Connacher Oil and Gas Limited - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- National Instrument 51-102 Continuous Disclosure Obligations -- Relief granted from the requirement for a company to include a pro forma interim income statement of an acquired business in a business acquisition report -- business acquisition report will include audited annual financial statements of the acquired business and an annual pro forma income statement.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, Part 8 and s. 13.1.

June 13, 2006

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

CONNACHER OIL AND GAS LIMITED (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 of the Legislation to include certain financial statements in the business acquisition report (the BAR) to be filed by the Filer in connection with an acquisition which was completed on March 31, 2006 on the condition that the Filer include the BAR Annual Financial Statements and the Annual Pro Forma Income Statements (each as defined herein and together, the Alternative BAR Financial Statements) in the BAR (the Requested Relief).

Application of 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:

2.1 the Alberta Securities Commission is the principal regulator for the Filer;

2.2 the Filer is relying on the exemption in Part 3 of MI 11-101 in all of the Provinces in Canada except Ontario; and

2.3 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:

4.1 The Filer is an Alberta Corporation engaged in the exploration for, and the development, production and marketing of, oil and natural gas with its head and principal office located in Calgary, Alberta. The Filer's Common Shares trade on the Toronto Stock Exchange.

4.2 The Filer is a reporting issuer in all of the provinces of Canada that have such a concept.

4.3 To its knowledge, the Filer is not in default of any of the requirements of the applicable securities legislation in any of the provinces in which it is a reporting issuer.

4.4 On March 31, 2006 the Filer completed the indirect acquisition of an 8,300 bbl/d refinery, together with certain related structures and assets, located in Great Falls, Montana (the Refinery) through the Filer's wholly-owned subsidiary Montana Refining Company, Inc. (the Acquisition).

4.5 The Acquisition constitutes a "significant acquisition" under the significance tests in Section 8.3 of NI 51-102.

4.6 Under the requirements of Part 8 of NI 51-102 the Filer is required to file a BAR relating to the Acquisition within 75 days after the date of the Acquisition which must include the following financial statements in the BAR:

4.6.1 audited annual financial statements of the Refinery for the years ended December 31, 2005 and 2004 prepared in compliance with section 8.4(1) of NI 51-102 (the BAR Annual Financial Statements);

4.6.2 a pro forma income statement of the Filer for the three months ended March 31, 2006 (the Interim Pro Forma Income Statement); and

4.6.3 for the year ended December 31, 2005 (the Annual Pro Forma Income Statement) prepared in compliance with Section 8.4(3) of NI 51-102 (collectively, with the Interim Pro Forma Income Statement, the BAR Pro Forma Financial Statements).

4.7 The Filer is seeking a decision of the Decision Maker to be permitted to exclude the Interim Pro Forma Income Statement in the BAR such that the financial statements included in the BAR will consist only of the BAR Annual Financial Statements and the Annual Pro Forma Income Statement.

4.8 Holly Corporation, the vendor of the Refinery, ("Holly") is an independent petroleum refiner and marketer producing products such as gasoline, diesel fuel and jet fuel. Holly operates through its subsidiaries a 75,000 barrel per stream day refinery located in New Mexico, and a 26,000 barrel per stream day refinery in Utah. Holly also owns an interest in Holly Energy Partners, L.P., which through subsidiaries owns or leases approximately 1,600 miles of petroleum product pipelines in Texas, New Mexico and Oklahoma and refined product terminals in several Southwest and Rocky Mountain states. Holly is registered with the Securities and Exchange Commission of the United States of America.

4.9 At the date of the Acquisition the Refinery was the smallest refinery held within Holly's portfolio.

4.10 The negotiations with respect to the Acquisition commenced several months prior to the completion date of the Acquisition of March 31, 2006. During the negotiations it was anticipated by all parties that the Acquisition would be completed by March 1, 2006. In light of this and in contemplation of the Business Acquisition Report financial statement requirements contained in NI 51-102 the Filer negotiated access to the records of Holly and Holly's auditors to prepare audited financial statements in respect of the Refinery for the year ended December 31, 2005. Had the Acquisition closed on March 1, 2006 as contemplated, the Filer would have filed the BAR prior to the date it filed its interim financial statements for the three months ended March 31, 2006 (the Interim Financial Statements) and the BAR would have only had to include the Alternative BAR Financial Statements. Because the closing of the Acquisition was delayed the Filer's access to the information required to prepare the Alternative BAR Financial Statements was delayed and the Filer filed the Interim Financial Statements prior to filing the BAR. Because the Interim Financial Statements were filed before the BAR was filed the Filer is required to include the Interim Pro Forma Income Statement in the BAR.

4.11 The purchase and sale agreement pursuant to which the Acquisition was completed does not provide for the access by the Filer of the information that it could use as the basis for preparing the Interim Pro Forma Income Statement and the Filer lacks the commercial bargaining power to negotiate access to such information.

Decision

5. The Decision Makers being satisfied that they have the jurisdiction to make this decision and that the relevant test under the Legislation has been met.

6. The decision of the Decision Makers under the Legislation is that the Requested Relief is granted, provided that the Filer include the Alternative BAR Financial Statements in the BAR.