CANADIAN OIL AND GAS EVALUATION STANDARDS AND REGULATORY DISCLOSURE

1
CANADIAN OIL AND GAS EVALUATION STANDARDS AND
REGULATORY DISCLOSURE

• Dr. David Elliott
• Chief Petroleum Advisor
• Alberta Securities Commission

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OUTLINE

• THE CANADIAN OIL AND GAS
• THE CHANGING INDUSTRY
• SECURITIES REGULATION
• OIL AND GAS REVIEWS
• STANDARDS, GUIDANCE, AMENDMENTS
• REFERENCE MATERIAL

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OIL AND GAS MARKET IN CANADA

• About 500 oil and Gas Reporting (Public) Issuers1
• About 35 of the worlds public oil and gas
  companies are listed on the Canadian stock
  exchanges
• CANADIAN 415
• US2, (NYSE, AMEX, NASDAQ) 205
• LSE/AIM2 155
• ASX (Australia)2 220
• 1. ASC files
• 2. TSX website 30 Sept. 2011
• 3. ASC files Jan 2012

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THE CHANGING INDUSTRY

• Unconventional resource activity
• Trapping conditions and recovery processes are
  different
• New technology
• Horizontal wells, multistage fracturing
• Major increase in portion of corporate assets in
  resources other than reserves

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SECURITIES REGULATION

• Ability to raise funds and trade securities
• Investor protection provide information
  (disclosure) that is
• Material (could affect trading decisions)
• Timely
• Reliable
• The responsibility of directors and officers of
  the reporting issuer
• ASC advises other provinces on oil and gas
  disclosure

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THE RESOURCE EVALUATION PROCESS
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CANADIAN OIL AND GAS EVALUATION HANDBOOK (COGEH)

• Principle based, prime requirement is good
  engineering and geological practice
• Volume 1, Reserves Definitions and Evaluation
  Practices and Procedures (2002, 2007)
• Volume 2. Detailed Guidelines (2005)
• Volume 3. Coal Bed Methane Reserves and
  Resources, International Properties (Production
  Sharing Agreements) (2007)
• Bitumen (mined and in-situ) in DRAFT (issue early
  2012)
• Resources

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COGEH CLASSIFICATION
CLASS
CATEGORY
Derived from PRMS
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CANADIAN OIL AND GAS DISCLOSURE LEGISLATION

• Provincial Securities Acts
• Continuous Disclosure (NI 51-102)
• National Instrument 51-101, 2003 (amendments
  2007, 2010)
• Companion Policy
• Provides guidance on use of NI 51-101
• CSA Staff Notices
• 51-327, Ongoing guidance on current issues
• 51-324, Glossary

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NATIONAL INSTRUMENT 51-101

• Applies to
• All disclosure by Reporting Issuers materially
  engaged in Oil and Gas Activities
• Conventional and Unconventional Hydrocarbons,
  including
• Bitumen (In-situ, Mined)
• Synthetic Crude
• Shale Gas and Oil
• Requires
• Annual regulatory filings
• Qualified Reserves Evaluator or Auditor
• Independent evaluation for annual filings
• Use of industry developed evaluation standards
  (COGEH)

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NI 51-101 ANNUAL FILINGS

• F1 Reserves ( Resources)
• Mandatory
• Proved and Probable Reserves (PDP, PDNP, PUD)
• At Forecast prices
• Optional
• Possible Reserves and other Resource classes
  (Contingent resources, etc.)
• At Constant prices
• Other mandatory and optional information

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NI 51-101 F2 AND F3

• F2 Signed by IQRE/A to confirm that the
  evaluations
• Were carried out according to COGEH
• Contain no material misstatements
• F3 Signed by two officers and two directors to
  confirm
• They have reviewed the evaluation procedures
• Have met with the QRE/A
• Have reviewed the reserves data with management
• Approved the filing of the F1 and F2

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ASC REVIEWS

• Annual filings
• About 450 reviews every year
• News releases
• Over 5000 scanned per year
• Includes press releases, websites, presentations,
  etc.
• Resource reports (since 2003)
• Reviewed 1561
• Issuers reviewed 853
• Countries represented 54
• Evaluators 69

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TECHNICAL REVISIONS

• Change in estimate as a result of new technical
  information
• Proved reserves
• Mostly positive
• Approaches zero as the number of entities
  increases
• Proved probable reserves
• Close to zero
• Approaches zero as the number of entities
  increases

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PROVED RESERVES
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PROVED PROBABLE RESERVES
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LIGHT MEDIUM OIL PROVED PROBABLE RESERVES
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SUMMARY

• Conventional reserves disclosure generally good
• Unconventional resources and resources other than
  reserves
• Technical standards still in an early stage of
  development and use
• Variation in practice
• Concern about contingent resources

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STANDARDS DEVELOPMENT

• COGEH
• SPEE Resources Committee preparing resource
  guidelines
• Discovery criteria (Known accumulation)
• Use of analogs
• Extrapolation
• Clarification of contingencies
• Technology under development
• Political matters
• Project maturity

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CSA NI 51-101 GUIDANCE

• Companion Policy
• Staff Notice 51-327 update Dec 2011
• Responsibilities of reporting issuers and
  evaluators
• Avoidance of misleading statements
• Professional standards
• Specific topics
• Barrels of oil equivalent
• Well tests
• After Tax Net Present Value
• Website

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NI 51-101 POTENTIAL AMENDMENTS

• Generally minor, e.g.,
• Product type
• Better explanations
• Disclose if management estimate
• Public comment period
• Timing
• Probably mid-2013

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REFERENCE MATERIAL

• ASC website www.albertasecurities.com
• All securities legislation
• For oil and gas, go to
• For companies
• Oil and gas
• Annual oil and gas reports
• Annual webinar
• COGEH
• Available from the SPE Canada or SPEE Calgary
• PRMS
• On the SPE website

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ASC OIL AND GAS STAFF CONTACTS
DAVID ELLIOTTChief Petroleum Advisor 403 297
4008 David.Elliott_at_asc.ca FLOYD
WILLIAMSPetroleum Evaluation Engineer 403
297 4145 Floyd.Williams_at_asc.ca BILL
ORRPetroleum Evaluation Geologist 403 297
7252 Bill.Orr_at_asc.ca CARRIE NERMOSenior
Petroleum Analyst 403 297 6588
Carrie.Nermo_at_asc.ca BLAINE YOUNGAssociate
Director 403 297 4220 Blaine.Young_at_asc.ca
JENNY KIRKPATRICKLegal Counsel 403 355 3880
Jenny.Kilpatrick_at_asc.ca JAN MAZURCompliance
Analyst 403 297 2091 Jan.Mazur_at_asc.ca