Cross-Border Income Trust Seminar, November 17, 2011

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Canadian Cross-Border Income Trusts: A Monetization Opportunity for U.S. Assets, presented in New York on November 17, 2011

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Cross-Border Income Trust Seminar, November 17, 2011

  1. 1. Canadian Cross-Border Income Trusts:A Monetization Opportunity for U.S. AssetsNovember 17, 2011 New York www.blakes.com
  2. 2. This presentation is not intended to provide legal advice with respect to any particular transaction or circumstance and no legal or business decision should be based on its content. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document.2
  3. 3. Overview • Synopsis • Background to the first generation of Canadian income trusts • Introduction of the new generation of Canadian cross-border income trusts • Discussion of tax structuring considerations • Overview of Canadian IPO process • Appendix A – Case Studies • About Blakes3
  4. 4. Synopsis • The new cross-border income trust model may provide an attractive valuation proposition for vendors of U.S. domiciled assets that may also be suitable for U.S. MLPs • Investor appetite in the Canadian capital markets remains strong for yield product and is expected to support additional trust IPOs in Canada • The Canadian IPO process allows for completion of a transaction in 3-4 months, reducing execution risk relative to the U.S. registration process • Key drivers: – Underlying assets with stable, sustainable cash flow profile that will support distributions by the trust – Experienced management and strong board – Transparent structure that is compliant with Canadian SIFT requirements4
  5. 5. Act 1 – Scene 1 • The Canadian income trust structure first emerged 25 years ago • Concept was to create a publicly traded trust that paid holders of trust units a stable stream of cash distributions on a pre-tax basis • Adoption of the income trust model occurred initially in the oil and gas sector – IPOs by new royalty trusts/conversions of corporate entities to royalty trusts – Provided exit opportunity for suitable assets at attractive valuations • Oil and gas royalty trusts focused on ownership of long-life, producing oil and gas assets – Strategy of undertaking low risk exploitation and development activities rather than higher risk exploration activities – Sought producing assets with long RLI that generated predictable cash flows available for distribution to unitholders – Regular M&A required to replenish reserves and sustain production/cash flows5
  6. 6. Act 1 – Scene 1 • Over time, the Canadian income trust sector matured – In 1999, S&P adopted a Stability Ratings Scale for income trusts regarding the prospective relative stability of distributable cash flow generation – Creation of the S&P/TSX Income Trust Index as a modular component of the S&P/TSX Composite Index – Structure modified to accommodate a range of asset classes, including assets/businesses domiciled outside of Canada – Proliferation of specialized research coverage by a range of investment dealers – Specialized Canadian securities rules adopted for income trusts in 2004 via National Policy 41-201 – Income Trusts and Other Indirect Offerings – Limited liability legislation adopted by various provinces in 2004-5 to shield trust investors from personal liability – Evolution of investor base, from highly retail weighted to increasing institutional investor acceptance and participation, reflecting in part improved governance practices6
  7. 7. Act 1 – Scene 1 • The Canadian income trust market peaked in 2006 with 256 funds having an aggregate market cap of ~ $225 billion Oil & Gas Infrastructure Power Mining Diversified • By 2006, the trust sector had expanded to include a wide range of asset classes7
  8. 8. Act 1 – Scene 1 • Trust provides a flow-through vehicle for tax purposes and simpler Canadian tax reporting for the investor than a partnership unit • To meet eligibility for tax deferred retirement and education plans the trusts were structured as “mutual fund trusts” under the Canadian Tax Act • A “mutual fund trust” under the Canadian Tax Act must meet the following conditions: – The trust’s only undertaking must be the investing of funds in property (other than real property that is not capital property) – The trust must be a unit trust resident in Canada – The trust must meet prescribed conditions (150 unitholders each having a block of units with a cost of at least $500) with respect to the dispersal of units and public trading8
  9. 9. Act 1 – Scene 2 • On October 31, 2006, the Minister of Finance (Canada) announced the Canadian federal government’s proposal to change the tax treatment of publicly traded income trusts and other flow-through entities through the enactment of the “Specified Investment Flow-Through” (“SIFT”) rules. – The SIFT rules were introduced to level the playing field between publicly traded income trusts and corporations and eliminated the flow-through advantages associated with the use of a trust – Under the SIFT rules, the Canadian-source income of certain publicly traded mutual fund trusts is subject to an entity-level tax at a rate comparable to the combined Canadian federal and provincial corporate tax rate and the income distributed to holders of units in such trusts is taxed as dividends – The only Canadian asset exemption from the SIFT rules is for REITs9
  10. 10. Act 1 – Scene 2 • The SIFT rules had a dramatic impact on Canadian capital markets and immediately curtailed IPO activity by new income trusts and resulted in the conversion of many income trusts to a dividend paying corporate model and M&A activity 40 Oct 31, 2006 Introduction 35 of SIFT tax 8 30 6 5 25 6 4 # of Royalty Trusts 5 8 4 20 8 7 2 3 2 2 2 7 3 15 2 7 1 2 3 3 3 2 1 3 3 2 2 1 1 1 6 10 10 10 10 9 1 1 3 5 3 1 1 9 8 8 8 1 2 1 3 7 6 1 5 1 1 1 1 1 1 1 1 1 1 1 5 4 4 4 3 3 3 3 3 3 3 3 3 3 3 3 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201110
  11. 11. Capital Markets Considerations • Fixed income securities currently providing historically low yields • Few Canadian companies paying > 7% dividend yield • Following contraction of income trust sector, investor yield appetite partially satisfied by preferred share and convertible debenture issuance TSX Equities(1) Yield Based Equity Issuance (Dividend Yield by Market Cap and Number of Companies) (2004 – Present) $30 $300,000 Market Capitalization (C$ Millions) _ 28 23 $24.3 36 $25 Number above bars indicates the $22.0 $250,000 number of companies within yield range $20 $18.4 30 $17.6 $200,000 $17.1 C$ billions $15.7 133 30 $15 $150,000 $12.0 $10.9 $100,000 20 $10 16 $50,000 6 $5 4 16 $0 $0 0 0% - 1% 1% - 2% 2% - 3% 3% - 4% 4% - 5% 5% - 6% 6% - 7% 7% - 8% 8% - 9% >9% 2004 2005 2006 2007 2008 2009 2010 2011YTD Preferred Shares Unit Trusts Convertible Debentures (1) Includes equities with a market capitalization greater than $500 million, except ETFs.11
  12. 12. Arrival of the Cross-Border Trust • On November 24, 2010, Eagle Energy Trust closed its IPO of trust units in Canada, resulting in the first of a new generation of cross-border income trusts accessing the Canadian capital markets • Parallel Energy Trust completed an IPO in April 2011 • Argent Energy Trust filed a preliminary prospectus on August 8, 2011 for a proposed IPO • North American Oil Trust filed a preliminary prospectus on November 7, 2011 for a proposed IPO12
  13. 13. Arrival of the Cross-Border Trust Eagle Energy Trust Parallel Energy Trust IPO Closing Date November 24, 2010 April 21, 2011 IPO Proceeds C$169.5 million C$393 million (including greenshoe) (including greenshoe) Vendor Proceeds US$119.2 million + 2 million US$377.4 million trust units IPO Yield 10.5% 9.0% Reserves (P+P) 5,126 mbbls 28,830 Mboe RLI 8-12 years 13.3 years Acquired Interest 73% W.I. 59% W.I.13
  14. 14. Attributes of the Cross-Border Trust • To date, these new trusts have focused on acquiring producing oil and gas assets and are viewed as offering a potential monetization opportunity for owners of U.S. domiciled energy assets – Opportunity for additional IPOs by new income trusts – Exit strategy through asset sales to an existing income trust, particularly as the income trust sector expands and matures – May offer solution for assets (lower RLI and moderate to high PDP as a % of reserves) not suitable for the MLP model • Key attributes of completed cross-border trust IPOs: – Sustainability of distribution profile, including sustaining and expansion capital expenditures and debt service requirements – Seasoned and recognized management teams14
  15. 15. SIFT Trust Rules do not Apply • The new generation of trusts do not fall within the scheme of the SIFT trust rules • The SIFT trust rules only apply to a publicly traded Canadian trust which holds “non-portfolio property” • “Non-portfolio property” is a direct or indirect interest in – The assets of a business carried on in Canada, or – Canadian real property or resource property • A mutual fund trust (“MFT”) must not be "established or maintained primarily for the benefit of non-residents" of Canada which is generally interpreted to mean that no more than 49% of the units of a trust may be held by non- residents of Canada – New generation of trusts exempt from this non-resident ownership restriction15
  16. 16. Eagle / Parallel US Tax View Interest, Capital & Income Interest MFT Interest, Income Canada Notes & Capital Corp. CT Canada Partnership Income US Operating Partnership US Oil & Gas Assets US Oil & Gas Assets16
  17. 17. Eagle / Parallel • For US tax purposes, the Commercial Trust (“CT”) elects to be treated as a corporation, and therefore is taxed as a foreign corporation with effectively connected US income earned through a US branch • MFT treated as a partnership for US tax purposes • The interest on the Notes owed by CT to the MFT is treated as a portfolio interest and therefore exempt from US withholding tax • The interest and, in these early trusts, resource drilling and exploration deductions reduce US corporate tax (and US branch tax) on the effectively connected income • In Canada, the income from the US oil and gas partnership flows through both the CT and the MFT directly to the unitholders without incidence of Canadian corporate level tax17
  18. 18. North American Oil Trust US Tax View Interest, Capital & Eligible Dividends Canada MFT Corp. Dividends and Capital Canada Canada Notes Corp. Notes Corp. Canada Tax Exempt Dividends Dividends and Capital and Capital US US US Corp. Corp. US Oil & Gas US Oil & Gas Assets Assets18
  19. 19. North American Oil Trust • For US tax purposes, the MFT elects to be treated as a corporation and therefore interest on the Notes owed by US Corp to the MFT is entitled to the benefit of the 0 percent withholding rate under the Canada/US tax treaty • The interest and, in these early trusts, resource drilling and exploration deductions reduce US corporate tax on income of the US Corp • In Canada, the distributions from US Corp. to Canada Corp are treated as tax exempt dividends or returns of capital and are paid to the MFT as “eligible dividends” or tax free returns of capital • “Eligible dividends” are entitled to a lower effective rate of tax (approximately 20% less than ordinary income) • The MFT passes through the eligible dividends, returns of capital and interest income to the unitholders without intervening tax19
  20. 20. Interest Considerations • It is critical to either structure that the interest on the Notes is deductible for US purposes. There are 3 key issues, namely that: – the terms of the Notes will be respected as debt and not equity for US thin capitalization purposes – the interest expense not exceed 50% of EBITDA for the purposes of the earnings stripping rule in § 163(j) of the Code – The related party interest rate is defensible as an arm’s length rate for transfer pricing purposes • A US financial model is prepared and a debt study and interest rate study undertaken by an independent financial advisor to substantiate interest deductibility20
  21. 21. Other Tax Considerations • Additional structuring may be done underneath US Corp (e.g. use of a partnership for Texas margin tax purposes) • Anti-inversion rule in § 7874 of the Code is not applicable provided that the US vendor retains its interest in the underlying resource properties at the “working interest” level and not through the MFT or a subsidiary of the MFT • Modeling of these early trusts has shown limited US tax leakage in the form of AMT, and refundable FIRPTA withholding tax • US mind and management at the US Corp. level is beneficial for the Canadian treatment of the dividends from US Opco once US Opco has E&P for US purposes21
  22. 22. Canadian IPO Process • An income trust IPO can be completed in Canada in 3-4 months • Engage lead underwriter, legal counsel, auditors • Structuring and • Build financial due diligence model • Obtain third • Size and price • Draft preliminary party debt/interest • Clear comments prospectus issue study • Commence • Commence • Complete due roadshow and • Execute preparation of diligence marketing period underwriting financial statements agreement • File preliminary • Receive • Receive TSX and third party prospectus and first/second conditional listing • File final 15 – 16 reports obtain preliminary comment letter(s) approval prospectus and WEEKS • Identify board, receipt obtain receipt • Respond to • Negotiate management • Apply to TSX for first/second underwriting • Issue press release • Negotiate PSA listing comment letter(s) agreement • Close Trading commences WEEK 1 - 6 WEEK 7 - 8 WEEK 9 - 10 WEEK 11-14 WEEK 15 - 16 POST-OFFERING22
  23. 23. Canadian IPO Process • Securities commission prospectus review and clearance process in Canada takes approximately one month – Initial comment letter within 10 business days of filing preliminary prospectus – Common on IPOs to receive second (and potentially a third) comment letter – Issuer, lead underwriter(s), counsel and auditors prepare written responses to securities commission comments • TSX listing approval process takes approximately 6-8 weeks from filing of formal listing application – Key to engage early with listing staff – Early filing of PIFs and discussion of novel issues with listing staff, including financial statements, reserves, incentive and compensation arrangements – File formal listing application concurrent with preliminary prospectus23
  24. 24. Securities Law Considerations • Financial statement requirements – Acquired asset financial statements • Three years audited, plus unaudited interims within 45 days of date of prospectus • operating statements for oil and gas assets – Trust financial statements • Audited financial statements from date of formation to date not earlier than 90 days prior to the date of the prospectus – IFRS • Required for all financial years beginning on or after January 1, 2011 • Allowed for prior periods with exemptive relief from securities commission24
  25. 25. Securities Law Considerations • Reserve report – Required for any issuer engaged in oil and gas activities – Must be prepared in accordance with Canadian National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities – Reserves must be evaluated by an independent evaluator – Different from SEC reserves reporting (i.e. forecast prices/costs for proved and probable reserves) – Reserve report key for: • development of the internal financial model prepared by the issuer/lead underwriter in connection with the IPO • statement of distributable cash contained in the prospectus25
  26. 26. Securities Law Considerations • Statement of Distributable Cash – Essential to IPO marketing efforts as source of estimated “distributable cash”, being the estimated future net cash to be generated by the income trust’s business available for distribution to public unitholders – Form and content regulated by Canadian National Policy 41-201 – Based off historical financial statements, asset development plan, reserve report, contractual arrangements and stated management assumptions (reasonable and supportable) – May be considered a “financial outlook” under Canadian securities rules thereby requiring disclosure in subsequently filed MD&A of material differences between actual results and the financial outlook26
  27. 27. Securities Law Considerations • Promoter and vendor liability – Under Canadian securities rules, a promoter is any person, acting alone or with others that, directly or indirectly, takes the initiative in founding or organizing the business of the issuer • “Promoter” includes a person who receives in consideration for property 10% or more of the proceeds from the sale of securities in connection with founding or organizing the business of the issuer except as consideration for property transferred to the issuer if that person does not otherwise take part in founding or organizing the business – Characterization as a promoter is highly fact specific – Promoters must certify the prospectus and have statutory liability (joint and several with issuer/underwriters) for prospectus misrepresentations – Securities commissions have indicated their expectation that vendors “take appropriate responsibility” for the information in the prospectus relating to the business being acquired by the income trust27
  28. 28. Securities Law Considerations • Due diligence – Underwriters have a due diligence defence for prospectus misrepresentations provided they have undertaken reasonable diligence investigations – For income trust IPOs, diligence will typically cover: • Structure documents (compliance with SIFT rules) • Purchase and sale agreement/PPAs • Commercial agreements (ROFRs, closing adjustments) • Environmental and title matters • Tax diligence, including use of third party debt capacity and debt/equity, and interest rate, studies/opinions – Diligence also needed to support borrowing base credit facility for income trust28
  29. 29. Securities Law Considerations • Other considerations – Governance • Capital markets expect governance structures and principles consistent with corporate issuers • Trust indenture; delegation by corporate trustee to management company board • Voting agreement to facilitate unitholder appointment of public board while complying with SIFT rules • Administrative services agreement • Domicile of mind and management29
  30. 30. Securities Law Considerations • Other considerations (cont’d) – U.S. securities law considerations • Concurrent exempt offering in the United States (typically utilizing Rule 144A) • Foreign private issuer implications – Lock-up agreements • No statutory or stock exchange escrow for IPOs >100 million but underwriters will expect insiders/vendors to enter into 180 day lock-up agreements – Founder stock; incentive/compensation arrangements – French translation of prospectus30
  31. 31. Commercial Agreements • Purchase and sale agreement • Joint operating agreement for third party operated assets • Joint development agreement • Credit agreement31
  32. 32. Appendix A – Case Studies32
  33. 33. Asset Profiles • Eagle acquired a 73% working interest in the Salt Flat Field – Light oil property located in Caldwell County, South Central Texas – Non operated at time of IPO; Eagle assumed operatorship in August 2011 – Rights to acquire additional assets • Net P+P reserves of 5,126 mbbls • Production at closing of >900 bbls/d • Estimated RLI of 8-12 years33
  34. 34. Asset Profiles • Parallel acquired a 59% working interest in certain liquids rich natural gas assets located in the West Panhandle Field in Texas – Assets previously owned by ConocoPhillips – Non operated (Bravo Natural Gas, LLC, a subsidiary of Natural Gas Partners) operates the properties • Net P+P reserves of 28,830 Mboe • Production at closing of ~ 2,900 boe/d • Estimated RLI of 13.3 years34
  35. 35. About Blakes35
  36. 36. About Blakes "Great lawyers who take • Blakes Named "Canadas Law Firm of the Year" for exceptional care in being Third Consecutive Year in the Whos Who Legal Awards thorough. First class - advice." 2011 - Client comment from PLC Which Lawyer? Awards 2010 • Blakes Wins "Law Firm of the Year: Canada" Award for the Third Straight Year at the PLC “Which Lawyer?” “Blakes sees more of its lawyers Awards selected than any other firm in Canada.” • Blakes is proud to hold the dominant Canadian position - The International Who’s Who of in every major M&A league for the first half of 2011 Business Lawyers 2011 • Blakes Tax Group is Ranked First Tier in “World Tax “Blakes top Canadian firm in 2011” and in the 2011 edition of Chambers Global: The mergermarket league tables.” World’s Leading Lawyers for Business - Financial Post, July, 2011 • Blakes Tax Group was named “Tax Firm of the Year” for “Blakes is a real market leader in the fourth consecutive year at International Tax the competition area.” Review’s “Americas Tax Awards 2011”. - Chambers Global: The Worlds Leading Lawyers for Business 201136
  37. 37. Blakes in M&A League Tables For the last four years, Blakes has been Canada’s busiest M&A law firm. Our No. 1 rankings in a wide range of M&A categories continued in 2011. Our No. 1 rankings in Thomson Reuterss M&A league Our No. 1 rankings in Bloombergs M&A league tables tables for 2011 include: for 2011 include: •Canada Announced Deals by deal value •No. 1 in Any Canadian Involvement Announced Deals by deal •Canada Announced Deals by deal count count •Canadian firm in United States Announced Deals by deal value •No. 1 in Any Canadian Involvement Completed Deals by deal •Canadian firm in United States Announced Deals – Counsel to count Principals by deal value •No. 1 Canadian firm in Any United States Involvement Announced •Canadian firm in Global Announced Deals by deal value Deals by deal value •Canadian firm in Global Announced Deals by deal count •No. 1 Canadian firm in United States Target Announced by deal •Canadian firm in Global Announced Deals – Counsel to Principals value by deal value •No. 1 Canadian firm in Worldwide Announced Deals by deal value •Canadian firm in Global Announced Deals – Counsel to Principals •No. 1 Canadian firm in Worldwide Completed Deals by deal value by deal count •Canadian firm in Cross Border Announced Deals by deal value •No. 1 Canadian firm in Worldwide Completed Deals by deal count •Canadian firm in Cross Border Announced Deals by deal count Our No. 1 rankings in mergermarket M&A league tables for 2011 include: •No. 1 in Canada Announced Deals by deal value •No. 1 in Canada Announced Deals by deal count •No. 1 Canadian firm in United States Announced Deals by deal value •No. 1 Canadian firm in United States Announced Deals by deal count •No. 1 Canadian firm in Americas Announced Deals by deal value •No. 1 Canadian firm in Americas Announced Deals by deal count •No. 1 Canadian firm in Global Announced Deals by deal value37 •No. 1 Canadian firm in Global Announced Deals by deal count
  38. 38. Our Capital Markets Rankings Through the third quarter of 2011, Blakes continues to dominate corporate finance league tables for public financings in Canada: • No. 1 Canadian law firm for equity-based offerings (Bloomberg) • No. 1 Canadian law firm for debt and equity prospectus financings (Financial Post), assisting our issuer and underwriter clients in raising over C$13-billion year to date • No. 1 legal advisor to underwriter clients on Canadian debt and equity financings (Financial Post) Bloomberg: – No. 1 law firm in Canada for equity-based offerings by deal count and dollar volume in 2010 • 20% share of the securities finance market – No. 1 Canadian law firm in 2010 for retail structured product offerings by deal count and dollar volume • 40% share of the total retail structured product market Thomson Reuters: – No. 1 Canadian law firm, by a significant margin, in Canadian debt, equity and equity-related offerings in 2010 – globally, Blakes ranked 11th for issuer legal advisor and 14th for manager legal advisor in global debt, equity and equity-related offerings based on deal count (the only Canadian law firm to make the rankings) Financial Post: – No. 1 law firm for combined debt and equity offerings for issuer and underwriter clients in 2010 • 20% share of the Canadian corporate finance market38
  39. 39. Blakes Contacts Securities Ross Bentley (403) 260-9720, ross.bentley@blakes.com Chad Schneider (403) 260-9660, chad.schneider@blakes.com Tax Edward Rowe (403) 260-9798, edward.rowe@blakes.com Robert Kopstein (604) 631-3317, robert.kopstein@blakes.com Carrie Aiken Bereti (403) 260-9775, carrie.aiken@blakes.com39
  40. 40. Accessing Canadian Capital Markets for Global Oil & Gas CompaniesJulie K. ShinDirector, Listed Issuer ServicesToronto Stock Exchange
  41. 41. Disclaimer This document is for information purposes only and is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange or Natural Gas Exchange. TMX Group Inc. and its affiliates do not endorse or recommend any securities referenced in this document. Please seek professional advice to evaluate specific securities. While the information herein is collected and compiled with care, neither TMX Group Inc. nor any of its affiliated companies represents, warrants or guarantees the accuracy or the completeness of the information. You agree not to rely on the information contained herein for any trading, business or financial purpose. This information is provided with the express condition, to which by making use thereof you expressly consent, that no liability shall be incurred by TMX Group Inc. and/or any of its affiliates as a result of any errors or inaccuracies herein or any use or reliance upon this information.© 2010 TMX Group Inc.2
  42. 42. TMX Group is at the Heart of Canada’s Capital MarketsDerivatives Energy Market data Cash trading Issuer services & related (51% Ownership) (~54% Ownership)(19.9% Ownership) 3
  43. 43. Canadian Markets… Global Leaders 7th 1st in the World by Market 2nd in North America by Capitalization in the World by Number Number of Issuers of Issuers 8th in the World by Equity Financing 4
  44. 44. Strong Fundamentals Canada: • Resource rich • Financially strong • Balanced corporate governance TSX & TSXV: • Robust capital markets • Strong trading liquidity • Earlier access to capital + access to North American capital5
  45. 45. Global Leadership Strengths 474 issuers Over 35% of the world’s public oil and gas companies 64 going public events $12.2 B equity raised Energy & Energy Services $271 B value traded 1531 issuers 58% of the world’s public mining companies 3670 issuers 208 going public events (RECORD Year) 524 going public events $17.8 B equity raised Mining $416 B value traded $54.0 B equity raised Average Financing: 132 issuers TSX $54.2 M Number one in the world by number of public clean TSXV $3.8 M technology companies 11 going public events Clean Technology $1.3 B equity raised $7.3 B value traded 6 As of December 31, 2010
  46. 46. TMX Group Serves Companies at all Stages of Growth Market Capitalization Unique feeder system Toronto Stock Exchange and TSX Venture Exchange As at December 31, 2010 86% % of TSX Issuers 491 % of TSXV Issuers graduates + 97 M&A* 40% 28% 31% 12% 428 1847 476 612 2% 51 Issuers Issuers Issuers 256 Issuers Issuers <$50 Million $50 - $250 Million >$250 Million *From January 1, 2000 – December 31, 2010Toronto Stock Exchange issuer base: 1,516 issuers, ~$2.2 trillion market capTSX Venture Exchange issuer base (excludes NEX): 2,154 issuers, ~$71.5 billion market cap7 7
  47. 47. The North American Stock Markets Continuum NYSE NASDAQ •Senior listing standards AIM • Disclosure rules • Junior listing standards OTCBB CNSX •Minimal/No listing OTC - Pink standards Sheets 8
  48. 48. TSX & TSXV Issuers are Top TierPerformersIn 2010, 956 TMX Issuers providedannual returns greater than 50%2004 2005 2006 2007 2008 2009 2010614 713 930 556 96 1,301 9569 9
  49. 49. Global Exchange Leader for New Listings in 2010 NYSE/AMEX Hong Kong TSX/TSXV LSE/AIM Nasdaq ASX Euronext (US) Exchanges Number of Issuers 3,670 2,966 2,317 2,778 1,999 1,413 Listed Quoted Market Value 2,277.5 3,613.1 13,394.1 3,889.4 1,454.5 2,711.3 (US$ Billions) New Listings 524 161 113 220 127 113 Equity Capital Raised 52.4 60.7 208.1 8.2* 53.8 109.5 (US$ Billions) Value Traded 1,383.6 2,741.3 17,795.6 12,659.2 1,062.6 1,496.4 (US$ Billions) Broad Stock Market Indexes (%Change 14.5% 11.0% 10.8% 16.9% -0.7% 7.2% over Dec. 31 2009) Data as at or for the year ended December 31, 2010 10 *NASDAQ Information does not include secondary financings Source: Exchange Websites, World Federation of Exchanges, (TMX analysis of public information)
  50. 50. Going Public in Canada - Benefits Unique capital market infrastructure & listing standards Canadian Capital Markets • operate within a world-class Proportionate governance financial services environment; • trade during North American Extensive analyst community business hours; and • by a vibrant institutional and retail investor base Access to U.S. + international capital Alternative options for going public11
  51. 51. International Investment Community Tradeson Toronto Stock Exchange 25 International Brokers including: • Barclays Capital Toronto Stock Exchange Volume • Citigroup • CSFB and Transactions (2004-2010) • Deutsche Bank • Goldman Sachs Volume 191.3 189.1 125.0 182.9 200 • HSBC CAGR 9% • JP Morgan Transactions 118.5 150 • Macquarie Capital Markets CAGR 29% 100.0 118.6 109.2 104.6 • Merrill Lynch • Morgan Stanley 85.7 96.1 100 • Raymond James 75.0 55.2 • Thomas Weisel 40.3 82.0 50 • State Street 64.2 61.3 • UBS 50.0 0 2004 2005 2006 2007 2008 2009 2010 80 Canadian Brokers including: Volume (B) Number of Transactions (M) • BMO Nesbitt Burns • Canaccord Genuity • CIBC World Markets ~40% of daily trading originates from • GMP Securities International brokers • RBC Capital Markets • Scotia Capital Markets • TD Securities • National Bank Financial 12
  52. 52. Growth Markets for Oil & Gas Companies Number of Oil & Gas Issuers Oil & Gas Analyst Coverage394 Analyst Coverage Comes at Earlier Stages 220 12 155 8 117 7 7 7 5 4 52 3 3 3 36 14 10 1 1 TSX ASX LSE-AIM NYSE NASDAQ NYSE Oslo HKEx $50-$150 Million $150-$500 Million $500-$1,000 Million >$1,000 MillionTSXV Amex Bors AIM ASX TMX Sources: Number of Oil & Gas Issuers: Capital IQ and Exchange Websites as at December 31 2010 13 Analyst Coverage: Capital IQ
  53. 53. TMX Group Issuers Have Global Assets Africa: UK/Europe: Russia: Canada: TSXV: 21 Companies TSXV: 20 Companies TSXV: 1 Companies TSXV: 171 Companies USA: TSX: 13 Companies TSX: 13 Companies TSX: 1 Companies TSX: 95 Companies TSXV: 60 Companies TSX: 21 Companies Mexico, Central America & Caribbean: TSXV: 5 Companies TSX: 0 CompaniesMiddle East:TSXV: 12 CompaniesTSX: 4 Companies Australia/NZ/PNG: TSXV: 9 Companies TSX: 1 Company India/Asia: South America: TSXV: 10 Companies TSXV: 26 Companies TSX: 7 Companies TSX: 11 Companies Number of TMX Group Companies with Oil & Gas assets located around the world. Note - A single company may have operations or assets in multiple countries/regions. 14 Source: TMX Group analysis of company websites as at December 31, 2010
  54. 54. Oil & Gas Listed Issuers Span the Spectrum Distribution of Oil & Gas Market Capitalization ($CMM) 36% 25% 20% 17% 16% 11% 12% 11% 10% 8% 9% 6% 5% 5% 5% 3% 2% 0% 0% 0% <1 1-5 5-10 10-25 25-50 50-100 100-250 250-500 500-1B >1B TSX Venture - 272 Issuers, $18.0 B Total QMV TSX - 122 Issuers, $407 B Total QMV *TSXV data excludes NEX As at Dec 31 2010 15
  55. 55. Snapshot of the Oil & Gas Sector on TSX & TSXV as at Dec. 31, 2010 TSXV TSX $425B As at Sept 30, 2011: 18 -394 Listed Issuers 37 -Total QMV: $335.9B Total QMV of O&G -35 New Listings YTD issuers on TSX & New Listings TSXV -$7.9B Equity capital raised -350 Financings TSXV 29.4B TSX $3.3B -$236.6B Value traded $8.0B Shares Traded Through 37 Million Equity Capital Raised TransactionsDec 31 2010 16
  56. 56. TMX - Oil & Gas Market Leader in 2010 No. of Quoted Equity No. of No. of Issuers Market Capital Financings New Listed Value (C$) Raised (C$) ListingsTSX & TSXV 394 $425B $11.3B 504 55 TSX 122 $407B $8.0B 101 18 TSXV 272 $18B $3.3B 403 37 LSE 68 $1,230B $4.3B 11 4 AIM 87 $26B $2.5B 61 5 ASX 220 $100B $4.1B 145 2 NASDAQ 52 $38B $2.9B 36 0 NYSE 117 $2,930B $10.6B 26 2 NYSE Amex 36 $46B $0.831B 23 017 Source: Capital IQ, Exchange Websites. As at and for the year ended December 31, 2010
  57. 57. Energy Services Companies Range from Micro toLarge Cap Distribution of Energy Services’ Market Capitalization 45% 27% 18% 18% 18% 13%10% 14% 14% 10% 8% 6% l 6% 2% 3% 0% 0% 0% 0-5 5-10 10-25 25-50 50-100 100-250 250-500 500-1B >1B TSXV - 31 Issuers, $1.4B Total QMV TSX - 49 Issuers, $25.2B Total QMV *TSXV data excludes NEX As at December 31 201018
  58. 58. Snapshot of the Energy Services Sector onTSX & TSXV (2010) TSXV $27B As at Sept 30, 2011: 49 -81 Listed Issuers 31 -Total QMV: $28.6B TSX Market Cap UP 40% -6 New Listings YTD from Dec 31 2009 # of Listed Issuers -$960MM Equity capital raised -22 Financings $.9B 2.1B -$18.4B Value traded Equity Capital Shares Traded Raised Through 32 Through 2.8 Million Financings Transactions 19
  59. 59. Benefits of TMX Listing for Oil & Gas Issuers Superior access to capital for junior growth companiesAccess to Listing criteria and transaction policies specific to oil & gasCapital Exchange staff with relevant energy business experience Rules facilitate fast raisings Strong energy trading liquidityTrading Graduation potential between junior & senior marketLiquidity Vibrant retail & institutional investor base - understands energy Equity culture - 50% of Canadians own shares Home to 35% of the world’s public oil and gas companiesGlobal Large analyst community that covers juniors & seniorsVisibility Able to finance international projects even in high risk places In same market as merger, acquisition and JV candidates 20
  60. 60. Accessing Capital is Key to Fund GrowthOil & Gas Equity Capital Raised on Toronto Stock Exchange and TSX Venture Exchange (C$B) Oil & Gas Issuers $11.7B $11.3B have raised $10.4B $10.5B $73+ Billion $9.2B since 2002 $8.2B $7.9B $5.3B $4.1B $2.6B 2002 2003 2004 2005 2006 2007 2008 2009 2010 to Sept 30 2011 Secondary Offerings Private Placements IPOs 21
  61. 61. Oil & Gas Equity Financing Comparatives 2010 OIL & GAS EQUITY CAPITAL RAISED BY EXCHANGE (C$BN) TSX/TSXV $11.3B NYSE $10.6B LSE/AIM $6.8B ASX $4.1B NASDAQ $2.9B22 Source: Capital IQ
  62. 62. Highly Liquid Oil & Gas Market $409 $347 $337 $283 $261 $258 $155 $129 $117 $95 $94 $87 $56 $12 $41 $23 $17 $20 $19 $15 $19 $1 $6 $13 2003 2004 2005 2006 2007 2008 2009 2010 AIM ASX TMX Source: Captus Partners, Capital IQ, Amounts are in C$Billions 23
  63. 63. on TSX / TSX V24
  64. 64. Going Public in Canada - Overview • Canadian capital markets operate within a world-class financial services environment – Traded during North American business hours – Vibrant institutional and retail investor base • Unique capital market infrastructure and listing standards • Proportionate governance • Extensive analyst community • Access to U.S. capital • Alternative options for going public • Raising capital on TSX does not require reincorporation or operations in Canada25
  65. 65. Canadian Public Markets are “right-sized” forMid & Small-Cap Issuers • Good fit for small - mid cap U.S. companies – Canadian capital markets have long history of financing smaller companies – Investors comfortable with risk – willing to support – Regulatory regimes consider the particular needs of smaller public companies – Infrastructure of market professionals with expertise in smaller public companies – May provide greater liquidity for smaller public companies 26
  66. 66. Alternative Methods for Going Public Available 27
  67. 67. Capital Pool Company™ (CPC) Program has a StrongTrack Record Since inception: •Over 2140 CPCs were created •80% have completed their QT – over 1700 companies Currently: •342 Graduates now trade on TSX •103 of the grads were CPCs •128 QTs in 2010 28
  68. 68. Proportionate governance• TMX Group, Inc. has “principle based” regulation• Proportionate Governance – TSX companies do not require external auditor attestation regarding internal controls (SOX 404) – In addition, TSX Venture companies have the benefit of a basic certification29
  69. 69. Specific Oil & Gas Listing Criteria • TSX requires issuers to have proved developed reserves (Minimum NPV $3MM, Exempt $7.5MM) or significant contingent resource + financial stability • TSX Venture listing requirements offer increased flexibility • Can accommodate smaller companies with proved or probable reserves or resources • Companies with no reserves may still be eligible – unproven property with prospects / recommended diversified exploration program of at least $1.5MM* • Energy companies required to report their reserves / resources in compliance with NI 51-101; globally recognized standard that affords transparency 30 *See TSX Venture Exchange Policy 2.1 for complete details 30 30
  70. 70. Timelines & Other Considerations• Timelines for listing vary significantly depending on deal complexity • Can be as quick as 2 months in ‘perfect’ situations for TSX listings• IFRS Accounting/Audit Standards; U.S. GAAP* accepted without reconciliation• No Exchange requirement for Canadian officers / directors but acceptable senior market public company experience is required• 200 global public board lot shareholders on TSXV and 300 on TSX• Canadian office not required but contact person in Canada must be accessible for shareholders and analyst inquiries• Sponsorship generally required (can be waived in certain situations) *Dependent upon issuer’s reporting status in the U.S.31
  71. 71. Estimated Costs of Listing Initial Listing Fees $10,000 - $200,000 $7,500 - $40,000 Annual Sustaining Fees $12,500 – $95,000 $5,000 – $90,000 Accounting & Audit Fees $75,000 - $100,000 $25,000 - $100,000 Legal Fees $400,000 - $750,000 $75,000+ Underwriters’ commission 4-6% Up to 12 % Other fees to consider include: Securities Commission fees ♦ Transfer agency fees ♦ Investor relations costs ♦ Geological or engineering reports ♦ Printing / translation costs ♦ Valuation reports ♦ Director and Officer liability insurance Actual individual and total costs will vary from these estimated ranges depending on the nature and complexity of the transaction and relative sophistication of the company, its management, internal controls and reporting processes.32
  72. 72. Toronto Stock Exchange and TSX Venture Exchangelisting fees are competitive Min and Max Initial Fees (C$000s) Min and Max Sustaining Fees (C$000s)700 700 588600 600 493500 500400 400 336300 246 300 222 200 194200 200 150 115 98 95 90 82 74 69 66100 100 40 25 27 25 39 8 0 0 LSE ASX* NYSE** NASDAQ TSX AIM*** HKEx NASDAQ NYSE TSXV HKEx NYSE** ASX HKEx NASDAQ TSX TSXV LSE NYSE NASDAQ HKEx AIM GM CM Amex GEM GM Amex CM GEM *There is no maximum fee. Market cap of $1B was used for illustration purposes **NYSE has a USD $500,000 cap on listing fees per issuer, per year ***Does not include NOMAD fees NB: For international companies, TSX initial listing fees max out at $150K Source: TSX analysis of exchange listing fee documents. Bank of Canada rates as of February 22, 2011. USD rate = 0.9859, GBP rate = 1.5901, AUD rate = 0.9851, HKD rate = 0.126516 As at February 22, 2011 33
  73. 73. Julie K. ShinDirector, Listed Issuer ServicesToronto Stock Exchange416.947-4539julie.shin@tsx.comCindy GrayHead, Business Development, Global Energy403.218-2822cindy.gray@tsx.com 34
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  77. 77. #UUQEKCVGF 1HHKEG
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l $NCMG %CUUGNU )TC[FQP ..2
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—#. 166#9# 6141061 %#.)#4; 8#0%1784 09 ;14- %*+%#)1 .1010 $#*4#+0 #.-*1$#4
  80. 80. $+,+0) 5*#0)*#+
  81. 81. DNCMGUEQO
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l $NCMG %CUUGNU )TC[FQP ..2

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