Kelt Exploration Ltd.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement to include in a business acquisition report approximately one year of financial statement disclosure financial statements do not exist in respect of this period -- exemption conditional upon the provision in the business acquisition report of certain alternative disclosure.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4, 8.10(3), 13.1.

Citation: Kelt Exploration Ltd., Re, 2013 ABASC 197

May 7, 2013


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
KELT EXPLORATION LTD. (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 requirement under subsection 8.4(1) of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) to include, in the 2011 Required Annual Financial Statements (as defined below), information in respect of the Grande Cache Property (as defined below) for periods prior to the date of its acquisition by Celtic Exploration Ltd. (Celtic) in November 2011 in the business acquisition report (the BAR) of the Filer to be filed in connection with the acquisition (the Acquisition) of the Kelt Assets (as defined below) (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 section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Quebec, 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 was incorporated under the Business Corporations Act (Alberta) (the ABCA) on October 11, 2012 as "1705972 Alberta Ltd." On October 19, 2012, the Filer amended its articles to change its name to "Kelt Exploration Ltd." The registered and head offices of the Filer are located in Calgary, Alberta.

2. The Filer was incorporated as a wholly owned subsidiary of Celtic for the purposes of participating in the Arrangement (as defined below) and completing the Acquisition. Prior to the completion of the Arrangement and the Acquisition, the Filer did not carry on an active business, other than in connection with the Arrangement and related matters.

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

4. The Filer is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada. The Filer is not, to its knowledge after reasonable enquiry, in default of applicable securities legislation in any jurisdiction in Canada.

5. The common shares of the Filer are listed on the Toronto Stock Exchange under the stock symbol "KEL".

The Arrangement and the Acquisition

6. On February 26, 2013, the Filer, Celtic, ExxonMobil Canada Ltd. and ExxonMobil Celtic ULC (formerly 1690731 Alberta ULC) (the Purchaser) completed a plan of arrangement under section 193 of ABCA (the Arrangement) whereby the Purchaser acquired all of the issued and outstanding common shares of Celtic.

7. As a result of the Arrangement, the Filer became a reporting issuer in each of the provinces of Canada as disclosed in the notice of change of corporate structure filed by the Filer on March 1, 2013.

8. Pursuant to the Arrangement and a conveyance agreement between the Filer and Celtic made effective as of February 26, 2013, Celtic transferred certain assets (the Kelt Assets) to the Filer on February 26, 2013. The Kelt Assets included all of Celtic's right, title, estate and interest in the petroleum, natural gas and related hydrocarbon rights and related personal property interests within, upon or under the lands and leases in the following areas:

(a) the Inga area of British Columbia (the Inga Property);

(b) the Grande Cache area of Alberta (the Grande Cache Property); and

(c) the Karr area of Alberta lying north-east of the Smoky River (the Karr Property).

9. The Grande Cache Property was acquired by Celtic in November 2011, the Inga Property was acquired by Celtic in September 2010 and the Karr Property was acquired by Celtic prior to 2009.

Business Acquisition Report Requirements

10. The Acquisition constitutes a "significant acquisition" of the Filer as determined under section 8.3 of NI 51-102. Pursuant to section 8.2 of NI 51-102 the Filer is required to file the BAR on or before May 13, 2013.

11. Among the requirements of subsection 8.4(1) of NI 51-102, the BAR is required to contain the following financial statements in respect of the Kelt Assets for the year 2011: a statement of comprehensive income, a statement of changes in equity and a statement of cash flows for the year ended December 31, 2011 (the 2011 Required Annual Financial Statements).

Subsection 8.10(3) of NI 51-102

12. Pursuant to subsection 8.10(3) of NI 51-102, a reporting issuer is exempt from the requirements set out in section 8.4 of NI 51-102 in respect of an acquisition of a business that is an interest in an oil and gas property that is not of securities of another issuer, provided that the conditions set out in subsection 8.10(3) of NI 51-102 are satisfied.

13. The acquisition of the Grande Cache Property by the Filer would satisfy the conditions in paragraphs 8.10(3)(a), (b) and (c) of NI 51-102, namely:

(a) the Acquisition constituted an acquisition of a business that is an interest in an oil and gas property and is not of securities of another issuer;

(b) the financial statements for the Grande Cache Property do not exist for the period prior to the acquisition of the Grande Cache Property by Celtic in November 2011; and

(c) the Acquisition did not constitute a reverse takeover.

Alternative Disclosure

14. The Filer proposes to include the following financial statements and information in the BAR (the Alternative Disclosure):

(a) other than the Exemption Sought, the financial statement disclosure required under section 8.4 of NI 51-102;

(b) certain disclosure modelled after subsection 8.10(3) of NI 51-102, intended to substitute for the disclosure to be omitted pursuant to the Exemption Sought, namely:

(i) an operating statement for the Grande Cache Property for the year ended December 31, 2011 (audited) prepared in accordance with subsection 3.11(5) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;

(ii) a description of the Kelt Assets;

(iii) disclosure of the annual oil and gas production volumes of the Kelt Assets for the years ended December 31, 2011 and December 31, 2012;

(iv) the estimated reserves and related future net revenue attributable to the Kelt Assets as at September 30, 2012 (being the most recent date such information has been prepared by a qualified reserves evaluator under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities), the material assumptions used in preparing the estimates and the identity and relationship to the Filer of the person who prepared the estimates; and

(v) the estimated oil and gas production volumes for the Kelt Assets for the year ended December 31, 2013.

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 the BAR includes the Alternative Disclosure.

"Blaine Young"
Associate Director, Corporate Finance
Alberta Securities Commission