Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from the requirement under Part 8 of National Instrument 51-102 Continuous Disclosure Obligations to include financial statements in a Business Acquisition Report -- Filer will provide alternative disclosure on the basis that the acquisition was in substance an acquisition by the Filer of an interest in oil and gas properties.

Applicable Legislative Provisions

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

Citation: Valeura Energy Inc., Re, 2011 ABASC 357

June 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

VALEURA ENERGY 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) exempting the Filer from the requirement to include in a business acquisition report (BAR) certain financial statements and information as required under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) in respect of a significant acquisition made by the Filer, on the condition that the Filer include in the BAR certain alternative financial information as more particularly described 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 Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia and Saskatchewan; 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) and its head office is in Calgary, Alberta.

2. The Filer is engaged in the exploration, development and production of petroleum and natural gas in Turkey and Western Canada.

3. The Filer is a reporting issuer in British Columbia, Alberta, Saskatchewan and Ontario, and is not, to its knowledge, in default of its obligations as a reporting issuer under the securities legislation of any of the jurisdictions in which it is a reporting issuer.

4. The Filer is a venture issuer.

The Acquisition

5. Pursuant to certain transactions and agreements, the Filer purchased particular oil and gas lands and assets located in Turkey (the Assets) on June 8, 2011. The Assets were owned by Thrace Basin Natural Gas Turkiye Corporation (TBNG) and Pinnacle Turkey Inc. (PTI). TBNG and PTI were wholly-owned by Mustafa Mehmet Corporation (MMC).

6. Due to tax, foreign ownership and government approval considerations, the purchase by the Filer of the Assets (the Acquisition) was structured in a certain manner, such that rather than the Filer acquiring the Assets directly, the Filer acquired the Assets via purchasing 100% of the issued and outstanding shares of Corporate Resources B.V. (Subco).

7. Subco was incorporated on September 11, 2001 as a shelf company by the Dutch trust company, BFT Nederland B.V.

8. MMC purchased Subco on April 18, 2011 for the sole purpose of facilitating the Acquisition.

9. In contemplation of and prior to the Acquisition, the Assets were transferred to Subco.

10. When Subco was purchased by MMC, Subco had no assets (other than a small amount of cash) and no liabilities. At closing of the Acquisition the only assets of Subco were the Assets.

11. The Acquisition constitutes a significant acquisition for the Filer within the meaning of Part 8 of NI 51-102. Accordingly, the Filer is required to file a BAR in respect of the Acquisition.

12. The financial year end of both the Filer and Subco is December 31.

13. Section 8.4 of NI 51-102 would require the Filer to include certain financial statements and other information in the BAR, including:

(a) an audited statement of comprehensive income, statement of changes in equity and statement of cash flows for Subco's most recently completed financial year ended on or before the acquisition date, and an audited statement of financial position for Subco as at the end of that year;

(b) an unaudited statement of comprehensive income, statement of changes in equity and statement of cash flows for Subco's financial year immediately preceding its most recently completed financial year, and an unaudited statement of financial position for Subco as at the end of that year;

(c) an interim financial report for Subco for the most recently completed interim period that started the day after the date of the most recent statement of financial position specified above and ended before the acquisition date, as well as interim financial information for the comparable period in the preceding financial year;

(d) a pro forma statement of financial position of the Filer as at the date of the Filer's most recent statement of financial position filed, that gives effect, as if they had taken place as at the date of that pro forma statement of financial position, to significant acquisitions that have been completed, but are not reflected in the Filer's most recent statement of financial position for an annual or interim period;

(e) a pro forma income statement of the Filer for the Filer's most recently completed financial year for which it has filed financial statements, that gives effect to significant acquisitions completed since the beginning of that financial year as if they had taken place at the beginning of that financial year;

(f) a pro forma income statement of the Filer for the Filer's most recently completed interim period for which it has filed financial statements that started after the period referred to in paragraph (e) above, and ended before the acquisition date, that gives effect to significant acquisitions completed since the beginning of the financial year referred to in paragraph (e) above as if they had taken place at the beginning of that interim period; and

(g) pro forma earnings per share based on the pro forma financial statements referred to in paragraphs (e) and (f) above.

14. Section 8.10(3) of NI 51-102 provides an exemption from the financial statement requirements that would otherwise apply under Section 8.4 of NI 51-102 if the significant acquisition is of a business that is an interest in an oil and gas property, provided that, among other things: (i) the acquisition is not an acquisition of securities of another issuer; and (ii) the BAR includes historical operating statements in respect of the assets purchased and pro forma operating statements of the issuer.

15. Although the Acquisition was made via the purchase of securities of another issuer (Subco), the Acquisition was, in substance, an acquisition by the Filer of oil and gas properties constituting a business. At the time of the Acquisition, the other conditions specified in Section 8.10(3) were met.

16. The Filer proposes to include the disclosure specified by Section 8.10(3) of NI 51-102 in the BAR to be filed in respect of the Acquisition, namely:

(a) an audited operating statement pertaining to the Assets presenting gross revenues, royalty expenses, production costs and operating income for the period that is the same as Subco's most recently completed financial year ended on or before the acquisition date;

(b) an unaudited operating statement pertaining to the Assets presenting gross revenues, royalty expenses, production costs and operating income for the period that is the same as Subco's financial year immediately preceding its most recently completed financial year;

(c) an unaudited operating statement pertaining to the Assets presenting gross revenues, royalty expenses, production costs and operating income for the period that is the same as Subco's most recently completed interim period that started after the period referred to in paragraph (a) above and ended before the acquisition date;

(d) a pro forma operating statement of the Filer for the Filer's most recently completed financial year for which financial statements are required to have been filed, that gives effect to significant acquisitions completed since the beginning of that financial year as if they had taken place at the beginning of that financial year;

(e) a pro forma operating statement of the Filer for the Filer's most recently completed interim period for which it has filed an interim financial report that began after the period referred to in paragraph (d) above and ended before the acquisition date, that gives effect to significant acquisitions completed since the beginning of the financial year referred to in paragraph (d) above as if they had taken place at the beginning of that interim period;

(f) a description of the Assets and the interest acquired therein;

(g) disclosure of the annual oil and gas production volumes from the Assets for the periods referred to in paragraphs (a) and (b) above;

(h) the estimated reserves and related future net revenue attributable to the Assets, the material assumptions used in preparing the estimates, and the relationship, if any, between the person who prepared the estimates and any of the Filer, TBNG, PTI or MMC; and

(i) the estimated oil and gas production volumes from the Assets for the first year reflected in the estimates disclosed under paragraph (h) above;

(collectively, the Alternative Disclosure).

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 Filer includes the Alternative Disclosure in the BAR to be filed in respect of the Acquisition.

"Blaine Young"
Associate Director, Corporate Finance