Exemption Orders (Discretionary)
ABRAXAS PETROLEUM CORPORATION
2001 BCSECCOM 871
Headnote:
Mutual Reliance Review System for Exemptive Relief Applications – Relief granted to a foreign issuer from certain reserve disclosure requirements in the Ontario long form prospectus rule and form in respect of a take over bid circular, provided that the foreign issuer complies with the reserve disclosure requirements of United States law.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 108(7) and 114(2)(c)
British Columbia Securities Commission Form 62-902F, Item 15
British Columbia Instrument 41-501
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA, BRITISH COLUMBIA AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF ABRAXAS PETROLEUM CORPORATION, ABRAXAS ACQUISITION CORPORATION AND GREY WOLF EXPLORATION INC.
MRRS DECISION DOCUMENT
1. WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of Alberta, British Columbia and Ontario (the “Jurisdictions”) has received an application from Abraxas Acquisition Corporation (“AcquisitionCo”), a wholly-owned subsidiary of Abraxas Petroleum Corporation (“Abraxas”), for a decision under the securities legislation of the Jurisdictions (the “Legislation”) in connection with a proposed take-over bid (the “Offer”) to acquire all of the issued and outstanding common shares (the “Grey Wolf Shares”) of Grey Wolf Exploration Inc. (“Grey Wolf”) by AcquisitionCo not already held by Abraxas and Canadian Abraxas Petroleum Limited (“Canadian Abraxas”), a wholly-owned subsidiary of Abraxas, that:
1.1 in Alberta, certain trades in common shares of Abraxas (“Abraxas Shares”) acquired by Alberta Shareholders (to be defined herein) in connection with the Offer shall not be subject to the requirement to file and obtain a receipt for a preliminary prospectus and a prospectus in respect of such security (the “Prospectus Requirement”); and
1.2 to the extent that the take-over bid circular (the “Circular”) mailed in connection with the Offer provides estimated reserve volumes, discounted cash flows from such reserves at a rate of 10% using constant prices, the reconciliation of such reserve volumes with the previous years where available, historical information with respect to the gross and net volumes produced and sold and the amounts received therefor and the dollar amount expended on the oil and gas properties, prepared and disclosed in a registration statement on Form S-4 prepared in accordance with the United States Securities Act of 1933 (the “1933 Act Requirements”) and filed with the Securities Exchange Commission, AcquisitionCo is exempt from the requirements under the Legislation as they relate to the disclosure of company interest gross share of reserves before royalties, the disclosure of probable reserves for the year ended December 31, 1999, the reconciliation of probable reserves for the year ended December 31, 2000, the use of specific rates of discounting cash flows using current prices and the disclosure of oil and gas netback calculations (the “Reserve Disclosure Requirements”);
2. AND WHEREAS under the Mutual Reliance System for Exemptive Relief Applications (the “System”), the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS AcquisitionCo has represented to the Decision Makers that:
3.1 AcquisitionCo was incorporated under the Business Corporations Act (Alberta) (the “ABCA”) as a wholly-owned subsidiary of Abraxas for the sole purpose of making the Offer;
3.2 AcquistionCo is not a reporting issuer in the Jurisdictions;
3.3 Abraxas is a corporation organized and subsisting under the laws of the State of Nevada;
3.4 Abraxas is not a reporting issuer in any of the Jurisdictions;
3.5 Abraxas is a registrant under the United States Securities Act of 1933 and is subject to the continuous disclosure requirements of the United States Securities Exchange Act of 1934;
3.6 the authorized share capital of Abraxas consists of 200,000,000 Abraxas Shares and 1,000,000 preferred shares, issuable in series (“Preferred Shares”) of which, as at June 1, 2001, approximately 26 million Abraxas Shares were issued and outstanding and no preferred shares were issued and outstanding;
3.7 the Abraxas Shares are listed and posted for trading on the American Stock Exchange;
3.8 Grey Wolf was incorporated under the ABCA;
3.9 Grey Wolf is a reporting issuer in British Columbia, Alberta and Ontario;
3.10 the authorized capital of Grey Wolf consists of an unlimited number of Grey Wolf Shares of which, as at June 1, 2001, 12,804,628 were issued and outstanding;
3.11 the Grey Wolf Shares are listed and posted for trading on the Toronto Stock Exchange;
3.12 Abraxas and Canadian Abraxas beneficially own, directly or indirectly, or exercise control or direction over approximately 6.19 million Grey Wolf Shares, representing approximately 48.3% of the issued and outstanding Grey Wolf Shares;
3.13 the directors and officers of Abraxas beneficially own, directly or indirectly, or exercise control or direction over approximately 1.7 million Grey Wolf Shares representing approximately 13.4% of the issued and outstanding Grey Wolf Shares;
3.14 AcquisitionCo proposes to make an offer to acquire all of the issued and outstanding Grey Wolf Shares not already owned by Abraxas and Canadian Abraxas;
3.15 holders of Grey Wolf Shares will receive 0.6 of an Abraxas Share for each Grey Wolf Share;
3.16 upon acceptance of the Offer, and upon the completion of any subsequent compulsory acquisition transaction, holders of Grey Wolf Shares, other than Abraxas and Canadian Abraxas, will receive 3.97 Abraxas Shares representing 13.2% of the issued and outstanding Abraxas Shares;
3.17 upon acceptance of the Offer, and upon the completion of any subsequent compulsory acquisition transaction, holders of Grey Wolf Shares resident in Alberta (the “Alberta Shareholders”) will receive 1,177,653 Abraxas Shares representing 3.9% of the issued and outstanding Abraxas Shares;
3.18 no exemptions from the Prospectus Requirement exist to permit the Alberta Shareholders to trade their Abraxas Shares without satisfying the Prospectus Requirement;
3.19 under the Legislation, if a take-over bid provides that the consideration for the securities of an offeree issuer is to be, in whole or in part, securities of an offeror or other issuer, the information provided by the form of prospectus appropriate for the offeror or issuer who securities are being offered in exchange for the securities of the offeree issuer must be included in the take-over bid circular;
3.20 AcquisitionCo has elected to comply with the requirements of Ontario Securities Commission Form 41-501F1 (“Form 41-501F1"), save for the Reserve Disclosure Requirements;
3.21 in lieu of satisfying the Reserve Disclosure Requirements, the Circular satisfies the 1933 Act Requirements;
4. AND WHEREAS under the System, the MRRS Decision Document evidences the decision of each Decision Maker (collectively the “Decision”);
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
6. THE DECISION of the Decision Makers under the Legislation is that:
6.1 the Prospectus Requirement shall not apply to trades by the Alberta Shareholders in Abraxas Shares acquired pursuant to the Offer provided that such trades are executed through the facilities of a stock exchange outside Canada in accordance with the rules of such exchange; and
6.2 AcquisitionCo is exempt from the Reserve Disclosure Requirements provided that the disclosure in the Circular complies with the 1933 Act Requirements.
DATED this 3rd day of August, 2001.
Stephen P. Sibold, Q.C., Chair Glenda A. Campbell, Vice-Chair