Lone Pine Resources Inc.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from prospectus requirement during the waiting period in connection with the delivery of a preliminary prospectus prepared in compliance with U.S. securities law to Canadian purchasers of securities under an initial public offering -- cross-border offering of securities -- Canadian purchasers of securities will receive both the U.S. preliminary prospectus and the Canadian preliminary prospectus, which are substantively the same except that the Canadian preliminary prospectus contains additional oil and gas disclosure prepared in compliance with applicable Canadian securities laws -- in absence of relief, Canadian purchasers of securities under the initial public offering will be unable to trade their securities to U.S. persons for a period of at least six months.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 65, 74(1).
Citation: Lone Pine Resources Inc., Re, 2011 ABASC 270
May 6, 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
LONE PINE RESOURCES INC.
(the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (each, a Decision Maker) has received an application for a decision under the securities legislation of the Jurisdictions (the Legislation) that the Filer be exempted from the requirement contained in the Legislation to file and obtain a receipt for both a preliminary prospectus and a prospectus (the Prospectus Requirement) in connection with the delivery of the US Preliminary Prospectus (as defined below) to prospective purchasers resident in each of the provinces of Canada other than Québec (the Canadian Offering Jurisdictions) during the period (the Waiting Period) between the issuance of a receipt for the Canadian Preliminary Prospectus (as defined below) and the issuance of a receipt for the associated final prospectus (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 section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, 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 in MI 11-102 have the same meaning in this decision, unless otherwise defined herein.
Representations
This decision is based on the following facts and representations made by the Filer:
1. The Filer was incorporated under the laws of the state of Delaware on September 30, 2010.
2. The Filer's principal office is located in Calgary, Alberta.
3. The Filer intends to conduct an initial public offering (the IPO) of shares of its common stock on a "cross-border" basis both in Canada and in the United States (US), and in connection therewith to cause all shares of its common stock offered in the IPO (Offered Shares) to be: (i) registered under the 1933 Act; and (ii) qualified for distribution under the local securities legislation of each of the Canadian Offering Jurisdictions.
4. The Filer has to date filed, in respect of the IPO: (i) a registration statement with the SEC, which includes a prospectus prepared in accordance with the 1933 Act, with amendments thereto filed subsequent to the initial filing (as amended, theUS Registration Statement); and (ii) a preliminary long form base PREP prospectus in each of the Canadian Offering Jurisdictions, with amended and restated versions thereof filed subsequent to the initial filing (as amended and restated, the Canadian Preliminary Prospectus).
5. The Filer wishes to register all of the Offered Shares under the 1933 Act pursuant to the US Registration Statement, including any Offered Shares offered and sold in the Canadian Offering Jurisdictions (the Canadian Placed Shares). If the Canadian Placed Shares are not registered under the 1933 Act, then for the purposes of US federal securities law they would be subject to resale restrictions for a six-month period following completion of the IPO during which they could not be offered or sold in the US or to US persons (as defined in Regulation S under the 1933 Act) and there could be no selling efforts directed at the US.
6. The US Registration Statement has not yet been declared effective by the SEC.
7. The Filer intends to file: (i) one or more further amendments to the US Registration Statement with the SEC; and (ii) one or more further amended and restated preliminary base PREP prospectuses (each, a Further Amendment) in the Canadian Offering Jurisdictions.
8. The Filer has applied to list its common stock on the Toronto Stock Exchange and the New York Stock Exchange.
9. No marketing activities have yet occurred with respect to the IPO. In connection with the marketing of the IPO: (i) a further amended and restated version of the Canadian Preliminary Prospectus will be distributed during the Waiting Period to prospective purchasers of Offered Shares in the Canadian Offering Jurisdictions; and (ii) a further amended preliminary prospectus prepared in accordance with US federal securities law (the US Preliminary Prospectus) will be distributed to prospective purchasers of Offered Shares in the US.
10. Compliance with US federal securities law relating to registration of the Canadian Placed Shares under the 1933 Act requires that prospective purchasers in the Canadian Offering Jurisdictions also be provided with copies of the US Preliminary Prospectus (the US Delivery Requirement) and, ultimately, the final US prospectus forming part of the US Registration Statement (together with the US Preliminary Prospectus, the US Prospectus), as applicable.
11. Absent the Exemption Sought, delivery of the US Preliminary Prospectus to prospective purchasers in the Canadian Offering Jurisdictions during the Waiting Period is contrary to the Prospectus Requirement and not otherwise permitted under the Legislation.
12. In the Filer's particular circumstances, delivery of the Canadian Preliminary Prospectus will not satisfy the US Delivery Requirement by reason of the differences in Oil and Gas Disclosure (as defined below) described in paragraphs 13 and 14 below.
13. Reserves data and other oil and gas information including production and operating data (collectively, Oil and Gas Disclosure) that is contained in the Canadian Preliminary Prospectus will, other than as noted in paragraph 15 below, be prepared in accordance with applicable Canadian disclosure requirements and conventions and, in particular, the applicable requirements of National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101). The Oil and Gas Disclosure prepared in accordance with NI 51-101 will not be contained in the US Preliminary Prospectus.
14. The Oil and Gas Disclosure contained in the US Preliminary Prospectus will be prepared in accordance with the applicable US disclosure requirements and conventions and, in particular, the applicable rules and regulations of the SEC.
15. The Canadian Preliminary Prospectus will contain certain additional Oil and Gas Disclosure that is also contained in the US Preliminary Prospectus as the historical financial statements of the issuer contained in the Canadian Preliminary Prospectus are prepared in accordance with US generally accepted accounting principles (US GAAP). Accordingly, in addition to Oil and Gas Disclosure in accordance with applicable Canadian disclosure requirements and conventions, the Canadian Preliminary Prospectus includes, in the notes to the financial statements pursuant to US GAAP, supplementary information with respect to oil and gas activities, including estimates of proved oil and gas reserves and a standardized measure of discounted future net cash flows relating to proved oil and gas reserve quantities. This supplementary information is presented in accordance with the oil and gas reserves estimation and disclosure requirements of the US Financial Accounting Standards Board, which align with corresponding SEC rules and regulations concerning reserves estimation and reporting.
16. The disclosure contained in the Canadian Preliminary Prospectus and the US Preliminary Prospectus will, at the time of their distribution to prospective purchasers of Offered Shares, be substantively the same, except that the Oil and Gas Disclosure prepared in accordance with NI 51-101 will not be contained in the US Preliminary Prospectus.
17. The Canadian Preliminary Prospectus includes a description of principal differences between the methodology and other requirements under NI 51-101 and those applicable under corresponding US standards.
18. The Filer is of the view that the US Preliminary Prospectus does not disclose any material facts relating to the Offered Shares for the purposes of Canadian purchasers of Offered Shares that is not also included in the Canadian Preliminary Prospectus.
19. If the Exemption Sought is granted, Canadian purchasers of Offered Shares will, subject to and in accordance with the applicable provisions of US federal securities law, have a right of action thereunder against the Filer, any applicable underwriter and certain other parties if the US Prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. This right of action under US federal securities law is in addition to any right of action for misrepresentation that a Canadian purchaser of Offered Shares may have under the securities legislation of the jurisdiction of Canada in which the purchaser is resident.
20. A Canadian purchaser of Offered Shares will receive the Canadian final prospectus in respect of the IPO and will only be able to purchase Offered Shares through an underwriter that is registered in the purchaser's Canadian jurisdiction of residence, unless an exemption from the dealer registration requirement is available.
21. The Filer is not in default of the securities legislation of any jurisdiction of Canada.
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 a prospective purchaser of Offered Shares resident in a Canadian Offering Jurisdiction to whom a copy of the US Preliminary Prospectus is delivered during the Waiting Period will also be delivered a copy of the Canadian Preliminary Prospectus.