Gentry Resources Ltd. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- s. 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) - exemption from the requirement under Part 8 of NI 51-102 to provide the financial statement disclosure in a business acquisition report (BAR) - Filer would have been able to use exemption in s. 8.10(3) to file alternative disclosure except that the transaction was structured for tax reasons as an acquisition of securities of a company incorporated for the specific purpose of acquiring the oil and gas properties and related assets from the vendor.

Citation: Gentry Resources Ltd., 2007 ABASC 510

July 26, 2007

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

GENTRY RESOURCES LTD. (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 to include in a business acquisition report (BAR), certain financial statements in respect of a significant acquisition made by the Filer, on the condition that the Filer include certain alternative financial information in the BAR (the Requested Relief).

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:

(a) the Alberta Securities Commission is the principal regulator for the Filer;

(b) the Filer is relying on the exemption in Part 3 of MI 11-101 in each of the other Provinces of Canada, except Quebec; and

(c) 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 defined in this decision.

Representations

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

Gentry Resources Ltd.

(a) The Filer is amalgamated under the Canada Business Corporations Act and is headquartered in Calgary, Alberta.

(b) The Filer is an independent Alberta oil and gas company which carries on the business of exploring, developing, acquiring and producing petroleum and natural gas reserves in Alberta and Saskatchewan.

(c) The Filer is a reporting issuer in each of the Jurisdictions where such concept exists and, to its knowledge, the Filer is not in default of any of the requirements of the applicable securities legislation in any such Jurisdictions in which it is a reporting issuer.

The Acquisition

(d) The Filer entered into a share purchase agreement dated April 30, 2007 (the Acquisition Agreement) with Bow Valley Energy Ltd. (the Vendor) in respect of an acquisition (the Acquisition) of certain oil and gas properties and related assets (the Assets). The Acquisition closed on May 31, 2007, with an effective date of April 1, 2007.

(e) Pursuant to the Acquisition Agreement, the Filer acquired 100% of the issued and outstanding shares (the AcquisitionCo Shares) in the capital of 1317010 Alberta Ltd., a shell company incorporated for the purpose of facilitating the Acquisition (AcquisitionCo), for aggregate cash consideration of $74.25 million, subject to adjustments.

(f) On April 30, 2007, concurrently with and subject to the Vendor and the Filer entering into the Acquisition Agreement, the Vendor transferred the Assets held by the Vendor to AcquisitionCo, with the result that AcquisitionCo owned the Assets from and after the Vendor and the Filer entering into the Acquisition Agreement and upon closing of the Acquisition.

(g) The transfer of Assets from the Vendor to AcquisitionCo was made for the sole purpose of facilitating the Acquisition in a tax efficient manner for the Vendor.

The Financial Statement Requirements

(h) Form 51-102F4 governs the form of the BAR which must be filed by the Filer in connection with the Acquisition.

(i) Item 3 of Form 51-102F4 directs an issuer to include in a BAR the financial statements or other information required by Part 8 of NI 51-102. Under Part 8 of NI 51-102, the Filer would be required to include:

(i) balance sheets and statements of income, earnings and cash flow as at and for the years ended December 31, 2006 and 2005 and the notes thereto in respect of the Assets;

(ii) statements of income, earnings and cash flow as at and for the three months ended March 31, 2007 and 2006 in respect of the Assets;

(iii) a pro forma balance sheet and income statement of the Filer as at and for the year ended December 31, 2006, along with pro forma earnings per share based on the pro forma financial statements, giving effect to the Acquisition; and

(iv) a pro forma income statement of the Filer as at and for the three months ended March 31, 2007;

(collectively, the Financial Statement Disclosure).

(j) Subsection 8.10(3) of NI 51-102 provides an exemption from the requirement to provide the financial statement disclosure under Part 8 for an acquisition of a business that is an interest in an oil and gas property, provided the acquisition is not an acquisition of securities.

(k) The Acquisition was, in substance, an acquisition of interests in oil and gas properties constituting a business. But for certain tax advantages gained by transferring the Assets from the Vendor into AcquisitionCo prior to the closing of the Acquisition, the Filer would have acquired the Assets directly from the Vendor, thereby availing itself of the exemption provided by subsection 8.10(3) of NI 51-102.

(l) The Filer is seeking a decision of the Decision Makers under the securities legislation of the Jurisdictions that the financial statement disclosure in the BAR in respect of the Acquisition be presented in accordance with the financial disclosure described in subsections 8.10(3)(e) and 8.10(3)(f) of NI 51-102.

(m) The Filer proposes to include in the BAR, with respect to the Acquisition:

(i) audited statements of revenue, royalties and operating expenses in respect of the Assets for the years ended December 31, 2006 and 2005;

(ii) unaudited statement of revenue, royalties and operating expenses in respect of the Assets for the three months ended March 31, 2007;

(iii) pro forma operating statements of the Filer that give effect to the Acquisition for the three months ended March 31, 2007 and for the year ended December 31, 2006; and

(iv) information with respect to reserve estimates of future net revenue and productions volumes and other relevant material information relating to the Assets, which information will be presented in accordance with the requirements of subsection 8.10(3)(g) of NI 51-102;

(collectively, the Alternative Financial Disclosure).

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 and the Filer shall not be required to include the Financial Statement Disclosure, provided that the Filer includes the Alternative Financial Disclosure in the BAR.