the conditions set forth in subsection 8.10(3) of NI 51-102 are satisfied in the circumstances of the Acquisition except that the Acquisition is an acquisition of securities of another issuer.

(m) The Acquisition was, in substance, an acquisition by the Filer of an interest in oil and gas properties constituting a business. But for certain tax and commercial efficiencies achieved by structuring the Acquisition as a purchase by the Filer of the AcquisitionCo Shares with the Vendor transferring the Assets to AcquisitionCo prior to closing, the Filer would have acquired the Assets directly from the Vendor and availed itself of the O&G Property Exemption.

(n) If the O&G Property Exemption was available to the Filer in the circumstances of the Acquisition, then the Filer would be permitted to include in the BAR financial disclosure as at and for the three-months ended March 31, 2007 instead of the six-months ended June 30, 2007 as the conditions set forth in subsection 8.4(4) of NI 51-102 would be satisfied on the basis that: (i) the Assets do not constitute a material departure from the business of the Filer immediately before completion of the Acquisition; (ii) the Filer will not account for the Acquisition as a continuity of interests; and (iii) the short form prospectus of the Filer dated August 7, 2007 (the Prospectus) was filed before the date of the Acquisition and included financial disclosure in respect of the Assets (as contemplated by the O&G Property Exemption) for the three-months ended March 31, 2007.

(o) The Filer seeks a decision of the Decision Makers under section 13.1 of NI 51-102 exempting the Filer from the requirement 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 described below.

(p) The Filer proposes to include in the BAR to be filed in respect of the Acquisition:

(i) an unaudited schedule of revenues, royalties and operating expenses in respect of the Assets for the three months ended March 31, 2007 and 2006;

(ii) an audited schedule of revenues, royalties and operating expenses in respect of the Assets for the financial year ended December 31, 2006 and an unaudited schedule of revenues, royalties and operating expenses in respect of the Assets for the financial year ended December 31, 2005;

(iii) unaudited pro forma consolidated schedule of revenues, royalties and operating expenses of the Filer as at and for the three months ended March 31, 2007 and for the year ended December 31, 2006;

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

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

(collectively, the Alternative Financial Disclosure).

(q) The Alternative Financial Disclosure is consistent with the financial disclosure in respect of the Assets and the Acquisition that was included in the Prospectus.

Decision

5. The Decision Makers being satisfied that they have jurisdiction to make this decision and that the relevant test under the Legislation has been met, the decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that the Filer includes the Alternative Financial Disclosure in the BAR to be filed in respect of the Acquisition.