Parex Resources Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- issuer made acquisition that met the profit and loss test under Part 8 of NI 51-102, thus requiring the filing of a business acquisition report and corresponding disclosure in any short form prospectus -- issuer submitted that absent a "one-time gain" from an asset sale in the relevant year the profit and loss test would not have been met -- issuer relieved from the foregoing requirements -- issuer included, in its application, certain measures (proved and probable reserves and average and exit rate production) intended to support its contention that the acquisition was not significant.

Applicable Legislative Provisions

National Instrument 44-101 Short Form Prospectus Distributions.

National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.

Citation: Parex Resources Inc., Re, 2012 ABASC 189

May 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

PAREX RESOURCES 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) to grant an exemption (i) from the obligation to file a business acquisition report (BAR) in connection with the Acquisition (as defined below) as required by Part 8 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102); and (ii) from any requirement under Item 10 of Form 44-101F1 Short Form Prospectus (44-101F1) to disclose the Acquisition as a completed acquisition in a short form prospectus (collectively, 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 the Provinces of 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, MI 11-102 or NI 51-102 have the same meaning if used in this decision, unless otherwise defined herein.

Representations

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

The Filer

1. The Filer, a corporation formed under the Business Corporations Act (Alberta) with its head office in Alberta, is a reporting issuer in each of the provinces of Canada. To its knowledge, the Filer is not in default of securities legislation in any jurisdiction of Canada.

The Acquisition

2. The Filer, through a wholly owned subsidiary, acquired pursuant to a purchase and sale agreement all the outstanding common shares (the Purchased Shares) of Ramshorn International Limited (Ramshorn) (the Acquisition). Closing of the Acquisition occurred on April 12, 2012. The consideration paid for the Purchased Shares was approximately US$72.6 million in cash, including customary closing adjustments (the Purchase Price).

Significance Test for the BAR and for a Short Form Prospectus

3. Pursuant to subsection 8.2(1) of NI 51-102, an issuer must file a BAR 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 comprised of three tests, namely: the asset test, the investment test and the profit or loss test. An acquisition is considered to be significant if any of the described tests are met.

4. Under Item 10 of 44-101F1, in certain circumstances, an issuer must disclose in a short form prospectus a completed acquisition that is considered a significant acquisition for the purposes of Part 8 of NI 51-102 and if applicable, include in the short form prospectus financial statements or other information about the acquisition or proposed acquisition.

5. The Acquisition is not a significant acquisition under the asset test in paragraph 8.3(2)(a) of NI 51-102 as the value of the Purchased Shares (based on the Purchase Price) represents only approximately 11% of the consolidated assets of the Filer as of December 31, 2011.

6. The Acquisition is not a significant acquisition under the investment test in paragraph 8.3(2)(b) of NI 51-102 as the Filer's consolidated investment in, and advances to, Ramshorn represent only approximately 11% of the consolidated assets of the Filer as of December 31, 2011.

7. However, the Acquisition is a significant acquisition under the profit or loss test in paragraph 8.3(2)(c) of NI 51-102, which requires comparison of the consolidated specified profit or loss of the Filer with the consolidated specified profit or loss (on an absolute basis) of Ramshorn, in both cases, for the year ended December 31, 2011. In particular, Ramshorn's consolidated specified profit or loss represents approximately 522.3% of the Filer's consolidated specified profit or loss as of December 31, 2011.

8. In March 2011, Ramshorn entered into a purchase and sale agreement with an Alberta based company (Alberta Co) pursuant to which Ramshorn sold certain oil and gas properties (the Assets) to Alberta Co for US $84.6 million, after customary adjustments. The sale of the Assets to Alberta Co resulted in a one-time gain of US $84.6 million (classified as a "Gain -- sale of assets") (the One Time Gain) on Ramshorn's unaudited income statement for the year ended December 31, 2011.

9. Absent inclusion of the One Time Gain, Ramshorn's consolidated specified profit or loss would represent 18.7% of the consolidated specified profit or loss of the Filer for the year ended December 31, 2011.

Non-significant Acquisition

10. The Filer is of the view that Ramshorn's consolidated specified profit or loss for the year ended December 31, 2011 is not representative of the financial or operational performance of Ramshorn due to the One Time Gain.

11. Overall, the Filer is of the view that the Acquisition is not a significant transaction to it from a practical, commercial, business or financial perspective.

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.