On December 4, 2014, the Canadian Securities Administrators (the CSA) announced a variety of amendments (the Amendments) to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101) and the related forms and policies, which are scheduled to take effect on July 1, 2015.

Instruments and forms affected

The Amendments affect NI 51-101, Form 51-101F1, Form 51-101F2, Form 51-101F3 and the Companion Policy (collectively, the Instrument), as well as CSA Staff Notice 51-324 and CSA Staff Notice 51-327 (consequential amendments). The Amendments also include a new Form 51-101F5 Notice of Ceasing to Engage in Oil and Gas Activities.


The Amendments are intended: (a) to promote improved disclosure of resources other than reserves in order to increase consistency and completeness among issuers by aligning the Instrument with changes made to the Canadian Oil and Gas Evaluation Handbook (COGEH) in July 2014; and (b) to update and modernize certain components of disclosure to recognize the need for greater flexibility for issuers that report sector-specific metrics, operate in different jurisdictions and recover product types not previously recognized by the Instrument.


Contingent and prospective resources One key change to the Instrument is that issuers will be permitted (but not obligated) to report resources other than reserves in their annual Form 51-101F1 filing (51-101F1) and to have such resources certified by the independent qualified reserves evaluator under an amended Form 51-102F2. If estimates of resources other than reserves (i.e. contingent and prospective resources) are included in the 51-101F1, such estimates must be prepared by an independent qualified reserves evaluator or auditor1 and be set forth in an appendix to either the stand-alone 51-101F1 or the issuer's Annual Information Form (AIF). If a reporting issuer discloses contingent resources in its 51-101F1, then, at a minimum, the reporting issuer must:

  • classify the contingent resources into specified project maturity sub-classes;
  • for each project maturity sub-class of contingent resources it is disclosing, disclose the risked 2C (best estimate) contingent resources volumes, gross and net, for each product type;
  • if contingent resources in the "development pending" project maturity sub-class are disclosed, disclose the risked net present value of future net revenue, calculated using forecast prices and costs for each product type, before deducting future income taxes and using discount rates of 0 percent, 5 percent, 10 percent, 15 percent and 20 percent; and
  • disclose a numeric value of the chance of development risk for each project maturity sub-class the issuer discloses and provide a description of the method of: (i) quantifying the chance of development risk; and (ii) estimating the contingent resources adjusted

If a reporting issuer discloses prospective resources in its 51-101F1, then, at a minimum, the reporting issuer must:

  • classify the prospective resources into specified project maturity sub-classes;
  • for each project maturity sub-class the issuer is disclosing, disclose the best estimate, gross and net, for each product type; and
  • disclose the numeric value of the chance of discovery and chance of development for each project maturity sub-class it is disclosing and provide a description of the method of: (i) quantifying the chance of discovery and chance of development; (ii) and estimating the prospective resources adjusted for chance of discovery and chance of development.

In addition, the public disclosure of resources other than reserves continues to be subject to section 5.9 of NI 51-101, which now requires a narrative description of each resource project for which an issuer has disclosed an estimate of quantity or value, the estimated total cost to achieve commercial production, the estimated date of first commercial production, the recovery technology and whether the project is based on a conceptual or pre-development study. These more robust requirements will apply, for example, to the disclosure of quantities of contingent or prospective resources in press releases, corporate presentations and other public disclosure (including in an issuer's AIF where the issuer does not wish to include its resources other than reserves in its 51-101F1).

Alternative resources evaluation standard

The Amendments allow for the disclosure of an estimate of the volume or the value of resources prepared under a resources evaluation standard other than COGEH (Supplementary Disclosure) without a reporting issuer having to apply for specific exemptive relief. This Supplementary Disclosure, however, must have been prepared by a qualified reserves evaluator under an alternative comprehensive evaluation framework that has a scientific basis and is similar to COGEH. The Supplementary Disclosure must be accompanied by additional information including, among other things, the effective date of the estimate, a description of the differences between the two regimes (an arithmetic reconciliation is not required) and the reason such differences exist.

The Amendments differentiate between Supplementary Disclosure under an alternative resources evaluation that is "required by the laws of the foreign jurisdiction" and disclosure that is not "required by the laws of the foreign jurisdiction." Supplementary Disclosure of estimates of resources – in a news release, for example – that is not "required by the laws of the foreign jurisdiction," must be accompanied by the same estimates prepared under COGEH, as at the same effective date as the Supplementary Disclosure. Supplementary Disclosure that is required under the laws of the foreign jurisdiction can, instead, simply reference the location on SEDAR where the corresponding COGEH based estimates may be found.

Product type and production group

The Amendments import and refine the product type definitions from COGEH for securities disclosure purposes and remove the concept of production groups. These amendments are meant to modernize the Instrument by emphasizing the sources and recovery processes for the hydrocarbons and moving away from the less-specific categories of "conventional" and "unconventional" resources. Issuers should familiarize themselves with the new COGEH terminology to ensure that their disclosure (including corporate presentations) use the correct product identifiers, as set forth in the Amendments.

Marketability of production and reserves

Disclosure of resources, or of sales of product types or associated by-products, must be made with respect to the first point of sale unless, to a reasonable person, the resources, product types or associated by-products would be marketable at an alternate reference point. The Amendments confirm that product types must be recovered before the first point of sale (or alternate reference point) in order to be booked as reserves. Commentary in Alberta Securities Commission (ASC) 2013/2014 Oil and Gas Review suggests that issuers will not be able to disclose, for example, wet gas (raw gas) as separate dry gas and natural gas liquids reserves if custody or title of the wet gas is transferred at the inlet to the gas processing facility.

Other amendments

In addition to the changes noted above, the Amendments clarify and specifically define "abandonment and reclamation costs". The Amendments require the disclosure of abandonment costs and reclamation costs (combined) in the future net revenue disclosure and a narrative commentary regarding significant factors or uncertainties relating to abandonment and reclamation costs (for both properties with reserves and properties with no attributed reserves) in the issuer's 51-101F1. Item 6.4 of Form 51-101F1 - Additional Information Concerning Abandonment and Reclamation Costs has been repealed in its entirety. The Amendments incorporate a new principles-based regime for oil and gas metrics, requiring issuers to describe the standard, methodology and meaning of a publicly disclosed oil and gas metric. If there is no standard metric, a reporting issuer must describe the parameters used in calculating the oil and gas metric and provide a cautionary statement. Provisions currently in the Instrument regarding metrics, including Net Asset Value, Netbacks, equivalency and reserve replacement, have been repealed in their entirety. The Amendments also: (i) remove the requirement to obtain the consent of the independent qualified reserves evaluator or auditor before disclosing results from the annual evaluation outside of the required annual filings; (ii) revise the date on which the independent qualified reserves evaluator or auditor is responsible for changes in the reporting issuer’s reserves data; and (iii) clarify the disclosure required when a reporting issuer has no reserves. Form 51-101F2 and Form 51-101F3 have been substantively modified for issuers that choose to disclose resources other than reserves as part of the annual 51-101F1 filings.

Practical considerations

The Alberta Securities Commission has informally indicated, with respect to the impact of the Amendments, that it intends to consider each issuer's disclosure on a case-by-case basis and focus on whether the pre-Amendment disclosure is materially misleading when viewed from a post-Amendment perspective. While it is clear that the CSA has taken significant steps to modernize the Canadian oil and gas disclosure requirements, for the next several reporting periods, issuers may face uncertainty regarding the impact of the Amendments on past, current and future disclosure as a result of the lack of adequate transition provisions in the amending materials. It remains to be seen whether the CSA will provide further official insight on how issuers are to deal with various identified transition issues, but the lack of certainty may increase the risk of delay or postponement for certain types of transactions between oil and gas issuers. While there are a number of such questions raised by the Amendments, the boards and management of affected reporting issuers may wish to consider more immediate issues, including the following:

  • does the issuer's corporate presentation need to be updated for July 1?
  • can a resource evaluation or assessment issued prior to the Amendments be relied on?
  • can disclosure issued prior to implementation of the Amendments be incorporated by reference into a short-form prospectus or other prospectus-level disclosure document?
  • are there circumstances, with respect to a contemplated future transaction, that may require a pre-filing conference with the ASC?
  • will engagement letters with the issuer's qualified reserves evaluator have to be updated and has such evaluator considered the impact of the Amendments?