The Canadian Securities Administrators (the “CSA”) have published amendments (the “Amendments”) to National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and the related companion policy to NI 51-101 (the “Companion Policy”). In its announcement, the CSA indicated that the Amendments will promote improved disclosure of resources other than reserves and associated metrics while simultaneously providing increased flexibility for oil and gas issuers that operate and report in different jurisdictions and recover product types not previously recognized. While the effective date of the Amendments is July 1, 2015, reporting issuers are required to immediately follow the latest requirements of the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) including ROTR Guidelines and Bitumen Guidelines. The CSA expects the Amendments to be adopted in each jurisdiction of Canada, following the satisfaction of applicable ministerial approval  requirements.

Access a complete copy of the Amendments or the amended Companion Policy.

Summary Of The Amendments

Set forth below is a summary of the key changes resulting from the Amendments

Alternative  Resources  Evaluation Standard

Under the current rules, issuers are prohibited from making public disclosure of reserves other than estimates that have been prepared in accordance with the COGE Handbook. This has been problematic for certain reporting issuers who are also subject to, or wish to comply with, the reserves disclosure requirements of other regulatory regimes, including the Securities and Exchange Commission of the United States (the “SEC”). In the past, certain issuers have obtained exemptive relief allowing them to disclose reserves prepared in accordance with U.S. requirements in addition to their reserves prepared under NI 51-101.

The Amendments will allow for supplementary disclosure of resources using evaluation standards other than the COGE Handbook (referred to in the Amendments as an “alternative resource evaluation standard”). The disclosure under the alternative standard must be accompanied by the disclosure required by NI 51-101 and, among other things, be made in respect of a regime which is comparable to the COGE Handbook. In addition, the estimates must be prepared by a qualified reserves evaluator or auditor. In the revisions to the Companion Policy, the CSA has indicated that alternative resource evaluation standards that the CSA would consider acceptable include the SEC’s oil and gas disclosure framework and the Petroleum Resource Management System prepared by the Society of Petroleum Engineers.

Product Types and Production Group

The Amendments have imported the product type definitions from the COGE Handbook including “bitumen”, “coal bed methane”, “conventional natural gas”, “shale gas”, “synthetic crude oil” and “synthetic gas” and have refined those definitions for securities disclosure purposes. In addition, the concept of “production group” has been deleted from NI 51-101 and accordingly, the requirement to disclose a reporting issuer’s reserves by production group will no longer be required in the annual statement of reserves data prepared in accordance with Form 51-101F1 – Statement of Reserves Data and Other Oil and Gas Information (“Form 51-101F1”).

Contingent  and  Prospective Resources

Under the Amendments, if a reporting issuer chooses to include contingent or prospective resources in
an appendix to its annual statement of reserves  data (prepared in accordance with Form 51-101F1) the reporting issuer will be required to include a summary of the future net revenue associated with such resources based on forecast prices and costs (comparable to the summary provided for reserves data) and the estimates of the resources and related future net revenue must be evaluated or audited by an independent qualified reserves evaluator or auditor. In addition, Section 5.9 (Disclosure of Resources Other than Reserves) of NI 51-101 has been amended to require issuers to include a description of resources recovery projects including estimated total cost to achieve (and estimated date of) commercial production, recovery technology and whether a project is a conceptual or pre-development study.

Oil and Gas Metrics

“Oil and gas metric” means a numerical measure of  a reporting issuer’s oil and gas activities and includes finding and development costs, BOEs, reserves replacement and netbacks. Under the Amendments, Sections 5.11 (Net Asset Value and Net Asset Value per Share ), 5.12 (Reserve Replacement ), 5.13 (Netbacks ), 5.14 (BOEs and McfGEs ) and 5.15 (Finding and Development Costs ) of NI 51-101 will be deleted in their entirety and replaced with a “principle-based” approach to disclosure. Pursuant to the Amendments, if a reporting issuer discloses an oil and gas metric, the reporting issuer must identify the standard and source of the oil and gas metric, provide a description of the method used to determine the oil and gas  metric, provide an explanation of the meaning of the oil and gas metric and caution readers as to the reliability of the oil and gas metric. If there is no identifiable standard for an oil and gas metric, the reporting issuer must also include a brief description of the parameters used in the calculation of the oil and gas metric and provide a cautionary statement that the oil and gas metric does not have any standardized meaning and should not be used to make comparisons.

Marketability of Production and Reserves

The Amendments will require disclosure of resources or of sales of product types or associated byproducts at the “first point of sale” provided that a reporting issuer may disclose resources or sales of product types or associated byproducts with respect to an “alternate reference point” if, to a reasonable person, the resources, product types or associated byproducts would be marketable at the alternate reference point. If a reporting issuer chooses to disclose resources or sales of product types or associated byproducts with respect to an alternate reference point, the reporting issuer must state that fact, disclose the location of the alternate reference point and explain why disclosure is not being made with respect to the first point of sale.

Abandonment and Reclamation Costs

The CSA noted in its request for comments that there is inconsistency in the determination of what constitutes abandonment and reclamation costs for the purposes of oil and gas disclosure. In order to
provide clarity, the Amendments define “abandonment and reclamation costs” in NI 51-101. In addition, Item 6.4 (Additional Information Concerning Abandonment and Reclamation Costs ) of the current Form 51-101F1 has been repealed in its entirety and reporting issuers will instead be required to include a discussion of any significant abandonment and reclamation costs in the significant factors and uncertainties disclosure in the annual statement of reserves data prepared in accordance with Form 51-101F1.

Other Amendments

With the introduction of IFRS 11, the Amendments refer to the COGE Handbook for the purpose of determining ownership and allow for flexibility in the manner of presenting resources for which a reporting issuer does not have control. In connection with the foregoing, Items 2.3 (Reserves Disclosure Varies with Accounting) and 2.4 (Future Net Revenue Disclosure Varies with Accounting ) of Form 51-101F1 have been repealed.

Under the Amendments, the requirement to obtain the consent of the independent qualified reserves evaluator before disclosing results from the annual evaluation outside of the required annual filings has been removed.

The Amendments will require reporting issuers that cease to be engaged in oil and gas activities to file a notice in the form of Form 51-101F5 – Notice of Ceasing to Engage in Oil and Gas Activities not later than 10 days after ceasing to be engaged in oil and gas activities.

The revised Companion Policy clarifies that a qualified reserves evaluator or auditor should not revise an evaluation using information in respect of events occurring after the effective date of that evaluation  for disclosure purposes. The revised Companion  Policy also clarifies that reporting issuers that have no reserves do not need to retain an evaluator or auditor, and that the reporting issuer should make clear that it has no reserves and is therefore not reporting related future net revenue.

The revised Companion Policy also includes new guidance with respect to the disclosure of after-tax net present value. In the revised guidance the CSA has stated that, if a reporting issuer discloses after- tax net present value, it should generally include, as appropriate, one or more of the following:

  • a general explanation of the method and assumptions used in the calculation of after-tax net present value, worded to reflect the reporting issuer’s specific circumstances and the approach taken. The revised Companion Policy states that major aspects should be addressed, such as whether tax pools have been included in the evaluation; and
  • an explanatory statement to the effect that the after-tax net present value of the entity’s oil and gas properties reflects the tax burden on the properties on a stand-alone basis, does not consider the business entity-level tax situation or tax planning, does not provide an estimate of the value at the business entity and that the financial statements and related MD&A of the entity should be consulted.


Steve G. Pearson

Other Author

Perry Feldman


Securities, Capital Markets and Public Companies
Oil and Gas