NuLoch Resources Inc.

Decision

[OSC Web Editor's Correction Note dated 2011-03-18: In the March 4, 2011 issue of the Bulletin, NuLoch Resources Inc. (2011), 34 OSCB 2571 was published in error. The correct decision is Enbridge Inc., Enbridge Gas Distribution Inc. and Enbridge Pipelines Inc. which appears in this Bulletin at (2011), 34 OSCB 3207]



Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief applications in Multiple Jurisdictions -- National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, s. 9.1 -- Affiliates request relief from the requirement of NI 52-107 s. 3.2 that financial statements be prepared in accordance with Canadian GAAP -- Part I to permit the Affiliates, who are not SEC Issuers, to prepare their financial statements in accordance with United States GAAP for financial years commencing January 1, 2012 until December 31, 2014 (fiscal 2012, 2013 and 2014). The Affiliates are rate regulated entities and may rely on section 5.4 of NI 52-107 to prepare and file Canadian GAAP -- Part V financial statements for the financial year commencing January 1, 2011 and ending December 31, 2011. Due to significantly divergent views on rate regulated accounting at the IASB, a rate regulated accounting standard has not been finalized. There continues to be significant uncertainty as to when, and if, rate regulated accounting under IFRS will be clarified.

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, s. 9.1

Citation: NuLoch Resources Inc., Re, 2011 ABASC 108

February 28, 2011

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

NULOCH 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) for an exemption in connection with an information circular (the Information Circular) to be sent to securityholders of the Filer pursuant to a plan of arrangement (the Arrangement) under section 193 of the Business Corporations Act (Alberta) (the ABCA) involving the Filer, Magnum Hunter Resources Corporation (Magnum Hunter) and MHR ExchangeCo Corporation (ExchangeCo) from the requirement to include a reconciliation of the following financial statements that are required to be included or incorporated by reference in the Information Circular to Canadian GAAP (the Exemption Sought): (i) historical financial statements of Magnum Hunter; (ii) historical financial statements of businesses acquired or proposed to be acquired by Magnum Hunter; and (iii) pro forma financial statements of Magnum Hunter.

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, Québec, Nova Scotia, New Brunswick, 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 or MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

The Filer

1. The Filer is a corporation amalgamated under the ABCA. The Filer's head and registered offices are located in Calgary, Alberta.

2. 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 in any of the provinces in which it is a reporting issuer.

3. The authorized capital of the Filer consists of an unlimited number of Class A common shares (NuLoch Shares), an unlimited number of Class B common shares (NuLoch Class B Shares) and an unlimited number of Class C preferred shares (NuLoch Preferred Shares). As at February 10, 2011, 122,332,907 NuLoch Shares and no NuLoch Class B Shares or NuLoch Preferred Shares were issued and outstanding. In addition, as at February 10, 2011, there were 11,815,500 NuLoch Shares reserved for issuance pursuant to outstanding stock options to purchase NuLoch Shares (NuLoch Options).

4. The NuLoch Shares are listed on the TSX Venture Exchange.

Magnum Hunter

5. Magnum Hunter is a corporation existing under the laws of the State of Delaware. The head office of Magnum Hunter is located in Houston, Texas and the registered office of Magnum Hunter is located in Wilmington, Delaware.

6. Magnum Hunter is subject to the 1934 Act but is not currently a reporting issuer or the equivalent in any Canadian jurisdiction. Magnum Hunter is not, to its knowledge, in default of its obligations under the 1934 Act or other applicable securities legislation in the United States.

7. The authorized capital of Magnum Hunter consists of 150,000,000 shares of common stock (Magnum Hunter Shares) and 10,000,000 shares of preferred stock (Magnum Hunter Preferred Shares). As at February 10, 2011, there were 75,847,130 Magnum Hunter Shares and 4,000,000 Magnum Hunter Preferred Shares issued and outstanding and 914,952 Magnum Hunter Shares held in treasury.

8. The Magnum Hunter Shares are listed on the New York Stock Exchange.

9. Magnum Hunter currently files financial statements prepared in accordance with generally accepted accounting principles in the United States (US GAAP) in accordance with the rules of the United States Securities and Exchange Commission (the SEC).

ExchangeCo

10. ExchangeCo is a corporation incorporated under the ABCA. ExchangeCo is an indirect wholly-owned subsidiary of Magnum Hunter and was incorporated for the sole purpose of completing the Arrangement.

The Arrangement

11. On January 19, 2011, the Filer, Magnum Hunter and ExchangeCo entered into an arrangement agreement whereby Magnum Hunter agreed to acquire, indirectly through ExchangeCo, all of the issued and outstanding NuLoch Shares pursuant to the Arrangement. Following completion of the Arrangement, the Filer will be an indirect wholly-owned subsidiary of Magnum Hunter.

12. In accordance with the ABCA, the Arrangement will need to be approved by the Court of Queen's Bench of Alberta and by the holders (the NuLoch Securityholders) of NuLoch Shares and NuLoch Options at an annual and special meeting of the NuLoch Securityholders. In connection therewith, the Filer will prepare and mail the Information Circular to the NuLoch Securityholders.

13. Pursuant to the form requirements for an information circular in the Jurisdictions, the Information Circular must include disclosure about Magnum Hunter prescribed by the form of prospectus Magnum Hunter would be eligible to use immediately prior to the sending and filing of the Information Circular.

14. Pursuant to section 3.1(c) of National Instrument 71-101 The Multijurisdictional Disclosure System (NI 71-101), Magnum Hunter is eligible to file a prospectus in the form of a MJDS prospectus prepared in accordance with the disclosure and other requirements of United States federal securities laws as it meets the eligibility criteria set forth in section 3.1(c) of NI 71-101.

15. In order for the Filer to provide the disclosure in the Information Circular in accordance with NI 71-101, the Information Circular must include the following financial statements (the Financial Statements): (i) historical financial statements of Magnum Hunter; (ii) historical financial statements of businesses acquired or proposed to be acquired by Magnum Hunter; and (iii) pro forma financial statements of Magnum Hunter. The Financial Statements have been prepared in accordance with US GAAP. Section 4.6 of NI 71-101 would require the Financial Statements to include a reconciliation to Canadian GAAP.

16. Magnum Hunter has advised the Filer that it falls within the definition of an SEC foreign issuer in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) and as such, once Magnum Hunter becomes a reporting issuer in certain of the jurisdictions in Canada, it intends to rely on section 3.9(1)(b) of NI 52-107 to continue to prepare its financial statements in satisfaction of its continuous disclosure obligations in Canada in accordance with US GAAP.

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.

"Blaine Young"
Associate Director, Corporate Finance