2018 Management Night Catriona Le May Doan

THE NEGOTIATOR

The Magazine of the Canadian Association of Petroleum Landmen January 2018

2018 MANAGEMENT NIGHT CATRIONA LE MAY DOAN

Liens in the Context of Litigation Funding in Canada 2017 CAPL Property Gas Processing Facilities The Rise of Third Party Litigation Funding and Transfer Procedure Recommendations When Dealing With Potential Effects on Our Civil System Transfers of Regulatory Licences Liens for Oil and Gas Facilities lawyers

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McMillan LLP | Vancouver | Calgary | Toronto | Ottawa | Montréal | Hong Kong | mcmillan.ca THE NEGOTIATOR The Magazine of the Canadian Association of Petroleum Landmen THE NEGOTIATOR Senior Editorial Board Director of Communications Marah Graham [ph] 403-930-3050 Advertising Editors Darcy Cosgrove [ph] 403-509-6439 Hallie MacCuaig [ph] 587-476-3711 Coordinating Editor Kristin Rennie [ph] 403-663-2595 Feature Content Editors Amy Kalmbach [ph] 403-619-2868 Regular Content Editor Martin Leung [ph] 403-517-6822 Social Content Editor Jason Peacock [ph] 403-724-5273

Editorial Committee Christine Balash [ph] 403-968-7313

Design and Production Rachel Hershfield, Folio Creations Features January 2018 Printing CBN Commercial Solutions

Submissions For information regarding submission of articles, please contact a 2 Liens in the Context of member of our Senior Editorial Board. By providing submissions to the Canadian Association of Petroleum Landmen for publication in The Negotiator you are granting permission for the content to Gas Processing Facilities be posted or re-posted on the CAPL website and CAPL’s affiliated social media. For further information regarding the submission of articles, please contact a member of the Senior Editorial Board. Caireen E. Hanert & Preet Saini Disclaimer All articles printed under an author’s, association’s or corporation’s name represent the views of the author; publication or posting neither implies approval of the opinions expressed, nor accuracy of 5 Litigation Funding in Canada the facts stated. Advertising David Tupper & Rachel Fridhandler For information, please contact Darcy Cosgrove (403-509-6439) or Hallie MacCuaig (587-476-3711). No endorsement or sponsorship by the Canadian Association of Petroleum Landmen is suggested or implied. 12 2017 CAPL Property Transfer Procedure The contents of this publication may not be reproduced outside of the Canadian Association of Petroleum Landmen regulated content, either in part or in full, without the consent of the Senior Jim MacLean Editorial Board.

In Every Issue 2017–2018 CAPL Board of Directors President Larry Buzan, P.Land 17 Board Briefs Vice-President Noel Millions, PSL Director, Business Development 17 The Negotiator’s Message From the Board: Professionalism Alberta Tim Galbreath 19 The Negotiator’s Message From the Board: Education Director, Business Development Saskatchewan & Alberta Oilsands Michelle Creguer 26 Roster Updates Director, Communications Marah Graham Director, Education 27 In Memoriam Robyn Baron, P.Land, PSL Director, Field Acquisition & Management Rob Pettifer, P.Land, PSL 28 The Social Calendar Director, Finance Kristin Rennie 29 CAPL Calendar of Events Director, Member Services Rob Pitchford, PSL Director, Professionalism/Business Development (BC) 29 January Management Night Meeting Glenn Miller, PSL Director, Public Relations Gary Richardson, PSL Secretary/Director, Technology Shaun Williams Director, Social Janice Redmond Past President Larry Buzan Also in this issue Readers may obtain any Director’s contact 22 M&A Report information from the CAPL office.

Suite 1600, 520 – 5 Avenue S.W. Calgary, Alberta T2P 3R7 25 CAPL 2018 Conference [ph] 403-237-6635 [fax] 403-263-1620 www.landman.ca 28 40th Annual CAPL Trap Shoot Kaitlin Polowski [email protected] Denise Grieve [email protected] Karin Steers [email protected] Liens in the Context of Gas Processing Facilities Lessons Learned from Cansearch Resources Ltd. v Regent Resources Ltd.

IN CANSEARCH RESOURCES LTD V a possessory lien under the Possessory Liens Act, REGENT RESOURCES LTD,1 CANSEARCH RSA 2000, c P-19 (PLA). The decision in this case is RESOURCES LTD. (CANSEARCH) APPLIED instructive for operators facing non-payment by FOR A DECLARATION that it had a first prior- facility co-owners. ity claim to proceeds realized from the sale of the WRITTEN BY interest held by Regent Resources Ltd. (Regent) in Factual Background an oil and gas facility jointly owned by Cansearch Cansearch and Regent were partners under CAIREEN E. HANERT and Regent. Cansearch argued its priority arose an Operating Agreement for the facility, which & PREET SAINI either by way of an operator’s lien, or through incorporated by reference the 1999 Petroleum (MCMILLAN LLP)

THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 2 Joint Venture Association Operating Procedure (the Operating Because Cansearch did not register its operator’s lien at the Procedure) and the 1996 PASC Accounting Procedure (the PPR, perfection by registration did not apply. Cansearch therefore Accounting Procedure). Cansearch was the operator of the had to demonstrate that it had possession of “relevant prop- facility and held an undivided 70.85% interest in the facility, erty… held by Cansearch as collateral” to secure payment.6 “Mere while Regent held an undivided 29.15% interest. The ownership physical handling or custody is not sufficient”7 for this purpose. interests were in each “Functional Unit” of the facility, with each The Court held that in order to qualify as collateral, the Functional Unit including “all real and personal property of every Operating Agreement would have had to include a provision that nature and kind attached to, forming part of, or used in connec- Cansearch possessed the property at the facility as collateral, tion with, the operation [of the Joffre Facility]”.2 or to provide other evidence of this. Having failed to do so, the The Operating Procedure provided an operator’s lien for requirements for perfection by possession were not met, and Cansearch in the event of non-payment by Regent: Cansearch therefore did not have priority over ATB on this basis.

Effective from the Effective Date, Operator shall have a Possessory Lien lien and charge, which is first and prior to any other lien, A possessory lien is a common law lien codified by the PLA. The charge, mortgage or other security interest, with respect PLA provides the following:8 to the Functional Unit Participations of each Owner in the Facility and such Owner’s share of Facility Products, • A person has a particular lien for the payment of the person’s to secure payment of such Owner’s proportionate share debt on a chattel on which the person has expended the of the costs and expenses incurred by Operator for the person’s money, labour or skill at the request of the owner of Joint Account.3 it and in so doing enhanced its value. (A chattel is moveable property that is not real property); The Operating Agreement allowed Regent to mortgage its owner- ship interest on certain conditions, including that the mortgagee • Actual or constructive and continued possession of the prop- must take its interest subject to the terms of the Operating erty that is the subject-matter of the debt is essential to the Agreement and must assume all obligations of Regent upon existence of the lien; and acquiring an interest in the facility.4 In 2012, Regent obtained a $28,000,000 mortgage from Alberta Treasury Branches (ATB). • A lien extends over all the property on which the lienholder Regent also provided a general security agreement (GSA) to ATB. has expended the lienholder’s money, labour or skill, but no ATB registered the GSA at the Personal Property Registry (PPR) lien arises on account of a general balance due from the owner pursuant to the Personal Property Security Act, RSA 2000, c P-7 (PPSA). of the property to the lienholder. In 2015, Regent stopped paying its share of expenses for the facility, and in 2016, Regent was placed into receivership by ATB. The Court clarified that a possessory lien is a particular lien, Cansearch did not register an operator’s lien at the PPR. meaning that it only pertains to claims that are related to the property in question, and not generally to unrelated property.9 Issue The Court held that: The validity of the amounts owing to Cansearch by Regent was not in dispute. The only issue was whether Cansearch was … [I]t is clear that, by its nature, a possessory lien is entitled to priority ahead of ATB for the proceeds of the sale of intended to cover a specific chattel on which someone Regent’s ownership interest on the basis of either its operator’s has expended a discernable [sic] amount of time, effort lien or a possessory lien. or money that has enhanced the specific chattel’s value.10

Operator’s Lien Although an operator’s lien may apply to tangible, intangible, and The Court found that Cansearch’s operator’s lien was a “consen- real property, a possessory lien under the PLA must only apply to sual and contractual lien created under the Operating Agreement specific chattels (moveable property). Possessory liens existed in THE NEGOTIATOR / JANUARY 2018 to secure potential future indebtedness”, which qualifies as a common law to protect artisans, repairmen and the like by allow- security interest under the PPSA.5 Because contractual liens are ing them to retain the chattel until they were paid. Accordingly, not afforded priority under section 32 of the PPSA, the normal the Court held that: “first in time” priority rules under section 35 of the PPSA applied. Under that provision, priority depends on when a security inter- Since a possessory lien is an artisan/repairman-type est is perfected (either through registration or possession). lien, I interpret the requirement for enhancing the value 3 of chattels to be synonymous with maintaining, restor- invoices from the operation of the facility for the unpaid ing or enhancing the subject chattel’s value. In other expenses were insufficient to prove entitlement to a posses- words, a possessory lien would provide Cansearch with sory lien.13 “a ‘particular’ lien over [specific chattel equipment] on which the lien holder has expended money, labour, or Accordingly, Cansearch was not entitled to a possessory lien. skill, provided that the lien holder maintains actual or constructive possession.”11 Lessons Learned There are two primary points to take away from this case. Cansearch argued that its possessory lien was established as First, operators wishing to retain their ability to assert an oper- a result of the nexus between certain component equipment ator’s lien should register the lien at the PPR to ensure that it situated on site at the facility and its role as an operator of the is perfected and will have priority over interests registered later facility. Specifically, it argued that: in time. Second, if an operator wishes to establish that it has a posses- • It expended money, labour, or skill maintaining the on-site sory lien, it must ensure that it can: equipment at the facility at Regent’s request, pointing to a list of equipment in the Operating Agreement that comprised a • readily identify the specific chattels to which the possessory Functional Unit in the facility; lien attaches;

• The value of the chattels was enhanced and this was indi- • specify the chattels that existed at the time the debt arose; cated in various operational invoices as evidence of unpaid expenses; and • provide evidence of the enhancements to each chattel provided by the operator and the value of each enhancement; • It had maintained continued possession of the equipment pursuant to the Operating Agreement, which provided that • demonstrate that the property to which the lien relates are Cansearch held an undivided interest in the whole of the facil- chattels (moveable property) and not fixtures (a chattel that has ity, including each specific component that comprised Regent’s been fixed or attached and can no longer be easily moved); and ownership interest. • trace all expenses claimed as part of the possessory lien to The Court accepted that Cansearch maintained the facility and specific chattels. had expended some amount of money, labour, or skill in fulfill- ing its obligations under the JOA. It also found that Cansearch Given the above, the preferable approach in most cases will be may have enhanced the value of some equipment and may have to register the operator’s lien to preserve its priority over subse- maintained actual or constructive possession. However, the court quent interests, particularly where other participants in the held that “assuming that all of this is true, more is still required facility may be facing financial difficulties.m before Cansearch can establish a possessory lien.”12 The Court’s decision on this point is instructive for operators Notes hoping to assert a possessory lien in similar circumstances. 1. 2017 ABQB 535. The Court noted that the following would be required to estab- 2. Ibid at para 9. lish a possessory lien claim: 3. Ibid at para 11. 4. Ibid at para 13. • Evidence of the specific equipment covered by the possessory 5. Ibid at paras 38-39. lien; and 6. Ibid at para 45. 7. Ibid at para 44. • Evidence that money, labour or skill was expended in enhanc- 8. Possessory Liens Act, RSA 2000, c P-19, ss 2, 5-6. ing the value of that specific equipment. 9. Supra note 2 at para 50. 10. Ibid at para 53. • Cansearch was not able to provide enough evidence to 11. Ibid at para 55 [citations omitted]. prove that a possessory lien attached to specific equipment. 12. Ibid at para 60. The Court held that a preliminary description of the equipment 13. Ibid at para 61. purportedly covered by the operator’s lien and generalized

THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 4 Litigation Funding in Canada

THE RISE OF THIRD PARTY LITIGATION FUNDING IS A NOTABLE DEVELOPMENT IN CANADIAN CIVIL LITIGATION, and is WRITTEN BY likely to have wide-ranging effects for litigants, This article introduces litigation funding THE NEGOTIATOR / JANUARY 2018 DAVID TUPPER & lawyers, and the justice system. Third party litiga- agreements, discusses key legal and practical RACHEL FRIDHANDLER tion funding has the potential to increase access considerations relating to negotiating the agree- BLAKE, CASSELS to justice and to develop the law in areas that ments, and explores their potential effect on & GRAYDON LLP traditionally have not often reached the courts. Canadian civil litigation.

5 Key considerations when negotiating a litigation funding agreement include how to structure payment terms, the effect of different payment structures on settlement, the level of control afforded to the litigant, and disclosure issues.

I. Litigation Funding Agreements The basis for litigation funding agreements is that a third party, a II. Considerations in Negotiating Litigation litigation “funder”, agrees to pay for or fund litigation for another Funding Agreements party, the “litigant”. Litigation funding agreements and their legal ramifications can Litigation “funders” agree to cover some or all of a liti- be complex. Key considerations when negotiating a litigation gant’s legal fees, disbursements and, in certain circumstances, funding agreement include how to structure payment terms, the a litigant’s living expenses or a business’s working capital. In effect of different payment structures on settlement, the level of exchange for the invested funds, the funder shares any award control afforded to the litigant, and disclosure issues. granted should the litigant succeed, based on an agreed formula. Litigation funders may adopt different investment styles such as A. Payment Structures and Settlement investing in specific cases, or diversifying their risk by investing There are a variety of methods to structure payment to the in a broader portfolio of cases. Various types of companies have funder in litigation funding agreements. In one common struc- provided litigation funding, including professional funders, ture, the litigation funder will take “first dollars”. In this structure, hedge funds, private equity firms, and banks. the funder receives its invested capital and an agreed return on Litigation funding provides several benefits to the funded that investment. Depending on the agreement, the lawyers may party, and enables litigants to apportion litigation risk between a receive a return as well, and the remainder of the award goes to number of parties. Litigants are often not interested in commit- the litigant. A funding agreement may also provide for a ceiling ting a large amount of their own capital to litigation, as litigation on the amount the funder may collect. is not their core business. Litigation funding enables the liti- There are numerous other ways that a litigation funder may gant to manage the “dry-spell” between incurring the litigation provide support. The litigation funder may agree to pay the cost expenses and collecting a potential award. Law firms engaged of legal fees and disbursements associated with the litigation. on a contingency fee basis and who share in the risk and reward For example, the funder may agree to pay a specified amount for with a funder may also benefit from the ability to better manage costs at the outset, and implement a mechanism for additional their cash flow. costs. As well, litigation funders often agree to pay any court-or- Litigation funding has supported a variety of matters, includ- dered costs if the litigation is unsuccessful. ing breach of contract, breach of duty, oppression, whistleblower, The courts have found that the cost of financing litigation, patent, insolvency, and class action litigation. While most with restricted use of funds or a pure indemnification for commonly litigation funding supports the plaintiffs’ side, defen- disbursements, can be a recoverable cost: Park Avenue Flooring dants may also benefit from litigation funding. Inc v EllisDon Construction Services Inc, 2016 ABQB 332; Bourgoin

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THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 6 v Ouellette (2009), 343 NBR (2d) 58 (QB). This is consistent with does not make settlement more difficult, and to include a dispute United Kingdom decisions which have allowed a party in resolution mechanism in the event the funder and the litigant do certain circumstances to recover the costs of litigation funding not agree on settlement. For example, an agreement may provide for an ICC (International Chamber of Commerce) arbitration: for a short-fuse arbitration of the disagreement. Alternatively, an Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd, [2016] agreement may set out that if a litigant does not accept a settle- EWHC 2361. However, Canadian law is not settled on this issue. ment offer, but the offer is within a pre-set range, the funder’s In Chandi (Guardian ad litem of) v Atwell, 2014 BCCA 446, the entitlement will increase. The litigant and funder’s interests are British Columbia Court of Appeal held that interest paid on a aligned when the funder takes on the risk of costs. funding loan for disbursements was not recoverable as costs under the British Columbia Supreme Court Civil Rules. B. Control Payment terms in a litigation funding agreement can affect Canadian decisions have held that the litigant – not the funder – settlement dynamics in a variety of ways. First, the existence must instruct counsel and control the proceedings. The funding of a funding agreement may promote settlement. Parties that agreement may address related provisions, such as the right are aware they are facing a funded litigant may be less likely to settle and the right to discontinue. In Canada, courts have to attempt to outlast the opposing party. Second, the funder adopted a negative view of the assumption by funders of a signif- and litigant may have different responses to a given settlement icant degree of control as that may exert undue influence on the offer. For instance, if an offer falls below the threshold at which litigation, which is one of the indicia of champerty. the funder’s “first dollars” are recovered, the litigant would not Canadian courts have also upheld a variety of terms in benefit from accepting the offer. A litigant operating under a litigation funding agreements. For example, in Schenk v Valeant litigation funding agreement may also have higher settlement Pharmaceuticals International Inc, 2015 ONSC 3215, the agreement expectations as the litigant benefits from spreading the litigation provided the funder could withdraw if it was no longer satisfied expenses over a longer period of time. as to the claim’s merits, or revise the agreement if costs exceed Parties entering litigation funding agreements will benefit the budget by over 25%. These terms were held to be fair and from taking steps to align incentives, to ensure the agreement reasonable. Similarly, the Court in Stanway v Wyeth Canada Inc,

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7 … it is important to consider whether there is a waiver of privilege when a litigant discloses otherwise privileged documents to a funder. To date, it does not appear that any Canadian court has specifically addressed this issue.

2014 BCSC 931 approved a funding agreement in the class actions implied undertaking to keep the opposing party’s information context in which the funder’s obligation to release disburse- confidential. This implied undertaking prevents a funder from ments was contingent on the litigant complying with an agreed using the information gained for a collateral purpose. A recent litigation plan. decision of the Federal Court supports the applicability of the implied undertaking rule to the funder, even absent the Court’s C. Disclosure approval of the funding agreement (Seedlings Life Science Ventures Litigation funding raises several questions related to disclo- v Pfizer Canada, 2017 FC 826). sure. The first question involves the litigant’s disclosure of the Second, it is important to consider whether there is a waiver opposing party’s documents to the funder, and the implied of privilege when a litigant discloses otherwise privileged docu- undertaking rule. Canadian courts have generally supported the ments to a funder. To date, it does not appear that any Canadian funding industry; however, the interests of the funder and of the court has specifically addressed this issue. In considering general opposing party need to be balanced. Funders are motivated to privilege principles however, it is most likely that solicitor-client obtain information to evaluate the claim. The opposing party’s or litigation privilege would apply to communications between a interest, however, is to protect its confidential information. One litigant and/or its counsel and a third party funder as part of the mechanism through which to balance these interests is to have application and due diligence process, and would accordingly the funding agreement specify that the funder is bound by an protect privileged documents shared between a litigant and a

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THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 8 litigation funder. When the funder agrees to fund the claim and agreement relating to strategy or trial stamina (Stanway v Wyeth its interests become aligned with the litigant, common interest Canada Inc, 2013 BCSC 1585). privilege would likely also apply. Outside the class action realm, the Federal Court recently Another disclosure issue arises with respect to the discov- found that litigation privilege attached to the subject funding erability of litigation funding agreements. Currently, there is no agreement, and the defendant was not entitled to obtain an definitive law in Canada as to whether the contents of litigation unredacted copy of the agreement (Seedlings Life Science Ventures funding agreements are privileged. In the class action context, v Pfizer Canada (17 July 2017) FC TD). The law in this area is still Ontario courts have previously held a funding agreement is developing, and funders need to be careful to ensure that noth- not privileged and should not contain confidential or sensitive ing that could harm the underlying litigation (such as budget or information (Fehr v Sun Life Assurance Co of Canada, 2012 ONSC strategy information) is disclosed. 2715). However, the Ontario Superior Court later acknowl- Lastly, it is important to note that reporting issuers may be edged that, in certain circumstances, fully disclosing a funding required to disclose the details of a litigation funding agreement agreement may provide a tactical advantage to an opposing under securities laws if the agreement is a material contract and party by sharing knowledge about how litigation may proceed. the regulator does not grant exemptive relief. Parties may wish to As such, some modification to the principle identified in Fehr negotiate who will bear the cost of this disclosure. was necessary, and the litigant may not be required to disclose the litigation funding agreement (Berg v Canadian Hockey League, III. Effect of the Litigation Funding Industry 2016 ONSC 4466). on Canadian Civil Litigation Courts in other jurisdictions have recognized the contents of The overall effect the developing litigation funding industry will funding agreements may contain sensitive information requir- have on the level of litigation in Canada remains to be seen. ing protection. Those courts have either refused to disclose the In the Australian context, litigation funding has led to an entire agreement (Schneider v Royal Crown Gold Reserve Inc, 2016 increase in securities litigation, and at least one study reflected SKQB 278) or refused to disclose only sensitive features of the an overall increase in litigation. However, Australia and Canada

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9 In an industry in which a funder’s investment may rely on court approval and independent legal advice, reputation is important.

are very different. In particular, unlike in Canada, Australia does likely be in more reasonable claims. Litigation funders tend to not permit lawyers to act on a contingency fee basis. extensively evaluate claims before they invest and can bring an Litigation funding agreements that require the funder to actuarial perspective to civil litigation. While there is a risk a indemnify for costs can lead to a system in which parties funder may support a frivolous claim with the hope of settling, pursue an economically efficient amount of litigation. this would be unlikely. If the case does not settle, the funder When the funder indemnifies for costs, it will be exposed to the would lose its investment and be liable for costs. In addition, potential upside and downside of the litigation, and funders both public and private funders will consider their reputation, will consider that risk when deciding whether to support which militates against a funder supporting meritless claims. particular litigation. In an industry in which a funder’s investment may rely on The broader rules of civil procedure, such as security for court approval and independent legal advice, reputation is costs, also provide economic balance if a defendant perceives important. that a litigant is commencing an action it cannot afford. In addition to business strategy, Canadian civil procedure For example, if a litigation funder supports an insolvent plaintiff, protects against frivolous claims by imposing heightened even absent the funder providing cost indemnification, a defen- requirements for pleading causes of action that are considered dant can utilize civil procedure tools such as security for costs to to be particularly damaging to a defendant, such as fraud and maintain fairness. misrepresentation. While it is possible that litigation funding arrangements Litigation funding contributes to reducing economic barriers will lead to an increase in Canadian litigation, any increase will to litigation and supports decisions based on a claim’s merits

THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 10 rather than the cost of litigation. Litigation funding may also Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd, [2016] serve as a deterrent by creating greater opportunities to hold EWHC 2361 wrongdoers to account, and lead to more cases with contempo- Fehr v Sun Life Assurance Co of Canada, 2012 ONSC 2715 rary issues reaching the courts. Park Avenue Flooring Inc v EllisDon Construction Services Inc, 2016 The particular facts and the context will be important ABQB 332 in determining whether any litigation funding agreement is Schenk v Valeant Pharmaceuticals International Inc, 2015 ONSC 3215 enforceable, and what disclosure or other limits are placed on it. Schneider v Royal Crown Gold Reserve Inc, 2016 SKQB 278 As a result of the complexity and legal effect of litigation funding Seedlings Life Science Ventures v Pfizer Canada, 2017 FC 826 (TD) agreements, litigation funders may require a litigant to obtain Seedlings Life Science Ventures v Pfizer Canada, (17 July 2017) FC TD independent advice or, in some circumstances, court approval Stanway v Wyeth Canada Inc, 2013 BCSC 1585 prior to entering a litigation funding agreement. One should Stanway v Wyeth Canada Inc, 2014 BCSC 931 consider consulting experienced legal counsel before entering into a litigation funding agreement. m Journals David Abrams and Daniel Chen, A Market For Justice: A First, Empirical Sources Look at Third Party Litigation Funding, University of Pennsylvania Legislation Journal of Business Law, (vol 15, issue 4, 1075: 1107) Alberta Rules of Court, Reg 124/2010, Rule 13.7. Supreme Court Civil Rules, BC Reg 168/2009, Rule 14-1(5). Corporate Literature Bentham IMF, https://www.benthamimf.ca/what-we-fund Cases (accessed April 1, 2017) Berg v Canadian Hockey League, 2016 ONSC 4466 Bourgoin v Ouellette (2009), 343 NBR (2d) 58 (QB) Chandi (Guardian ad litem of) v Atwell, 2014 BCCA 446

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11 Negotiator Feb 2016.indd 1 2/12/2016 2:00:54 PM 2017 CAPL Property Transfer Procedure Transfers of Regulatory Licences

THE 2017 CAPL PROPERTY TRANSFER that presents the detailed verbatim comments we PROCEDURE (“PTP”) WAS ENDORSED BY received from a modest number of commenting THE CAPL BOARD IN DECEMBER. The pack- parties, together with our responses to each indi- age on the CAPL web page includes: (i) an overview vidual comment; (v) a redline of the final document of the project scope and the major changes relative relative to the July, 2017 draft; (vi) Word versions of to the 2000 PTP; (ii) a detailed 39 page matrix that the election sheets and the case studies included outlines all material changes relative to the 2000 as Addendums to the PTP to facilitate early use of PTP and their rationale; (iii) a clean copy of the the PTP for anyone that wishes to use the docu- WRITTEN BY text and annotations; (iv) a coded comment matrix ment in a new transaction; (vii) a collection of the JIM MACLEAN

THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 12 Despite our differences in background and functional expertise, we were united by a common belief: that our industry does not efficiently process our low to modest value, straightforward A&D transactions.

articles from The Negotiator to date on the PTP, as updated to reflect So, How Has AER Bulletin 2017-13 Impacted The PTP? the final document; and (viii) a redline of the final document rela- While the implementation of the revised process outlined in the tive to the 2000 PTP. While we do not expect that the redline to Bulletin will have a significant impact on the manner in which the 2000 PTP will be reviewed in any detail, we believe that even transactions are effected, we have chosen not to modify the a cursory glance at that redline will demonstrate convincingly the provisions of the PTP to address the Bulletin. thought and effort that has been invested in the 2017 document The definition of Licencee Rating, the Vendor’s representation over the last 20 months by our 15 member committee. about its ability to transfer regulatory licences (Paragraph 6.02(q)), The November article was about the due diligence process. This the corresponding Purchaser representation in Paragraph 6.04(d) month’s article is about the process of transferring well and tangi- and the mutual condition about regulatory transfers in Paragraph bles licences under the Regulations and the endorsement of the PTP. 10.01(e) are structured so that they can apply across multiple jurisdictions. AER Bulletin 2017-13 Has Changed The Goal Posts If the ability to effect a transfer of any licence for any of the The Alberta Energy Regulator issued Bulletin 2017-13 in late Assets is in question (as under Bulletin 2017-13), the onus is on July. It introduces major changes to the process of transferring the parties to add custom content in their Head Agreement to licences in a way that will have a significant impact on the address their particular needs. As noted several times in the manner in which industry’s A&D transactions are conducted. annotations, this might be done, for example, by including addi- Some of the major elements of the AER’s modified process for tional definitions, a Clause that relates to the specific handling handling licence transfers are: required for their circumstances, the possible inclusion of a Closing in escrow mechanism and the inclusion of additional • a requirement to bundle all transfers from one holder to conditions to Closing. another associated with a transfer; There were two reasons for this approach. The first was the belief that the PTP should not attempt to predict or prescribe the • a standard review period of 30 days before a decision is issued handling of an important emerging issue that should be assessed by the AER; and handled by the parties and their applicable business and legal advisors on a case by case basis. The second was that the • publication of transfer applications to allow for the filing of a fluidity of the Regulations on this area over time and across juris- “statement of concern”; dictions was such that any more specific handling of the issue in the PTP based on a snapshot in time would potentially create • further potential delays in effecting transfers if there are any unintended consequences for the parties over time. “statements of concern”, as the AER will typically request, as a Simplifying the review of the other procedural aspects of minimum, that the transferor respond to the filer of the state- the overall Transaction through use of the PTP facilitates a more ment of concern in writing. focused examination of this important issue by the parties’ repre- sentatives relative to what would be the case without the PTP. This Bulletin will see major changes in the manner in which industry will often negotiate A&D transactions in which there are Pipeline Records any required transfers of regulatory licences. The PTP also includes a generic definition of Pipeline Records In the absence of any change to the AER’s process, cautious and other provisions in response to AER Bulletin 2015-34. parties will often choose to close in escrow because the Vendor and That Bulletin contemplates that the AER could conduct compli- THE NEGOTIATOR / JANUARY 2018 Purchaser will not have sufficient certainty to know if the transfers ance monitoring (for existence and transfer of required records) of regulatory transfers associated with their transaction will be on a random basis or during routine field inspections, typically approved. Including a customized closing in escrow step would see after the transfers have been processed. the parties structuring their transactions so that some or all of the The new licencee (transferee) is responsible for producing transaction would be undone if the required AER approvals are not the applicable records on request of the AER, which places an obtained, with any associated return of funds. onus on the Purchaser to protect itself through its due diligence 13 process. A licencee that fails to do so will be in a non-compli- deficiencies on a different negotiated basis under the Head ance position. Non-compliance could, among other things, force Agreement. A negotiated cost sharing creates reinforcement it to conduct an engineering assessment to demonstrate that for each party to address any deficiencies in a timely and cost the applicable pipeline is fit for its intended use. Pending such effective manner. an assessment, the AER could order the pipeline out of service, which may require wells to be shut-in. Compounding the chal- Check Out The Case Studies lenge of compliance is that the parties might not agree about As noted in my earlier November, 2016 article in The Negotiator, whether the Pipeline Records are complete for the purposes of the Addendum to the draft includes five case studies that were the review by the regulatory authority and that the regulatory prepared to provide a compelling case for use of the 2017 PTP authority’s expectation for completeness might not be known for the low to modest value transactions for which it has been until any site inspection. designed. To a large degree, those case studies will determine the The references to Pipeline Records in Clause 3.07 require the pace at which the PTP will ultimately be accepted by industry. selected party (Vendor or Purchaser) to bear accountability to They show the potential use of the PTP for: (i) a simple sale of a address any deficiencies associated with Pipeline Records. The producing property; (ii) a simple swap involving producing prop- optional representation included in Paragraph 6.02(r) is fairly oner- erties; (iii) a simple sale of an undeveloped property; (iv) a more ous, and Vendors will typically be extremely reluctant to assume complex sale of an undeveloped property involving reserved a trailing liability. One would typically expect Vendors would rights and the reservation of an ORR; and (v) a simple swap of have a strong preference not to accept that representation and undeveloped properties. The common theme is that use of the to select Alternate 1 of Clause 3.07 as a consequence. Conversely, schedule of elections from the PTP allows the head agreement one would expect that Alternate 2 would be selected only (but not for each of those case studies to be not greater than two pages, necessarily) if a Vendor has agreed to provide that representation. as shown for item (iii) in that article. Alternate 3 of Clause 3.07 has been included to add flexibility. To facilitate a transition to use, the CAPL website includes It allows the parties to choose to share financial responsibility Word versions of the annotated and unannotated election sheets for any engineering assessments required to rectify identified to the PTP and those case studies.

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THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 14 As noted in the October, 2017 article in The Negotiator, consider straightforward transactions because of labour intensive reviews using the case studies to take the “2017 PTP Challenge”. Take a of different presentations of similar concepts and a tendency “road test” of the PTP and see how you would have managed to debate how best to say basically the same thing as what had one or two of your recent low to modest value, straightforward been originally proposed. transactions using the PTP and compare the outcomes to the Put simply, our industry has done a remarkable job of making agreement you used for your transaction. simple transactions much more complex than they should be, than they must be in a business environment that requires us to “Making Simple Transactions Simple Again” do more with even less. Our committee is a diverse one, with representation from We believe that our work demonstrates that there is, in fact, smaller companies, intermediate sized companies and larger a better path available to us for low to modest value, straightfor- companies. Our members represent not only CAPL, but also our ward transactions. We believe that current industry conditions partners in CAPLA, EPAC, PADA, PASC and the Legal Community. create an appetite for efficiency, effectiveness and change. Most Despite our differences in background and functional expertise, importantly, however, we believe that a critical mass of the we were united by a common belief: that our industry does not smaller and intermediate sized companies will quickly embrace efficiently process our low to modest value, straightforward the 2017 CAPL Property Transfer Procedure as “first followers” for A&D transactions. the transactions for which it is designed. One of the major contributing factors to this is the lack of This strong existing undercurrent of support for “making standardization in our agreements. We currently have hundreds simple transactions simple again” is why we have dedicated of different companies saying basically the same thing in many so much of our effort on this project to target the smaller and different ways. This lack of consistency is apparent when we see intermediate sized companies and why we believe that use of the deficiencies in agreements presented to us and when we the 2017 PTP will cascade quickly within at least that segment recall the bias in the documents we often see proposed. It is most of potential users. apparent, though, when we consider the additional effort and We look forward to hearing about your experiences as you associated delays respecting many of our low to modest value, begin to work with the 2017 PTP! m

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THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 16 Board Briefs • Larry, President, reminded the Board of the following: • The next General Meeting is a breakfast meeting at the The key discussion items at the Westin Hotel on Thursday, November 16, 2017. The guest speaker is Rafi G. Tahmazian of Canoe Financial. CAPL Board of Directors’ Meeting • The next Board of Directors’ Meeting will be held on Tuesday, held November 7, 2017 at the December 5, 2017.

office of PrairieStorm Energy • Meeting adjourned. m Corp. were as follows: Shaun Williams Secretary/Director, Technology In Attendance Absent Guests R. Baron R. Pettifer None Denise Grieve L. Buzan R. Pitchford M. Creguer J. Redmond T. Galbreath K. Rennie The Negotiator’s M. Graham G. Richardson G. Miller S. Williams Message From N. Millions the Board • Kristin, Finance, presented a Treasurer’s Report as at October 31, 2017, showing CAPL investments totalling $348,740.44 Canadian as at the end of September 30, 2017 along with a Professionalism cash balance of $285,440.68 Canadian for a total of $634,181.12. THIS IS MY FIRST YEAR ON The CAPL Scholarship Fund has a balance of $237,091.99 at the THE CAPL BOARD and it’s end of September 30, 2017. been a great experience to work with such a committed group of • Rob, Membership, presented the Board with a motion to professionals. endorse the recommendation of the Membership Committee I started volunteering on the to accept one candidate for Associate Membership in the Professionalism Committee in the Canadian Association of Petroleum Landmen, which was fall of 2016 and had no idea how passionate this Committee is approved. and all the hard work that goes in behind the scenes. At that time, I never envisioned that I’d have the opportunity to join the Board • Noel, Vice President, advised that Denise Grieve will be retir- and become Director of Professionalism. When I first joined the ing December 31, 2017. Noel presented a motion to the Board to Professionalism Committee, they were working on updating the approve that D. Grieve continue to work approximately 20 hours Professionalism manual. We have now engaged a technical writer a week beginning January 1, 2018 to allow for a smooth transition who has provided the Committee with a first draft of the updated of office duties. The contract will end June 30, 2018, but may be manual. While we are still updating a few sections that are extended depending on the work load. The Board also approved outstanding, we are working expeditiously to have this manual that a Senior Accountant be hired on a contract basis to work update completed as soon as possible. I would like to thank all approximately two days a week to take over financial reporting, the contributors who have volunteered their time to assist us in budgeting, etc. This will allow Karin to focus on cheque runs, office updating the manual. There is a lot of hard work, dedication and expenses and to fill vacancies from the reduction of hours by D. countless hours that go into completing the update. THE NEGOTIATOR / JANUARY 2018 Grieve. Noel added the CAPL will no longer have a formal Office Manager role, the responsibility will fall to the CAPL Vice President. New Exams: In response to concerns heard from CAPL members regarding the PSL®/P.Land® Exams, we have attempted to resolve • Janice, Social, presented a motion to approve the transfer of those concerns by forming a subcommittee. The subcommit- networking events from the General Meetings Committee to the tee was chaired by Steve Oslanski (PSL) and consisted of 5 of Social Director, which was approved. the 10 most recent PSL® and P.Land® designation achievers. 17 Conversations were had with many peers to determine how to Steve Oslanski, Brad Reynolds, Ryan Stackhouse, Darren Clarke, improve the exam to increase the pass to failure rate, assuming Kaitlin Polowski, and Brent Nelson. those writing the exam thoroughly studied the manual. The Moving onto the current number of landmen that hold previous exam committee went to great lengths to create an Professional designations. We currently have 1637 CAPL members, exam specific to our profession. Since inception of the exams, 217 having the P. Land designation, 51 with the PSL® designa- some of the regulations have changed significantly as well as tion, eight with the CML, and six with the CSL designations. the key play type developments in our industry. The subcommit- We recognize the significant downturn that we have come tee reviewed every single question in full detail and a decision through in our industry which has seen a drop in our numbers. was made to delete, revise, or keep the question depending on With the stabilization of commodity prices and a slow recovery whether it met the agreed upon criteria. Some of these crite- starting to occur, this is now a great opportunity for our members ria included ensuring questions were in accordance with the to get certified and support the amazing organization that we Professionalism Procedure, omitting questions with the potential have. I would ask those with designations to talk to your compa- for multiple answers, and ensuring that the PSL®/P.Land® ques- nies and peers and encourage hiring those with designations. tions were neutral as the questions are shared by both exams. The Professionalism Committee and the Board continues to reach Upon completion of the review, the sections were swapped out to organizations such as CAPP and the Farmer’s Advocate in between reviewers to complete a second review and then submit- an effort to further the recognition of our designations. ted to the CAPL office where Kaitlin updated the exam system. The Exam Study Material Lists were also updated on CAPL’s Recertification: Mark your calendars, the end of 2018 is the date website to be more transparent about the exam weighting and all designation holders are required to complete their renewal criteria. We’re now confident that the exam is current to where by. There are 86 members that still need recertify. If you haven’t it should be, to give all of us professionals a fair opportunity done so already, please determine what courses you may need to pass the exam. Studying is still highly recommended as the yet for recertification. There are also many alternatives besides exam material is not dealt with on a daily basis, depending on taking courses that will allow you to meet the required educa- the type of role you are in. Special thanks to this subcommittee: tion credits. I would urge you to get working on your renewal

THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 18 and make it a New Year’s resolution to get it done in early 2018. Over the past several years, the Education Committee has Looking forward to all our designation holders getting recertified continued to review, update and rebrand our existing courses before the end of 2018 and even more members obtaining new along with looking for new courses that as a committee we feel Professional designations in support of our very fine organiza- will increase knowledge in the ever changing regulations that the tion. We have included a PSL® and P.Land® Flow Chart, which energy sector faces. It is through this initiative that the Education outlines how you can achieve your Professional designation. Committee will be looking at holding hot topic lunch & learns, while continuing to run 44 of the current courses along with a Lastly, I’m very impressed by the continued dedication of few new courses that are in development throughout 2018. the Professionalism Committee, and owe a very big thank you to To all the Landman with certifications, don’t forget 2018 is the year their continued hard work in 2017. m where you need to complete your recertification requirements. Keep checking the website as we continue to update the Course Calendar on Glenn Miller, PSL upcoming courses and lunch & learns. Director, Professionalism Over the next year, the Education Committee will continue to bring new courses and topics to the CAPL membership while reducing costs in order to assist with the downward Education trend in revenue and finding ways to increase course atten- AS THE DIRECTOR OF dance. Through which currently being explored, the Education EDUCATION, I am looking forward Committee is hopeful it will reduce the number of course cancel- to the upcoming year and the lations as seen in 2016-2017, which will in turn reduce the CAPL new challenges that we will face. deficit we face annually. The Education portfolio includes directing of education • running courses using webinars; within CAPL through an Education • adding on-line courses; Committee, a Scholarship Committee, a Mentorship Committee, • investigating and working towards the standardizing of and Advisory Committees for both the University of Calgary and instructor fees; Mount Royal University – updating courses, enrolment review, • lowering the current course costs; and current and future direction and funding. These committees are • looking into future incentives for members who register for chaired by some very talented and hardworking CAPL members. more than one course or companies who register more than The Education Committee is chaired by Melissa Mackenzie. one member for courses. The Mentorship Committee is co-chaired by Brad Johnston and Sandy Sandhar. The Scholarship Committee is chaired by Shelly On behalf of the Education Committee, thank you for your Witwer. I would like to thank these individuals and all the volun- continued support. m teers who sit on each of the committees including Denise, Karin and Kaitlin, the CAPL office staff, for their immense contribution Robyn Baron, P.Land, PSL to the committees and the CAPL during the past years and my Director, Education tenure as a Director. THE NEGOTIATOR / JANUARY 2018

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21 M&A Report Corporate Financial Services™ November 29, 2017 CANADIAN M&A METRICS

Annual Results 2017 YTD 2016 2015 2014 2013 2012 2011 Number of transactions 71 94 90 151 93 130 121 Total sample dollar value C$BN $40.1 $13.2 $14.7 $37.5 $10.2 $43.4 $9.5 Total Proven Reserves ($/BOE) $7.18 $9.89 $15.56 $18.05 $18.31 $22.93 $25.72 Proven + Probable Reserves ($/BOE) $4.75 $7.02 $9.73 $12.68 $12.76 $17.22 $18.29 Per flowing BOE Production $54,930 $47,250 $48,346 $56,079 $58,769 $73,400 $65,093 WTI ($US/barrel) $50.05 $43.46 $48.80 $92.99 $97.97 $94.21 $95.10 Edmonton Light (C$/barrel) $61.41 $53.19 $57.19 $94.48 $93.00 $86.12 $95.28 WCS (C$/barrel) $50.25 $39.08 $45.92 $78.27 $76.21 $74.36 $78.54 NYMEX ($US/MMBtu) $3.03 $2.56 $2.67 $4.37 $3.75 $2.85 $4.00 AECO-C (C$/MMBtu) $2.42 $2.21 $2.70 $4.37 $3.24 $2.44 $3.62 Station-2 (C$/MMBtu) $1.87 $1.78 $1.96 $4.13 $3.15 $2.41 $3.36 USD FX price 1.3010 1.3255 1.2769 1.1043 1.0298 0.9992 0.9887

Proven + Probable Reserves ($/BOE) Flowing BOE Production $18.29 $73,400 $17.22 $65,093 $58,769 $56,079 $54,930 $12.76 $12.68 $48,346 $47,250 $9.73

$7.02

$4.75

2011 2012 2013 2014 2015 2016 2017 YTD 2011 2012 2013 2014 2015 2016 2017 YTD

Quarterly Results Q4 17 (QTD) Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Number of transactions 8 14 24 25 31 19 25 Total sample dollar value C$MM $1,653 $3,205 $2,197 $33,006 $4,919 $2,457 $4,499 Total Proven Reserves ($/BOE) - $4.46 $6.62 $6.51 $9.85 $8.98 $10.22 Proven + Probable Reserves ($/BOE) $6.69 $3.32 $6.26 $4.25 $6.93 $6.15 $7.37 Per flowing BOE Production $29,534 $29,279 $37,915 $59,529 $51,100 $43,227 $45,863 Light Oil Weighted transactions (> 70%, $ per BOE) 2 - 4 - 5 6 11 OIL - Proven + Probable Reserves $9.07 - $9.05 - $12.10 $10.80 $9.03 OIL - Per flowing BOE Production $60,772 - $53,888 - $77,342 $54,095 $50,093 Gas Weighted transactions (> 70%, $ per BOE) 1 4 3 2 5 - 5 Gas - Proven + Probable Reserves - $3.03 $5.60 $1.79 - - $3.23 Gas - Per flowing BOE Production $24,074 $16,951 $15,250 $30,860 $31,062 - $21,875

Average Prices Q4 17 (QTD) Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 WTI ($US/barrel) $51.57 $48.16 $48.29 $51.89 $49.35 $44.98 $45.70 Edmonton Light (C$/barrel) $61.45 $56.75 $61.88 $63.94 $61.66 $54.85 $54.95 WCS (C$/barrel) $53.00 $48.00 $50.02 $49.36 $46.72 $41.08 $41.75 NYMEX ($US/MMBtu) $2.90 $2.96 $3.13 $3.08 $3.18 $2.80 $2.25 AECO-C (C$/MMBtu) $2.15 $1.89 $2.78 $2.68 $3.10 $2.43 $1.48 Station-2 (C$/MMBtu) $1.52 $1.21 $2.31 $2.22 $2.59 $2.10 $1.17 USD FX price 1.2742 1.2522 1.3452 1.3229 1.3338 1.3051 1.2884

Proven + Probable Reserves ($/BOE) Flowing BOE Production $7.37 $6.93 $6.69 $6.15 $6.26 $59,529

$51,100 $45,863 $4.25 $43,227 $37,915 $3.32 $29,279 $29,534

Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 (QTD) Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 (QTD)

THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 22 KEY STATISTICS SUMMARY November 29, 2017

Alberta Electricity 2017 YTD 2016 2015 2014 3-Year Average Source: AESO Prices ($/MWh) $21.94 $18.03 $33.99 $49.18 $33.73 Source: AUC and AESO Generation Capacity (maximum capcity, MW) Coal 6,283 6,267 6,258 6,271 6,265 Natural Gas 7,555 7,081 7,080 7,143 7,101 Hydro 894 902 900 894 899 Wind 1,445 1,491 1,459 1,434 1,461 Other 434 521 545 409 492 Total Capacity 16,611 16,261 16,242 16,151 16,218

% Coal 38% 39% 39% 39% 39% % Natural Gas 45% 44% 44% 44% 44% % Other 17% 18% 18% 17% 18%

Drilling Results (WCSB) Sep-17 Sep-16 Sep-15 Sep-14 3-Year Average Source: CAODC Drilling Rig Count 191 121 174 387 227 Drilling Rig Utilization 30.1% 18.1% 22.8% 47.8% 29.6%

Sep-17 Sep-16 Sep-15 Sep-14 3-Year Average Service Rig Utilization 31.0% 28.0% 28.4% 47.7% 34.7%

Well Counts & Well Type (Western Canada) Sep-17 Sep-16 Sep-15 Sep-14 3-Year Average Oil 530 190 307 696 398 Natural Gas 158 94 90 271 152 Service and Dry 51 17 23 73 38 Total 739 301 420 1,040 587

2017(f) 2016(f) 2015 2014 3-Year Average Active Rigs (avg) 199 112 184 370 222 Rig Utilization (avg) 31% 17% 24% 46% 29% Operating Days 71,839 40,403 64,851 131,021 78,758

Wells Drilled 6,842 4,072 5,394 11,226 6,897 Wells Completed na na 5,292 11,534 8,413

Commodity Prices 2017 YTD 2016 2015 2014 3-Year Average

WTI ($US/barrel) $49.66 $43.46 $48.80 $98.68 $63.65 Edmonton Light (C$/bbl) $60.92 $53.19 $57.19 $94.48 $68.29 WCS (C$/barrel) $49.51 $39.08 $44.81 $81.03 $54.97

NYMEX ($US/MMBtu) $3.04 $2.56 $2.63 $4.28 $3.16 AECO (C$/MMBtu) $2.42 $2.21 $2.70 $4.37 $3.09 Station-2 (C$/MMBtu) $1.87 $1.78 $1.96 $4.13 $2.62

Oil & Gas M&A Prices 2017 YTD 2016 2015 2014 3-Year Average Source: ATB 2P Reserves - Light Oil Weighted ($/BOE) $9.06 $9.84 $14.23 $20.68 $14.92 2P Reserves - Gas Weighted ($/BOE) $3.36 $2.46 $4.84 $5.62 $4.31 2P Reserves - Total Sample Average ($/BOE) $4.75 $7.02 $9.73 $12.68 $9.81

Flowing Production - Light Oil Weighted ($/BOE) $55,895 $56,207 $65,246 $90,891 $70,781 Flowing Production - Gas Weighted ($/BOE) $20,420 $32,113 $28,159 $29,519 $29,930 Flowing Production - Total Sample Average ($/BOE) $54,930 $47,250 $48,346 $56,079 $50,558 THE NEGOTIATOR / JANUARY 2018

23 Alberta Land Sales 2017 YTD 2016 2015 2014 3-Year Average Source: Alberta Energy Conventional Bonus Paid ($MM) $415 $137 $276 $489 $301 Conventional Bonus per hectare ($/HA) $410 $146 $178 $462 $262 Oilsands Bonus Paid ($MM) $22 $12 $23 $5 $13 Oilsands Bonus per hectare ($/HA) $260 $267 $373 $150 $263

Natural Gas Volumes Nov-17(f) Nov-16 Nov-15 Nov-14 3-Year Average Source: EIA U.S. Natural Gas Supply (BCF/d) 78.0 73.5 76.6 82.0 77.3 U.S. Natural Gas Consumption (BCF/d) 76.8 72.1 75.0 78.6 75.2 U.S. Working Gas Inventory (BCF) 3,753 3,977 3,927 3,427 3,777

Oil and Liquids Volumes Nov-17(f) Nov-16 Nov-15 Nov-14 3-Year Average Source: EIA Global Production (MMbbl/d) 99.3 99.1 97.7 95.4 97.4 Global Consumption (MMbbl/d) 98.8 97.7 94.8 93.5 95.3 OPEC Surplus Capacity (MMbbl/d) 2.1 1.0 1.5 2.1 1.5

Economic Indicators 2017(f) 2016 2015 2014 3-Year Average Source: Bank of Canada and Alberta Treasury Board & Finance Canada Real GDP Growth % 3.1 1.5 0.9 2.5 1.6 Alberta GDP Growth % 3.1 (3.5) (3.6) 4.4 (0.9)

Oct-17 Oct-16 Oct-15 Oct-14 3-Year Average Source: Bank of Canada BOC Overnight Interest Rate (%) 1.00 0.50 0.50 1.00 0.67 Prime Rate (%) 3.20 2.70 2.70 3.00 2.80 BA 30 day Rate (%) 1.25 0.81 0.80 1.22 0.94 Prime - BA Spread (%) 1.95 1.89 1.90 1.78 1.86

YoY change (%) Sep-17 Sep-16 Sep-15 Sep-14 3-Year Average Canada Total CPI 1.6 1.3 1.0 2.0 1.4 Canada CORE CPI 0.8 1.8 2.1 2.1 2.0 Alberta Total CPI 1.3 0.5 1.3 2.6 1.5 Alberta Energy CPI 6.4 (7.4) (12.6) 1.4 (6.2)

Questions? Please contact: Andrew Yang @ (403) 767-4013; [email protected] This report is provided for informational purposes only. While ATB Financial believes the information to be reliable, ATB Financial does not guarantee, or make any representation as to its accuracy or completeness. The information is not to be construed as offering investment or financial advice and ATB Financial will not be liable for any loss or damage resulting from its use.

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THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 24 Building on the success of the 2017 conference in Calgary, CAPL 2018 the committee is focusing its efforts on delivering a conference with a quality program, engaging speakers, and ample network- ing opportunities. It is our goal to deliver a premier suite of Conference learning opportunities for our delegates whether they work for Saskatchewan-based companies or not. WE ARE VERY EXCITED THAT While nothing is set in stone quite yet, we are looking at THE 2018 CONFERENCE combining some of the province’s historic gems into our themes. IS BRINGING US TO THE The possibilities stretch from football fans to Chicago gangsters LAND OF PETROLEUM, – I’m sure I’m not the only who just learned that Saskatchewan’s POTASH AND PILSNER. torrid past includes bringing booze via tunnel in Moose Jaw, The Conference will be held in reportedly to Al Capone, during prohibition. Regina, Saskatchewan from In light of these exciting opportunities, we have already had Sunday September 16 to Thursday an incredible number of sponsors and support come forward. September 20, 2018 at the Hotel I will be contacting those who supported last year’s conference GROWING POSSIBILITIES Saskatchewan. early in the New Year. Anyone who is interested in sponsoring REGINA 2018 CAPL Conference We haven’t had a conference this conference, feel free to contact me or the dedicated team, in Saskatchewan since 1984 and which includes: it’s long overdue. Petroleum, potash and pilsner are only some of the highlights of this progressive province. Fundamentally Chris Ellis, Canada West Land Services Ltd. THE NEGOTIATOR / JANUARY 2018 our theme, Growing Possibilities, intends to capture that there is Crystal Pomedli, Encana Corporation opportunity abound in this province. Kim King, Seven Generations Energy Ltd. m We are overwhelmed with the opportunities Regina provides. The venues are incredible, from the regal Hotel Saskatchewan Marah Graham built in the 1920s, to the brand new Mosaic Stadium, home of the 2018 CAPL Conference Committee, Marketing guys in green. 25 On the Move Roster Updates Greg Anderson Burland Management Ltd to Independent New Members Steven Bradford Marquee Energy Ltd. The following member was approved by a Motion on to Independent November 7, 2017: Bobby Clark Birchcliff Energy Ltd. Applicant Current Employer Sponsors to Gain Energy Ltd. Associate Jeffrey Olsen Third Rock Kim Edwards Debbie DeCoste D.M. Decoste Consulting Ltd. Geomatics Ltd. Ryan Gugyelka to Prairie Provident Resources Canada Ltd. Elaine Smith, PSL Audrey Densham Apache Canada Ltd. to Paramount Recourses (ACL) Ltd. The following members were approved to change their membership status from Active to Senior: Kellie D’Hondt Independent to Bow River Energy Ltd. John Beaton Joelle Dunne Apache Canada Ltd. Richard Crowe, P.Land to Paramount Resources (ACL) Ltd. Janine Douglas

Allan Gilders Kathy Fell Gain Energy Ltd. to TORC Oil & Gas Ltd. Bob Grisack, P.Land

Jerry Hagen Kim Florence Cona Resources Ltd. to Independent George Hardisty

Debra Iantkow, P.Land Jason Gouw, PSL Nexen Energy ULC Ann Janicki to Terreno Land Consultants

Larry Loomes Lee Hardy Vertex Professional Services Ltd Levonne Louie, P.Land to Independent Dave MacKay John Huffman Sinopec Daylight Energy Ltd. Edward Nunes-Vaz, P.Land to Independent Gordon Salt, P.Land Sherry Koftinoff Niven Fischer Energy Services Inc. Jerry Seida m to Niven Fischer, a Sproule Company

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THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 26 Curtis Kucharuk Apache Canada Ltd. to Paramount Recourses (ACL) Ltd. In Memoriam Pearl Leong ConocoPhillips Canada to Cenovus Energy Inc. Douglas Leitch Sr. It is with deepest sadness that the CAPL announces the passing Barbara Lerner Strike Seven Generations Energy Ltd. of Douglas Leitch Sr. on November 7, 2017 at the age of 92. He is to Strike Ventures Canada Inc. survived by his wife Margaret Anne Leitch (nee Conover) and by his sons Douglas, Bob (Pat), daughter Ginny Viccars and brother Megan Lloyd Independent Ted Leitch (Joan) of Kamloops as well as several stepchildren, to Frank O’Sullivan Petroleum Western Ltd. grandchildren and great grandchildren. Darlene McLaughlin GDM Systems Inc. Doug was born in Edmonton, served his country in World War to Catapult Environmental Inc. II and then graduated from the University of Alberta, faculty of Geology. He married Lea in 1949 and moved to Calgary in 1950 to Yvette Miller Independent raise a family and pursue a career in the oil and gas industry. He to Gain Energy Ltd. had a long and successful career with Unocal as a scout, land- man and VP Land/Special Projects. Doug was highly respected in David Morrison Athabasca Oil Corporation to Independent the oil industry. Doug joined the CAPL in 1950 serving as Secretary - Treasurer Scott Porter Apache Canada Ltd. in 1954 and Vice President in 1955 before becoming the ninth to Paramount Recourses (ACL) Ltd. President of the CAPL in 1956 and a Life Member thereafter. He was the longest surviving CAPL Past President. Doug was “instru- Cindy Sutherland Vesta Energy Ltd. mental in having a Landmen’s course established at Mount Royal to Independent College, similar to the courses available in Oklahoma and Texas”.

Perry Tse PTM Enterprises Inc. He enjoyed his summers at Shuswap Lake and winters on the to Independent ski hill. After retiring in 1985, he kept active by travelling, volun- teering (including the Calgary 1988 Winter Olympics) and being Brian Thom Apache Canada Ltd. involved in politics. He met his second wife, Margie in 1997 who to Paramount Recourses (ACL) Ltd. he shared the next 20 years of his life with. Doug enriched the lives of those who had the opportunity to Kari Webb Independent to Fortuna Energy Inc. know him. He will be truly missed. m

Wendy Whittaker Spartan Energy Corp. to Independent

Cam Yamada Niven Fischer Energy Services Inc. to Niven Fischer, a Sproule Company m

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P. 403.503.5263 E. [email protected] SINCE 1965 #215, 5718–1a St. SW Calgary, AB • www.mcnallyland.com 27 The Social Calendar

COST REGISTRATION EVENT DATE TIME LOCATION CONTACT NAME CONTACT PHONE CONTACT EMAIL (INCLUDING GST) DEADLINE

Members $73.50 CAPL January Karin Steers [email protected] 18-Jan-18 5:00 PM The Westin Hotel Non-Members $99.75 (403) 237-6635 11-Jan-18 General Meeting Kaitlin Polowski [email protected] Student $47.25

* Information and online registration: General Meetings: http://landman.ca/events/general-meetings/ Social: http://landman.ca/events/social-events/ 40th Annual CAPL Trap Shoot

THE 40TH ANNUAL CAPL TRAP SHOOT WAS HELD, as usual, at the AHEIA Calgary Firearms Centre on Saturday, September 9. We were blessed with another beautiful day with 32 members and guests and just a little tail wind. The Trap Shoot Committee decided to rename the High Overall All trophy the Ed Grandan Trophy, to honor our friend, fellow landman and avid trap shooter, the late Ed Grandan, a 15 consecutive winner who will be truly missed for all of his contributions to the event and shooting expertise he passed onto fellow guests and members. The winners of the various events were as follows: Gowlings LLP Slider event Trophy was won by Louis Champagne; Pengrowth Energy Corporation Class A Handicap trophy – Chris Lizotte; the Trophy Sponsors McMillan LLP Class A 16 yard trophy went to Matt Rasula and RPS Group The RPS Group HOA/Ed Grandan Trophy was awarded to Brent McMillan LLP Lewis. The winners of the Buddy Shoot were Keith McFarquhar Norton Rose Fulbright LLP and Matt Rasula. The Annie Oakley winner was Mike Jameison. Pengrowth Energy Corporation The food this year was provided by Chicken on the Way, chips Gowlings LLP by Old Dutch Foods Ltd., and the salad and dessert was provided by John Kanderka’s Viper Consulting Inc. and Dave Arthur’s 302 Lunch Sponsors Consulting Ltd. Chicken on the Way The committee also wish to express our appreciation and Viper Consulting Inc. gratitude to the following sponsors for their generous support; 302 Consulting Ltd. without them we would not be able to hold the shoot every year. Old Dutch Foods Ltd. Please make sure you thank these sponsors for their generosity the next time you are doing business with them. m Sponsors Alberta Hunter Education Instructors’ Association Ryan Hall, Chairman McElhanney Land Surveys Ltd.

THE NEGOTIATOR / JANUARY 2018 / JANUARY THE NEGOTIATOR 28 CAPL Calendar January of Events Management

January 1 Monday New Year’s Day Night 9 Tuesday Board Meeting 10 Wednesday Alberta Crown Land Sale 17 Wednesday British Columbia Crown Land Sale January 18, 2018 18 Thursday General Meeting Guest Speaker: Catriona Le May Doan 24 Wednesday Alberta Crown Land Sale m

February Cocktails: 5:00 p.m. 6:00 p.m. 6 Tuesday Board Meeting Dinner: 6 Tuesday Saskatchewan Crown Land Sale Where: The Westin Hotel 7 Wednesday Alberta Crown Land Sale 320 4 Avenue S.W. 14 Wednesday Manitoba Crown Land Sale Cost: Members: $73.50 19 Monday Family Day Student Members: $47.25 21 Wednesday British Columbia Crown Land Sale m Guests: $99.75

To register, please go the event tab on the CAPL website. Deadline for registration: Thursday, January 11, 2018. m

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