Provident Energy Trust - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief granted from the requirement to include certain financial statements in a business acquisition report -- Issuer filed a prospectus that included the financial information for the acquisition as a probable significant acquisition -- Financial information in the prospectus was for a period that ended not more than one interim period before the financial information that would be required under Part 8 of NI 51-102 -- Issuer will include the financial information that was in the prospectus in the business acquisition report -- The acquired business does not constitute a material departure from the business or operations of the Issuer immediately before the acquisition -- Issuer will not account for the acquired business as continuity of interests.

National Instruments Cited

National Instrument 51-102, ss. 8.4, 13.1.

Citation: Provident Energy Trust, 2006 ABASC 1121

February 24, 2006

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

PROVIDENT ENERGY TRUST (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 under Section 8 of NI 51-102 to include the following financial statements in the business acquisition report (the BAR):

1.1 the unaudited schedule of select assets and the unaudited schedule of revenue and operating expenses of the EnCana Natural Gas Liquids Processing Operations as at and for the nine months ended September 30, 2005 and September 30, 2004;

1.2 the unaudited balance sheets of Kinetic Resources USA and Kinetic Resources (LPG) as at October 31, 2005 and the unaudited statements of partners' capital, income and cash flows for the nine months ended October 31, 2005 and October 31, 2004; and

1.3 the unaudited pro forma consolidated balance sheet of the Trust as at September 30, 2005 and the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2005 and for the year ended December 31, 2004

(collectively the Requested Relief).

2. Under Multilateral Instrument 11-101 Principal Regulator System (MI 11-101) and the Mutual Reliance Review System for Exemptive Relief Applications:

2.1 the Alberta Securities Commission is the principal regulator for the Filer;

2.2 the Filer is relying on the exemption in Part 3 of MI 11-101 in all of the Provinces in Canada except Ontario; and

2.3 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:

4.1 The Filer is an open-end unincorporated investment trust governed by the laws of Alberta and is headquartered in Calgary, Alberta.

4.2 The Filer's business is the acquisition of interests in crude oil and natural gas rights and the exploration, development, production, marketing and sale of crude oil and natural gas. The Filer also owns and manages a midstream services business.

4.3 The Trust Units are listed and posted for trading on the TSX and the New York Stock Exchange. The Trust Units are registered under Section 12 of the United States Securities Exchange Act of 1934.

4.4 The Filer is a reporting issuer, where such status exists, in all of the provinces of Canada.

4.5 To its knowledge, the Filer is not in default of any of the requirements of the applicable securities legislation in any of the provinces in which it is a reporting issuer.

4.6 Provident Energy Ltd. (Provident) is a corporation the common shares of which are wholly-owned by the Trust. Provident was incorporated under the Business Corporations Act (Alberta) on January 19, 2001.

4.7 Provident is a reporting issuer in British Columbia, Alberta, Saskatchewan, Ontario and Quebec. Pursuant to a Mutual Reliance Review System decision document dated January 5, 2005 (the MRRS Decision Document), Provident is relieved from the continuous disclosure obligations of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and certain other disclosure requirements subject to certain conditions.

4.8 To its knowledge, Provident continues to satisfy the conditions set out in the MRRS Decision Document.

4.9 On October 27, 2005, the Filer and Provident entered into a purchase and sale agreement with EnCana Corporation (EnCana), 1140102 Alberta Ltd., EnCana Midstream Inc., WD Energy Services Inc. and EnCana Kerrobert Pipelines Limited (collectively, the Vendors) pursuant to which Provident agreed to acquire (the Acquisition) certain assets, shares and partnership interests which comprise the Vendors' natural gas liquids business (the NGL Business) for an aggregate purchase price of $697 million, plus working capital and other adjustments. The assets of the NGL Business included interests in certain NGL extraction plants, pipelines, storage and fractionation facilities, distribution facilities, contracts and the Vendors' interest in the NGL marketing business operated by Kinetic Resources U.S.A., a partnership formed under the laws of the State of Michigan and Kinetic Resources (LPG), a partnership formed under the laws of Alberta. The Acquisition was completed on December 13, 2005.

4.10 The Acquisition was partially financed by the Filer's public offering of 21,830,000 subscription receipts and $150 million of 6.5% extendible convertible unsecured subordinated debentures (the Offering) made pursuant to a (final) short form prospectus dated November 7, 2005 (the Prospectus).

4.11 The NGL Business acquired by Provident did not constitute a material departure from the business or operations of the Filer immediately before the Acquisition.

4.12 National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) and the Companion Policy to NI 44-101 (as in effect as of the date of the Prospectus) set forth the financial statements that are required to be included in a short form prospectus if an issuer is proposing to make a significant probable acquisition.

4.13 Using the significance tests set forth in Section 1.2 of NI 44-101, the Acquisition was determined to be significant above the 40% level.

4.14 In compliance with the requirements of Section 4.4 of NI 44-101 and Section 5.16(6) of the Companion Policy to NI 44-101, the Prospectus contained the following financial statements relating to the Acquisition:

4.14.1 the audited schedule of select assets and the audited schedule of revenue and operating expenses of the EnCana Natural Gas Liquids Processing Operations as at and for the years ended December 31, 2004 and 2003;

4.14.2 the audited balance sheets of Kinetic Resources USA and Kinetic Resources (LPG) as at January 31, 2005 and January 31, 2004 and the audited statements of partners' capital, income and cash flows for the years ended January 31, 2005 and January 31, 2004;

(collectively referred to as the Prospectus Annual Financial Statements)

4.14.3 the unaudited schedule of select assets and the unaudited schedule of revenue and operating expenses of the EnCana Natural Gas Liquids Processing Operations as at and for the six months ended June 30, 2005 and June 30, 2004;

4.14.4 the audited balance sheets of Kinetic Resources USA and Kinetic Resources (LPG) as at July 31, 2005 and the audited statements of partners' capital, income and cash flows for the six months ended July 31, 2005 and July 31, 2004;

(collectively referred to as the Prospectus Interim Financial Statements)

4.14.5 the unaudited pro forma consolidated balance sheet of the Filer as at June 30, 2005 and the unaudited pro forma consolidated statements of operations for the six months ended June 30, 2005 and for the year ended December 31, 2004

(collectively referred to as the Prospectus Pro Forma Financial Statements).

(the Prospectus Pro Forma Financial Statements, Prospectus Interim Financial Statements and the Prospectus Annual Financial Statements being collectively referred to herein as the Prospectus Financial Statements).

4.15 All material facts in respect of the NGL Business and the Acquisition at the time the Prospectus was filed, including the Prospectus Financial Statements, were provided in the Prospectus. To the knowledge of the Filer and Provident since the time the Prospectus was filed on November 7, 2005, there has not been any change in the business or affairs of the NGL Business that is material and adverse to the Filer or Provident, taken as a whole.

4.16 Pursuant to the requirements of Part 8 of NI 51-102 the Filer is required to file a BAR relating to the Acquisition within 75 days after the date of the Acquisition.

4.17 Using the significance tests set forth in Section 8.3 of NI 51-102, the Acquisition was determined to be significant above the 40% level.

4.18 To comply with the requirements of Section 8.4 of NI 51-102 and Section 8.6 of the Companion Policy to NI 51-102, the Filer would be required to include the following financial statements in the BAR:

4.18.1 the audited schedule of select assets and the audited schedule of revenue and operating expenses of the EnCana Natural Gas Liquids Processing Operations as at and for the years ended December 31, 2004 and 2003;

4.18.2 the audited balance sheets of Kinetic Resources USA and Kinetic Resources (LPG) as at January 31, 2005 and January 31, 2004 and the audited statements of partners' capital, income and cash flows for the years ended January 31, 2005 and January 31, 2004;

(collectively referred to as the BAR Annual Financial Statements)

4.18.3 the unaudited schedule of select assets and the unaudited schedule of revenue and operating expenses of the EnCana Natural Gas Liquids Processing Operations as at and for the nine months ended September 30, 2005 and September 30, 2004;

4.18.4 the unaudited balance sheets of Kinetic Resources USA and Kinetic Resources (LPG) as at October 31, 2005 and the unaudited statements of partners' capital, income and cash flows for the nine months ended October 31, 2005 and October 31, 2004;

(collectively referred to as the BAR Interim Financial Statements)

4.18.5 the unaudited pro forma consolidated balance sheet of the Trust as at September 30, 2005 and the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2005 and for the year ended December 31, 2004

(collectively referred to as the BAR Pro Forma Financial Statements).

4.19 The Prospectus Annual Financial Statements and the BAR Annual Financial Statements are identical.

4.20 The Prospectus Interim Financial Statements and the Prospectus Pro Forma Financial Statements are for the interim financial period immediately prior to the interim financial period for which the BAR Interim Financial Statements and the BAR Pro Forma Financial Statements are required.

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, provided that:

6.1 the Filer includes or incorporates by reference the Prospectus Financial Statements in the BAR;

6.2 The NGL Business acquired by Provident did not constitute a material departure from the business or operations of the Filer immediately before the Acquisition; and

6.3 the Filer will not account for the Acquisition as continuity of interests.