Introduction

National Instrument 51-101 and its related forms (Forms) and companion policy (51-101CP) were amended effective December 30, 2010 and will therefore apply to reporting issuers for fiscal years ending on and after December 31, 2010.

In conjunction with the amendments to NI 51-101, the Canadian Securities Administrators (CSA) Staff Notice 51-324 Glossary To NI 51-101 Standards Of Disclosure For Oil And Gas Activities (Notice 51-324) and CSA Staff Notice 51-327 Oil And Gas Disclosure: Resources Other Than Reserves Data (Notice 51-327) were also amended effective December 30, 2010. Notice 51-324 explains much of the terminology used in NI 51-101 and also focuses on the definition of reserves and is derived from Section 5 of Volume 1 of the COGE Handbook, while Notice 51-327 provides guidance in disclosure of possible reserves and other resource classes. We will not comment on the consequential amendments to National Instrument 41-101 – General Prospectus Requirements arising out of these changes.

Purpose of the Amendments

In their announcement of amendments to NI 51-101 published October 15, 2010, the CSA notes that the amendments fall into three broad categories: amendments for clarification, amendments to codify existing staff guidance and practice, and added requirements to enhance reliability of certain disclosure of "reserves" and "resources" other than "reserves". A brief summary of the effect of the amendments is provided below.

Summary of Amendments

Two areas of particular interest to the commissions were the disclosure treatment of "resources" other than "reserves" and the addition of amounts across "resource" categories. In reading this bulletin, the definitions contained in NI 51-101 should be kept in mind and are placed in quotation marks in this bulletin.

  • One of the more significant amendments:
    • prohibits disclosure that involves a summation of an estimated quantity, or estimated value, of two or more of the following:
      • "reserves";
      • "contingent resources";
      • "prospective resources";
      • the unrecoverable portion of "discovered petroleum initially-in-place";
      • the unrecoverable portion of "undiscovered petroleum initially-in-place";
      • "discovered petroleum initially-in-place"; and
      • "undiscovered petroleum initially-in-place".
    • but provides relief for disclosure of an estimate of "total petroleum initially-in-place", "discovered petroleum initially-in-place" or "undiscovered petroleum initially-in-place" if the disclosure document includes, proximate to the disclosure of the information described above, an estimate of each of the following, as applicable:
      • "reserves";
      • "contingent resources";
      • "prospective resources";
      • the commercial portion of "discovered petroleum initially-in-place";
      • the sub-commercial portion of "discovered petroleum initially-in-place";
      • the unrecoverable portion of "discovered petroleum initially-in-place";
      • the unrecoverable portion of "undiscovered petroleum initially-in-place";
      • "discovered petroleum initially-in-place"; and
      • "undiscovered petroleum initially-in-place".
    • and further permits disclosure of an estimate of "total petroleum initially-in-place", "discovered petroleum initially-in-place" or "undiscovered petroleum initially-in-place" as the most specific category that can be assigned to the "resources" being reported on if, proximate to that disclosure:
      • an explanation is given as to why that categorization is the most specific assignable category; and
      • includes the cautionary statement required by NI 51-101, appropriate to that category

Notice 51-327 should also be considered in making this kind of disclosure.

  • Another significant amendment requires that if disclosure of an estimate of "proved" plus "probable" plus "possible" "reserves" is made, then disclosure of the corresponding estimates of:
    • "proved" and "proved" plus "probable" "reserves", or
    • "proved" and "probable" "reserve

must also be made.

  • If disclosure of a high-case estimate of "resources" other than "reserves" is made, then disclosure of the corresponding low and best-case estimates must also be made.
  • In all provinces, Form 51-101F3 Report of Management and Directors on Oil and Gas Disclosure now must be signed
    • by two officers, one of whom is the chief executive officer, and
    • on behalf of the board of directors, by any two directors, other than the officers above,

except where the issuer has only three directors, two of whom are officers above, then it must be signed by all of the

directors.

  • The requirement to file a news release announcing that the NI 51-101 forms have been filed has been removed; however, issuers may wish to consider whether this information is material and therefore required under other securities or stock exchange rules.
  • Issuers may satisfy the requirement to file the Forms by including the information in their "annual information form". In that case, they must also file a new form, 51-101F4 Notice of Filing of 51-101F1 Information.
  • The requirement that issuers using "Canadian GAAP" must follow either the full-cost or successful efforts methods of accounting has been removed.
  • Amendments have been made requiring, in relation to both "reserves" and "resources" other than "reserves", that issuers
    • use the terminology and categories set out in the COGE Handbook and
    • classify both "reserves" and "resources" other than "reserves" in the most specific category applicable to them,

except when disclosing "total petroleum initially-in-place", "discovered petroleum initially-in-place" or "undiscovered petroleum

initially-in-place", in which case reference to the specific "product type" of the "resource" may be used in place of "petroleum".

In particular, issuers should consider Notice 51-324 in responding to this item.

  • Amendments have been made to the disclosure rules relating to "anticipated results" for "resources" other than "reserves" to include the requirement that they be
    • prepared or audited in accordance with the COGE Handbook, and
    • classified in the most specific category of "resources" other than "reserves".
  • Form 51-101F1 has several significant changes, including:
    • new instructions have been added, including those dealing with presentation of foreign currency amounts and consistency in reporting units of measurement;
    • amendments were made to allow supplementary disclosure based on constant prices and costs; and
    • a reconciliation is not required when "opening" estimates as at the beginning of the financial year are not available.