2014 Canadian Public Oil and Gas M&A ReviewJANUARY 1 - JUNE 30

STIKEMAN ELLIOTT LLP

Stikeman elliott llP

ContentS

TERMS OF REFERENCE ...............................2

H1 2014 TRENDS & KEY METRICS ..............3

NOTABLE FEATURES ...................................4

TOPPING/TERMINATION ACTIVITY .............6

oVeRVieW ................................................................................7

tRanSaCtion PRoCeSS ......................................................11

Voting/SuPPoRt agReementS ........................................12

tRanSaCtion timing .........................................................13

meeting meCHaniCS ..........................................................14

DiViDenDS & DiStRibutionS ...............................................15

mateRial aDVeRSe effeCt .................................................16

inteRim PeRioD CoVenantS .............................................17

ConDitionS ..........................................................................18

CoVenantS ..........................................................................21

RePReSentationS & WaRRantieS .....................................22

toPPing offeRS ..................................................................24

matCHing PeRioD ...............................................................25

teRmination ........................................................................26

otHeR RemeDieS ..................................................................31

DEALS SURVEYED .....................................32

ABOUT STIKEMAN ELLIOTT ......................33

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teRmS of RefeRenCe

Stikeman elliott prepared this study based on a review of public m&a transactions that were announced between January 1, 2014 and June 30, 2014, with the addition of one deal announced in December 2013 that closed in July 2014. only m&a transactions involving a target which was a “reporting issuer” in Canada and the primary assets of which were involved in upstream, midstream, downstream or oilfield service were included in the study of deal terms, except where the transaction was governed by non-Canadian law, or, if the acquisition was of a non-reporting issuer, the acquisition agreement was publicly available. as a result, certain transactions appear in the deal list and notable features section, but are not included in the deal terms survey. Reverse takeover transactions involving a going public process were not included in the survey.

a total of fourteen transactions were surveyed (please see ‘Deals Surveyed’ on page 32 for a complete list). When we use the term “deal value” we refer to the total number of outstanding common shares of the target multiplied by the announced cash value per share of the buyer’s offer. these numbers have been rounded.

in compiling the study, Stikeman elliott reviewed acquisition agreements, management proxy circulars, take-over bid circulars, press releases and related publicly available documents on Disclosurenet and the System for electronic Document analysis and Retrieval (SeDaR).

the agreements and other disclosure documents surveyed for the purpose of this study contain complex legal language and terms. most terms and provisions are not identical. accordingly, Stikeman elliott has relied on its judgment and exercised its discretion in categorizing and summarizing the information comprising this study. additionally, this study is based only on publicly available information; non-public information, such as that included in disclosure schedules or letters to the agreements surveyed, may be relevant to the analysis but is not reflected in the study.

this document is a general overview created for informational purposes only and does not constitute legal advice. if you or your business have questions about specific legal issues, legal counsel qualified in the appropriate jurisdiction(s) and familiar with your specific circumstances should always be consulted. the distribution of this document to any person does not create, continue or revive a lawyer-client relationship between Stikeman elliott llP and that person or any associated person or entity. We welcome your comments and suggestions.

Please forward any comments, suggestions or questions regarding this publication to: andrew Wong at ADWong@stikeman.com.

H1 2014 Trends & Key Metrics

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international assets managed in Canada led the hit parade in the first six months of 2014, both by number and by deal value. the second largest international deal of the period was larger by value than all of the other domestic deals combined. other notable features included the following:

• Theperiodsawareboundinactivityfrom2013(by33%),butnotareturntothelevelsof2012(aboutone-thirdbelow2012)

• Servicedealsdwindled-onlyonedealwascompletedintheperiodanditinvolvedtheacquisitionofarelated-party

• Financialbuyerscompletednotransactionsinthefirsthalfof2014

• Therewerenoacquisitionsofdomestictargetsbyinternationalbuyers

• Therewassometoppingactivityinthefirsthalf,aphenomenonthatwasabsentin2013

• Generally,thesalesprocesseswerenotfranticandinvolvedtheusualmixofstoriesthatunfoldedquicklyandothersthatwentonformorethan a year

• Cashwentfromcomprisingsomeorallof68%ofdealsin2013tojust43%intheperiod

• Dealcompletiontimecreptup,with29%ofthedealsrunningover70days,against18%in2013,butthiswaslikelyafunctionofmoreforeign-law deals

• Changesindealtermsweremixed,buttherewassomebiastoimprovedconditionsfortargetsfrom2013,perhapsreflectingmarketconditions

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NOTABLE FEATURES

Purchaser Target Structure Features of Note Equity ValueDomestic Mid Cap

Spartan energy Corp. Renegade Petroleum ltd.

� target had adopted a rights plan and advance notice by-laws the year before entering into a sales process

� target was subject to a six month activist campaign that settled � target completed three major asset dispositions before selling � Purchaser was the product of a recapitalization and management change

C$327M

Surge energy longview oil Corp. � Purchaserheld19.8%ofTarget’sstockacquiredinasecondaryofferingbyashareholderoftarget completed just before the acquisition C$275M

long Run exploration ltd. Crocotta energy inc.

� Purchaser offered shares of a newly formed montney-focused e&P company (“exploreCo”) as part of the share-based consideration

� target and exploreCo also entered into a bought deal agreement with a synidcate of underwriters to raise $30m through a private placement of subscription receipts of exploreCo C$242M

tourmaline oil Corp. Santonia energy inc. � target completed a substantial asset disposition before the sale, reducing its assets to a

single core area � Purchaser had offered the prior year to purchase those assets

C$161M

Domestic Small Cap

Petrobank energy Resources ltd

touchstone exploration inc.

� Purchaser was required to hold a meeting to approve share issuance provided for by the arrangement

� target was required to offer to repurchase its debentures as a result of a change of control � Purchaser holds assets in trinidad - the acquisition was a means of diversifying its assets

C$55M

Paramount Resources ltd. mgm energy Corp. � Purchaser’sinsidersheld47%ofTarget’sshares � Purchaser had spun-out target earlier � target held high-cost assets in northern Canada

C$50M

amarok energy inc. Passport energy ltd.

� target completed a subscription receipt private placement before closing, along with a placement to a private equity fund in consideration for cash and land

� target shareholders were required to approve the fund’s participation in the transaction � target completed a continuance as part of the transaction

C$38M

trident exploration Corp. Wrangler West energy Corp. � Purchaser owned complimentary assets C$8M

blackbird energy inc. Pennant energy inc. � Purchaser and target shared officers and directors � Contained a mechanic for the amendment of the target’s debentures so that they

would be convertible into shares of the purchaserC$2M

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International

Compañia española de Petroleos, S.a.u.

Coastal energy Company

� Purchasercompletedlock-upagreementswith33%oftheshares

� transaction was completed pursuant to Cayman corporate law, target was listed on aim and tSX

� target’s assets were located in thailand and malaysia

C$2.3B

baytex energy Corp.aurora oil & gas limited.

� target’s assets were in the united States, but it was listed on tSX and managed in australia C$1.9B

Petroflow energy Corp. equal energy ltd.

� the sale was proceeded by a long and difficult activist campaign

� target was nYSe-listed and the shareholder approval process was considerably longer than a Canada-only transaction

� mechanics included provision for payment of dividends in the period between making the agreement and closing

C$247M

Petroamerica oil Corp. Suroco energy inc. � transaction was agreed five weeks after the initial approach from Purchaser - subject to a failed

topping bid C$108M

first oil expro ltd antrim energy inc.

� transaction involved the sale of all or substantially all of the target’s assets and required share-holder approval

� target used part of the proceeds to fund the development of a non-operated project and avoid default on its loan obligations

C$53M

transform exploration Pty ltd.

eaglewood energy inc. � target owned early stage Papua new guinea assets

� Purchaser passed on the initial sale process, but returned five months later to make an offerC$34M

Caracal energy inc. transglobe energy � Purchase agreement was signed but was later terminated as a result of the Purchaser being

acquired by glencoreC$696M

(Terminated)

Service

CWC Well Services Corp. ironhand Drilling inc.

� target was widely-held, but not a reporting issuer; consideration was cash or shares, with cash capped

� Purchaser completed a $28m subscription receipt offering in connection with the acquisition

� Purchaser was required to hold a vote to satisfy tSXV minority shareholder protection rules - insidersheld86%ofPurchaserand45%ofTarget

C$29M

NOTABLE FEATURES

Purchaser Target Structure Features of Note Equity Value

note, not all deals discussed in “notable features” were included in the survey. for a list of Deals Surveyed, please see page 32.

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TOPPING BIDS

Petroamerica Oil Corp. & Suroco Energy Inc. (failed topping)

• OnApril28,2014,PetroamericaannouncesthatSurocohasenteredintoanarrangementagreementwithPetroamericawherePetroamerica will pay in cash and shares of Petroamerica. the equity value of the deal is approximately C$108m.

• OnJune10,privately-heldVetraAcquisitionLtd.,asubsidiaryofVETRAHoldingS.a.r.l.,offersapproximately$80MincashforSuroco.Vetra states that its offer is superior to Petroamerica’s offer, arguing that a Petroamerica/Suroco company would have inadequate funds to sufficiently develop its existing asset base or conduct a substantial exploration program.

• OnJune11,SurocorejectstheVetraofferinfavourofPetroamerica’soffer.Suroco’sboardstatesthatitcontinuestobelievethePetroamerica offer is superior to Vetra’s and that Vetra has repeatedly attempted to acquire Suroco for “low-ball” cash offers.

• OnJune25,PetroamericareaffirmsitsintentiontoproceedwiththeApril28offer.

• OnJuly15,PetroamericacompletesitsacquisitionofSuroco.

TERMINATED BIDS

Caracal Energy Inc. & TransGlobe Energy Corp. (terminated bid)

• OnMarch15,2014,CaracalandTransglobeannouncethattheyhaveenteredintoanagreementwherebyCaracalwillacquireTransglobebywayofmerger.TheequityvalueofthedealisapproximatelyC$696M.

• OnApril14,Caracalannouncesthatithasterminatedtheproposedmerger,andinsteadagreestobeacquiredbyGlencoreXstrataPLC.Glencoreoffersa$1.8Ball-cashforCaracal,a61%premiumtoCaracal’ssharepriceatthetimeoftheoffer.CaracalpaysaUS$9.25Mtermination fee to transglobe.

TOPPING/TERMINATION ACTIVITY

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OVERVIEW

Oil and Gas M&A Transactions

Deals

0

5

10

15

20

January – June, 2012

17

July – December,

2012

15

January – June, 2013

10

July – December,

2013

10

January – June, 2014

17

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Sector in 2014

■ Exploration and Production: 93%

■ Midstream: 0%

■ Oil and gas services: 7%

■ Fully integrated: 0%

■ Other: 0%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

OVERVIEW

2012

2013

■ Exploration and Production: 75%

■ Midstream: 3%

■ Oil and gas services: 7%

■ Fully integrated: 15%

■ Other: 0%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

■ Exploration and Production: 68%

■ Midstream: 0%

■ Oil and gas services: 26%

■ Fully integrated: 0%

■ Other: 6%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

Historical

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Deal size in 2014

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

■ Under $100M: 8 deals

■ $100M to $250M: 4 deals

■ $250 to $500M: 2 deals

■ $500M to $1B: 1 deal (terminated)

■ $1B to $5B: 2 deals

■ Over $5B: 0 deals

OVERVIEW

■ Under $100M: 13 deals

■ $100M to $250M: 5 deals

■ $250 to $500M: 1 deal

■ $500M to $1B: 1 deal

■ $1B to $5B: 0 deals

■ Over $5B: 0 deals

Deal size■ Under $100M: 14 deals

■ $100M to $250M: 5 deals

■ $250 to $500M: 5 deals

■ $500M to $1B: 2 deals

■ $1B to $5B: 4 deals

■ Over $5B: 2 deals

Deal size

2012

2013

Historical

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Transaction structure Consideration

■ Cash: 29%

■ Stock: 57%

■ Cash and stock: 14%

Cash/share/mixed

■ Plan of arrangement: 93%

■ Amalgamation: 7%

Deal size

OVERVIEW

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TRANSACTION PROCESS

Time to completion(measured from the time the parties enter into definitive agreement until closing)

Number of fairness opinions obtained in respect of the transaction

WHAT PERCENTAGE OF

■ Less than sixty days: 64%

■ Sixty to seventy days: 0%

■ More than seventy days: 29%

■ Terminated: 7%

0

20

40

60

80

100

■ One: 86%

■ Two or more: 14%

FAIRNESS OPINIONS OBTAINED

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WHAT PERCENTAGE OF

■ Zero to 10: 36%

■ 11 to 20: 14%

■ 21 to 30: 7%

■ 31 plus: 36%

■ Not stated: 7%

VOTING/SUPPORT AGREEMENTS

Percentage of common shares locked up by the buyer Where a lock-up is present, how often were the following parties locked up?

0

20

40

60

80

100

■ Directors: 92% of the time

■ Of�cers: 85% of the time

■ Other shareholders: 46% of the time

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■ “As promptly as possible”: 43%

■ Within 30 days: 43%

■ Between 31-50 days: 14%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

■ Not speci�ed: 7%

■ Within one month: 14%

■ Within two months: 50%

■ Within three months: 7%

■ Within four months: 14%

■ As soon as reasonably practicable: 7%

TIME BETWEEN DATE OF TRANSACTION AGREEMENT

AND OUTSIDE MEETING DATE

TRANSACTION TIMING

Time allowed to prepare and mail the target’s circular to approve the plan of arrangement

Time between the date of the transaction agreement and the outside meeting date regarding the plan of arrangement

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■ Yes: 14%

�■ No: 86%

CAN BUYER REQUIRE TARGET TO ADJOURN

MEETING MECHANICS

Can the buyer require the target to adjourn the meeting in respect of an arrangement?

Can the buyer force a vote of the target securityholders whether or not a superior proposal has been made?

None of the surveyed agreements provided the buyer with the option of forcing a vote of the target securityholders

if a superior proposal is made

Optionholders entitled to vote at the arrangement meeting?

None of the surveyed agreements provided that optionholders were entitled to vote

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■ Yes: 7%

■ No: 93%

CAN BUYER REQUIRE TARGET TO ADJOURN

DIVIDENDS & DISTRIBUTIONS

Does the transaction agreement expressly provide that declarations of dividends or other distributions trigger a

reduction in purchase price?

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0

20

40

60

80

100

�■ Conditions affecting oil & gas industry generally in any of the jurisdictions in which assets are held: 100%

�■ Changes in global economic or political conditions: 100%

�■ Change in law: 79%

�■ Change in IFRS: 57%

�■ Natural disasters: 57%

�■ Change in trading price of buyer or target shares resulting from the announcement of the agreement: 57%

�■ Failure to meet internal or published projections: 29%

■ Yes: 20%

■ No: 80%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

MATERIAL ADVERSE EFFECT

Does the “Material Adverse Effect” definition specifically include adverse effects on the target’s ability to perform its obligations

under the transaction agreement?

Events included in the list of disproportionate effect exceptions to what constitutes a “Material Adverse Effect”

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STANDARD FOR PARTIES OBTAIN REGULATORY APPROVALS

■ Reasonable commercial efforts (or commercially reasonable efforts): 79%

■ Reasonable best efforts: 7%

■ As soon as reasonably practicable: 7%

■ All reasonable action necessary: 7%

INTERIM PERIOD COVENANTS

Can the buyer withhold consent unreasonably for exceptions from interim period restrictions on the target business?

Standard for efforts of the parties to obtain regulatory approvals

■ Yes: 7%

■ No: 93%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

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Mutual conditionsStandard(atleast75%ofsurveyedagreementsincludethefollowingconditions)

- interim order granted in substance that is consistent with terms of agreement

- arrangement resolution approved/adopted by target shareholders

- final order granted in substance and form that is satisfactory to parties, on terms consistent with agreement

- articles of arrangement in form satisfactory to both parties and on terms consistent with agreement

- Consummation of agreement not illegal/prohibited by law

- listing approval (conditional approval to list shares to be issued pursuant to agreement)

- agreement has not been terminated pursuant to the terms of the agreement

- mailing Date and effective Date have occurred on/before dates specified in agreement

- all required regulatory, governmental and third party approvals, waivers and consents have been obtained on terms satisfactory to the parties

Uncommon(10-30%ofsurveyedagreementsincludethefollowingconditions)

- Competition Act approval obtained, or waiting period has expired, terminated, or been waived

Rare(lessthan10%ofsurveyedagreementsincludethefollowingconditions)

- all necessary actions taken so that any shares to be issued in the united States will be exempt from certain registration requirements of the united States Securities Act

- third party must elect to receive its consideration for the target’s shares in Purchaser’s shares

- Purchaser shall have appointed a mutually agreeable existing independent director of the target to Purchaser’s board

CONDITIONS TO THE OBLIGATION TO CLOSE

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CONDITIONS TO THE OBLIGATION TO CLOSE

Conditions to obligations of PurchaserStandard(atleast75%ofsurveyedagreementsincludethefollowingconditions)

- target’s representations are true/correct in material respects as of effective Date

- target has complied with all covenants, except where failure not expected to have material adverse effect or impede arrangement

- no material adverse change has occurred

- no material adverse action taken by domestic/foreign governmental authority

- no proceedings against target expected to have material adverse effect on target or to impede consummation

- target has provided copies of all documents required by agreement

- target’s board approves the transaction

- arrangement resolution passed by target shareholders

- Holders of no more than a specified percentage of issued/outstanding target shares have exercised dissent rights

Uncommon(10-50%ofsurveyedagreementsincludethefollowingconditions)

- Purchaser satisfied all options have been exercised/terminated

- target’s officers/directors have submitted resignations

- Voting agreements have been entered into, not terminated

- number of outstanding target shares capped

- outstanding target warrants exercised or terminated

- target’s net debt is less than specified amount

Rare(lessthan10%ofsurveyedagreementsincludethefollowingconditions)

- target’s production as of a specified date will not be less than a specified level

- target maintains a specified minimum working capital level

- no right of first refusal exercised on target properties

- target board has not withdrawn or amended recommendation

- target employment or severance-related obligations do not exceed specified amount

- target’s transaction costs do not exceed specified amount

- aggregate amount of target’s tax pools will not be less than specified sum

- target will have fully paid and satisfied all payables greater than a specified number of days in arrears

- Purchaser’s financing shall have been completed

- target has credit facilities or other funds available to pay any net debt at the effective time

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CONDITIONS TO THE OBLIGATION TO CLOSE

- target has paid all payables that are greater than 45 days in arrears

- target must enter into executive employment agreements satisfactory to Purchaser with certain officers

- target must give prompt notice of any breach or non-performance

- Purchaser must obtain a copy of all electronic data that pertains to the business and operations of target

- no make Whole Premium shall be payable in respect to any convertible debentures

- target’s capital expenditure shall not exceed specified amount

Conditions to obligations of TargetStandard(atleast75%ofsurveyedagreementsincludethefollowingconditions)

- Purchaser’s representations are true/correct in all material respects as of effective Date

- Purchaser has complied with all covenants, except where failure not expected to have material adverse effect or impede arrangement

- no material adverse change has occurred

- no material adverse action taken by domestic/foreign governmental authority

- no proceedings against target expected to have material adverse effect on target or to impede consummation

- Purchaser has provided copies of all documents required by agreement

- Purchaser’s board approves transaction

- Purchaser furnishes certified copies of board resolution approving agreement and contemplated transactions

- Purchaser has paid/deposited consideration

Uncommon(10-40%ofsurveyedagreementsincludethefollowingconditions)

- Releases are provided to the directors or officers of target

Rare(lessthan10%ofsurveyedagreementsincludethefollowingconditions)

- Particular debt or liability of Purchaser cannot exceed specified threshold

- Purchaser maintains minimum working capital

- Purchaser’s production as of a specified date will not be less than a specified level

- aggregate amount of Purchaser’s tax pools will not be less than specified sum

- aggregate number of Purchaser’s fully diluted shares capped

- Purchaser’s shares issued to target’s shareholders shall not be subject to any hold period, restricted period or seasoning period

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COVENANTS

Mutual covenantsStandard(atleast75%ofsurveyedagreementsincludethefollowingcovenants)

- use efforts to complete arrangement on or before specified date and satisfy conditions precedent

- obtain all necessary consents, approvals from parties to contracts, credit agreements, etc.

- obtain all other consents, waivers, approvals required by law

- obtain all regulatory approvals

- Provide other party reasonable access to information required and maintain ongoing communications with other party

- information provided relating to regulatory approval only to be given to external legal counsel of other party

Uncommon(10-30%ofsurveyedagreementsincludethefollowingcovenants)

- Where competitively sensitive information required, parties must provide information only to external legal counsel or other experts hired by a party

- Provide notice of any known misrepresentations in relation to regulatory filings

- Provide notice of any communication with governmental entities

- Provide notice of any material adverse change

- Will not take or permit action, will refrain from acting in manner, that is inconsistent with agreement or would be expected to significantly impede consummation of the transaction

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�■ Zero to 50: 14%

�■ 51 to 100: 14%

�■ 101 to 150: 29%

■ 150 plus: 43%

�■ Yes: 64%

�■ No: 36%

�■ Yes: 64%

�■ No: 36%

REPRESENTATIONS & WARRANTIES

Approximate number of representation/warranty paragraphs

Representations made regarding working capital or net debt?

Does agreement permit amendments to representations at closing?

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REPRESENTATIONS & WARRANTIES

Parties represent that the representations and warranties themselves contain no misrepresentations

■ Yes: 20%

■ No: 80%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

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TOPPING OFFERS: Restriction on Non-Solicitation

What are requirements for a Topping Proposal to qualify as a Superior Proposal?

When is Target permitted to change recommendation?*

The definition of ‘Superior Proposal’ in all agreements included:a) must be written bona fide proposal

b) necessary funds are likely available

c) financially more favorable proposal (after consultation with financial advisor)

d) after consulting with legal advisors, accepting proposal is consistent with fiduciary duties of the board

Over 90% of agreements required that the Target must provide:a) prompt notice that it is entering discussions

b) copy of proposal and all related written documents

c) copies of all information provided to third party

d) notice of any inquiries, offers, proposals with respect to Superior Proposal

e) third party identity

f) status updates

Items b) to f) were all required by the purchaser within 24 hours

0

10

20

30

40

50

60

70

80

■ Third party will not require access to books/records of Target longer than time speci�ed in agreement: 7%

■ Speci�ed amount of outstanding securities or assets are to be acquired: 7 %

■ Likely to be completed without undue delay: 57%

■ Complies with all applicable laws: 7%

■ Did not result from breach of the agreement: 21%

■ Not subject to any due diligence or access condition: 71%

0

10

20

30

40

50

60

70

80

■ Third party will not require access to books/records of Target longer than time speci�ed in agreement: 7%

■ Speci�ed amount of outstanding securities or assets are to be acquired: 7 %

■ Likely to be completed without undue delay: 57%

■ Complies with all applicable laws: 7%

■ Did not result from breach of the agreement: 21%

■ Not subject to any due diligence or access condition: 71%

Other requirements

*subject to a matching period

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■ Two days: 15%

■ Three days: 54%

■ Four plus days: 31%

PERIOD LENGTH

■ Yes: 93%

■ No: 7%

PERIOD LENGTH

MATCHING PERIOD

Is there a right to match? Period in which right to match is open to the buyer

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TERMINATION

Are there termination rights for failure to meet prescribed working capital or net debt levels?

■ Yes: 27%

■ No: 73%

Termination right for failure to meet

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TERMINATION

Is a break fee provided for? Purchaser break fee triggers

Over 80% of the deals surveyed contained the following triggers to the payment of a break fee by the Target:1) target board of directors fails to publicly reaffirm recommendations and

approvals, or withdraws, changes, or proposes publicly to withdraw, amend, or change any recommendations or approvals in a manner adverse to the buyer

2) target accepts or moves to implement a superior proposal

3) target is in breach of any of its covenants or obligations in any material respect

4) target breaches any representations, warranties, or covenants, which, individually or in the aggregate, would reasonably be expected to result in a material adverse change and where target fails to cure the breach

�■ Yes: 93%

�■ No: 7%

Does the break fee constitute liquidated damages?

In all of the deals surveyed, the break fee constituted liquidated damages

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■ Equal to: 82%

■ Less than: 18%

TERMINATION

Target break fee triggers

Over 90% of the deals surveyed contained the following reverse break fee triggers:1) Purchaser breaches any covenants where the breach is reasonably expected

to result in material adverse change, where Purchaser fails to cure the breach within time period granted

2) Purchaser breaches any representations or warranties where the breach is reasonably expected to result in material adverse change, where Purchaser fails to cure the breach within time period granted

Only 15% of deals surveyed contained the following as a reverse break fee trigger:1) Purchaser board fails to make any recommendations or determinations,

in a manner adverse to target; or withdraws, modifies, or changes any recommendations in manner adverse to target

Is a reverse break fee provided for?

■ Yes: 73%

■ No: 27%

Is the reverse break fee less than the break fee?

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■ Not speci�ed 43%

■ Six months: 7%

■ Twelve months: 50%

PERIOD FOR 3RD PARTY ACQUISITION CONSUMMATION POST TERMINATION?

�■ One business day: 36%�■ Two business days: 36% ■ Three or more business days: 28%

PERIOD FOR 3RD PARTY ACQUISITION CONSUMMATION POST TERMINATION?

�■ One business day of termination event: 23%�■ Two business days of termination event: 54% ■ Three or more business days of termination event: 23%�

PERIOD FOR 3RD PARTY ACQUISITION CONSUMMATION POST TERMINATION?

TERMINATION

Reverse break fee payment must be paid within

Period in which consummation of any third party acquisition must occur post termination to trigger the

payment of a break fee by the Target

Break fee payment must be paid within

Stikeman elliott llP: H1 2014 CanaDian PubliC oil anD gaS m&a ReVieW30

TERMINATION

Expense reimbursement in addition to break fee and reverse break fee provided for?

■ Yes: 29%

■ No: 71%

DOES MAE DEFINITION INCLUDE EFFECT ON TARGET'S ABILITY

TO PERFORM OBLIGATIONS UNDER TRANSACTION AGREEMENT?

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OTHER REMEDIES

Specific performance available as a remedy?

In all of the deals surveyed, specific performance was made available as a remedy

Stikeman elliott llP: H1 2014 CanaDian PubliC oil anD gaS m&a ReVieW32

DEALS SURVEYED

Buyer Target Equity Value Announced Completed

Petroflow energy Corp. equal energy ltd. $247m December9,2013 July 31, 2014

trident exploration Corp. Wrangler West energy Corp. $8m January 20, 2014 march 5, 2014

Spartan energy Corp. Renegade Petroleum ltd. $327m february 11, 2014 march 31, 2014

blackbird energy inc. Pennant energy inc. $2m february 18, 2014 april 17, 2014

Petrobank energy Resources ltd. touchstone exploration inc. $55m march 6, 2014 may 14, 2014

Paramount Resources ltd. mgm energy Corp. $50m march 11, 2014 June 11, 2014

tourmaline oil Corp. Santonia energy inc. $161m march 14, 2014 april 24, 2014

Caracal energy inc. transglobe energy $696M march 15, 2014 Terminated

CWC Well Services Corp. ironhand Drilling inc. $29M march 20, 2014 may 15, 2014

amarok energy inc. Passport energy ltd. $38m march 21, 2014 June 17, 2014

Surge energy inc. longview oil Corp. $275m april 1, 2014 June 5, 2014

Petroamerica oil Corp. Suroco energy inc. $108m april 28, 2014 July 15, 2014

transform exploration Pty ltd. eaglewood energy inc. $434m may 17, 2014 July9,2014

long Run exploration ltd. Crocotta energy inc. $242m June 12, 2014 Not completed

about Stikeman elliott

Stikeman elliott is one of Canada’s leading business law firms with offices in Calgary, toronto, montréal, ottawa and Vancouver as well as in london, new York and Sydney. the firm is recognized as a Canadian leader in each of our core practice areas – corporate finance, m&a, corporate-commercial law, banking, structured finance, real estate, tax, insolvency, competition/antitrust, employment and business litigation – and we are regularly retained by domestic and international companies in a wide range of industries.

our firm has an extensive domestic and international oil and gas practice. We have a leading team of energy lawyers in our Calgary office, with seamless access to national and international coverage through our offices across Canada and abroad.

our services include mergers, acquisitions, dispositions, corporate finance and securities, the structuring of joint ventures and other commercial arrangements, energy trading and energy derivative products, midstream facility contracts and transactions, infrastructure projects, regulatory matters and litigation. our energy group works regularly with other lawyers in our firm to advise on the tax, environmental, corporate governance, employment and competition and foreign investment aspects of transactions involving participants in the oil and gas sector.

We have acted as trusted advisors on many of the energy sector’s most complex undertakings, from the financing and development of major projects to ongoing operations. businesses turn to us for expert counsel relating to the exploration, production and refining of conventional oil and gas, oil sands and shale gas as well as the extraction, transportation, processing, storage and marketing of crude oil, bitumen, natural gas, natural gas liquids and liquefied natural gas (lng) on a worldwide basis.

for more information, please contact our Calgary office at(403)266-9000 or visit www.stikeman.com

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