Heritage Oil Plc

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from the prospectus requirements to permit a U.K. issuer to issue ordinary shares to a de minimus number of its Canadian security holders -- de minimis exemption in NI 45-101 not technically available

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, ss. 53, 74(1).

Citation: Heritage Oil Plc, Re, 2012 ABASC 345

August 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

HERITAGE OIL PLC

(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 the prospectus requirements of the Legislation, specifically section 110 of the Securities Act (Alberta) and section 53 of the Securities Act (Ontario), with respect to a proposed rights offering (the Rights Offering) by the Filer (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, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon; 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 herein.

Representations

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

1. The Filer is a company incorporated under The Companies (Jersey) Law 1991 (as amended). The corporate head office and registered office of the Filer is located in Jersey, Channel Islands.

2. The Filer is an oil and gas exploration and production company.

3. Substantially all of the assets and operations of the Filer are located outside Canada.

4. The mind and management of the Filer is located outside Canada.

5. The authorized capital of the Filer consists of an unlimited number of ordinary shares (the Ordinary Shares) and one special voting share (the Special Voting Share). As of the date of the report of J.P. Morgan Cazenove, referenced below, the Filer has 259,330,704 Ordinary Shares and 1 Special Voting Share issued and outstanding.

6. The Ordinary Shares are traded on the main market of the London Stock Exchange (the LSE) and are listed on the Official List of the United Kingdom Listing Authority.

7. The Filer is subject to the reporting requirements of the Financial Services Authority of the United Kingdom (the FSA) and the ongoing requirements of the LSE (collectively, the UK Requirements).

8. The Filer is a "designated foreign issuer" pursuant to National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.

9. Heritage Oil Corporation (Heritage) is a corporation existing under the Business Corporations Act (Alberta) and has its head office and registered office located in Calgary, Alberta.

10. Heritage is an oil and gas exploration and production company.

11. Substantially all of the assets and operations of Heritage are located outside Canada.

12. The mind and management of Heritage is located outside Canada.

13. The authorized capital of Heritage consists of an unlimited number of common shares (Common Shares) and an unlimited number of exchangeable shares (Exchangeable Shares). As of the date of the report of Computershare and Broadridge referenced below, Heritage has 252,472,242 Common Shares and 2,811,408 Exchangeable Shares issued and outstanding.

14. The Filer is the indirect holder of all of the Common Shares.

15. The Exchangeable Shares were created to facilitate a reorganization (the Reorganization) of Heritage, which involved creating the Filer as the new parent company of Heritage and its subsidiaries.

16. Subject to the terms and conditions of the Exchangeable Shares, the Special Voting Share, and ancillary agreements, the Exchangeable Shares are exchangeable on a one-for-one basis into Ordinary Shares. This permitted residents of Canada to participate in the Reorganization on a tax-efficient basis.

17. The effect of the Exchangeable Share structure is that holders of Exchangeable Shares have, as nearly as practicable, the same rights, privileges, and restrictions as the holders of the Ordinary Shares, including voting rights, rights to dividends and rights on dissolution.

18. The Exchangeable Shares are listed for trading on the Toronto Stock Exchange and the LSE.

19. The Filer and Heritage are reporting issuers in the Jurisdictions.

20. Under the the Rights Offering, the Filer will offer holders of Ordinary Shares and Exchangeable Shares the right to purchase Ordinary Shares (Rights) so that such holders may maintain their pro rata position.

21. The proposed Rights Offering will be conducted in accordance with all applicable laws, including the UK Requirements.

22. Holders of Ordinary Shares and Exchangeable Shares are entitled to participate in the proposed Rights Offering. Upon exercise of the Rights, the holders of Ordinary Shares and Exchangeable Shares will have the right to purchase Ordinary Shares. The Filer seeks to raise proceeds of approximately US$370 million under the Rights Offering, but the pricing of the Rights under the Rights Offering is yet to be determined.

23. The aggregate number of beneficial holders of Ordinary Shares and Exchangeable Shares resident in Canada does not constitute, in aggregate, 10 percent or more of all holders of Ordinary Shares and Exchangeable Shares.

24. The aggregate number of Ordinary Shares and Exchangeable Shares beneficially held by securityholders resident in Canada does not constitute, in aggregate, 10 percent or more of the outstanding Ordinary Shares and Exchangeable Shares.

25. The aggregate number of beneficial holders of Ordinary Shares and Exchangeable Shares resident in any of the provinces or territories of Canada does not constitute five percent or more of all holders, in aggregate, of the Ordinary Shares and Exchangeable Shares.

26. The aggregate number of Ordinary Shares and Exchangeable Shares beneficially held by securityholders resident in any of the provinces or territories of Canada does not constitute, in aggregate, five percent or more of the outstanding Ordinary Shares and Exchangeable Shares.

27. The Exchangeable Shares were designed to be, and always have been represented in the Filer's public disclosure to be, the economic equivalent of the Ordinary Shares. The Exchangeable Shares carry the same voting, dividend and rights on dissolution as the Ordinary Shares. As a condition of relief previously granted to Heritage (see In the Matter of Heritage Oil Corporation, 2008 ABASC 164, subparagraph 6(h)(ii)), the Filer was required to indicate in all mailings of proxy solicitation materials to registered and beneficial holders of the Exchangeable Shares "that the Exchangeable Shares are the economic equivalent to the [Ordinary Shares]".

28. The Filer's inability to aggregate the Exchangeable Shares and the Ordinary Shares for the purpose of the thresholds set out in subsection 10.1(1) of National Instrument 45-101 Rights Offerings (NI 45-101) would require the Filer to file a prospectus in the relevant jurisdictions in Canada to complete the Rights Offering in Canada, which would involve time and expense that are otherwise unwarranted given the de minimis number of securityholders of the Filer and Heritage in Canada.

29. The registrar and transfer agent for the Exchangeable Shares, and the registrar and transfer agent for the Ordinary Shares, provided reports on the number of registered and beneficial shareholders for each class of security. Reports delivered for the Exchangeable Shares by Computershare and Broadridge dated 22 May 2012 indicated that there were 2,811,408 Exchangeable Shares outstanding, of which 2,768,908 Exchangeable Shares were held through CDS Clearing and Depository Services Inc. The Broadridge report showed that there were 532 beneficial holders of Exchangeable Shares holding 2,647,715 shares. There were an additional three registered shareholders of Exchangeable Shares (one from Ontario, one from Nova Scotia and one from Australia).

30. The Filer obtained a report on its Ordinary Shares for registered shareholders from its registrar and transfer agent; a report for the beneficial holders was unavailable. A J.P. Morgan Cazenove report dated 29 December 2011 on the beneficial holders of the Ordinary Shares indicated that there were approximately 27 beneficial Canadian holders of Ordinary Shares holding approximately 1,562,652 Ordinary Shares with 7,243 non-Canadian beneficial holders holding approximately 257,768,052 Ordinary Shares.

31. After reasonable inquiry, the Filer has determined that approximately 91.24% of the Exchangeable Shares are held by residents of Canada, who comprise approximately 96% of the holders of the Exchangeable Shares. Accordingly, the Filer would not meet the 10% limits in sections 10.1(1)(a)(i) and (ii) of NI 45-101 unless the Exchangeable Shares and Ordinary Shares were aggregated. If the Exchangeable Shares were aggregated with the Ordinary Shares, residents of Canada would comprise approximately 7.11% of the aggregate number of beneficial shareholders, holding approximately 1.69% of the aggregate number of shares beneficially held. Similarly, residents of Alberta, British Columbia, Ontario and Québec represent approximately 23%, 14%, 41% and 11% of the number of beneficial holders of Exchangeable Shares, and 20%, 4%, 61% and 5% of the number of Exchangeable Shares, respectively. Accordingly, the Filer would not meet the 5% limits in sections 10.1(1)(a)(iii) and (iv) of NI 45-101 unless the Exchangeable Shares and Ordinary Shares were aggregated. Assuming the unlikely scenario that all beneficial holders of Ordinary Shares in Canada lived in one province and that the Exchangeable Shares were aggregated with the Ordinary Shares, the residents of any given province or territory would comprise no more than approximately 3.3% of the aggregate number of beneficial shareholders, and would not hold more than approximately 1.2% of the aggregate number of shares beneficially held.

32. Other than the Exchangeable Shares, there is no market in Canada for the securities of the Filer and none is expected to develop. The Filer does not currently intend to list any additional securities on any exchange or marketplace in Canada.

33. The Rights Offering is expected to be completed by 14 September 2012.

34. Neither the Filer nor Heritage is in default of any of the requirements of the Legislation or the conditions of any exemptive relief orders that have been granted to the Filer or Heritage.

35. The Filer is subject to various UK Requirements. Heritage is subject to various continuous disclosure obligations under the securities laws of the Jurisdictions. All disclosure documents of both the Filer and Heritage are concurrently filed and available on SEDAR.

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) to the knowledge of the Filer after reasonable inquiry, as of the record date of the Rights Offering:

(i) the aggregate number of beneficial holders of Ordinary Shares and Exchangeable Shares resident in Canada does not constitute, in aggregate, 10 percent or more of all holders of Ordinary Shares and Exchangeable Shares;

(ii) the aggregate number of Ordinary Shares and Exchangeable Shares beneficially held by securityholders resident in Canada does not constitute, in aggregate, 10 percent or more of the outstanding Ordinary Shares and Exchangeable Shares;

(iii) the aggregate number of beneficial holders of Ordinary Shares and Exchangeable Shares resident in any of the provinces or territories of Canada does not constitute five percent or more of all holders, in aggregate, of the Ordinary Shares and Exchangeable Shares; and

(iv) the aggregate number of Ordinary Shares and Exchangeable Shares beneficially held by securityholders resident in any of the provinces or territories of Canada does not constitute, in aggregate, five percent or more of the outstanding Ordinary Shares and Exchangeable Shares;

(b) all materials sent to any other securityholders for the Rights Offering are concurrently sent to each applicable securities regulatory authority and to each securityholder of the Ordinary Shares and Exchangeable Shares resident in Canada;

(c) the Filer, with respect to the Rights Offering:

(i) complies with sections 1, 4 and 9 of NI 45-101;

(ii) sends to each applicable securities regulatory authority a certificate of an officer or director of the Filer that to the knowledge of the person signing the certificate, after reasonable enquiry, the conditions set out in paragraph (a) above have been met; and

(iii) complies with paragraphs 2.1(a) and 2.1(b) of National Instrument 45-106 Prospectus and Registration Exemptions; and

(d) the first trade of Ordinary Shares issued upon the exercise of Rights will be a distribution, unless the conditions set out in section 2.6 of National Instrument 45-102 Resale of Securities are satisfied at the time of such first trade.