Canada: CSA Implements Amendments To Oil And Gas Disclosure Requirements

The Canadian Securities Administrators (CSA) have implemented significant amendments to the oil and gas disclosure requirements contained in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101), its Companion Policy (CP 51-101) and related forms and notices. The changes affect both general, ongoing disclosure relating to oil and gas activities and specific annual disclosure requirements. The amendments are effective July 1, 2015, meaning that the changes to the annual disclosure requirements will apply in respect of the year ending December 31, 2015 for issuers with a December 31 year end. The changes will, among other things:

  • Allow Canadian reporting issuers to provide supplemental oil and gas disclosure in accordance with alternative resource evaluation standards, such as U.S. Securities and Exchange Commission (SEC) rules, provided that certain accompanying disclosure is made and other conditions are satisfied
  • Provide clearer guidance and additional prescribed requirements for the disclosure of contingent and prospective resources data in an issuer's annual filings made under NI 51-101 (Annual Filings), including that such resource estimates:

    • Be prepared or audited by a qualified reserves evaluator or auditor (QRE) independent of the issue
    • Be included in an appendix to the Annual Filing
    • Include the risked net present value of future net revenue for certain types of contingent resources.
  • Amend and refine the various product types for which oil and gas disclosure must be made, to better align with the product type definitions in the COGE Handbook, while removing the concept of production groups
  • Replace the required form of disclosure for certain oil and gas metrics such as netbacks, reserve replacement, net asset value and finding and development (F&D) costs with a principle-based approach to describe the meaning and methodology of calculating any disclosed oil and gas metrics
  • Clarify the concept of "marketability" for the purposes of reporting oil and gas sales volumes and values
  • Clarify what constitutes abandonment and reclamation costs and require enhanced disclosure of these costs in the Annual Filings.

The amendments to NI 51-101 follow the amendments made to the COGE Handbook on July 17, 2014 relating to the guidelines for estimation and classification of resources other than reserves on April 1, 2014 containing detailed guidelines relating to the estimation and classification of bitumen resources. In conjunction with the amendments to NI 51-101 and CP 51-101, the CSA also published amended versions of CSA Staff Notice 51-324 Revised Glossary to NI 51-101 Standards of Disclosure for Oil and Gas Activities, which summarizes much of the terminology used in NI 51-101 and the COGE Handbook, and CSA Staff Notice 51-327 Revised Guidance on Oil and Gas Disclosure, which provides additional general and issue-specific guidance with respect to oil and gas disclosure.


Currently, certain Canadian reporting issuers who are either required or voluntarily desire to disclose reserves and other oil and gas information prepared in accordance with foreign disclosure standards (including the U.S. SEC reserves disclosure framework) have sought and obtained a limited form of exemptive relief from the NI 51-101 provisions that only permit public disclosure of oil and gas information that has been prepared in accordance with the COGE Handbook and NI 51-101. The amendments to NI 51-101 effectively codify the previously granted relief and allow for disclosure made under alternative resource evaluation standards provided certain conditions are met, including that the alternative standard has a comprehensive framework for the evaluation of resources and a scientific basis, defines resources using terminology and categories consistent with those in the COGE Handbook, and requires that estimates of the volume and value of resources is based on reasonable assumptions.

Additionally, the estimates made under the alternative standard must have been prepared or audited by a QRE. The issuer must also disclose the effective date of the estimate and describe any significant differences—and the reasons those differences exist—between the estimates prepared in accordance with the alternative standard and those prepared in accordance with the COGE Handbook. However, no actual reconciliation of the estimates between the two disclosure regimes is required.

The amendments to NI 51-101 also impose additional disclosure requirements depending on whether or not the alternative disclosure is "required" under the laws of a foreign jurisdiction, as opposed to being voluntarily made by the issuer. In CP 51-101, the CSA has stated that disclosure is "required" under the laws of a foreign jurisdiction when such information must be presented under the alternative standard in order to access the capital markets of a foreign jurisdiction. Where the disclosure is required under the laws of a foreign jurisdiction, the reporting issuer must disclose a reference to the location on its SEDAR website profile where the reserve or resource estimate prepared in accordance with NI 51-101 and the COGE Handbook may be found. However, where disclosure under an alternative resources evaluation standard is not required by a foreign jurisdiction, the issuer must instead disclose the actual reserve or resource estimate prepared in accordance with NI 51-101 and the COGE Handbook, and include a description of the alternative standard.

It should be noted that disclosure of resources under alternative resource evaluation standards is supplemental to, and not in replacement of, the disclosure that is required to be made in accordance with the COGE Handbook and NI 51-101.


Perhaps the most impactful change made to NI 51-101 relates to the disclosure of contingent and prospective resources data in a Canadian reporting issuer's Annual Filings. Currently, disclosure of resources other than proved and probable reserves is not required but is often voluntarily made by reporting issuers, including on the basis that it constitutes material information that is important to investors. In order to better standardize this type of resource disclosure, NI 51-101 has been amended to provide that all such data must be contained in an appendix to the issuer's Annual Filings and evaluated or audited by an independent QRE, which is more onerous than the requirement that only 75 per cent of the proved and probable reserves value of a reporting issuer be evaluated or audited by an independent QRE. Forms 51-101F2 and 51-101F3 to be prepared by the independent QRE and management and directors of the issuer, respectively, have been amended to reflect the potential disclosure of resources other than reserves in the Annual Filings.

If a reporting issuer discloses contingent resources in its Annual Filings, the issuer must include, among other things:

  • The risked 2C (i.e. best estimate) contingent resource volumes for each product type and for each of four newly designated "project maturity sub-classes" of those contingent resources
  • Prescribed risked net present values of future net revenue for the 2C contingent resources in the "development pending project maturity sub-class" (generally those with a high chance of development where resolution of the final conditions for development is being actively pursued)
  • The numeric value of the chance of development risk and a description of the methods to quantify that risk and to determine the estimate of the risked contingent resources and net present value.

If a reporting issuer discloses prospective resources in its Annual Filings, it must disclose the best estimate of prospective resources for each product type, along with the numeric value of the chance of discovery and chance of development, the methodology relating to quantifying those chances, and the risked prospective resource estimates.

Any disclosure regarding the value of contingent or prospective resources that are not in the development pending project maturity sub-class must also be risked and include additional explanation relating to the viability of those resources. The CSA has provided guidance, in both CP 51-101 and the Alberta Securities Commission's Oil and Gas Review Report released in December 2014, on the methodology that can be used to quantify the risked volumes and values of resources other than reserves. The requirement to risk disclosure for resources other than reserves for chance of development and discovery, as applicable, for both volumes and values, as well as to include all contingent and prospective resources data in an appendix to the Annual Filings, represents changes from the amendments initially proposed in October 2013. However, the approved final amendments to NI 51-101 eliminated the previously proposed requirement to include estimated values for all classes and categories of resources other than reserves, other than contingent resources in the development pending project maturity sub-class.

Amendments were also made to the provisions of NI 51-101 that apply to all disclosure made with respect to resources other than reserves, which apply to any disclosure made by a reporting issuer (i.e. press releases, investor presentations, etc.) as well as the Annual Filings. In particular, enhanced disclosure is required relating to projects to which contingent or prospective resources have been attributed, including the estimated total cost required to achieve commercial production and the general timeline of the project.


The amended NI 51-101 generally incorporates the product type definitions in the revised COGE Handbook to give greater emphasis to both the source and recovery process for different oil and gas product types on the basis that the same physical product attracts the same price whatever the source but that different sources have significantly different cost and risk profiles and production characteristics. In particular, the new "product type" categories seek to move away from grouping resources into conventional and unconventional categories and include a refined definition of "bitumen" to better differentiate it from heavy oil, and a new category of "tight oil," which includes shale oil. The current definition of "production groups," for which certain disclosure is required to be made in the Annual Filings, has been deleted and replaced with the new definition of product types.

Reporting issuers should note that, for the purposes of the initial reserves reconciliations to be included in the Annual Filings (generally commencing with the Annual Filings for the year ending December 31, 2015), the CSA has advised that the same new product types to be included in the issuer's summary reserves tables should be used for both the opening and closing reserves balances, and the issuer should choose the closest product type for the opening balance (generally being December 31, 2014) if the substance produced did not exactly match one of the new product types or matched more than one of the new product types defined in revised NI 51-101.


NI 51-101 currently prescribes mandatory methodology and disclosure when certain oil and gas metrics are disclosed, including netbacks, reserve replacement, net asset value and F&D costs. The CSA has revised NI 51 101 to replace this mandatory disclosure with principle-based requirements to instead require an issuer to include disclosure that identifies the standard and source of the metric, if any; provides a brief description of the method used to determine the metric; provides an explanation of the meaning of the metric; and cautions readers as to its reliability. To the extent that there is no identifiable standard for an oil and gas metric used, a reporting issuer must also include disclosure that provides a brief description of the parameters used in the calculation of the metric and a disclaimer that the particular metric does not have any standardized meaning and should not be used to make comparisons.


NI 51-101 has been amended to clarify that disclosure of reserves or resources and sales of certain product types or associated by-products must now be made with respect to the price at the "first point of sale," which is newly defined as the first point after initial production at which there is a transfer of ownership of that product type. However, where this point is not relevant, an issuer may use an alternate reference point if it provides additional disclosure as to why the alternate reference point is more appropriate than the first point of sale. Additionally, NI 51-101 has been amended to require that disclosure of natural gas by-products, including NGLs and sulphur, be made only for volumes that have been or will be recovered prior to the first point of sale or alternate reference point, as applicable.


In response to inconsistency in the determination and disclosure of what constitutes abandonment and reclamation costs for the purposes of the Annual Filings, NI 51-101 has been amended to include a combined new definition of "abandonment and reclamation costs" and require disclosure of both in the estimated future net revenue and the significant factors or uncertainties relating to reserves data in an issuer's Annual Filings.


Numerous other amendments were made to NI 51-101, CP 51-101 and the related forms, which will have varying impacts and importance on reporting issuers with oil and gas activities. Certain of the amendments in addition to those described above include:

  • A revised framework and additional disclosure requirements for resources over which a reporting issuer does not have ownership or control
  • The deletion of the requirement to obtain the consent of an independent QRE in order to use its report prepared in connection with the Annual Filings
  • A new form required to be filed when an issuer has ceased to be engaged in oil and gas activities
  • Revised or additional disclaimers and disclosure regarding risks and uncertainties relating to reserve and resource estimates


The amendments to NI 51-101, CP 51-101 and the related forms are detailed and technical and will require careful review by reporting issuers with oil and gas activities. Although the amendments applicable to Annual Filings will generally not apply until the year ending December 31, 2015, the amendments applicable to an issuer's general oil and gas disclosure will apply on July 1, 2015, and will require advanced preparation by issuers, together with their legal and petroleum engineering consultants, in advance of that date.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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