CONFERENCE KEYNOTE SPEAKER STEPHEN HARPER

Transcription

1 THE NEGOTIATOR The Magazine of the Canadian Association of Petroleum Landmen June 2017 CONFERENCE KEYNOTE SPEAKER STEPHEN HARPER FHOA, Past Present and Future Getting to Know the Freehold Petroleum & Natural Gas Owners Association 2017 CAPL Property Transfer Procedure: Reps And Warranties Part II The New PTP: Second Part to a Closer Look at the Reps and Warranties 2017 CAPL Conference Showcasing the Land Profession and our Influence Within the Energy Industry

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3 THE NEGOTIATOR The Magazine of the Canadian Association of Petroleum Landmen Senior Editorial Board Director of Communications Marah Graham [ph] Advertising Editors Patrick Craig [ph] Vanessa Pankratz [ph] Coordinating Editor Kristin Rennie [ph] Feature Content Editors Amy Kalmbach [ph] Regular Content Editor Martin Leung [ph] Social Content Editor Jason Peacock [ph] Editorial Committee Christine Balash [ph] Design and Production Rachel Hershfield, Folio Creations Printing McAra Printing Submissions For information regarding submission of articles, please contact a 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 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. 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 the facts stated. Advertising For information, please contact Patrick Craig ( ) or Vanessa Pankratz ( ). No endorsement or sponsorship by the Canadian Association of Petroleum Landmen is suggested or implied. 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 Editorial Board CAPL Board of Directors President Larry Buzan, P.Land Vice-President Noel Millions, PSL Director, Business Development Alberta Tim Galbreath Director, Business Development Saskatchewan & Alberta Oilsands Michelle Creguer Director, Communications Marah Graham Director, Education Robyn Baron, P.Land, PSL Director, Field Acquisition & Management Rob Pettifer, P.Land, PSL Director, Finance Kristin Rennie Director, Member Services Rob Pitchford, PSL Director, Professionalism/Business Development (BC) Glenn Miller, PSL Director, Public Relations Gary Richardson, PSL Director, Technology Shaun Williams Director, Secretary/Social Janice Redmond Past President Larry Buzan Readers may obtain any Director s contact information from the CAPL office. Suite 1600, Avenue S.W. Calgary, Alberta T2P 3R7 [ph] [fax] Kaitlin Polowski Denise Grieve Karin Steers reception@landman.ca dgrieve@landman.ca ksteers@landman.ca THE NEGOTIATOR Features June CAPL Property Transfer Procedure Jim MacLean 8 FHOA, Past Present and Future David Speirs & Dennis Eisner Annual CAPL Conference Richard Fulton In Every Issue 12 Get Smart 14 The Negotiator s Message From the Board: President 14 The Negotiator s Message From the Board: Finance 16 Board Briefs 21 Roster Updates 27 The Social Calendar 28 CAPL Calendar of Events 28 June General Meeting Also in this issue 13 AAPL Board Meeting 13 Olds College 18 M&A Report th Annual CSPG/CSEG/CAPL 10km/5km Road Race and Fun Run CAPL Golf Tournament 25 Special 40 th Annual Trap Shoot Cover photograph of Stephen Harper: World Wide Speakers Group

4 2017 CAPL Property Transfer Procedure Reps and Warranties: Part II THE SECOND DRAFT OF THE 2017 CAPL PROPERTY TRANSFER PROCEDURE ( PTP ) WAS MADE AVAILABLE TO INDUSTRY IN LATE JANUARY THROUGH A WEB ENABLED DISTRIBUTION. Addendums to the PTP to facilitate early use of the PTP for anyone that wishes to use the draft in a new transaction; and (vii) a redline of the second draft relative to the 2000 PTP. While we do not expect that the redline to the 2000 PTP will The package on the CAPL web page includes: (i) be reviewed in any detail, we believe that even a an overview of the project scope and the major cursory glance at that redline will demonstrate changes relative to the 2000 PTP; (ii) a detailed convincingly the thought and effort that has matrix that outlines all material changes rela- been invested in the 2017 document over the last tive to the 2000 PTP and their rationale; (iii) a 13 months by our 15 member committee. clean copy of the text and annotations; (iv) a 34 Last month s article addressed the common page coded comment matrix that presents the reps in Clause 6.01 and the Vendor s reps and detailed verbatim comments we received from a warranties in Paragraphs 6.02(a)-(t). This month s 2 modest number of commenting parties, together with our responses to each individual comment; (v) a redline of the second draft relative to the initial July, 2016 draft; (vi) Word versions of the election sheet and the case studies included as article offers additional context about Article 6.00 of the PTP by reviewing the remaining reps and warranties of the Vendor in Paragraphs 602(u)-(bb), the Purchaser s reps in Clause 6.04 and the remainder of the Article. WRITTEN BY JIM MACLEAN

5 Clause 6.02 Vendor s Representations and Warranties This rep includes an exception for Clause 1401 of the Area of Mutual Interest or Area of Exclusion (Paragraph 6.02(u)): 1990 CAPL Operating Procedure. This is because of the limited Except as identified in a Schedule, no Title and Operating commitment to deliver obligation with respect to production Document includes an area of mutual interest or area of exclu- facilities operated thereunder. That being said, it is important sion that is in effect as of the Effective Date. for users to recall that the 1990 CAPL Operating Procedure and Few P&S Agreements include this representation. It is an the subsequent updates cover minor production facilities orig- important item, though, particularly if the Purchaser intends inally designed solely for use in the exploitation of the lands to expand its position in the region. There is limited scope for subject to the applicable land agreement. (That obligation was application under new agreements, as the AMI term under those eliminated as of the 2007 CAPL Operating Procedure.) agreements tends to be relatively short. However, care must be taken for old agreements, as they occasionally include large, Not a Disposition of Substantially all Vendor s Assets (Paragraph perpetual AMI obligations. This representation is particularly rele- 6.02(x)): This rep is included because special shareholder approv- vant if the transaction primarily involves undeveloped acreage. als would be required if a Vendor were selling all or substantially This rep was modified in the 2017 PTP to extend to any area all of its assets in the transaction. The advice of legal advisors of exclusion obligation. While it is likely that any such obligation would be required if it were apparent that this were an issue. assumed by the Vendor would be personal to it, the Vendor should Leased Vehicles, Equipment and Premises (Paragraph 6.02(y)): review any such document to ensure that it does not adversely This rep was introduced in the 2017 PTP. It will be important for affect the transaction. This reinforces to users why it is important to a Purchaser becoming the operator of a property to understand track these types of obligations carefully in internal records systems. the Tangibles, personal property and buildings that are owned and those that are only leased. No Notice of Offset Obligations (Paragraph 6.02(v)): Except as identified in a Schedule, the Vendor has not received a notice from the No Removal of Assets (Paragraph 6.02(z)): This representation was applicable lessor that any Lease is subject to an offset obligation. introduced in the 2017 PTP. Other than for any excess inventory The representation is linked to the receipt of a lessor notice belonging solely to it, the Vendor should not remove from the loca- for two reasons, even though an offset notice as such is not tion of an operated property equipment that is serving the Assets, required under a freehold lease. The first is that a potential such as inventory owned for the joint account. (See also the removal Purchaser has the ability to conduct an initial due diligence obligation under Clause if there is any excess inventory.) review from public data sources. The second is that Crown offset It is the better practice to remove any such excess inventory notices are often discretionary, such that a notice from the on site before the Purchaser s site visit or to identify it clearly Crown is required to trigger the obligation. Some agreements as inventory that will be removed prior to the Closing Date or include an additional component in the provision, such as and shortly thereafter. is not aware of any particular circumstance that has created such an offset obligation. However, a Vendor should be cautious about Quiet Enjoyment (Paragraph 6.02(aa)): Purchasers will often extending the scope of the application of this representation. request a quiet enjoyment representation from the Vendor. It is a good practice for a Vendor to review offsetting lands to The rep suggested by Purchasers is often too broad, as it may determine if there is recent drilling activity that might cause an not recognize the interrelationship between the quiet enjoy- offset obligation, to make a note of any such well on the applica- ment rep and the limitations applicable to the Vendor s delivery ble lease file and to conduct such further investigations as may of the Assets - the other reps and warranties provided by the be appropriate in the circumstances. Vendor and the Permitted Encumbrances (includes the Title and Operating Documents and Title Defects that have been waived No Commitment to Deliver (Paragraph 6.02(w)): J.V. Agreements by the Purchaser). Failure to recognize that connection in the sometimes include a requirement that an owner deliver all of quiet enjoyment rep arguably eliminates much of the protection its production from a designated area to a particular facility. a Vendor intends with those limitations. This is typically not addressed in A&D Agreements, even though there could be a large negative impact on a Purchaser s regional Additional Representations (Paragraph 6.02(bb)): Both Clause strategy. Purchasers should review this issue very early in their due diligence process, even if this representation is not included. This Paragraph was expanded in the 2017 PTP to address take or pay obligations for use of Tangibles or other facilities in addition to the commitment to deliver. (See also Paragraph 6.02(i).) 6.02 and Clause 6.04 (Paragraph 6.04(f)) anticipate that the Parties may choose to include additional representations in the Head Agreement. Any such additional custom representation is treated in a consistent manner with those in the PTP, as if it had been made under Clause 6.02 or Clause

6 One rep that will probably often be included in a Head balanced outcome. It allows either Party to raise as a potential Agreement pertains to long term inactive wells and facilities defence with respect to a breach of a rep that the other Party did and the measures being taken by Regulatory Authorities at the not rely on it. relevant time to manage the abandonment and reclamation issues associated with orphan wells and facilities. Parties will Subclauses 6.03B and C: Subclause 6.05A of the 2000 PTP was increasingly choose to address this issue specifically in a rep substantially rewritten as Subclauses 6.03B and C of the 2017 because of the potential negative impact associated with the document. Subclause 6.03B reinforces the as is, where is nature acquisition of an inactive well or an inactive multi-well facility of the transaction by building on the first portion of the former under, for example, the Alberta AER requirements. Both Vendors Subclause 6.05A. Subclause 6.03C greatly expands the content and Purchasers should be aware of the requirements of the appli- that had been included in the last sentence of the former cable Regulatory Authorities on this issue and the consequences Subclause 6.05A with respect to the Purchaser s due diligence of non-compliance. Although a very important issue, this was inspection of the Assets and its analysis of the value of the Assets. not included in the list of optional reps in Clause 6.02 because of Notwithstanding the expanded wording in these Subclauses the need to review the matter on a case-by-case with business relative to the 2000 document, the principles remain unchanged. and legal advisors if it is an issue and the degree to which the A prudent Purchaser will ask for copies of the Vendor s envi- regulatory regime will continue to evolve. (See also the definition ronmental records respecting the Assets as part of its normal of Licencee Rating, Paragraphs 6.02(q) and 6.04(d), together with due diligence process (whether conducted under optional Article the associated annotations.) 8.00 or prior to execution of the Agreement, as contemplated Purchasers often request additional representations. Examples in the introduction to Article 8.00). A Vendor that withholds are reps that: (a) the Vendor has made reasonable inquiries and records that the Purchaser had requested the opportunity to searches for material documents and information relating to the review potentially finds itself in breach of the rep about the Assets and for all information reasonably required to ensure that provision of documents (Paragraph 6.02(p)) if it has been selected its reps and warranties would not be misleading; (b) the Tangibles to apply. Even if that rep were not selected to apply, there could are suitable for the production of Petroleum Substances; (c) no Wells be extreme circumstances in which a conscious decision by the need to be abandoned; (d) there are no Environmental Liabilities Vendor to withhold records or to disclose selective records that of which a Purchaser should be aware; (e) to the knowledge of the create a misleading presentation of the circumstances could Vendor, the production and financial data provided to the Purchaser leave it open to a claim for fraud. In this regard, it is important were not materially inaccurate; and (f) the Vendor knows of nothing to remember that a claim for fraud is not limited to the normal that would reasonably cause the Purchaser to wish to terminate period prescribed for the survival of representations and warran- the transaction. Some of these are far too broad, and attempt to ties under Subclause 6.05A and Subclause 13.01C. pass business risk to the Vendor. The Vendor is not privy to the Purchaser s evaluations of the property, for example, and cannot be Subclause 6.03D: This Subclause is similar to Subclause 6.05B of expected to know how it proposes to operate a property. the 2000 document. A similar provision is typically used in A&D A Purchaser might also consider addressing some of the Agreements. items noted above as part of its due diligence process or as a The Vendor makes no reps respecting the Assets in addition condition to Closing. Similarly, a Purchaser could also have a to those provided in Clauses 6.01 and 6.02, including those made remedy for fraud in circumstances in which, for example, the in the Head Agreement under Paragraph 6.02(bb). The Vendor has financial information presented by a Vendor to the Purchaser/ generally provided information in its possession to the Purchaser potential bidders was deliberately misleading. to assist the Purchaser to conduct its own evaluation of the Clause 6.03 No Additional Representations or Warranties by Vendor (2000 PTP Clause 6.05) Assets. The Vendor did so without any intention of guaranteeing that the information was accurate. Excepting fraud on the part of the Vendor and the Vendor s responsibility for its reps on the basis provided in the Agreement, the acquisition of the Assets Subclause 6.03A: This Subclause was added in the 2017 PTP to is ultimately a business decision of the Purchaser, based on its reinforce that the Purchaser could not claim a breach of a rep assessment of the accuracy of all available data. 4 insofar as the applicable matter were disclosed in the Agreement. Agreements sometimes include language stating that the qualification extends to any matter, event or circumstance that was disclosed in the Agreement, in a data room or of which the Purchaser was otherwise aware. Subclause 6.05C offers a more The Vendor has three reasons for the inclusion of this type of Subclause. Firstly, the Vendor wishes to reinforce that the Purchaser relies on information outside the contract at its own risk. Except as provided in the Agreement, it is responsible for conducting its

7 own evaluation of the Assets. Any information provided by the Vendor, such as a contract summary from a land information system, is intended to assist the Purchaser in its due diligence review, not to replace it. Secondly, the inclusion of representations/information outside of the Agreement poses difficult proof problems, even assuming that the parol evidence rule (a general prohibition on consideration by a court of negotiations/collateral representations outside the contract) could be overcome by the Purchaser. It would be difficult to prove if and how the alleged information was provided and the degree of the Purchaser s reliance thereon. The most practical reason, though, is that a Vendor wishes to minimize the possibility that unauthorized personnel and authorized, but uninformed, personnel could make statements that would impact the Parties contractual arrangement. It is common for the Purchaser s representatives to be in contact with a number of the Vendor s representatives at any time, requesting various pieces of information. In their desire to assist, the Vendor s personnel occasionally provide honest, but incorrect advice, largely because the Purchaser s representatives often request an immediate response. The probable result of the exclusion of the general release would be the creation of a very formalized process. Each Party would designate a representative through which all questions and answers would be directed in writing. In practice, the cost of such a mechanism seems to exceed the perceived benefit of the change when dealing with credible parties. Clause 6.04 Purchaser s Representations and Warranties (2000 PTP Clause 6.03) Investment Canada Act (Paragraph 6.04(a)): Notwithstanding the brief references to the Investment Canada Act (Canada) and the Competition Act (Canada) in the PTP, it is unlikely that the PTP would be used in practice for any disposition that would be subject to review under either of those Acts. In the unlikely event that the PTP were used for any Transaction that was reviewable under one or both of those Acts, legal assistance would be required to address the process to be used by the Parties. The references included in the annotations about those Acts are primarily included to offer a general context for users because of the likely use of this document as a reference document. This offers a context about the requirements that could apply to larger transactions. The Investment Canada Act (Canada) is considered briefly in the annotations on Paragraph 10.01(a), for example. If the transaction is reviewable under that Act, Paragraph 10.01(a) will apply. As a service provider, our product is our people. Keeping them safe is a serious matter. LAND IS OUR PASSION, SAFETY IS OUR CULTURE That s why a Certificate of Recognition (COR) is a significant achievement for Synergy Land, and a benefit to you, our clients. You can rest assured that we uphold strict safety standards to protect the people directly involved in your projects. Call us today at to learn more about the COR advantage. synergyland.ca LAND (5263) 5

8 No Lawsuits or Claims (Paragraph 6.04(b)): This rep was introduced in the 2017 PTP to offer similar protection as that offered to the Clause 6.05 Survival of Representations and Warranties (2000 PTP Clause 6.04) Purchaser under Paragraph 6.02(b). While unlikely, the Purchaser could be subject to legal proceedings that could threaten its abil- Subclause 6.05A: The representations and warranties are to be ity to complete the transaction. The Vendor would need to assess true on the Effective Date, at execution of the Agreement and at the risk of Closing occurring if this were a potential issue. the Closing Time. A rep that was true at the Effective Date would be of little comfort to a Purchaser if it was not also true at Closing. Acquiring as Principal (Paragraphs 6.04(c)): The Vendor wants to The representations and warranties will not survive Closing be able to enforce the Purchaser s ongoing obligations under unless the provision states that they are to survive beyond the Agreement against it. Recognition of potential risks in this Closing. Although the inclusion of a limited survival period is area also reinforces to the Vendor s personnel that ongoing obli- generally accepted, the duration of the period has sometimes gations, such as liability and indemnification obligations, are been a matter of negotiation. The norm has become 12 months ultimately only as good as the financial viability of the Party that for material transactions, with six months sometimes used for has those obligations. minor transactions involving non-operated properties or only undeveloped lands. Wells and Tangibles Transfers (Paragraph 6.04(d)): Given potential The survival period was modified from a negotiated number restrictions on the transfer of licences under the Regulations, the of months to one year in the 2017 document to reflect the most Purchaser represents that it is eligible to accept a transfer of the typical outcome. Parties that prefer a different survival period in licence for Wells and Tangibles anticipated to be operated by it. this Subclause and Subclause 13.01C remain free to negotiate a A Vendor must carefully screen potential buyers and only different time period. attempt to dispose of properties to a financially viable Purchaser. This Subclause does not go so far as to state that the repre- The Purchaser sometimes will not be able to make this rep as sentations and warranties cease to have any effect at the end of of the Effective Date. It will need to be modified for those cases, so the prescribed period because of the exception for fraud noted in that the required steps to become eligible have been completed Subclause 6.05B and the related annotations. by Closing. This would typically require identification of the The survival period for representations and warranties in this eligibility gaps to the Vendor. The rep could have been struc- Subclause does not enable the Vendor to avoid its contractual obli- tured more broadly to apply the eligibility test only as of Closing. gations for J.V. and royalty audits under Subclause 4.02C, however. This was not done because of the Vendor s need to understand any eligibility issues in this area early in the transaction. Subclause 6.05B: If a representation or warranty was made fraud- As noted in the annotations on the definition of Licencee ulently, the limited survival period probably would not prevent a Rating, Clause 3.04, Clause 3.06, Paragraph 6.02(q) and Paragraph Party from subsequently pursuing its full legal rights within the 10.03(c), the onus is on the Parties to work with their business and normal legal limitation period prescribed under the Limitations legal advisors to add custom content in their Head Agreement to Act. However, the inclusion of the exception for fraud provides address their particular circumstances and needs if there are any Purchasers with additional comfort, and should be of no concern contemplated issues about the transfer of Well licences in addi- to a Vendor that is processing its divestitures properly. tion to the condition to Closing in Paragraph 10.03(c). The fluidity A Party claiming a breach of a representation or warranty of the Regulations on this area over time and across jurisdictions after Closing must do so by providing notice with reasonable was also such that any more specific handling of the issue in this particulars about the alleged breach within the prescribed document would potentially create unintended consequences period, subject to the qualification for fraud noted above. It has for the Parties over time. no basis to make any further claim for that breach if it misses the Simplifying the other procedural aspects of the overall transac- prescribed period within which to make a claim. tion through use of the PTP facilitates a more focused examination of this important business issue by the Parties representatives Subclause 6.05C: Vendors occasionally include a provision relative to what would be the case without the PTP. whereby a Purchaser would be prohibited from commencing an action for any rep if the Purchaser had any knowledge that would 6 Financial Capacity (Paragraph 6.04(e)): Subject to any condition to Closing respecting financing, the Purchaser represents that it has the available funds to make the payments required by it at Closing and to perform any other financial commitments required under the Head Agreement. cause it to question the truth of that rep. A Purchaser pursuing a claim for damages for the breach of a rep would be required to convince a court that there had been a breach of the rep to its detriment and, if so, to prove that the damages suffered by it resulted from its reliance on the rep.

9 It would seem difficult for a Purchaser to make this argument if it had knowledge at the time that indicated that it was not relying on the rep. Although the defence might also be available at common law in the absence of this Subclause, the document states that a Party may offer as a possible defence that the other Party was aware, prior to Closing, of the matter that forms the basis of its claim for breach of a rep and that it chose to proceed with Closing anyway. However, the success of the defence would ultimately depend on the facts. Purchasers sometimes request amendments to provisions like Clauses 6.03 and 6.05 whereby there is a recognition that the Parties have, in fact, relied on the representations and warranties made by the other Party under this Article. This is inappropriate. The other Party would not have relied on the representation if it knew that it was untrue, but Closed anyway. Subclause 6.05D: This Subclause was introduced in the 2017 document to try to mitigate the risk that the survival periods for representations and warranties under this Clause and Clause might not be effective because of the potential application of Subsection 7(2) of the Limitations Act (Alberta). There has been some uncertainty as to whether that Subsection might impact the typical practice to include survival periods on reps and warranties in commercial agreements. This topic was considered in the 2015 Alberta case of NOV Enerflow v. Enerflow Industries Inc. The Court found that sophisticated contracting parties are free to agree to expiration dates for reps and warranties in a contract. It also found that a party making a claim for breach of one or more reps and warranties could not make a very broad claim initially and then modify its claim to add additional breaches of unrelated reps and warranties after expiry of the survival period for the reps and warranties. Takin Care of Business The representations and warranties provision has historically been one of the most heavily negotiated provisions of A&D Agreements with respect to both the types of representations that are to be included and their wording. As noted in last month s article, the PTP mitigates the potential for this to occur for the transactions for which the PTP is designed by providing a common framework that allows the Parties to focus on the more substantive business issues associated with their transaction. We will be issuing what is expected to be the final industry draft of the PTP in June. m Thank You! We are about to hit a major milestone in June. For the past 100 consecutive quarters, Scott Land has been the industryʼs Top Crown Land Buyer. We thank our valued clients, as this unmatched accomplishment reflects the trust you have consistently placed in us over a very long time. This trust has positioned us to become the industryʼs go-to land company for surface, freehold minerals, pipelines, stakeholder engagement and a range of other services. The trusted choice for land services! CALL US AT TO DISCUSS YOUR NEXT PROJECT. SCOTTLAND.CA CALGARY EDMONTON GRANDE PRAIRIE FORT ST. JOHN LLOYDMINSTER REGINA 7

10 FHOA, Past Present and Future THE FREEHOLD PETROLEUM & NATURAL GAS OWNERS ASSOCIATION (FHOA) WAS INCORPORATED UNDER THE CANADA CORPORATIONS ACT ON OCTOBER 16, 1998 as a not-for-profit organization to provide When FHOA was first established, the issue of the day was the distinction between petroleum, owned by the successor corporations to the Canadian Pacific Railway Company, and natural gas, owned by individual freeholders as education and information to individuals who own the successors or assigns of western Canada s subsurface petroleum or natural gas in Canada pioneer settlers on split title mineral rights. This ( freeholders ), research issues of concern to free- issue was ultimately decided by the Supreme holders and act as their common voice in respect Court in The association raised funds from of matters that impact their ownership rights. its membership to intervene before the high The issues that affect ownership derive primar- court and, although FHOA s intervention was 8 ily from decisions made by either government, regulatory agencies or the courts. Many other issues arise due to the provisions of freehold leases, the lack of clarity in these agreements and freeholders inability to understand the complexities. unsuccessful, there is now certainty as to the legal ownership of the hydrocarbons produced from wells on the approximately 2.5 million acres of petroleum/natural gas split title mineral rights in southern Alberta. WRITTEN BY DAVID SPEIRS & DENNIS EISNER

11 FHOA was more successful in the coal bed methane ownership dispute. This dispute also pitted individual freeholders whose forefathers had purchased homestead lands from the CPR at the turn of the last century against the corporate successors to the railway company. In the early 1900 s the CPR had retained the rights to coal in land sales to settlers and the CPR s successors claimed that their ownership of coal included CBM. FHOA successfully intervened before the Alberta regulator in The regulator ruled that CBM is a form of gas that should be considered to be gaseous under initial in situ conditions and should not be considered to be part of the coal. The Alberta Government ultimately put an end to ongoing litigation by amending the Mines and Minerals Act in 2010 to declare that CBM is, and always has been, natural gas. FHOA also successfully intervened before the Alberta regulator in 2009 in a hearing to determine the meaning of the phrase capable of producing the leased substances in a CAPL 91 freehold lease and before the Alberta Court of Appeal in 2011 in the appeal of the regulator s ruling. In OMERS, the Appeal Court upheld the regulator s ruling that to continue a CAPL 91 lease with a suspended well, the well must be capable of producing a meaningful quantity of the leased substances in its current configuration. Although contentious ownership issues and some of the more problematic lease interpretation issues have now been resolved, FHOA and its membership must now address a far graver issue the viability of conventional exploration and development on freehold mineral rights in Alberta an issue which impacts not just freeholders. The 5% Crown royalty for new wells on Crown lands until payout of drilling and completion costs in the new Crown royalty regime should have the effect of driving down Alberta well costs, and making the province more competitive with other oil and gas producing jurisdictions. FHOA commends the Royalty Review Panel for recommending this approach. However, there are unintended consequences. Most existing freehold leases provide for a fixed royalty of somewhere between 12.5% and 20% and most freeholders are accustomed to leasing for fixed royalties in this range. The combination of freehold royalties of this magnitude and Alberta freehold mineral tax ( FMT ) creates a situation in which the financial burden during the critical pre-payout period for an operator of a good well (500 Mcf/d or 50 bopd) on freehold land is roughly four times as great as it would be for the same well on Crown land with current oil and gas prices. This unbalanced Crown/freehold playing field can only result in technically superior opportunities on freehold land remaining unleased, while industry operators concentrate on less prospective Crown opportunities, driving up Crown prices and skewing industry economics. 9

12 Freehold mineral owners must adjust their royalty expectations to current economic realities. However, there are other issues that the Alberta Government could, and should, address: 1. align the royalty review conclusions with FMT such that for a well on freehold lands, FMT is waived or reduced during the payout period for a like well on Crown. This benefits both the freeholder and the producer. 2. follow Saskatchewan s lead by having FMT collected on a monthly basis from the well operator with the lessor s share deducted on a monthly basis from the freeholder s royalty. Under Alberta s current system, FMT is levied against each freehold title owner in a productive spacing unit. However, FMT is actually paid by the designated payor who typically, but not necessarily, is the lessee. In February of each year, Alberta Energy publishes default oil and gas product prices for the prior year, and on March 25 sends invoices to the designated payor and the freeholder for production during the prior year. The designated payor pays FMT by April 25, then invoices its working interest partners for their share and deducts the lessor s royalty share from future royalties. Even during good times, this cumbersome system creates an unnecessary economic burden on industry operators. During difficult times such as we are currently experiencing this delayed payment FMT system creates chaos. The designated payor, or their working interest partners, who were going concerns in the prior year may become insolvent by April of the following year. If the designated payor can t, or won t pay FMT, the freeholder must pay his own share plus the designated payor s or risk having the mineral rights appropriated by the Crown. Designated payors also run the risk of being unable to collect from working interest partners who have become insolvent. A major revision to legislation governing Alberta FMT to align the system with that used in Saskatchewan would benefit industry, freeholders, and Alberta. When dealing with the freehold lease there are many issues that cause concern. Notwithstanding the fact that CAPL lease agreements have evolved to more fairly balance the rights of the lessor and the lessee, industry tends to ignore the newer documents and land agents typically use the 1991 CAPL lease form which does not contain the more balanced 1999 or 2014 provisions. The Canadian Bar Association advocates plain language drafting, yet very few freeholders and many land agents understand the convoluted language in the CAPL 91 lease form. 10

13 Some of the issues we counsel FHOA members about when they ask advice on signing the lease agreements are: deep rights reversion, similar to Crown leases - if a freeholder s deep rights have not been evaluated during the primary term, they should not be continued; although the OMERS decision has caused some companies to address their freehold well and lease portfolio relative to suspended wells, more companies and freeholders need to ensure they understand the implications of OMERS on their leases at and after the end of the primary term; deductions continue to be a major source of conflict in the relationship between freehold lessors and lessees and creating a less complex way of calculating deductions is in all parties best interest; and dealing with a professional landman. Companies may utilize the services of land agents to acquire freehold leases on their behalf. As with anything, one bad apple spoils the whole bunch, and the actions of an undereducated landman is not something that benefits the industry nor the freehold owner community. In FHOA s view, one way to address this issue is to have freeholders refuse to deal with the land agent assigned to the file unless the agent has a P. Land or equivalent designation. The CAPL ethics and professionalism requirements are quite stringent and enforceable against the individual should there be an issue. With the recent decline in professional members of the CAPL, this is an area where FHOA can, and will, support CAPL in its efforts to advocate value in having a professional designation. Working with CAPL to resolve issues was the intent of establishing a liaison position in Although we will likely be on opposite sides on many issues, we can hopefully work together to compromise. Industry can review practices to establish and build relationships. For example, when negotiating lease terms, it should be common practice to leave a copy of the lease with the freeholder so they can read it and be informed prior to signing the lease. Corporate lessors require information on drilling, completion, testing and production (as reported to the Crown) in their leases, so updating the practice to include all freeholders should not be a burden. In these troubled times, FHOA considers it essential to work with reputable industry organizations such as the CAPL in an effort to enhance the economics of conventional exploration and development. The FHOA website ( is a very valuable resource for freeholders and industry alike, and to ensure we can continue to provide the service, we encourage CAPL members to join FHOA and assist us in our efforts. m British Columbia St. Fort St. John BC V1J 3Y6 T: F: Alberta Box Ave. Fairview, AB T0H 1L0 T: F: Toll Free: Negotiator Feb 2016.indd 1 Visit us online at 2/12/2016 2:00:54 PM 11

14 Get Smart June 2017 Courses Insolvency Luncheon. AER LLR Program. Speaker: Paul Negenman June 13, :30 a.m. to 1:30 p.m. Join Paul Negenman of Lawson Lundell for a 2 hour fast paced lunch session on the AER LLR program, the LLR trap on A&D Transactions, the hopefully released Alberta Court of Appeal decision on Redwater and the recent AER enforcement and insolvency proceeding with Lexin Resources. THE CAPL OFFICE CLASSROOMS ARE AVAILABLE TO RENT Pipeline Plain Talk Luncheon Part 2 Pipeline Development: The New Reality (PSL ) June 15, :30 a.m. to 1:30 p.m. Part 2 of the Pipeline Plain Talk series will explore the new realities of developing pipeline projects in Canada in response to stakeholder concerns. This 1.5-hour seminar will focus on the internal and external challenges faced by land and other stakeholder engagement professionals in preparing and managing pipeline new build applications under provincial and federal regulatory frameworks. An overview of the NEB s application life cycle will be presented and contrasted to the AER s. Part 3 will be held on October 19. September 2017 Courses Directive 071: Emergency Preparedness and Response Requirements (PSL ) September 27, :30 a.m. to 4:30 p.m. This seminar is intended for surface land agents and other industry personnel. The instructor(s) will focus on Emergency Response Preparedness, Key Regulatory Requirements and Stakeholder Consultation Expectations for the Petroleum Industry in Alberta as outlined in the Alberta Energy Regulator (AER) Directive 71. m 12

15 AAPL Board Meeting Update From Your Past President ON MARCH 11-12, 2017, I WAS PLEASED TO REPRE- SENT ALL OF YOU AT THE QUARTERLY AMERICAN ASSOCIATION OF PROFESSIONAL LANDMEN (AAPL) MEETING IN SANTA BARBARA, CALIFORNIA. Saturday morning I enjoyed a beach view breakfast and then headed to the beach to enjoy some beach volleyball and the scenery. That afternoon there was a round table discussion with committee and board members, with a Board reception the same evening. It was great to get out with Ted Lefebvre, his family, and David W. Miller (First Vice President) to enjoy a delicious Italian meal and great conversation. Bright and early Sunday morning the full day Board meeting began. A balanced budget was presented by David Miller. In order to approve the budget, an increase in dues for from $ to $ was approved by the Board, with a second increase in to $ As noted in my last update, the fee has not been adjusted since We also discussed the possibility of reinstating CPL/RPL/RL recertification fees. There are 1.5 staff members dedicated to recertification. The AAPL s Annual Meeting (conference) will be held in Seattle on June 21-24, 2017 with the next AAPL Board meeting on June 20-21; Michelle Radomski will be representing CAPL here. The 2018 Annual Meeting will be held at the Sheraton Denver. This location was picked for a number of reasons, but one is that many AAPL members will be able to fly direct to Denver. Marc Strahn (Past President) presented the slate of officer nominations for the Executive Committee for the year. I was a bit surprised that the Board was presented with only one candidate per position and it was more of an affirmation, rather than a vote for candidates. Like CAPL, AAPL s educational offerings have been affected by the downturn. There are 15 new vignettes being developed over the next few years; AAPL is encouraging folks to use these. They continue to work towards 100% AAPL ownership of course material and are creating new Webinars as courses are instructed. There could be an opportunity for CAPL to piggy back on some of these courses. Marc Acree presented several educational programs for reaccreditation by AAPL. Many of the educational institutions are moving away from Land Management to Energy Management; Marc suggested that AAPL should review this to determine whether this is a direction that AAPL and employers would like. AAPL representatives Marc Acree and Adam Stellar visited with the University of Calgary representatives, alumni, and instructors regarding the Petroleum Land Management B.Comm on January 26, I was fortunate to attend these meetings with the AAPL folks and experience the AAPL new reaccreditation process. It sounds like the U of C will be presented for reaccreditation at the June Board meeting. The Publications Committee has requested articles and a contact for local organizations so they can include more local association articles in their bimonthly newsletter. The incoming Chair Joe Munsey has asked me to sit on this committee and supply Canadian content. If you have an article that you would like to share with AAPL or if you read one that you feel would be beneficial to our southern neighbours, please let me know. There was a recent Ohio court ruling that requires Landman to hold Real Estate Licences. AAPL s Executive Committee will prepare and send a letter to Ohio regarding this ruling. The remaining AAPL Board meetings for the year will be in Seattle, WA (Michelle Radomski) June 20-21, 2017, Farmington, PA (Larry Buzan) September 8-10, 2017 and San Antonio, TX (Nikki Sitch) December 1-3, We are honoured to be representing CAPL at these Board meetings and exchanging relevant information between the two associations, learning from one another. m Nikki Sitch, P.Land, PSL, BComm (PLM) Olds College THE LAND AGENT PROGRAM AT OLDS COLLEGE WOULD LIKE TO THANK CAPL AND ITS MEMBER- SHIP for the support of our March Networking Event held at the Palliser Hotel in Calgary. Recognizing there are not many positions at this time for all our students, we are grateful to our industry guests for taking the time to come out and support and engage with our students. We had 18 students graduate this year from the program. The graduates produced a resume book that is available electronically or in hard copy from Nicola at nhollamby@oldscollege.ca should you be looking for some keen junior land agents, please contact her for a copy. We appreciate your ongoing support and look forward to a successful event in spring

16 The Negotiator s Messages From the Board Looking Forward, Embracing Our past I REMEMBER A FAMOUS LINE FROM A CRAZY MOVIE, GUMBALL RALLY, WHERE THE FERRARI DRIVER TEARS OFF THE REAR-VIEW MIRROR while declaring to his driving co-pilot What s behind me doesn t matter. As CAPL moves into its new Board of Directors tenure we do have to be careful not to repeat mistakes we have made, nor do we want to be too timid to make bold statements about who we are as CAPL. We should be excited about the future together. Canada needs us more than ever as its constituencies process the facts and myths being actively circulated about fossil fuels and renewables. More than ever, we need to engage the public with professional landmen upholding standards we ve created since 1948 and showing folks that we can help each other at every level with a win-win deal. Alberta jobs, more than 40,000 professionals, need to find their way back into solid employment working with their needed skill sets so the deals we do make are so important now to do it right. Regulatory mazes need to be solved and it requires landmen to explain the intricacies so that Canada remains at the forefront of environmental care, indigenous relations, and multi-use harmonies, while providing safe and secure energy sources for our populace and for export beyond our borders. CAPL needs landmen who watch over and provide great opportunities to meet and learn together and to educate one another on the ever-changing business climate around each of us. Through your answers to our survey in April, the Board of Directors for has its mandate to have CAPL survive and thrive so that we can provide all of Canada the know-how of experienced landmen making Canada secure its energy future together. m Larry Buzan, P.Land President Finance CAPL Summary of 2016 Audited Financial Statements I would like to take the opportunity in this years Finance Article to re-enforce the messages that we delivered at the April 27, 2017 AGM at the Westin. During that delivery, I outlined that we once again endured a very challenging Fiscal Cycle. I also wanted to share our approach as a Board of Directors and Executive Committee on how we positioned our approach to our Budget Process and the Financial Review Process. Those key themes: Communication surrounding our financial position was paramount for the Board of Directors: We want to foster an environment for complete transparency on our financial decisions and gain input and direction from the membership wherever possible. Regular articles added to The Negotiator ensure all members have access to this Financial information and specific mentions of our Budget and/or Financial picture is captured at each Monthly BOD Mtg. All of these actions were instituted to achieve increased awareness Street, Edmonton, Alberta T5V 1M5

17 Leveraged External Feedback from our Auditor: Deanna (Numeris) was once again was a key resource for the Executive as we focused on our budget. In this years audit, we asked Deanna to include her observations and key areas she felt we need to focus on to strengthen our Financial Outlook. She even one-up d us and agreed to cut her 2017 services by over 20%. This is just one example of how we need to continue to focus on each line item within our budget and ask ourselves tough questions on what is a nice to have or a must to have, just like we do on a personal budget. Areas of focus included: A major achievement was negotiating our Lease Terms with Colliers. We achieved 10 months rent free over the next two years saving = >$100,000 We also eliminated both Committee & Board lunches/ modified our insurance benefits and made necessary staffing adjustments. Membership and Education are the back bone of our Association: Downward trend in membership revenue (5%) in 2016 has a significant impact on our overall cash flow. There has also been a significant trend in the transition of Active Members to Senior Members, with a significant impact on our revenue and is exaggerated when we are not seeing equal replacement with new and young professionals. The elephant in the room looking forward is considering our membership fees. We have not raised our fees since 2012 and we all recognize the significance of this matter. This needs to be a focus of our Association going forward: promoting the health of organization and the value the CAPL offers its members built on the strong history of the CAPL. Feedback is welcomed. Working our way collectively through this downturn is the only way. Our position will not be strengthened by working in silos, we need a coordinated and aligned focus to weather this storm. Finally, I wanted to formally acknowledge the combined efforts from Deanna and our diligent CAPL Office Staff (Denise, Karin & Kaitlin) in the preparation of the financial statements and their unwavering support of the Association. m Noel Millions, PSL Director, Finance a Full service land COMPaNY serving NOrth america ELEXCO LTD. ON, Canada ELEXCO LAND SERVICES, INC. Michigan New York Pennsylvania Mineral and Surface Leasing Right-of-Way Acquisitions Mineral Ownership/Title Curative Land Administration Seismic Permitting Mapping/GIS Services Abstracts of Title Due Diligence 15

18 Board Briefs Nikki, Past President, provided an update on the 2017/18 elections: The Committee received 6 candidacy applications for the The key discussion items at the five positions for the 2017/18 elections. CAPL Board of Directors Meeting The nominee for the position of President stands unopposed since no other nominations were received. The nomination held April 4, 2017 at the CAPL for the position of President is Larry Buzan, P.Land. Office were as follows: The nominee for the position of Vice President stands unopposed, as no further nominations were received. The nomination for the position of Vice President is Noel In Attendance Absent Guests L. Buzan G. Richardson N. Millions Denise Grieve M. Creguer B. Schlegel R. Pettifer M. Graham N. Sitch R. Pitchford T. Lefebvre R. Stackhouse P. Mandry S. Williams J. Murray Millions, PSL. Elections will be done on-line for those members that have an address. Approximately 50 paper ballots will be mailed to members that do not have an address. Cut-off for on-line voting is April 27, 2017 at 9:59 a.m. The cut-off for paper ballots is April 26, 2017 at 4:00 p.m. An Election Candidate Brochure, with detailed information on the nominees, will be posted on the CAPL website. In Noel s absence, Larry, President, presented a Treasurer s CAPL s auditor will review the results of the on-line vote and Report as at April 3, 2017, showing CAPL investments totalling will also count and provide the results of the paper ballots. $347, Canadian along with a cash balance of $418, The result of the election will be announced at the Annual Canadian for a total of $765, The CAPL Scholarship Fund General Meeting and Elections Luncheon on April 27, has a balance of $237, at the end of February 28, A revised Election Procedure was presented by Nikki Sitch There were no transfers made since the last report. and approved by the Board. The Election Procedure will be posted on the CAPL website. Ryan, Membership, presented the Board with a motion to endorse the recommendation of the Membership Committee Bill, Education, advised that: to accept one candidate for Active Membership, two candi- As a follow-up to the PLM Advisory Committee meeting dates for Associate Membership and three candidates for held on March 7, 2017, he met with Dr. Bob Schulz from Student Membership in the Canadian Association of Petroleum the University of Calgary to review the feedback from the Landmen, which were approved. Ryan, also presented the Board meeting. with a motion to approve two Active members to change their CAPL course registration for April to June has been increas- membership status from Active to Senior effective January 1, ing, but is still lower than expected Ryan then presented a motion to grant an Honorary The Education Committee will be hosting a luncheon on Membership to Paul Negenman, which was approved. June 13, 2017 with Paul Negenman. Ryan, Membership, presented the Board with a motion that Rob, Field Acquisition and Management, was absent and was approved, to accept the recommendations of the Merit provided the following: Awards Committee for the following awards that will be Jessica Schlager and Jan Palsen from the AER made a presen- presented at the May 25, 2017 General Meeting. tation to the FAM Committee on the proposed Integrated Herb Hughes Award Decision Approach which allows for multiple applications Award of Merit three candidates to be done simultaneously. Gary Richardson organized the Friend of CAPL Award one candidate speakers. Jordan, Social, provided an update on social events: Ted, Business Development, Alberta and British Columbia, 16 The Curling Bonspiel and Squash Tournament were recently held and both events were well received. The next social events scheduled are the Golf Tournament and Trap Shoot. advised that Jim MacLean and his committee are still working on the draft of the 2017 Property Transfer Procedure and the expected release date is the fall of 2017.

19 Michelle Creguer, Business Development, Alberta Oil Sands and Saskatchewan, advised that several changes in positions are currently taking place with the Alberta Department of Energy. Marah, Communications, advised that advertising for The Negotiator is almost full except for June and October (full page is still remaining). Gary, Public Relations, advised that: He attended the EAMS event at SAIT on April 3, 2017 as a judge for: Pipeline or Rail Which is Safer? EAMPA An EAM Based App Avoiding LMR Deposits He attended the wrap-up dinner at SAIT for the CEAMS program the evening of April 3, Melissa Sadal attended the Career Fair at JD Diefenbaker High School on March 3 and Debby Degenstein and Moya Little attended the Career Fair at James Fowler High School on March 12. He attended the Olds College Land Agents Reception at the Palliser Hotel on March 23 with the PR Booth. Shaun, Technology, advised that CAPL s social media is receiving positive reaction and information is being disbursed to a wide range of viewers. There is a share button on the website which is helping to spread the information through Facebook, Twitter, LinkedIn and . Paul, Vice President, advised that the 2017 Conference Committee has several venues booked and the Committee is in the process of securing keynote speakers. Larry, President, reminded the Board of the following: The next General Meeting is the CAPL s Annual General Meeting and Elections luncheon at the Westin Hotel on April 27, The guest speaker is Jim Gray, Founder, Canadian Hunter Exploration Ltd. The next Board of Directors Meeting and Planning Session is tentatively scheduled for Saturday, May 6, 2017 at the CAPL office. A CAPL Strategic Planning Forum will be held at the CAPL office on Thursday, April 7 beginning at 7:30 a.m. Motion to adjourn. (Accepted) m Jordan Murray Secretary/Director, Social WE KNOW DIRT. Let us help you with yours. Remediation & Reclamation info@actionland.ca actionland.ca Medicine Hat Calgary Edmonton Kindersley Regina Saskatoon 17

20 M&A Report Corporate Financial Services April 4, 2017 CANADIAN M&A METRICS Annual Results 2017 YTD Number of transactions Total sample dollar value C$BN $33.0 $13.2 $14.7 $37.5 $10.2 $43.4 $9.5 Total Proven Reserves ($/BOE) $6.51 $9.89 $15.56 $18.05 $18.31 $22.93 $25.72 Proven + Probable Reserves ($/BOE) $4.25 $7.02 $9.73 $12.68 $12.76 $17.22 $18.29 Per flowing BOE Production $58,212 $47,250 $48,346 $56,079 $58,769 $73,400 $65,093 WTI ($US/barrel) $51.89 $43.46 $48.80 $92.99 $97.97 $94.21 $95.10 Edmonton Light (C$/barrel) $63.96 $53.19 $57.19 $94.48 $93.00 $86.12 $95.28 WCS (C$/barrel) $49.36 $39.08 $45.92 $78.27 $76.21 $74.36 $78.54 NYMEX ($US/MMBtu) $3.09 $2.56 $2.67 $4.37 $3.75 $2.85 $4.00 AECO-C (C$/MMBtu) $2.68 $2.21 $2.70 $4.37 $3.24 $2.44 $3.62 Station-2 (C$/MMBtu) $2.22 $1.78 $1.96 $4.13 $3.15 $2.41 $3.36 USD FX price Proven + Probable Reserves ($/BOE) Flowing BOE Production $18.29 $17.22 $12.76 $12.68 $65,093 $73,400 $58,769 $56,079 $48,346 $47,250 $58,212 $9.73 $7.02 $ YTD YTD Quarterly Results Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 Q3 15 Number of transactions Total sample dollar value C$MM $32,986 $4,919 $2,457 $4,499 $1,365 $4,611 $929 Total Proven Reserves ($/BOE) $6.51 $9.85 $8.98 $10.22 $11.12 $11.77 $14.46 Proven + Probable Reserves ($/BOE) $4.25 $6.93 $6.15 $7.37 $7.37 $7.89 $8.99 Per flowing BOE Production $58,212 $51,100 $43,227 $45,863 $48,508 $42,964 $42,013 Light Oil Weighted transactions (> 70%, $ per BOE) OIL - Proven + Probable Reserves - $12.10 $10.80 $9.03 $9.08 $11.52 $9.67 OIL - Per flowing BOE Production - $77,342 $54,095 $50,093 $46,916 $48,152 $56,098 Gas Weighted transactions (> 70%, $ per BOE) Gas - Proven + Probable Reserves $ $3.23 $3.81 $2.35 $4.39 Gas - Per flowing BOE Production $29,732** $31,062 - $21,875 $37,757 $13,601 $31,536 Average Prices Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 Q3 15 WTI ($US/barrel) $51.89 $49.35 $44.98 $45.70 $33.78 $42.18 $46.43 Edmonton Light (C$/barrel) $63.96 $61.66 $54.85 $54.95 $41.31 $52.97 $56.22 WCS (C$/barrel) $49.36 $46.72 $41.08 $41.75 $26.76 $36.85 $43.41 NYMEX ($US/MMBtu) $3.09 $3.18 $2.80 $2.25 $2.01 $2.24 $2.73 AECO-C (C$/MMBtu) $2.68 $3.10 $2.43 $1.48 $1.83 $2.48 $2.90 Station-2 (C$/MMBtu) $2.22 $2.59 $2.10 $1.17 $1.26 $1.57 $1.82 USD FX price $8.99 Proven + Probable Reserves ($/BOE) Flowing BOE Production $7.89 $7.37 $7.37 $6.15 $6.93 $4.25 $42,013 $42,964 $48,508 $45,863 $43,227 $51,100 $58,212 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q *$58,212 per flowing is based on weighted average of Q1 total production in our model. Simple average would result in $43,654 per flowing instead **$29,732 per flowing is based on weighted average of Q1 gas-weighted production in our model. Simple average would result in $25,167 per flowing instead Notable Transactions in March 2017 Seller Buyer Marathon Oil Shell Canada Marathon Oil CNRL Shell Canada CNRL UGR Blair Creek Painted Pony Petroleum Unspecified Pengrowth Energy ConocoPhillips Cenovus Energy

21 KEY STATISTICS SUMMARY April 4, 2017 Alberta Electricity 2017 YTD Year Average Source: AESO Prices ($/MWh) $22.39 $18.03 $33.99 $49.18 $33.73 Source: AUC and AESO Generation Capacity (maximum capcity, MW) Coal 6,299 6,267 6,258 6,271 6,265 Natural Gas 7,348 7,081 7,080 7,143 7,101 Hydro Wind 1,445 1,491 1,459 1,434 1,461 Other Total Capacity 16,420 16,261 16,242 16,151 16,218 % Coal 38% 39% 39% 39% 39% % Natural Gas 45% 44% 44% 44% 44% % Other 17% 18% 18% 17% 18% Drilling Results (WCSB) Feb-17 Feb-16 Feb-15 Feb-14 3-Year Average Source: CAODC Drilling Rig Count Drilling Rig Utilization 42.1% 26.0% 40.2% 70.4% 45.5% Jan-17 Jan-16 Jan-15 Jan-14 3-Year Average Service Rig Utilization 35.0% 25.8% 38.1% 54.4% 39.4% Well Counts & Well Type (Western Canada) Feb-17 Feb-16 Feb-15 Feb-14 3-Year Average Oil Natural Gas Service and Dry Total , (f) 2016* Year Average Active Rigs (avg) Rig Utilization (avg) 23% 17% 24% 46% 29% Operating Days 48,980 40,403 64, ,021 78,758 Wells Drilled 4,665 3,562 5,394 11,226 6,727 Wells Completed na 3,434 5,292 11,534 6,753 *December forecast included Commodity Prices 2017 YTD Year Average WTI ($US/barrel) $51.89 $43.46 $48.80 $98.68 $63.65 Edmonton Light (C$/bbl) $63.96 $53.19 $57.19 $94.48 $68.29 WCS (C$/barrel) $49.36 $39.08 $44.81 $81.03 $54.97 NYMEX ($US/MMBtu) $3.09 $2.56 $2.63 $4.28 $3.16 AECO (C$/MMBtu) $2.68 $2.21 $2.70 $4.37 $3.09 Station-2 (C$/MMBtu) $2.22 $1.78 $1.96 $4.13 $2.62 Oil & Gas M&A Prices 2017 YTD Year Average Source: ATB 2P Reserves - Light Oil Weighted ($/BOE) - $9.84 $14.23 $20.68 $ P Reserves - Gas Weighted ($/BOE) $1.79 $2.46 $4.84 $5.62 $4.31 2P Reserves - Total Sample Average ($/BOE) $4.25 $7.02 $9.73 $12.68 $9.81 Flowing Production - Light Oil Weighted ($/BOE) - $56,207 $65,246 $90,891 $70,781 Flowing Production - Gas Weighted ($/BOE) $29,732 $32,113 $28,159 $29,519 $29,930 Flowing Production - Total Sample Average ($/BOE) $58,212 $47,250 $48,346 $56,079 $50,558 19

22 Alberta Land Sales 2017 YTD Year Average Source: Alberta Energy Conventional Bonus Paid ($MM) $81 $137 $276 $489 $301 Conventional Bonus per hectare ($/HA) $293 $146 $178 $462 $262 Oilsands Bonus Paid ($MM) $2 $12 $23 $5 $13 Oilsands Bonus per hectare ($/HA) $109 $267 $373 $150 $263 Natural Gas Volumes Mar-17(f) Mar-16 Mar-15 Mar-14 3-Year Average Source: EIA U.S. Natural Gas Supply (BCF/d) U.S. Natural Gas Consumption (BCF/d) U.S. Working Gas Inventory (BCF) 2,121 2,495 1, ,611 Oil and Liquids Volumes Mar-17(f) Mar-16 Mar-15 Mar-14 3-Year Average Source: EIA Global Production (MMbbl/d) Global Consumption (MMbbl/d) OPEC Surplus Capacity (MMbbl/d) Economic Indicators 2017(f) 2016(f) Year Average Source: Bank of Canada and Alberta Treasury Board & Finance Canada Real GDP Growth % Alberta GDP Growth % 2.6 (2.8) (3.5) 4.4 (0.6) Mar-17 Mar-16 Mar-15 Mar-14 3-Year Average Source: Bank of Canada BOC Overnight Interest Rate (%) Prime Rate (%) BA 30 day Rate (%) Prime - BA Spread (%) YoY change (%) Feb-17 Feb-16 Feb-15 Feb-14 3-Year Average Canada Total CPI Canada CORE CPI Alberta Total CPI Alberta Energy CPI 18.1 (11.7) (16.9) 4.5 (8.0) Questions? Please contact: Andrew (403) ; Ayang@atb.com 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. 29 th Annual CSPG/CSEG/CAPL 10km/5km Road Race and Fun Run Wednesday, September 20, 2017 Registration OPEN! Registration closes: Tuesday September 19 at 12:00 noon 20 To register please go to Events Road Race & Fun Run Member rate: $40+gst Non-member rate: $50+gst Student & In-Transition rate: $25+gst

23 Roster Updates New Members The following members were approved to student membership status by a Motion on April 4, 2017: Applicant Current Employer Sponsors Active Christine Ball Concorde Land Calvin House Services Ltd. Shawn Irwin Ken McNeill Associate Sarah Bigelow Chevron Canada Sue Dsikun Resources Jacquie Farquhar Andrea Janska Andrea Ewing GMP FirstEnergy Wayne Ellis Marah Graham Curtis Kucharuk Student Matthew Geib University of Calgary Bob Schulz Connor Matzelle University of Calgary Bob Schulz Tony Tang University of Calgary Bob Schulz The following members were approved to change their membership status from Active to Senior: John Rodgers Byron Yip m Honorary Membership Paul Negenman Lawson Lundell LLP It s like virtual reality for your survey 3D Laser Scanning produces fast and accurate results, saving you time and money when there isn t a lot of either. Contact us today to see how 3D Laser Scanning can work for your next project! Calgary Edmonton Grande Prairie Swift Current Fort Nelson Fort St. John canam.com 21

24 On the Move Peter Abercrombie Christine Ball Bruce Cameron Cindy Cameron Canadian Natural Resources Limited to Independent Independent to Concorde Land Services Ltd. Enerplus Corporation to Independent Enerplus Corporation to Athabasca Oil Corporation Jay Partridge Ken Rossi, P.Land Ed Smerek, P.Land Ryan Swanson LandSolutions LP to Independent Terrex Holdings Ltd. to Southern Alberta Institute of Technology Trident Exploration Corp. to Independent SanLing Energy Ltd. to Birchcliff Energy Ltd. m Peter Connelly Ryan Gugyelka David Hollenzer Gordon Howe Lee James Brennan Kasper Kim King Joy Lamb Neil McPherson David Meier Penn West Petroleum Ltd. to Independent TransCanada to Birchcliff Energy Ltd. Independent to TAQA North Ltd. Twin Butte Energy Ltd. to West Lake Energy Corp. Blackbird Energy Inc. to Independent Twin Butte Energy Ltd. to West Lake Energy Corp. TAQA North Ltd. to Seven Generations Energy Ltd. Canadian Natural Resources Limited to Independent Felcom Resources Corporation to Persistence Energy Ltd. OMERS Energy Inc. to Independent In Memoriam Bob Elias It is with deepest sadness that the CAPL announces the passing of Robert (Bob) Elias on March 23, 2017 at the age of 87. He is survived by his three children Nancy (Gordon Freight), Richard, and Robert (Jamie Moyer) and three grandchildren and several other relatives. He was born on August 17, 1929 in Lethbridge, Alberta, to parents John and Sophie. Bob graduated from Crescent Heights High School, then worked in the banking industry briefly before his entry in the oil industry with Texaco Canada. An intelligent and hardworking man, Bob was promoted to become Canadian Land Manager by the mid-1950 s, where he was a key player in assembling the land position of many large oil and gas developments ongoing during his era. Always the entrepreneur, Bob started and ran several small companies in the oil patch and also provided expert land consulting to many firms in later years. Since 1987, Bob was owner and publisher of the Oil & Gas Index, the premier quarterly print and on-line directory to the Canadian oil industry. Bob worked at his company full-time, which he enjoyed immensely, right up to his passing. Bob enjoyed a full and eventful life. The world will miss this ambitious and hardworking entrepreneur. m 22 SINCE 1965 Surface / Mineral Acquisition & Administration Accredited Appraisers & Expert Witnesses for Regulatory Proceedings Certifi ed Arbitrators / Mediators Valuation Impact Studies Real Estate Services P E. mlsmail@mcnallyland.com #215, a St. SW Calgary, AB

25 2017 Annual CAPL Conference the specific time and location, some of the courses we expect to offer include: First Nations Consultation/ Indigenous Relations; Directive 56 SRB Hearings; Constructive Conflict Management; LLR/LMR: Changing the Numbers; and a Sproule economics course. Full CAPL education credits will be granted for attendees Calgary, Alberta September 18-21, 2017 THE 2017 CONFERENCE COMMITTEE IS EXCITED TO BRING THIS YEAR S EVENT TO OUR HOMETOWN OF CALGARY IN THIS AMAZING AND BEAUTIFUL PROVINCE, ALBERTA. Hosting the 38 th annual conference in Calgary affords of these classes. As interest is expected to be high in the educational program, we encourage people to register early for the conference to secure their attendance in the classes they choose. Registration is expected to open early June. Monday evening conference registrants and registered guests are invited to attend the Welcoming Reception hosted by Cenovus and Encana in the Bow building. The 54 th floor of the our association a unique and unparalleled opportunity to show- Bow is the Sky Garden, with breathtaking views over the city. case the land profession and our influence within and upon the Delegates will have the opportunity to mingle and socialize in energy industry. This year s theme is engage, education and execute. one of Canada s most unique office towers. This special event The program will deliver solid value through meaningful educa- will officially kickoff the 38 th Conference and welcome delegates tional programs and topical presentations on issues that influence from across the country and around the world to our great and shape our membership. The conference program will be city. Beginning Tuesday, the conference moves into the Markin anchored by keynote speakers who will provide insight and perspec- MacPhail Centre at Canada Olympic Park. The program begins tive into our industry and its impact on local and global economy. with a breakfast meeting and our first of four keynote speakers, The conference kicks off on Monday, September 18, 2017 Jeremy Gutsche, who is a New York Times bestselling author, an and runs through to Thursday September 21. There will be award winning innovation expert and a University of Calgary eight educational classes offered to registered delegates; four graduate with close ties to Calgary. each on Monday and Thursday. These educational courses will After Jeremy concludes his keynote speech on Monday morn- be jointly coordinated by the CAPL Education and Conference ing, delegates will head into smaller, topic-specific, breakout Committees. While details are still being determined regarding sessions providing a more interactive and focused learning AT PRAIRIE LAND WE PLACE OUR CLIENTS FIRST. Aron Streifel Terry Jordan REGINA: TOLL-FREE: WE SPECIALIZE IN: Land Acquisitions Freehold Mineral Specialists Surface Acquisitions Pipeline Right-of-Way Rental Reviews Damage Settlements Crown Sale Attendance Title Registration Potash Projects Wind Generation Projects SASKATCHEWAN MANITOBA ALBERTA Suite 201, th Avenue, Regina, Saskatchewan, S4S 2N9 Fax: postoffice@prairie-land.com Website: 23

26 experience. The breakout sessions will allow delegates to focus their time and needs towards topics specific to their interests. Topics being featured over the two days of breakout sessions will include surface, mineral, legal, contracts as well as emerging topics like Activism vs. Industry and First Nations focused learning. Following the breakout sessions on Tuesday, we will reconvene for lunch with a keynote address by Kerry Frazer. Kerry will bring his enforcement knowledge from four decades of professional hockey to the podium when he addresses our conference. Kerry covers several topics including Making Tough Calls, Dealing with Rejection and Leadership and Teamwork. Lunch will be followed again by several breakout sessions throughout the afternoon wrapping up around 4:00 p.m. Delegates are invited to remain at the conference center as the Sponsors Reception will kick off immediately following the sessions at the Molson Canadian Hockey House across the hall. This Sponsors networking event will allow delegates to mingle and share insights from the day s program. The conference picks up again on Wednesday morning with breakfast and a keynote address by Brad Wall, the 14 th Premier of Saskatchewan serving since November 21, Mr. Wall will no doubt provide insight and experience from a province that is unique and directly tied into our industry. After breakfast, delegates will again break into smaller topic specific sessions for the morning. Once the breakout sessions wrap, delegates will gather for lunch and the final keynote speaker, Mr. Stephen Harper. Mr. Harper served as the 22 nd Prime Minister of Canada from February 6, 2006 to November 4, Mr. Harper will provide delegates with insights and experiences from his vast and unmatched experiences as our nation s leader. With the formal portion of the conference complete following Mr. Harper s address, delegates are invited to join the conference committee for the Landman Social at Studio Bell as the eye popping architecture and stunning artifacts of the National Music Hall will provide the perfect backdrop to this networking event. Cocktails and hors d oeuvres will be served. On behalf of the 2017 Conference committee, I invite you all to attend the 38 th annual conference and to take part in the engagement, education and execution of one of the best conferences in recent memory. m Richard Fulton 2017 CAPL Golf Tournament 24 Brought to you by geologic Thursday, August 17, 2017 Heritage Pointe Golf Club CAPL, ALONG WITH TITLE SPONSOR GEOLOGIC WOULD LIKE TO INVITE THE MEMBERSHIP TO OUR ANNUAL GOLF TOURNAMENT AT HERITAGE POINTE GOLF CLUB ON AUGUST 17. For those not familiar with the tournament, this is a casual round meant for players of all skill levels to come out and enjoy a relaxing day of networking and golf. As one of the premier CAPL events of the year, the tournament is a fantastic opportunity to interact with participants from all sectors within the land community, whether meeting new contacts or reconnecting with old friends. We will be playing a fun scramble format with a morning shotgun start and ending the day with dinner and prizes. Registration is $200 per person once again this year and CAPL is pleased to provide bus transportation to and from downtown. Online registration begins June 1 so please save the date and get yourself registered early. The link for online registration will be available by clicking on the Golf Tournament under Social Events on the CAPL Website. If you have any questions regarding the tournament or sponsorship opportunities please contact Garrett Zokol at , or garrett.zokol@lexterraland.com. We look forward to seeing you all again at the 2017 CAPL Golf Tournament brought to you by geologic. m

27 Special 40 th Annual Trap Shoot IN THE SPIRIT OF THE GOOD OLD DAYS, BACK COMES THE POKER GAME AND CHICKEN ON THE WAY! Come join us at the 40 th Annual Trap Shoot to be held at the AHEIA Calgary Firearms Centre (near DeWinton) on Saturday September 9, Shooting Competition will start at approximately 09:45 and consist of two rounds of 25 clays at 16 yards, one round of 25 clays in a slider event, and one round of 25 clays in a handicapped event. We will also squeeze in buddy shoots and an Annie Oakley shoot before playing a friendly game of poker at 4:00 p.m. If an event of force majeure necessitates the rescheduling to a later date, most likely in late October, the number of events may be curtailed. Registration fees remain the same as last year, they are: $ for members, $ for student members, and $ for guests (GST included). The registration form and waiver of liability will be online on the CAPL website. The Trap Shoot Committee would appreciate receiving your completed registration form, waiver of liability, and fees prior to the August 31, 2017 deadline. New shooters, veterans, and sponsors are encouraged to join us for a fun day of shooting followed with some chips and cards. The fee includes 100 competition targets (12 gauge shells provided), beverages, lunch, awards, and the special event shoots. Award presentations and refreshments will follow the shoot. Entries are limited to 70, so please pre-register as soon as possible. The primary purpose of the shoot is to network and have a safe, enjoyable time while attempting to break as many clay targets as possible. It s also great practice if you plan to go bird hunting this fall. All skill levels, from beginner to expert, are welcome. Shotguns are available at the Firearms Centre for use by non-owners for a nominal fee and basic instruction is available if the need arises. m Questions to any of below committee members: Ryan Hall Kyle Huntley Chris Lizotte THE NAME IN SURFACE LAND ACQUISITIONS SHERWOOD PARK Info@hurland.ca 25

28 CAPL AND THE NEGOTIATOR EDITORIAL COMMITTEE WOULD LIKE TO ISSUE AN APOLOGY TO THE SPONSORS OF THE CAPL SQUASH TOURNAMENT. There were errors in the previously published article. Sponsorship and participation in sponsored events is very important CAPL and we offer our sincerest apologies that this oversight went out in print. We want to thank the sponsors below and we look forward to working with all of you in the future. m 26

29 The Social Calendar EVENT DATE TIME LOCATION COST (INCLUDING GST) CONTACT NAME CONTACT PHONE CONTACT REGISTRATION DEADLINE CAPL June General Meeting 14-Jun-17 7:30 AM The Westin Calgary Members: $36.75 Student Members: $31.50 Non-Members: $63.00 Karin Steers Kaitlin Polowski (403) Jun-17 CAPLA, CAPL, IRWA Triple Roundup 22-Jun-17 04:30 PM National on 10th Members: $26.25 Non-Members: $36.75 Chad Hughes (403) Jun CAPL Golf Tournament 17-Aug-17 08:30 AM Heritage Pointe Golf Club $ Garrett Zokol Aryn Sendall (403) (403) Aug th Annual Salmon Fishing Adventure 29-Aug-17 to 2-Sep-17 TBD Queen Charlotte Islands, BC TBD Kevin Egan (403) st come, 1 st serve. Some spots remain 2017 CAPL Special 40 th Annual Trap Shoot 9-Sep-17 9:30 AM AHEIA Calgary Firearms Centre (near DeWinton) Members: $ Student Members: $ Non-Members: $ Ryan Hall (403) ryanjrhall@yahoo.ca 31-Aug th Annual CSPG/CSEG/ CAPL Road Race and Fun Run 20-Sep-17 06:00 PM Eau Claire YMCA Members: $42.00 Student Members: $26.25 Non-Members: $52.50 Sean McLeod (403) sean.mcleod@cnrl.com 19-Sep-17 Registration 15-Aug-17 To guarantee shirt size * Information and online registration: General Meetings: Social: 27

30 CAPL Calendar of Events June 6 Tuesday Board Meeting 6 Tuesday Saskatchewan Crown Land Sale 7 Wednesday Alberta Crown Land Sale 13 Tuesday CAPL Business Luncheon: AER LLR Program, Paul Negenman (NEW) 14 Wednesday General Meeting 15 Friday Luncheon: Pipeline Plain Talk Series Part 2 Pipeline Development: The New Reality (PSL ) 21 Wednesday Alberta Crown Land Sale 21 Wednesday British Columbia Crown Land Sale 22 Thursday Triple Round-Up m July 1 Saturday Canada Day 5 Wednesday Alberta Crown Land Sale 19 Wednesday Alberta Crown Land Sale 26 Wednesday British Columbia Crown Land Sale m August 1 Saskatchewan Crown Land Sale 2 Wednesday Alberta Crown Land Sale 9 Wednesday Manitoba Crown Land Sale 16 Wednesday Alberta Crown Land Sale 17 Thursday CAPL Golf Tournament 23 British Columbia Crown Land Sale 29-2 Tues-Sat Salmon Fishing Trip 30 Wednesday Alberta Crown Land Sale m June General Meeting June 14, 2017 Guest Speaker: Vivian Krause Time: Where: Cost: 7:30 a.m. 9:30 a.m. The Westin Calgary Avenue S.W. Members $36.75 including GST Student Members - $31.50 including GST Non-Members - $63.00including GST To register, please go the event tab on the CAPL website. Deadline for registration is Friday, June 9, m Land Acquisition I Environmental Services I Asset Management I Stakeholder Engagement 1000 signatures in 5 minutes? An innovation in A&D, bulk digital encrypted signing is here. Fast, legal, secure. 28 To learn more, contact LandSolutions today. Calgary I Bentley I Edmonton I Lloydminster I Grande Prairie I Fort St. John I Lampman I Toronto I Fredericton LandSolutions.ca

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