Canadian Oil & Gas Market and Legal

Update
First Quarter 2016
Authors:
Chip Johnston
Jennifer McPherson
Janel Young
Erin Dand
Haifeng Hu
Rhonda Ferguson

STIKEMAN ELLIOTT LLP

MONTRAL TORONTO OTTAWA CALGARY VANCOUVER NEW YORK LONDON SYDNEY

stikeman.com

Introduction
Thank you for taking the time to review this update.
Weve compiled a summary of activity in the energy
market and an overview of key legal developments in
both the public and private markets from January 1
to March 31, 2016 that may be of particular interest.
About Stikeman Elliott
Stikeman Elliott is one of Canadas leading business law firms,
recognized for top tier services in each of our core practice
areas M&A, corporate finance, real estate, corporatecommercial law, banking, structured finance, tax, insolvency,
competition and foreign investment, and employment and
business litigation. We have prominent cross-border expertise,
as the first Canadian firm to open offices in London and New
York, and extensive experience in the U.S., Europe, China, and
South and Southeast Asia, as well as in Latin America, the
Caribbean and Africa.

Calgary Office
Our Calgary office is home to many of Albertas leading lawyers.
Opened in 1992, the office maintains a business law practice
focused on M&A, securities, banking, joint ventures, project
financings, real estate, tax and employment. In addition, our
Calgary office maintains a busy commercial litigation practice
recognized for its work on leading oil and gas cases, as well as a
renowned regulatory practice involving oil and gas and
electricity related matters.
Our Calgary lawyers have expertise in a variety of sectors, with a
focus on the oil and gas industry. We have acted as trusted
advisors on many of the energy sectors most complex
undertakings, from the financing and development of major
projects to ongoing operations. Businesses turn to us for expert
counsel relating to the exploration, production and refining of
conventional oil and gas, oil sands and shale gas, as well as the
extraction, transportation, processing and storage of crude oil,
bitumen, natural gas and liquefied natural gas (LNG) on a
worldwide basis. We also have extensive experience with respect
to energy trading and energy derivative products.
The office has a significant international dimension, advising on
foreign investment in the Canadian energy sector, cross-border
trade in energy resources and participation in international
energy projects.

STIKEMAN ELLIOTT LLP

We would be very pleased to hear

your thoughts and feedback.
Please feel free to contact any of the
editors of this update.
Chip Johnston
+1 403 266 9020
cjohnston@stikeman.com
Janel Young
+1 403 781 9190
jyoung@stikeman.com
Jennifer McPherson
+1 403 266 9056
jmcpherson@stikeman.com
Erin Dand
+1 403 266 9085
edand@stikeman.com
Haifeng Hu
+1 403 266 9081
hhu@stikeman.com
Rhonda Ferguson
+1 403 266 9075
rlferguson@stikeman.com
For additional copies of this
publication in printed or digital
form, or should you no longer wish
to receive these updates, please
contact us at rsvp@stikeman.com.

Canadian Oil & Gas M&A and Finance Transactions

First Quarter 2016
Value
(CAD)

Date

Transaction

E&P Acquisitions
Public Targets
$4.595B

March 21

Acquisition of Canadian Oil Sands by Suncor by take-over bid and

second-step squeeze-out amalgamation

$100M

January 13

Acquisition of Petroamerica by Gran Tierra by arrangement

$90M

March 24

Acquisition of Mart Resources by Midwestern Oil & Gas by arrangement

$80M

January 18

Acquisition of Canamax by Edge Natural Resources by arrangement

(go-private supported by management)

$30M

February 2

Acquisition of PhosCan by Petrus by arrangement (reverse take-over

combined with spin-out of PhosCans mining project)

$10M

March 24

Acquisition of Marsa Energy by Condor Petroleum by arrangement

$5M

January 27

Acquisition of Maple Leaf Royalties by Eagle Energy by arrangement

Private Targets & Assets

$185M

February 2

Acquisition of Minehead-Edson-Ansell assets from undisclosed vendor by

Tourmaline

$185M

February 3

Acquisition of natural gas properties from Enerplus by undisclosed party

$30M

February 29

Acquisition of Stream Oil & Gas from TransAtlantic by GBC Oil

$30M

March 31

Acquisition of Sunset assets from Surge by undisclosed purchaser

$15M

March 24

Acquisition of Valhalla assets from Surge by undisclosed purchaser

STIKEMAN ELLIOTT LLP

Value
(CAD)

Date

Transaction

E&P Acquisitions: Private Targets & Assets (continued)

$15M

January 22

Acquisition of Rainbow assets from undisclosed vendor by Northern

Petroleum

$5M

March 15

Acquisition of northeast Alberta leases from Perpetual by undisclosed

purchaser

Midstream Acquisitions
Private Targets & Assets
$95M

February 29

Acquisition of AltaGas Northcentral Processing LP by Tidewater from

AltaGas

Oilfield Services Acquisitions

Private Targets & Assets
$15M

January 4

Acquisition of Global Fluids International from Eurocontrol Technics by

SICPA

E&P Finance
Prospectus Offerings of Equity
$110M

March 9

Raging River Bought deal offering of common shares led by FirstEnergy

$100M

March 8

Advantage Bought deal offering of common shares led by FirstEnergy

$95M

March 15

Whitecap Bought deal offering of common shares led by National Bank

$95M

March 16

Spartan Bought deal offering of common shares led by Peters

$45M

March 18

Tamarack Bought deal offering of common shares led by National Bank

$35M

March 24

RMP Bought deal offering of common shares led by Macquarie

Private Placements of Equity

$300M

February 24

STIKEMAN ELLIOTT LLP

Seven Generations Bought deal placement of common shares co-led by

Peters and RBC

Value
(CAD)

Date

Transaction

Private Placements of Equity (continued)

$30M

January 14

Petrus Bought deal placement of subscription receipts co-led by

FirstEnergy and GMP

$10M

February 16

Manitok Placement of common shares and flow-through common shares

co-led by Integral and GMP

$5M

January 5

Jericho Placement of common shares and warrants

Private Placements of Equity to Sponsors

$30M

March 1

Oryx Placement of common shares to Zeg (38.3% on a diluted basis)

Private Placements of Debt

$95M

February 29

Strategic Placement of convertible notes led by RBC

Midstream Finance
Prospectus Offerings of Equity
$2.3B

March 1

Enbridge Offering of common shares co-led by RBC, Credit Suisse, BMO,

CIBC, Scotiabank and TD

$345M

March 29

Pembina Bought deal offering of common shares co-led by RBC and

Scotia

$170M

January 15

Pembina Bought deal offering of convertible preferred shares co-led by

Scotiabank, BMO and RBC

$80M

March 22

Tidewater Bought deal offering of common shares co-led by CIBC,

Macquarie and National Bank

Prospectus Offerings of Debt

$1.2B

January 22

TransCanada Offering of 10-year notes co-led by Deutsche Bank and J.P.

Morgan

$565M

January 22

TransCanada Offering of 3-year notes co-led by Deutsche Bank and J.P.

Morgan

STIKEMAN ELLIOTT LLP

Value
(CAD)

Date

Transaction

Oilfield Services Finance

Prospectus Offerings of Equity
$150M

March 22

Secure Bought deal offering of common shares co-led by FirstEnergy and

Raymond James

$65M

March 29

Canyon Bought deal offering of common shares led by Peters

Other Events and Transactions

Activism
$2.11B

March 31

InterOil - A group of dissident shareholders (including the founding

shareholder) of InterOil requisitioned a special meeting to put forward
resolutions to, among other things:

$20M

March 14

reduce the size of the InterOil board

amend InterOils compensation policy
amend the policy on third-party reviews of InterOils reserves
amend InterOils charter to require shareholder approval for
transactions over 10% of total asset value

Titan Logix - Jerry Zucker requisitioned a special meeting to elect three

dissident nominees to the five-person Titan Logix board and to terminate
Titans shareholder rights plan

Recapitalizations
$25M

January 18

Perpetual Rights offering of common shares led by BMO, backstopped

by Dreamworks

$10M

February 12

Yoho Purchase of outstanding convertible debentures

CCAA and Bankruptcy Proceedings

$260M

February 17

Argent sought creditor protection under the CCAA

$290M

March 3

Parallel filed an assignment in bankruptcy and KPMG was appointed as

trustee of the estate

$110M

March 21

Terra consented to the enforcement by Canadian Western Bank, as

secured lender, of its security pursuant to section 244(2) of the
Bankruptcy and Insolvency Act (Canada)

STIKEMAN ELLIOTT LLP

Terms of reference
This survey reports all closed oil & gas industry transactions valued at $5M or greater involving
businesses listed on a Canadian exchange or headquartered in Canada. All values are rounded to the
nearest $5M and are stated in Canadian dollars. Transactions values are reported on a net basis as of the
closing date (not announcement), and therefore include assumed debt and other payments, but do not
include assumed net working capital, when such details are available.
We have relied only on press releases and various data services in compiling this list. We have not
attempted to identify transactions which are disclosed indirectly or are otherwise not disclosed. We have
used our discretion in determining how a transaction is described and whether a transaction was
announced in the quarter or constitutes an oil and gas transaction.
Undisclosed transactions involving the purchase or sale of assets of private entities, or entities listed
outside of Canada are not included.
A target is public if it is listed, is a reporting issuer or is sufficiently widely-held to justify the use of an
arrangement or non-exempt bid to complete the acquisition. In certain cases we have identified the
notable features of an M&A transaction. We identify all unsolicited transactions.
A placement is to a sponsor if the issuer has placed a substantial number of securities to a single
purchaser or small group of purchasers. Sponsor investments, where known, are expressed on a diluted
basis.
Values listed in the CCAA and Bankruptcy Proceedings category reflect the total assets of the company
listed in the most recently filed interim or annual financial statement.
Values listed in the Activism category reflect the market capitalization of the company, calculated by
using the number of shares outstanding as of the most recently filed interim or annual financial
statement, multiplied by the opening share price of the company on the event date.
We have used our discretion in identifying a transaction as a Recapitalization and have described only
the material features of the transaction.
Corporate names have been truncated and parent entities are used in place of subsidiaries, as applicable.
Only the lead dealers in financings are identified. We have used our discretion in this regard if the
transaction press release does not disclose this information. If no agent or underwriter was disclosed, we
assumed the financing was non-brokered.

STIKEMAN ELLIOTT LLP

Key Developments in Canadian Public Markets Law

Oil & Gas Focus
First Quarter 2016

The following is an overview of key developments in Canadian public markets law

applicable to the oil and gas industry from January 1 to March 31, 2016.
Mergers and Acquisitions
Effective May 9, 2016, take-over bids will be subject to a minimum 105-day deposit period (subject to a
target right to waive), a minimum tender condition of 50% of independent shareholders and a mandatory
10-day extension to the bid period after the tender condition is satisfied.
The 2016 transaction size threshold for advance notice under the Competition Act was increased to
C$87M (from C$86M in 2015).
The 2016 review threshold for the Investment Canada Act applicable to the acquisition of non-cultural
Canadian businesses by WTO country state-owned enterprises was increased to C$375M (from C$369M in
2015).

Capital Markets
Albertas Finance Minister appointed a new ASC Chair and Chief Executive Officer and re-affirmed that
Alberta will not support the creation of a national securities regulator.
British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick adopted a new prospectus
exemption permitting listed issuers to, subject to satisfying certain disclosure requirements, distribute
securities to investors who have obtained advice about the suitability of the investment from a registered
investment dealer. This exemption does not restrict the size of offerings or the size of an investors
investment.
The CSA released its 2015 Enforcement Report showing an increase over 2014 in proceedings
commenced, ongoing matters concluded and the quantum of monetary sanctions imposed.
In light of the changes to the prospectus exempt rights offering regime, the TSX and the TSXV issued
interim guidance confirming that materials must be pre-cleared with the relevant exchange and five
trading days advance notice of the record date must be provided.
The TSX issued a staff notice answering frequently asked questions regarding normal course issuer bids
by listed issuers and publishing previously undisclosed TSX administrative practices regarding normal
course issuer bids.

STIKEMAN ELLIOTT LLP

Continuous Disclosure
The CSA released final amendments to the early warning requirements. Effective May 9, 2016, reporting of
2% decreases in ownership and exit reporting upon ownership falling below the 10% reporting threshold
will be mandatory.
The ASC published its 2015 Oil and Gas Review Report summarizing, among other things, deficiencies in
disclosure under NI 51-101. Key areas for improvement were disclosure of resources other than reserves,
type wells (type curves) and drilling locations, well test data and reserves reconciliations. The report also
provided guidance on disclosure of abandonment and reclamation costs.
The CSA released revised guidelines regarding disclosure of non-GAAP measures, in particular relating to
the inclusion of additional subtotals from an issuers financial statements in a press release or outside of
financial statements.
The OSC published the results of its review of insider reporting and insider trading policies urging
reporting insiders to improve the accuracy, completeness and timeliness of their insider reporting. The
OSC also provided recommendations for improving issuers insider trading policies.

Corporate Governance
The Institute of Corporate Directors released guidance encouraging corporate boards to play a more
meaningful role in shareholder engagement.

Litigation
The ASC released reasons for its decision in Re Perpetual Energy Inc. to decline to cease trade a rights
offering that was dilutive to the value debentureholders would receive when their convertible debentures
were repaid with shares at maturity. The ASC found that Perpetual had a genuine and legitimate business
purpose for the rights offering and that while it may be unfair to certain debentureholders, the applicants
failed to prove that it was abusive to debentureholders or harmful to the capital markets. The ASC also
found that a cease trade order was not an appropriate remedy as it could harm shareholders while
granting a windfall to debentureholders that, like one of the applicants, purchased convertible debentures
after announcement of the rights offering.
In Beaudette v Alberta, the Alberta Court of Appeal upheld the ability of the ASC to compel witnesses to
appear, give testimony and produce documents, and to share information with law enforcement agencies
and other government or regulatory authorities in Canada or elsewhere.

STIKEMAN ELLIOTT LLP

Key Developments in Canadian Private M&A Law

Oil & Gas Focus
First Quarter 2016

The following is an overview of key developments in Canadian law and regulatory

practice applicable to private M&A in the oil and gas industry from January 1 to March
31, 2016.
Oil & Gas Regulatory
The NEB approved, for the first time, a 40-year liquefied natural gas export licence for the Shell-led LNG
Canada Development facility in Kitimat, British Columbia.
Albertas NDP announced a summary of a Modernized Royalty Framework it intends to implement. While
important details have yet to be worked out, industrys preliminary reaction has been positive.

Litigation
The federal government has already imposed conditions on Enbridges Northern Gateway pipeline project,
but provincial conditions may also be forthcoming as a result of a B.C. courts ruling that the province
must fulfil its own duty to consult with affected First Nations and make its own decision.

Tax
The federal budget proposes to introduce a specific regime that will treat emissions allowances as
inventory, which will apply to emissions allowances acquired in taxation years beginning after 2016.
Although the Liberal government had previously promised to change the tax treatment of stock options,
the 2016 budget is silent on this issue, meaning there will be no changes to taxation of stock options in
the upcoming year.

Employment
In Keenan v Canac Kitchens Ltd., the Ontario Court of Appeal found that two contractors that worked
exclusively for one company were dependent contractors entitled to notice periods akin to those that
similarly situated employees would receive, even though the company had labelled these individuals as
independent contractors.

Competition
In US Steel Canada Inc. (Re), the Ontario Court of Appeal held that the confidentiality provisions set out in
the Investment Canada Act (ICA) do not prevent courts from ordering companies to disclose the
undertakings they are required to make to the Canadian government in order to obtain ICA approval for
foreign acquisitions.

STIKEMAN ELLIOTT LLP

Related Publications
Canadian Public Markets Law

Canadian Private M&A Law

CSA Provide Updated Guidance on Non-GAAP

Financial Measures
Canadian Securities Law Blog January 18, 2016

2016 Oil and Gas M&A Trends in Canada

Canadian Energy Law Blog January 5, 2016

TSX Provides FAQ Guidance on Normal Course

Issuer Bids
Canadian Securities Law Blog January 21, 2016
Five Provinces Adopt a New Prospectus Exemption
for Retail Investors Relying on Suitability Advice
From an Investment Dealer
Canadian Securities Law Blog January 22, 2016
Canadian Merger Control Thresholds for 2016:
Competition Act and Investment Canada Act
increases
The Competitor Blog January 27, 2016
Rights Offering Guidance Published by TSX and
TSXV
Canadian Securities Law Blog January 28, 2016
Final Take-Over Bid Rules Announced With a
105-day Minimum Deposit Period
Canadian Securities Law Blog February 25, 2016
Early Warning Changes in Canada to Impact
Securities Lending Arrangements and Provide for
Enhanced Disclosure
Canadian Securities Law Blog February 25, 2016

STIKEMAN ELLIOTT LLP

Pipe Dreams Deferred: A look back on how major

Canadian pipeline projects fared in 2015 and outlook
for the future
Canadian Energy Law Blog January 8, 2016
Albertas Modernized Royalty Framework
Canadian Energy Law Blog February 1, 2016
Key Issues in Canadian Energy M&A for US Buyers
Canadian Energy Law Blog February 3, 2016
Investment Canada Act: "Privilege" has its limits in US
Steel case
The Competitor Blog - February 26, 2016
The Liberal Budget: No changes to the taxation of stock
options
Canadian Securities Law Blog - March 23, 2016
Federal Budget Addresses the Taxation of Emissions
Allowances
Canadian Energy Law Blog - March 24, 2016
Court of Appeal Upholds Notice Period for Dependent
Contractors
Canadian Employment & Pension Law Blog - March 30,
2016

10

STIKEMAN ELLIOTT LLP