AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 12, 2006
REGISTRATION NO. 333-133818
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
AMENDMENT NO. 1 TO
FORM F-10
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
__________________________
PRIMEWEST ENERGY TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ALBERTA 1311 98-0389391
(PROVINCE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.,
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IF APPLICABLE)
__________________________
5100, 150 - 6TH AVENUE S.W.
CALGARY, ALBERTA, CANADA T2P 3Y7
(403) 234-6600
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CT CORPORATION SYSTEM
111 - 8TH AVENUE, NEW YORK, NEW YORK 10011
(212) 894-8940
(NAME, ADDRESS AND TELEPHONE NUMBER (INCLUDING AREA CODE)
OF AGENT FOR SERVICE IN THE UNITED STATES)
__________________________
COPIES TO:
DENNIS G. FEUCHUK LELAND P. CORBETT ANDREW J. FOLEY
PRIMEWEST ENERGY TRUST STIKEMAN ELLIOTT LLP PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
5100, 150 - 6TH AVENUE S.W. 4300, 888-3RD STREET, S.W. 1285 AVENUE OF THE AMERICAS
CALGARY, ALBERTA, CANADA T2P 3Y7 CALGARY, ALBERTA T2P 5C5 NEW YORK, NEW YORK 10019-6064
(403) 234-6600 (403) 266-9000 (212) 373-3000
__________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
PROVINCE OF ALBERTA, CANADA
(PRINCIPAL JURISDICTION REGULATING THIS OFFERING)
It is proposed that this filing shall become effective (check appropriate box
below):
A. |_| upon filing with the Commission, pursuant to Rule 467(a) (if in
connection with an offering being made contemporaneously in the United
States and Canada).
B. |X| at some future date (check appropriate box below)
1. |_| pursuant to Rule 467(b) on ( ) at ( ) (designate a time
not sooner than 7 calendar days after filing).
2. |_| pursuant to Rule 467(b) on ( ) at ( ) (designate a time 7
calendar days or sooner after filing) because the securities
regulatory authority in the review jurisdiction has issued a receipt
or notification of clearance on ( ).
3. |X| pursuant to Rule 467(b) as soon as practicable after notification of
the Commission by the Registrant or the Canadian securities
regulatory authority of the review jurisdiction that a receipt or
notification of clearance has been issued with respect hereto.
4. |_| after the filing of the next amendment to this Form (if preliminary
material is being filed).
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to the home jurisdiction's shelf
prospectus offering procedures, check the following box. |X|
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE AS PROVIDED IN RULE 467 UNDER THE SECURITIES
ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A)
OF THE ACT, MAY DETERMINE.
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PART I
INFORMATION REQUIRED TO BE
DELIVERED TO OFFEREES OR PURCHASERS
I-1
SHORT FORM BASE SHELF PROSPECTUS
[GRAPHIC OMITTED]
[LOGO -- PRIMEWEST ENERGY TRUST]
TRUST UNITS
$750,000,000
PrimeWest Energy Trust (the "TRUST") may from time to time offer and
issue trust units of the Trust ("TRUST UNITS") up to $750,000,000 in the
aggregate of initial offering price (or its equivalent in any other currency
used to denominate the Trust Units at the time of the offering) at any time
during the 25-month period that this short form base shelf prospectus (the
"PROSPECTUS"), including any amendments hereto, remains valid.
The specific terms of the Trust Units offered will be described in
one or more shelf prospectus supplements (collectively or individually, as the
case may be, a "PROSPECTUS SUPPLEMENT"), including the number of Trust Units
being offered, the offering price and any other specific terms.
All shelf information permitted under applicable laws to be omitted
from this Prospectus will be contained in one or more Prospectus Supplements
that will be delivered to purchasers together with this Prospectus. Each
Prospectus Supplement will be incorporated by reference into this Prospectus
for the purposes of securities legislation as of the date of the Prospectus
Supplement and only for the purposes of the distribution of the Trust Units to
which the Prospectus Supplement pertains. A Prospectus Supplement may include
specific variable terms pertaining to the Trust Units that are not within the
alternatives and parameters described in this Prospectus.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"SEC") NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE
TRUST UNITS OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
THE TRUST IS PERMITTED, UNDER A MULTIJURISDICTIONAL DISCLOSURE SYSTEM
ADOPTED BY THE UNITED STATES, TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH
CANADIAN DISCLOSURE REQUIREMENTS. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT
SUCH REQUIREMENTS ARE DIFFERENT FROM THOSE OF THE UNITED STATES. THE TRUST'S
FINANCIAL STATEMENTS INCORPORATED HEREIN BY REFERENCE HAVE BEEN PREPARED IN
ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") AND
ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS AND THUS
MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED STATES' COMPANIES OR
TRUSTS.
PROSPECTIVE INVESTORS SHOULD BE AWARE THAT PURCHASING, HOLDING OR
DISPOSING OF ANY OF THE TRUST UNITS MAY SUBJECT INVESTORS TO TAX CONSEQUENCES
BOTH IN THE UNITED STATES AND CANADA. THIS PROSPECTUS OR ANY APPLICABLE
PROSPECTUS SUPPLEMENT MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY.
PROSPECTIVE INVESTORS SHOULD READ THE TAX DISCUSSION IN THIS PROSPECTUS AND
ANY APPLICABLE PROSPECTUS SUPPLEMENT FULLY.
AN INVESTOR'S ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED
STATES FEDERAL SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE THE TRUST IS
ORGANIZED UNDER THE LAWS OF THE PROVINCE OF ALBERTA, CANADA, A MAJORITY OF
PRIMEWEST ENERGY INC.'S ("PRIMEWEST") OFFICERS AND DIRECTORS AND CERTAIN OF
THE EXPERTS NAMED IN THIS PROSPECTUS ARE RESIDENTS OF CANADA, AND ALL OF THE
TRUST'S ASSETS AND ALL OR A SIGNIFICANT PORTION OF THE ASSETS OF SUCH PERSONS
ARE LOCATED OUTSIDE THE UNITED STATES.
The Trust may sell the Trust Units to or through underwriters or
dealers purchasing as principals, and may also sell the Trust Units to one or
more purchasers directly, pursuant to applicable statutory exemptions, or
through agents. The Prospectus Supplement relating to a particular offering of
Trust Units will identify each
DATED MAY 12, 2006
underwriter, dealer or agent engaged by the Trust, in connection with the
offering and sale of the Trust Units, and will set forth the terms of the
offering of such Trust Units, the method of distribution of such Trust Units,
including, to the extent applicable, the proceeds to the Trust, and any fees,
discounts or any other compensation payable to underwriters, dealers or agents
and any other material terms of the plan of distribution. In connection with
any offering of Trust Units, the underwriters or dealers, as the case may be,
may over-allot or effect transactions intended to fix or stabilize the market
price of the Trust Units at a level above that which might otherwise prevail
in the open market. Such transactions, if commenced, may be discontinued at
any time. See "Plan of Distribution".
The outstanding Trust Units are listed on the Toronto Stock Exchange
(the "TSX") under the symbol "PWI.UN" and the New York Stock Exchange ("NYSE")
under the symbol "PWI".
The return on an investment in Trust Units is not comparable to the
return on an investment in a fixed-income security. The recovery of the
initial investment made by holders of Trust Units (the "UNITHOLDERS") is at
risk, and the anticipated return on a Unitholder's investment is based on many
performance assumptions. Although the Trust intends to make distributions of a
portion of its available cash to Unitholders, these cash distributions may be
reduced or suspended. The ability of the Trust to make cash distributions and
the actual amount distributed will depend on numerous factors including, among
other things: the financial performance of the Trust, debt obligations,
working capital requirements and future capital requirements, all of which are
susceptible to a number of risks. In addition, the market value of the Trust
Units may decline if the Trust is unable to meet its cash distribution targets
in the future, and that decline may be significant. Prospective purchasers of
Trust Units also should consider the particular risk factors that may affect
the industry in which the Trust operates, and therefore the stability of the
distributions that Unitholders receive. See "Risk Factors". This section also
describes the Trust's assessment of those risk factors, as well as potential
consequences to Unitholders if a risk should occur.
The offering of Trust Units is subject to approval of certain legal
matters on behalf of the Trust by Stikeman Elliott LLP, Calgary, Alberta and
Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York. NO
UNDERWRITER OR DEALER IN CANADA OR THE UNITED STATES HAS BEEN INVOLVED IN THE
PREPARATION OF THIS PROSPECTUS OR PERFORMED ANY REVIEW OF THE CONTENTS OF THIS
PROSPECTUS.
THE TRUST UNITS ARE NOT "DEPOSITS" WITHIN THE MEANING OF THE CANADA
DEPOSIT INSURANCE CORPORATION ACT (CANADA) AND ARE NOT INSURED UNDER THE
PROVISIONS OF THAT ACT OR ANY OTHER LEGISLATION. FURTHERMORE, THE TRUST IS NOT
A TRUST COMPANY AND, ACCORDINGLY, IT IS NOT REGISTERED UNDER ANY TRUST AND
LOAN COMPANY LEGISLATION AS IT DOES NOT CARRY ON OR INTEND TO CARRY ON THE
BUSINESS OF A TRUST COMPANY.
The Trust has not obtained a stability rating from an independent
rating agency regarding the relative stability and sustainability of the
Trust's cash distribution stream. The Trust may consider obtaining a stability
rating from an independent rating agency in the future.
The Trust's principal and head office is located at 5100, 150 - 6th
Avenue S.W., Calgary, Alberta T2P 3Y7 and PrimeWest's registered office is
located at 4300 Bankers Hall West, 888 - 3rd Street S.W., Calgary, Alberta T2P
5C5.
(ii)
TABLE OF CONTENTS
NOTE REGARDING FORWARD-LOOKING DESCRIPTION OF TRUST UNITS..............16
STATEMENTS...............................1 DESCRIPTION OF THE ROYALTY..............17
PRESENTATION OF OUR FINANCIAL, RESERVE PLAN OF DISTRIBUTION....................18
AND OTHER INFORMATION....................3 CASH DISTRIBUTIONS ON TRUST UNITS.......19
NON-GAAP MEASURES........................4 CERTAIN INCOME TAX CONSIDERATIONS.......19
EXCHANGE RATE............................4 LEGAL MATTERS...........................20
ADDITIONAL INFORMATION...................5 INTERESTS OF EXPERTS....................20
ENFORCEABILITY OF CERTAIN CIVIL AUDITORS, TRANSFER AGENT AND REGISTRAR..20
LIABILITIES..............................5 DOCUMENTS FILED AS PART OF THE
DOCUMENTS INCORPORATED BY REFERENCE......5 REGISTRATION STATEMENT..................20
RISK FACTORS.............................7 AUDITORS' CONSENT.......................21
PRIMEWEST ENERGY TRUST..................15
USE OF PROCEEDS.........................16
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference herein
contain forward-looking statements with respect to the Trust, including
forward-looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995.
The use of any of the words "anticipate", "continue", "estimate",
"expect", "forecast", "may", "will", "project", "should", "believe", "outlook"
and similar expressions are intended to identify forward-looking statements.
In addition, statements relating to "reserves" or "resources" are deemed to be
forward-looking statements, as they involve implied assessment, based on
certain estimates and assumptions, that the resources and reserves described
can be profitably produced in the future. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual results
or events to differ materially from those anticipated in the forward-looking
statements.
The Trust and PrimeWest believe the expectations reflected in those
forward-looking statements are reasonable. However, neither the Trust nor
PrimeWest can assure you that these expectations will prove to be correct. You
should not unduly rely on forward-looking statements included in, or
incorporated by reference into, this Prospectus. These statements speak only
as of the date of this Prospectus or as of the date specified in the documents
incorporated by reference into this Prospectus, as the case may be.
In particular, this Prospectus, and the documents incorporated by
reference, contain forward-looking statements pertaining to the following:
o The quantity and recoverability of the Trust's reserves;
o The timing and amount of future production;
o Prices for oil, natural gas and natural gas liquids produced;
o Operating and other costs;
o Business strategies and plans of management;
o Supply and demand for oil and natural gas;
o Expectations regarding the Trust's ability to raise capital and to
add to the Trust's reserves through acquisitions and exploration and
development;
o The Trust's treatment under governmental regulatory regimes;
1
o The focus of capital expenditures on development activity rather than
exploration;
o The sale, farming in, farming out or development of certain
exploration properties using third-party resources;
o The objective to achieve a predictable level of monthly cash
distributions;
o The intention of maintaining a payout ratio of distributions to cash
flow from operations within any range;
o The use of development activity and acquisitions to replace and add
to reserves;
o The impact of changes in oil and natural gas prices on cash flow
after hedging;
o Drilling plans;
o The existence, operations and strategy of the commodity price risk
management program;
o The approximate and maximum amount of forward sales and hedging to be
employed;
o The Trust's acquisition strategy, the criteria to be considered in
connection therewith and the benefits to be derived therefrom;
o The impact of the Canadian federal and provincial governmental
regulations on the Trust relative to other oil and natural gas
issuers of similar size;
o The goal to sustain or grow production and reserves through prudent
management and acquisitions;
o The emergence of accretive growth opportunities; and
o The Trust's ability to benefit from the combination of growth
opportunities and the ability to grow through the capital markets.
With respect to forward-looking statements contained in this
Prospectus, including the documents incorporated herein by reference, the
Trust and PrimeWest have made assumptions regarding, among other things:
o Future oil and natural gas prices and differentials between light,
medium and heavy oil prices;
o The cost of expanding the Trust's property holdings;
o The Trust's ability to obtain equipment in a timely manner to carry
out development activities;
o The Trust's ability to market the Trust's oil and natural gas
successfully to current and new customers;
o The impact of increasing competition;
o The Trust's ability to obtain financing on acceptable terms; and
o The Trust's ability to add production and reserves through the
Trust's development and exploitation activities.
The Trust's actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risk
factors set forth below and elsewhere in this Prospectus and the documents
incorporated by reference in this Prospectus:
o Volatility in market prices for oil and natural gas;
o The impact of weather conditions on seasonal demand;
o Risks inherent in the Trust's oil and natural gas operations;
o Uncertainties associated with estimating reserves;
o Competition for, among other things: capital, acquisitions of
reserves, undeveloped lands and skilled personnel;
2
o Incorrect assessments of the value of acquisitions;
o Geological, technical, drilling and processing problems;
o General economic conditions in Canada, the United States and globally;
o Industry conditions, including fluctuations in the price of oil and
natural gas;
o Royalties payable in respect of the Trust's oil and natural gas
production;
o Government regulation of the oil and natural gas industry, including
environmental regulation;
o Fluctuation in foreign exchange or interest rates;
o Unanticipated operating events that could reduce production or cause
production to be shut-in or delayed;
o Failure to obtain industry partner and other third-party consents and
approvals, when required;
o Stock market volatility and market valuations;
o OPEC's ability to control production and balance global supply and
demand of crude oil at desired price levels;
o Political uncertainty, including the risks of hostilities in the
petroleum-producing regions of the world;
o The need to obtain required approvals from regulatory authorities; and
o The other factors discussed under "Risk Factors" contained in this
Prospectus.
These factors should not be construed as exhaustive. The
forward-looking statements contained in this Prospectus and the documents
incorporated by reference herein are expressly qualified by this cautionary
statement. The Trust and PrimeWest undertake no obligation to publicly update
or revise any forward-looking statements, except as required by law.
PRESENTATION OF OUR FINANCIAL, RESERVE AND OTHER INFORMATION
Unless indicated otherwise, financial information in this Prospectus,
including the documents incorporated by reference herein, has been prepared in
accordance with Canadian GAAP. Canadian GAAP differs in some significant
respects from U.S. GAAP and thus the Trust's financial statements may not be
comparable to the financial statements of U.S. companies. The principal
differences as they apply to the Trust are summarized in note 20 to the
Trust's annual audited consolidated financial statements incorporated herein
by reference.
The SEC generally permits oil and gas companies, in their filings
with the SEC, to disclose only proved reserves after the deduction of
royalties and interests of others which are those reserves that a company has
demonstrated by actual production or conclusive formation tests to be
economically producible under existing economic and operating conditions. The
securities regulatory authorities in Canada have adopted NI 51-101 - STANDARDS
OF DISCLOSURE FOR OIL AND GAS ACTIVITIES ("NI 51-101"), which imposes oil and
gas disclosure standards for Canadian public issuers engaged in oil and gas
activities. NI 51-101 permits oil and gas issuers, in their filings with
Canadian securities regulators, to disclose not only proved reserves but also
probable reserves, and to disclose reserves and production on a gross basis
before deducting royalties. Probable reserves are of a higher risk and are
less likely to be accurately estimated or recovered than proved reserves.
Because the Trust is permitted to disclose reserves in accordance with
Canadian disclosure requirements, the Trust has disclosed in this Prospectus
and in the documents incorporated by reference reserves designated as
"Probable". If required to be prepared in accordance with U.S. disclosure
requirements, the SEC's guidelines would prohibit reserves in these categories
from being included. Moreover, in accordance with Canadian practice, The Trust
has determined and disclosed estimated future net cash flow from its reserves
using both escalated and constant prices and costs; for the constant prices
and costs case, prices and costs in effect as of December 31, 2005 were held
constant for the economic life of the reserves. The SEC does not permit the
disclosure of estimated future net cash flow from
3
reserves based on escalating prices and costs and generally requires that
prices and costs be held constant at levels in effect at the date of the
reserve report. Additional information prepared in accordance with United
States Statement of Financial Accounting Standards No. 69 "Disclosures About
Oil and Gas Producing Activities" relating to the Trust's oil and gas reserves
is set forth in the Trust's annual audited consolidated financial statements
incorporated herein by reference. Unless otherwise stated, all of the reserves
information contained in this Prospectus, including the documents incorporated
herein by reference, has been calculated and reported in accordance with NI
51-101.
Words importing the singular number only include the plural, and VICE
VERSA, and words importing any gender include all genders.
All dollar amounts set forth in this Prospectus are in Canadian
dollars, except where otherwise indicated.
NON-GAAP MEASURES
In this Prospectus, including the documents incorporated by reference
herein, the Trust uses the terms "cash flow", "cash flow from operations" and
"cash available for distribution" to refer to the amount of cash available for
distribution to Unitholders and as indicators of financial performance. "Cash
flow", "cash flow from operations" and "cash available for distribution" are
not measures recognized by Canadian GAAP and do not have standardized meanings
prescribed by Canadian GAAP. Therefore, "cash flow", "cash flow from
operations" and "cash available for distribution" of the Trust may not be
comparable to similar measures presented by other issuers, and investors are
cautioned that "cash flow", "cash flow from operations" and "cash available
for distribution" should not be construed as alternatives to net earnings,
cash flow from operating activities or other measures of financial performance
calculated in accordance with Canadian GAAP. All references to "cash flow" and
"cash flow from operations" are based on cash flow before changes in non-cash
working capital related to operating activities, as presented in the
consolidated financial statements of the Trust. Cash available for
distribution cannot be assured and future distributions may vary. The Trust
uses such terms, and particularly "cash available for distribution", as an
indicator of financial performance because such terms are commonly utilized by
investors to evaluate royalty trusts and income funds in the oil and gas
sector. The Trust believes that "cash available for distribution" is a useful
supplemental measure as it provides investors with information of what cash is
available for distribution from the Trust to Unitholders in such periods.
EXCHANGE RATE
The following table sets out certain exchange rates based upon the
noon buying rate in New York City for cable transfers in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York. The
rates are set out as United States dollars per C$1.00 and are the inverse of
the rates quoted by the Federal Reserve Bank of New York for Canadian dollars
per U.S.$1.00.
Year Ended December 31,
-----------------------------------
2003 2004 2005
------ ------ ------
Low 0.6349 0.7158 0.7872
High 0.7738 0.8493 0.8690
Average(1) 0.7205 0.7719 0.8282
Note:
(1) Average represents the average of the rates on the last day of each month
On May 11, 2006, the inverse of the noon buying rate quoted by the
Federal Reserve Bank of New York for Canadian dollars was C$1.00 per
U.S.$0.9100.
4
ADDITIONAL INFORMATION
The Trust has filed with the SEC a registration statement on Form
F-10 of which the Prospectus forms a part. This Prospectus does not contain
all the information set out in the registration statement. For further
information about the Trust and the Trust Units, please refer to the
registration statement. The Trust is subject to the information requirements
of the United States SECURITIES EXCHANGE ACT OF 1934, as amended (the
"EXCHANGE ACT") and applicable Canadian securities legislation, and in
accordance therewith, the Trust files and furnishes reports and other
information with the SEC and with the securities regulatory authorities of the
provinces of Canada. Under a multi-jurisdictional disclosure system adopted by
the United States and Canada, the Trust generally may prepare these reports
and other information in accordance with the disclosure requirements of
Canada. These requirements are different from those of the United States. As a
foreign private issuer, the Trust is exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements, and
PrimeWest's officers and directors, and those Unitholders holding 10% or more
of the Trust Units, are exempt from the reporting and short-swing profit
recovery provisions contained in Section 16 of the Exchange Act.
The reports and other information filed by the Trust with the SEC may
be read and copied at the SEC's public reference room at 100F Street, N.E.,
Washington, D.C. 20549. Copies of the same documents can also be obtained from
the public reference room of the SEC in Washington by paying a fee. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The SEC also maintains a web site (www.sec.gov) that makes available
reports and other information that the Trust files electronically with it,
including the registration statement that the Trust has filed with respect to
this offering.
Copies of reports, statements and other information that the Trust
files with the Canadian provincial securities regulatory authorities are
electronically available from the Canadian System for Electronic Document
Analysis and Retrieval (www.sedar.com), which is commonly known by the acronym
"SEDAR". Reports and other information about the Trust are also available for
inspection at the offices of the TSX.
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
Both the Trust and PrimeWest are organized under the laws of Alberta,
Canada with their principal place of business in Canada. Most of the directors
and all of the officers of PrimeWest and the representatives of the experts
named in this Prospectus are residents of Canada, and all or a substantial
portion of their assets and the Trust's assets are located outside the United
States. As a result, it may be difficult for investors in the United States to
effect service of process within the United States upon such directors,
officers and representatives of experts who are not residents of the United
States or to enforce against them judgments of United States courts based upon
civil liability under the United States federal securities laws or the
securities laws of any state within the United States. There is doubt as to
the enforceability in Canada against the Trust or PrimeWest or against any of
PrimeWest's directors, officers or representatives of experts who are not
residents of the United States, in original actions or in actions for
enforcement of judgments of United States courts of liabilities based solely
upon the United States federal securities laws or the securities laws of any
state within the United States.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents of the Trust, filed with the various
provincial securities commissions or similar authorities in Canada, are
specifically incorporated into and form an integral part of this Prospectus:
(a) the annual information form of the Trust dated March 15, 2006 (the
"AIF");
(b) management's discussion and analysis of the financial condition and
operations of the Trust for the year ended December 31, 2005 and the
audited consolidated financial statements of the Trust as at and for
the years ended December 31, 2005, 2004 and 2003, together with the
notes thereto and the auditors' report thereon, each as filed on
March 29, 2006;
5
(c) the Management Proxy Circular of the Trust relating to the annual
general and special meeting of the Unitholders to be held on May 4,
2006 (the "PROXY CIRCULAR"); and
(d) management's discussion and analysis of the financial condition and
operations of the Trust and the unaudited comparative consolidated
financial statements of the Trust as at and for the three months
ended March 31, 2006, together with the notes thereto.
Any of the following documents, if filed by the Trust with the
provincial securities commissions or similar authorities in Canada after the
date of this Prospectus and before the completion or withdrawal of any
offering hereunder, are deemed to be incorporated by reference in this
Prospectus:
(a) material change reports (except confidential material change
reports);
(a) business acquisition reports;
(b) comparative interim financial statements;
(c) comparative financial statements for the Trust's most recently
completed financial year, together with the accompanying report of
the auditor; and
(d) information circulars.
ANY STATEMENT CONTAINED IN THIS PROSPECTUS OR IN A DOCUMENT
INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED
TO BE MODIFIED OR SUPERSEDED, FOR THE PURPOSES OF THIS PROSPECTUS, TO THE
EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED
DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN
MODIFIES OR SUPERSEDES SUCH STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT
NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE
ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT THAT IT MODIFIES OR
SUPERSEDES. THE MAKING OF A MODIFYING OR SUPERSEDING STATEMENT SHALL NOT BE
DEEMED AN ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED
STATEMENT, WHEN MADE, CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF
A MATERIAL FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE
STATED OR THAT IS NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE
CIRCUMSTANCES IN WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED
SHALL NOT CONSTITUTE A PART OF THIS PROSPECTUS, EXCEPT AS SO MODIFIED OR
SUPERSEDED.
Upon a new annual information form and the related annual audited
consolidated financial statements together with the auditors' report thereon
and management's discussion and analysis contained therein being filed by the
Trust with, and where required, accepted by, the applicable securities
regulatory authorities during the currency of this Prospectus, the previous
annual information form, the previous annual audited consolidated financial
statements and all interim financial statements, quarterly management's
discussion and analysis and material change reports filed prior to the
commencement of the Trust's financial year in which the new annual information
form was filed, no longer shall be deemed to be incorporated by reference in
this Prospectus for the purpose of future offers and sales of Trust Units
hereunder. Upon interim consolidated financial statements and the accompanying
management's discussion and analysis being filed by the Trust with the
applicable securities regulatory authorities during the duration of this
Prospectus, all interim consolidated financial statements and the accompanying
management's discussion and analysis filed prior to the new interim
consolidated financial statements shall be deemed no longer to be incorporated
into this Prospectus of future offers and sales of Trust Units under this
Prospectus.
A Prospectus Supplement containing the specific terms of an offering
of Trust Units and other information in relation to the Trust Units will be
delivered to purchasers of such Trust Units together with this Prospectus and
will be deemed to be incorporated by reference into this Prospectus as of the
date of such Prospectus Supplement solely for the purposes of the offering of
the Trust Units covered by that Prospectus Supplement.
6
To the extent that any document or information incorporated by
reference into this Prospectus is included in a report that is filed with or
furnished to the SEC on Form 40-F, 10-K, 10-Q, 8-K or 6-K (or any respective
successor form), such document or information shall also be deemed to be
incorporated by reference as an exhibit to the registration statement on Form
F-10 of which this Prospectus forms a part. In addition, if and to the extent
indicated therein, we may incorporate by reference into this Prospectus from
documents that we file with or furnish to the SEC pursuant to Section 13(a) or
15(d) of the Exchange Act.
The Trust maintains an Internet web site on the World Wide Web at
www.primewestenergy.com. Information on the Trust's web site is not, and
should not be deemed to be, part of this Prospectus and is not being
incorporated by reference herein.
RISK FACTORS
Prospective purchasers of the Trust Units should consider carefully
the risk factors set forth below as well as the other information contained in
and incorporated by reference in this Prospectus and in the applicable
Prospectus Supplement before purchasing the Trust Units offered hereby. If any
event arising from these risks occurs, the Trust's business, prospects,
financial condition, results of operations or cash flows could be materially
adversely affected.
RISKS RELATED TO OUR BUSINESS
VOLATILITY IN OIL AND NATURAL GAS PRICES COULD HAVE A MATERIAL
ADVERSE EFFECT ON RESULTS OF OPERATIONS AND FINANCIAL CONDITION, WHICH, IN
TURN, COULD AFFECT THE MARKET PRICE OF THE TRUST UNITS AND THE AMOUNT OF
DISTRIBUTIONS TO UNITHOLDERS.
Results of operations and financial condition are dependent on the
prices received for the oil and natural gas that PrimeWest sells.
Historically, the markets for oil and natural gas have been volatile and are
likely to continue to be volatile in the future. Oil and natural gas prices
may fluctuate widely on a daily basis in response to a variety of factors
beyond the Trust's control, including:
o Global energy policy, including the ability of OPEC to set and
maintain production levels and prices for oil;
o Political conditions, including the risk of hostilities in the
petroleum producing regions of the world;
o Global and domestic economic conditions;
o Weather conditions, including weather related natural disasters;
o The supply and price of imported oil and liquefied natural gas;
o The production and storage levels of North American natural gas;
o The level of consumer demand;
o The price and availability of alternative fuels;
o The impact of US/Canadian currency exchange on the Canadian prices
realized by the Trust;
o The proximity of reserves to, and capacity of, transportation
facilities;
o The effect of worldwide energy conservation measures; and
o Government regulations.
Any decline in crude oil or natural gas prices may have a material
adverse effect on PrimeWest's operations, financial condition, borrowing
ability, reserves and the level of expenditures for the development of
reserves. Any resulting decline in PrimeWest's cash flow could reduce
distributions and the market price of the Trust Units.
7
PrimeWest uses financial derivative instruments and other hedging
mechanisms to attempt to limit a portion of the adverse effects resulting from
changes in oil and natural gas commodity prices. To the extent PrimeWest
hedges its commodity price exposure, it foregoes the benefits it would
otherwise receive if commodity prices were to increase. In addition,
commodity-hedging activities could expose PrimeWest to losses. Such losses
could occur under various circumstances, including those in which the other
party to a hedge does not perform its obligations under the applicable
agreement, the hedge is imperfect or PrimeWest's hedging policies and
procedures are not followed. Furthermore, these hedging transactions will not
fully offset the risks of changes in commodities prices.
AN INCREASE IN OPERATING COSTS OR A DECLINE IN PRIMEWEST'S PRODUCTION
LEVEL COULD HAVE A MATERIAL ADVERSE EFFECT ON THE TRUST'S RESULTS OF
OPERATIONS AND FINANCIAL CONDITION AND, THEREFORE, COULD REDUCE DISTRIBUTIONS
TO UNITHOLDERS AND AFFECT THE MARKET PRICE OF THE TRUST UNITS.
Higher operating costs associated with PrimeWest's properties will
directly decrease the amount of cash flow received by the Trust and,
therefore, may reduce distributions to Unitholders. Electricity, chemicals,
supplies, and reclamation, abandonment and labour costs are some of the types
of operating costs that are susceptible to material fluctuation.
The level of production from existing properties may decline at rates
greater than anticipated due to unforeseen circumstances, many of which are
beyond PrimeWest's control. A significant decline in production could result
in materially lower revenues and cash flow and, therefore, could reduce the
amount available for distributions to Unitholders.
DISTRIBUTIONS MAY BE REDUCED DURING PERIODS IN WHICH PRIMEWEST MAKES
CAPITAL EXPENDITURES OR DEBT REPAYMENTS USING CASH FLOW, WHICH COULD ALSO
AFFECT THE MARKET PRICE OF THE TRUST UNITS.
To the extent that PrimeWest uses cash flow to finance acquisitions,
development costs and other significant expenditures, the net cash flow that
the Trust receives from PrimeWest will be reduced, and, as a consequence, the
amount of cash available to distribute to Unitholders will decrease.
Distributions may be reduced, or even eliminated, at times when significant
capital or other expenditures are made.
The board of directors of PrimeWest has the discretion to determine
the extent to which cash flow from PrimeWest will be allocated to the payment
of debt service charges as well as the repayment of outstanding debt,
including debt under the Trust's credit facility. The amount of funds retained
by PrimeWest to pay debt services charges or reduce debt will reduce the
amount of cash distributed to Unitholders during those periods in which funds
are so retained.
A DECLINE IN PRIMEWEST'S ABILITY TO MARKET ITS OIL AND NATURAL GAS
PRODUCTION COULD HAVE A MATERIAL ADVERSE EFFECT ON PRODUCTION LEVELS OR ON THE
PRICE RECEIVED FOR PRODUCTION, WHICH, IN TURN, COULD REDUCE DISTRIBUTIONS TO
UNITHOLDERS AND AFFECT THE MARKET PRICE OF THE TRUST UNITS.
PrimeWest's business depends in part upon the availability, proximity
and capacity of gas gathering systems, pipelines and processing facilities.
Canadian federal and provincial, as well as United States federal and state,
regulation of oil and gas production, processing and transportation, tax and
energy policies, general economic conditions, and changes in supply and demand
could adversely affect PrimeWest's ability to produce and market oil and
natural gas. If market factors change and inhibit the marketing of PrimeWest's
production, overall production or realized prices may decline, which could
reduce distributions to Unitholders.
FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES COULD ADVERSELY
AFFECT PRIMEWEST'S BUSINESS, AND COULD AFFECT THE MARKET PRICE OF THE TRUST
UNITS AS WELL AS DISTRIBUTIONS TO UNITHOLDERS.
The price that PrimeWest receives for its oil and natural gas is
based on United States dollar denominated benchmarks, and therefore the price
that PrimeWest receives in Canadian dollars is affected by the exchange rate
between the two currencies. A material increase in the value of the Canadian
dollar relative to the United States dollar may negatively impact net
production revenue by decreasing the Canadian dollars received for a given
8
United States dollar price. PrimeWest could also be subject to unfavourable
price changes to the extent that it has engaged, or in the future engages, in
risk management activities related to foreign exchange rates, through entry
into forward foreign exchange contracts or otherwise.
IF PRIMEWEST IS UNABLE TO ACQUIRE ADDITIONAL RESERVES, THE VALUE OF
THE TRUST UNITS AND DISTRIBUTIONS TO UNITHOLDERS MAY DECLINE.
PrimeWest does not actively explore for oil and natural gas reserves.
Instead, PrimeWest adds to its reserves primarily through development and
acquisitions. As a result, future oil and natural gas reserves are highly
dependent on PrimeWest's success in exploiting existing properties and
acquiring additional properties. PrimeWest also distributes the majority of
its net cash flow to Unitholders rather than reinvesting it in reserve
additions. Accordingly, if external sources of capital, including the issuance
of additional Trust Units, become limited or unavailable on commercially
reasonable terms, PrimeWest's ability to make the necessary capital
investments to maintain or expand its oil and natural gas reserves will be
impaired. To the extent that PrimeWest is required to use cash flow to finance
capital expenditures or property acquisitions, the level of cash flow
available for distribution to Unitholders will be reduced. Additionally,
PrimeWest cannot guarantee that it will be successful in developing additional
reserves or acquiring additional reserves on terms that meet its investment
objectives. Without these reserve additions, PrimeWest's reserves will deplete
and as a consequence, either production from, or the average reserve life of,
its properties will decline. Either decline may result in a reduction in the
value of Trust Units and in a reduction in cash available for distributions to
Unitholders.
ACTUAL RESERVES WILL VARY FROM RESERVE ESTIMATES, AND THOSE
VARIATIONS COULD BE MATERIAL, AND AFFECT THE MARKET PRICE OF THE TRUST UNITS
AND DISTRIBUTIONS TO UNITHOLDERS.
The value of the Trust Units depends upon, among other things, the
reserves attributable to PrimeWest's properties. Estimating reserves is
inherently uncertain. Ultimately, actual reserves attributable to PrimeWest's
properties will vary from estimates, and those variations may be material. The
reserve figures contained herein are only estimates. A number of factors are
considered and a number of assumptions are made when estimating reserves.
These factors and assumptions include, among others:
o Historical production in the areas in which the properties are
located and production rates from similar producing areas;
o Future commodity prices, production and development costs, royalties
and capital expenditures;
o Initial production rates;
o Production decline rates;
o Ultimate recovery of reserves;
o Success of future development activities;
o Marketability of production;
o Effects of government regulation; and
o Other government levies that may be imposed over the producing life
of reserves.
Reserve estimates are based on the relevant factors, assumptions and
prices on the date that such estimates are prepared. Many of these factors are
subject to change and are beyond PrimeWest's control. If these factors,
assumptions and prices change or prove to be inaccurate, actual results may
vary materially from reserve estimates.
IF PRIMEWEST EXPANDS ITS OPERATIONS BEYOND OIL AND NATURAL GAS
PRODUCTION IN WESTERN CANADA, IT MAY FACE NEW CHALLENGES AND RISKS. IF
PRIMEWEST IS UNSUCCESSFUL IN MANAGING THESE CHALLENGES AND RISKS, ITS RESULTS
OF OPERATIONS AND FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED, WHICH COULD
AFFECT THE MARKET PRICE OF THE TRUST UNITS AND DISTRIBUTIONS TO UNITHOLDERS.
9
PrimeWest's operations and expertise are currently focused on
conventional oil and gas production and development in the Western Canada
Sedimentary Basin. In the future, it may acquire unconventional oil and gas
properties outside this geographic area. In addition, the Declaration of Trust
does not limit the activities to oil and gas production and development, and
PrimeWest could acquire other energy related assets, such as oil and natural
gas processing plants or pipelines. Expansion of PrimeWest's activities may
present challenges and risks that it has not faced in the past. If PrimeWest
does not manage these challenges and risks successfully, its results of
operations and financial condition could be adversely affected.
IN DETERMINING THE PURCHASE PRICE OF ACQUISITIONS, PRIMEWEST RELIES
ON ASSESSMENTS RELATING TO ESTIMATES OF RESERVES THAT MAY PROVE TO BE
INACCURATE, WHICH COULD AFFECT THE MARKET PRICE OF THE TRUST UNITS AND
DISTRIBUTIONS TO UNITHOLDERS.
The price PrimeWest is willing to pay for an acquisition is based
largely on estimates of the reserves to be acquired. Actual reserves could
vary materially from these estimates. Consequently, the reserves PrimeWest
acquires may be less than expected, which could adversely impact cash flows
and distributions to Unitholders.
An initial assessment of an acquisition may be based on a report by
engineers or firms of engineers that have different evaluation methods and
approaches than those of PrimeWest's engineers, and these initial assessments
may differ significantly from PrimeWest's subsequent assessments.
PRIMEWEST DOES NOT OPERATE SOME OF ITS PROPERTIES AND THEREFORE,
RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY THE FAILURE OF THIRD-PARTY
OPERATORS, WHICH COULD AFFECT THE MARKET PRICE OF THE TRUST UNITS AND
DISTRIBUTIONS TO UNITHOLDERS.
The continuing production from a property, and to some extent the
marketing of that production, is dependent upon the ability of the operators
of those properties. At December 31, 2005, approximately 20% of PrimeWest's
daily production came from properties operated by third parties. To the extent
that a third party operator fails to perform its functions efficiently or
becomes insolvent, PrimeWest's operating income may be reduced.
Further, the operating agreements that govern the properties not
operated by PrimeWest typically require the operator to conduct operations in
a good and "workmanlike" manner. These operating agreements generally provide,
however, that the operator has no liability to the other non-operating working
interest owners, for losses sustained or liabilities incurred, except for
liabilities that may result from gross negligence or wilful misconduct.
DELAYS IN BUSINESS OPERATIONS COULD ADVERSELY AFFECT DISTRIBUTIONS TO
UNITHOLDERS AND THE MARKET PRICE OF THE TRUST UNITS.
In addition to the usual delays in payment by purchasers of oil and
natural gas to PrimeWest and to the operators of PrimeWest's non-operated
properties, and the delays of those operators in remitting payment to
PrimeWest, payments between any of these parties may also be delayed by:
o Restrictions imposed by lenders;
o Accounting delays;
o Delays in the sale or delivery of products;
o Delays in the connection of wells to a gathering system;
o Blowouts or other accidents;
o Adjustments for prior periods;
o Recovery by the operator of expenses incurred in the operation of the
properties; or
o The establishment by the operator of reserves for these expenses.
10
Any of these delays could reduce the amount of cash available for
distribution to Unitholders in a given period and expose PrimeWest to
additional third party credit risks.
THE TRUST AND PRIMEWEST'S INDEBTEDNESS MAY LIMIT THE TIMING OR AMOUNT
OF THE DISTRIBUTIONS THAT ARE PAID TO UNITHOLDERS, AND COULD AFFECT THE MARKET
PRICE OF THE TRUST UNITS.
The payments of interest and principal, and other costs, expenses and
disbursements made to the providers of the Trust's credit facility reduce
amounts available for distribution to Unitholders. Variations in interest
rates and scheduled principal repayments could result in significant changes
to the amount of the cash flow available for payment to the Unitholders in any
given period. The agreements governing the Trust's credit facility provide
that if the Trust or PrimeWest are in default under the Trust's credit
facility, exceed certain borrowing thresholds or fail to comply with certain
covenants, they must repay the indebtedness at an accelerated rate, and the
ability to make distributions to Unitholders may be further restricted.
The lenders under the Trust's credit facility have been provided with
a security interest in substantially all of the Trust and PrimeWest's assets.
If the Trust and PrimeWest are unable to pay the debt service charges or
otherwise commit an event of default, such as bankruptcy, these lenders may
foreclose on and sell the properties. The proceeds of any sale would be
applied to satisfy amounts owed to the creditors. Only after the proceeds of
that sale were applied towards the debt would the remainder, if any, be
available for distribution to Unitholders.
THE CURRENT CREDIT FACILITY AND ANY REPLACEMENT CREDIT FACILITY MAY
NOT PROVIDE SUFFICIENT LIQUIDITY.
The amounts available under the existing credit facility may not be
sufficient for future operations, or the Trust and PrimeWest may not be able
to obtain additional financing on economic terms attractive to them, if at
all. A portion of the existing credit facility is available on a one-year
revolving basis. If the lenders do not extend the facility at the end of the
annual revolving period, the loan will convert to a term basis with 60% of the
aggregate principal amount of the loan repayable on the date which is 366 days
after that conversion date and the remaining 40% of the aggregate principal
amount outstanding repayable on the date which is 365 days after the initial
term repayment date. If this occurs, the Trust and PrimeWest may need to
obtain alternate financing. Any failure to obtain suitable replacement
financing may have a material adverse effect on the business, and
distributions to Unitholders may be materially reduced.
THE TRUST MAY BE UNABLE TO SUCCESSFULLY COMPETE WITH OTHER
ORGANIZATIONS IN THE TRUST'S INDUSTRY, WHICH COULD AFFECT THE MARKET PRICE OF
THE TRUST UNITS AND DISTRIBUTIONS TO UNITHOLDERS.
The oil and natural gas industry is highly competitive. PrimeWest
competes for capital, acquisitions of reserves, undeveloped lands, skilled
personnel, access to drilling rigs, service rigs and other equipment, access
to processing facilities, pipeline and refining capacity and in many other
respects with a substantial number of other organizations, many of which may
have greater technical and financial resources than PrimeWest. Some of these
organizations explore for develop and produce oil and natural gas but also
carry on refining operations and market oil and other products on a worldwide
basis. As a result of these complementary activities, some of PrimeWest's
competitors may have greater and more diverse competitive resources to draw on
than PrimeWest does.
THE INDUSTRY IN WHICH PRIMEWEST OPERATES EXPOSES THE TRUST AND
PRIMEWEST TO POTENTIAL LIABILITIES THAT MAY NOT BE COVERED BY INSURANCE.
PrimeWest's operations are subject to all of the risks associated
with the operation and development of oil and natural gas properties,
including the drilling of oil and natural gas wells, and the production and
transportation of oil and natural gas. These risks and hazards include
encountering unexpected formations or pressures, blow outs, craterings and
fires, all of which could result in personal injury, loss of life, or
environmental and other damage to PrimeWest's property and the property of
others. PrimeWest cannot fully protect against all of these risks, nor are all
of these risks insurable. While PrimeWest's insurance broker is responsible
for ensuring that insurance underwriters have the financial strength necessary
to respond to claims, PrimeWest may become liable for damages arising from
events against which PrimeWest cannot insure or against
11
which PrimeWest may elect not to insure because of high premium costs or other
reasons. Any costs incurred to repair these damages or pay these liabilities
would reduce funds available for distribution to Unitholders.
THE OPERATION OF OIL AND NATURAL GAS WELLS COULD SUBJECT PRIMEWEST TO
ENVIRONMENTAL CLAIMS AND LIABILITY.
The oil and natural gas industry is subject to extensive
environmental regulation pursuant to local, provincial and federal
legislation. A breach of that legislation may result in the imposition of
fines or the issuance of "clean up" orders. Legislation regulating the oil and
natural gas industry may be changed to impose higher standards and potentially
more costly obligations. For example, the Kyoto Protocol will require, among
other things, significant reductions in greenhouse gases. The impact of the
Kyoto Protocol on PrimeWest is uncertain and may result in significant
additional costs (future) for PrimeWest's operations. Although PrimeWest has
established a reclamation fund for the purpose of funding the estimated future
environmental and reclamation obligations based on current knowledge and
expectations, PrimeWest cannot guarantee that it will be able to satisfy its
actual future environmental and reclamation obligations.
PrimeWest is not fully insured against certain environmental risks,
either because such insurance is not available or because of high premium
costs. In particular, insurance against risks from environmental pollution
occurring over time (as opposed to sudden and catastrophic damages) is not
available on economically reasonable terms. Accordingly, PrimeWest's
properties may be subject to liability due to hazards that cannot be insured
against, or that have not been insured against due to prohibitive premium
costs or for other reasons.
Any site reclamation or abandonment costs actually incurred in the
ordinary course of business in a specific period will be funded out of cash
flow and, therefore, will reduce the amounts available for distribution to
Unitholders. Should PrimeWest be unable to fully fund the cost of remedying an
environmental problem, PrimeWest might be required to suspend operations or
enter into interim compliance measures pending completion of the required
remedy.
LOWER OIL AND GAS PRICES INCREASE THE RISK OF WRITE-DOWNS OF
PRIMEWEST'S OIL AND GAS PROPERTY INVESTMENTS.
Under Canadian accounting rules, the net capitalized cost of oil and
gas properties may not exceed a "ceiling limit" that is based, in part, upon
estimated future net cash flows from reserves. If oil and natural gas prices
decline, PrimeWest's net capitalized cost may exceed this cost ceiling,
ultimately resulting in a charge against PrimeWest's earnings. Under U.S.
GAAP, the cost ceiling is generally lower than under Canadian GAAP because the
future net cash flows used in the United States ceiling test are discounted to
a present value. Accordingly, PrimeWest would have more risk of a ceiling test
write-down in a declining price environment if it reported under U.S. GAAP.
While these write- downs would not affect cash flow, the charge against
earnings could be viewed unfavourably in the market.
UNFORESEEN TITLE DEFECTS MAY RESULT IN A LOSS OF ENTITLEMENT TO
PRODUCTION AND RESERVES.
PrimeWest conducts title reviews in accordance with industry practice
prior to any purchase of resource assets. However, these reviews do not
guarantee that an unforeseen defect in the chain of title will not arise and
defeat PrimeWest's title to the purchased assets. If such a defect were to
arise, PrimeWest's entitlement to the production from the affected assets
could be jeopardized and, as a result, distributions to Unitholders may be
reduced.
THE ECONOMIC IMPACT ON PRIMEWEST OF CLAIMS OF ABORIGINAL TITLE IS
UNKNOWN.
Aboriginal people have claimed aboriginal title and rights to a
substantial portion of western Canada. PrimeWest is unable to assess the
effect, if any, that any such claim would have on its business and operations.
12
RISKS RELATED TO THE TRUST STRUCTURE AND THE OWNERSHIP OF TRUST UNITS
CHANGES IN TAX AND OTHER LAWS MAY ADVERSELY AFFECT UNITHOLDERS.
Income tax laws, other laws or government incentive programs relating
to the oil and gas industry, such as the treatment of mutual fund trusts and
resource allowance, may in the future be changed or interpreted in a manner
that adversely affects the Trust and Unitholders. Tax authorities having
jurisdiction over the Trust or the Unitholders may disagree with the manner in
which the Trust calculates its income for tax purposes or could change their
administrative practices to the Trust's detriment or the detriment of its
Unitholders.
THERE WOULD BE MATERIAL ADVERSE TAX CONSEQUENCES IF THE TRUST LOST
ITS STATUS AS A MUTUAL FUND TRUST UNDER CANADIAN TAX LAWS.
It is intended that the Trust continue to qualify as a mutual fund
trust for purposes of the Income Tax Act (Canada) (the "Tax Act"). The Trust
may not, however, always be able to satisfy any future requirements for the
maintenance of mutual fund trust status. Should the status of the Trust as a
mutual fund trust be lost or successfully challenged by a relevant tax
authority, certain adverse consequences may arise for the Trust and
Unitholders. Some of the significant consequences of losing mutual fund trust
status are as follows:
o The Trust would be taxed on certain types of income distributed to
Unitholders, including income generated by the Royalty held by the
Trust. Payment of this tax may have adverse consequences for some
Unitholders, particularly Unitholders that are not residents of
Canada and residents of Canada that are otherwise exempt from
Canadian income tax.
o Trust Units held by Unitholders that are not residents of Canada
would become taxable Canadian property. These non-resident holders
would be subject to Canadian income tax on any gains realized on a
disposition of Trust Units held by them.
o The Trust Units would not constitute qualified investments for
Registered Retirement Savings Plans, or "RRSPs", Registered
Retirement Income Funds, or "RRIFs", Registered Education Savings
Plans, or "RESPs" or Deferred Profit Sharing Plans, or "DPSPs". If,
at the end of any month, one of these exempt plans holds Trust Units
that are not qualified investments, the plan must pay a tax equal to
1% of the fair market value of the Trust Units at the time the Trust
Units were acquired by the exempt plan. An RRSP or RRIF holding
non-qualified Trust Units would be subject to taxation on income
attributable to the Trust Units, including the full amount of any
capital gain realized on a disposition of non-qualified Trust Units
by the RRSP or RRIF. If an RESP holds non-qualified Trust Units, it
may have its registration revoked by the Canada Revenue Agency.
The Trust may take certain measures in the future to the extent the
Trust believes them necessary to ensure that it maintains its status as a
mutual fund trust. These measures could be adverse to certain holders of Trust
Units.
RIGHTS AS A UNITHOLDER DIFFER FROM THOSE ASSOCIATED WITH OTHER TYPES
OF INVESTMENTS.
The Trust Units do not represent a traditional investment in the oil
and natural gas sector and should not be viewed by investors as shares in the
Trust or PrimeWest. The Trust Units represent an equal fractional beneficial
interest in the Trust and, as such, the ownership of the Trust Units does not
provide Unitholders with the statutory rights normally associated with
ownership of shares of a corporation, including, for example, the right to
bring "oppression" or "derivative" actions. The unavailability of these
statutory rights may also reduce the ability of Unitholders to seek legal
remedies against other parties on PrimeWest's behalf.
The Trust Units are also unlike conventional debt instruments in that
there is no principal amount owing to Unitholders. The Trust Units will have
minimal value when reserves from PrimeWest's properties can no longer be
economically produced or marketed. Unitholders will only be able to obtain a
return of the capital they invested during the period when reserves may be
economically recovered and sold. Accordingly, the distributions received over
the life of the investment may not meet or exceed the initial capital
investment.
13
THE LIMITED LIABILITY OF UNITHOLDERS IS UNCERTAIN.
On July 1, 2004 a new statute entitled the INCOME TRUSTS LIABILITY
ACT (Alberta) was proclaimed in force, creating a statutory limitation on the
liability of unitholders of Alberta income trusts such as the Trust. The
legislation provides that a Unitholder is not, as a beneficiary, liable for
any act, default, obligation or liability of the Trustee that arises after
July 1, 2004.
However, because of prior uncertainties in the law relating to
investment trusts, there is a risk that a Unitholder could be held personally
liable for obligations of the Trust in respect of contracts or undertakings
which the Trust entered into and for certain liabilities arising otherwise
than out of contracts including claims in tort, claims for taxes and possibly
certain other statutory liabilities arising prior to July 1, 2004. Although
every written contract or commitment of the Trust must contain an express
disavowal of liability of the Unitholders and a limitation of liability to
Trust property, such protective provisions may not operate to avoid Unitholder
liability for the relevant period. Notwithstanding attempts to limit
Unitholder liability, Unitholders may not be protected from such liabilities
to the same extent that a shareholder is protected from the liabilities of a
corporation. Further, although the Trust has agreed to indemnify and hold
harmless each Unitholder from any costs, damages, liabilities, expenses,
charges and losses suffered by the Unitholder resulting from or arising out of
that Unitholder not having limited liability, the Trust cannot guarantee that
any assets would be available in these circumstances to reimburse Unitholders
for any such liability.
CHANGES IN MARKET-BASED FACTORS MAY ADVERSELY AFFECT THE TRADING
PRICE OF TRUST UNITS.
The market price of the Trust Units is primarily a function of
anticipated distributions to Unitholders and the value of the properties owned
by PrimeWest and the Trust. The market price of the Trust Units is therefore
sensitive to a variety of market-based factors, including, but not limited to,
interest rates and the comparability of the Trust Units to other yield
oriented securities. Any changes in these market-based factors may adversely
affect the trading price of the Trust Units.
THE OPERATION OF THE TRUST IS ENTIRELY INDEPENDENT FROM THE
UNITHOLDERS AND LOSS OF KEY MANAGEMENT AND OTHER PERSONNEL COULD IMPACT THE
BUSINESS.
Unitholders are entirely dependent on the management of the Trust
with respect to the acquisition of oil and gas properties and assets, the
development and acquisition of additional reserves, the management and
administration of all matters relating to the properties and the
administration of the Trust. The loss of the services of key individuals who
currently comprise the management team could have a detrimental effect on the
Trust. Investors should carefully consider whether they are willing to rely on
the existing management before investing in the Trust Units.
THERE MAY BE FUTURE DILUTION.
One of the Trust's objectives is to continually add to its resource
reserves through acquisitions and through development. Because the Trust does
not reinvest the majority of its cash flow, its success is, in part, dependent
on its ability to raise capital from time to time by selling Trust Units.
Unitholders will suffer dilution as a result of Trust Unit offerings if, for
example, the cash flow, production or reserves from acquired assets do not
reflect the additional number of Trust Units issued to acquire those assets.
Dilution may also occur if the deployment of funds raised through the various
components of the Trust's distribution reinvestment plan does not result in
the creation of additional value for Unitholders.
THERE MAY NOT ALWAYS BE AN ACTIVE TRADING MARKET IN THE UNITED STATES
AND/OR CANADA FOR THE TRUST UNITS.
While there is currently an active trading market for the Trust Units
in both the United States and Canada, the Trust cannot guarantee that an
active trading market will be sustained in either country.
14
THE REDEMPTION RIGHT OF UNITHOLDERS IS LIMITED.
Unitholders have a limited right to require the Trust to repurchase
their Trust Units, which is referred to as a redemption right. It is
anticipated that the redemption right will not be the primary mechanism for
Unitholders to liquidate their investment. The Trust's ability to pay cash in
connection with redemption is subject to limitations. Any securities, which
may be distributed in specie to Unitholders in connection with redemption, may
not be listed on any stock exchange and a market may not develop for such
securities. Also, such securities (or some of them) may not be a qualified
investment for RRSPs, RRIFs, DPSPs or RESPs. In addition, there may be resale
restrictions imposed by law upon the recipients of the securities pursuant to
the redemption right.
PRIMEWEST ENERGY TRUST
THE TRUST
The Trust is an open-end investment trust created under the laws of
Alberta pursuant to a declaration of trust dated as of August 2, 1996, among
the settlor of the Trust, PrimeWest and Montreal Trust Company of Canada, as
amended and restated (the "DECLARATION OF TRUST"). Computershare Trust Company
of Canada is the trustee of the Trust (the "TRUSTEE"). The beneficiaries of
the Trust are the Unitholders. The Trust's principal and head office is
located at 5100, 150 - 6th Avenue S.W., Calgary, Alberta T2P 3Y7.
The principal undertaking of the Trust is to acquire and hold,
directly and indirectly, interests in oil and natural gas properties. One of
the Trust's primary assets is currently a royalty (the "ROYALTY") equal to
approximately 99% of the net cash flow generated by the oil and natural gas
interests held from time to time by PrimeWest, after certain costs and
deductions. See "Description of the Royalty" below. A portion of the net cash
flow received by the Trust is distributed monthly to Unitholders. The Trust
also lends money to PrimeWest to allow it to make further acquisitions and
develop its properties. The interest income earned on such funds is also
distributed monthly to Unitholders.
The structure of the Trust and the flow of funds from the oil and
natural gas properties owned by PrimeWest to the Trust, and from the Trust to
Unitholders, is set forth in more detail on page 1 of the AIF incorporated
herein by reference under the heading "Organization - Trust Structure".
PRIMEWEST
PrimeWest was incorporated under the BUSINESS CORPORATIONS ACT
(Alberta) (the "ABCA") on March 4, 1996 and was amalgamated with PrimeWest Oil
and Gas Corp., PrimeWest Royalty Corp. and PrimeWest Resources Ltd. on January
1, 2002, with PrimeWest Management Inc. and another subsidiary on November 6,
2002 and with PrimeWest Gas Corp. on December 31, 2005, in each case
continuing as PrimeWest Energy Inc. The head and principal office of PrimeWest
is located at 5100, 150 - 6th Avenue S.W., Calgary, Alberta T2P 3Y7. All of
the issued and outstanding voting shares of PrimeWest are currently held by
the Trust.
The business of PrimeWest is the acquisition, development,
exploitation, production and marketing of oil and natural gas and granting the
Royalty to the Trust.
The capital structure of PrimeWest includes exchangeable shares (the
"EXCHANGEABLE SHARES"). The Exchangeable Shares were issued in connection with
previous corporate acquisitions. As at May 2, 2006, there were issued and
outstanding 1,175,935 Exchangeable Shares, which are exchangeable into 691,532
Trust Units based on a ratio which is adjusted and increased on each date that
the Trust pays a distribution to its Unitholders. As at May 2, 2006, the
exchange ratio was 0.58807 Trust Units for each Exchangeable Share. The
outstanding Exchangeable Shares are traded on the TSX under the trading symbol
"PWX".
15
USE OF PROCEEDS
The Trust Units will be issued from time to time at the discretion of
the Trust with an aggregate offering amount not to exceed $750,000,000. The
net proceeds derived from the issue of the Trust Units under any Prospectus
Supplement will be the aggregate offering amount thereof less any commission
and other issuance costs paid in connection therewith. The net proceeds cannot
be estimated as the amount thereof will depend on the extent to which the
Trust Units are issued under any Prospectus Supplement. Unless otherwise
specified in the applicable Prospectus Supplement, the net proceeds will be
added to the general funds of the Trust and will be used for general business
purposes.
DESCRIPTION OF TRUST UNITS
The following is a summary of the material attributes and
characteristics of the Trust Units. This summary does not purport to be
complete and is subject to, and qualified in its entirety by, reference to the
terms of the Declaration of Trust. A summary of certain provisions of the
Declaration of Trust, in addition to those establishing the terms of the Trust
Units, is contained in Item 1 of the AIF incorporated herein by reference.
Each Trust Unit represents an equal undivided beneficial interest in
the Trust. Each Trust Unit shares equally in all distributions from the Trust
and all Trust Units carry equal voting rights at meetings of Unitholders.
Except as otherwise set forth in the documents incorporated herein by
reference, no Unitholder is liable to pay any further calls or assessments in
respect of the Trust Units and no conversion, retraction, redemption or
pre-emptive rights attach to the Trust Units. Unitholders have a right of
redemption as further described under the heading "- Redemption Right" in Item
1 of the AIF incorporated herein by reference.
An unlimited number of Trust Units have been authorized and may be
issued pursuant to the Declaration of Trust. At April 24, 2006, there were
80,906,609 Trust Units outstanding. The Declaration of Trust provides for,
among other things, the calling of meetings of Unitholders, the conduct of
business thereof, notice provisions, the appointment and removal of the
trustee of the Trust and the form of Trust Unit certificates. The Declaration
of Trust may be amended from time to time. Substantive amendments to the
Declaration of Trust, including early termination of the Trust and the sale or
transfer of the property of the Trust as an entirety or substantially as an
entirety, will require approval by a special meeting of Unitholders at which a
resolution must be passed by a majority of not less than 66% of the votes
cast, either in person or by proxy, at such meeting.
CASH DISTRIBUTIONS
Unitholders of record on the fifth trading day following the 15th day
of each month are entitled to receive cash distributions of distributable
income of the Trust in respect of that month. Such distributions are made on
or about the 15th day of the following month. The Trust has not obtained a
stability rating from an independent rating agency regarding the relative
stability and sustainability of the Trust's cash distribution stream. The
Trust may consider obtaining a stability rating from an independent rating
agency in the future. See also "Cash Distributions on Trust Units" below.
CONSTRAINTS ON NON-RESIDENT OWNERSHIP OF TRUST UNITS
In order to provide PrimeWest with a measure of flexibility in
responding to evolving positions within the Government of Canada's Department
of Finance on appropriate levels of ownership of Trust Units by non-residents
of Canada, the Declaration of Trust provides:
(b) if at any time the board of directors of PrimeWest determines, in its
sole discretion, or becomes aware, that the Trust's ability to
continue to rely on paragraph 132(7)(a) of the Tax Act for purposes
of qualifying as a "mutual fund trust" thereunder is in jeopardy,
then the Trust shall not be maintained primarily for the benefit of
non-residents of Canada and it shall be the sole responsibility of
PrimeWest to monitor the holdings by non-residents of Canada and take
such steps as are necessary or desirable to ensure that the Trust is
not maintained primarily for the benefit of non-residents of Canada;
16
(c) PrimeWest may request that the Trustee make reasonable efforts, as
practicable in the circumstances, to obtain declarations as to
beneficial ownership, perform residency searches of Unitholder and
beneficial Unitholder mailing address lists and take such other steps
specified by PrimeWest to determine or estimate as best possible the
residence of the beneficial owners of Trust Units; and
(d) If at any time the board of directors of PrimeWest, in its sole
discretion, determines that it is in the best interest of the Trust,
PrimeWest may, notwithstanding the ability of the Trust to continue
to rely on paragraph 132(7)(a) of the Tax Act:
(i) require the Trustee to refuse to accept a subscription for
Trust Units from, or issue or register a transfer of Trust
Units to, a person unless the person provides a declaration
to PrimeWest that the Trust Units to be issued or
transferred to such person will not when issued or
transferred be beneficially owned by a non-resident of
Canada;
(ii) to the extent practicable in the circumstances, send a
notice to registered holders of Trust Units which are
beneficially owned by non-residents of Canada, chosen in
inverse order to the order of acquisition or registration of
such Trust Units beneficially owned by non-residents of
Canada or in such other manner as PrimeWest may consider
equitable and practicable, requiring them to sell their
Trust Units which are beneficially owned by non-residents of
Canada or a specified portion thereof within a specified
period of not less than 60 days. If the Unitholders
receiving such notice have not sold the specified number of
such Trust Units or provided PrimeWest with satisfactory
evidence that such Trust Units are not beneficially owned by
non-residents within such period, PrimeWest may, on behalf
of such registered Unitholder, sell such Trust Units and, in
the interim, suspend the voting and distribution rights
attached to such Trust Units and make any distribution in
respect of such Trust Units by depositing such amount in a
separate bank account in a Canadian chartered bank (net of
any applicable taxes). Any sale shall be made on any stock
exchange on which the Trust Units are then listed and, upon
such sale, the affected holders shall cease to be holders of
Trust Units so disposed of and their rights shall be limited
to receiving the net proceeds of sale, and any distribution
in respect thereof deposited as aforesaid, net of applicable
taxes and costs of sale, upon surrender of the certificates
representing such Trust Units;
(iii) delist the Trust Units from any non-Canadian stock exchange;
and
(iv) take such other actions as the board of directors of
PrimeWest determines, in its sole discretion, are
appropriate in the circumstances that will reduce or limit
the number of Trust Units held by non-resident Unitholders
to ensure that the Trust is not maintained primarily for the
benefit of non-residents of Canada.
DESCRIPTION OF THE ROYALTY
The Trust's primary sources of net cash flow are payments received
from the Royalty issued to the Trust by PrimeWest on the production from its
oil and natural gas properties and interest and principal payments on debt
issued to the Trust by PrimeWest. For a complete description of the Royalty
prospective purchasers should refer to the Royalty Agreements (as defined
below), copies of which are available on SEDAR and at www.sec.gov.
The Royalty is payable to the Trust under a royalty agreement between
the Trust and PrimeWest and a royalty agreement between PrimeWest and a prior
subsidiary of PrimeWest that was assigned by PrimeWest to the Trust
(collectively, the "ROYALTY AGREEMENTS"). Pursuant to the Royalty Agreements,
PrimeWest is required to pay to the Trust the Royalty with respect to a
particular month on the 15th day (or the next business day if the 15th is not
a business day) of the month following. The Royalty is in an amount equal to
99% of the aggregate of the production revenues generated by the oil and
natural gas interests held from time to time by PrimeWest and certain other
revenues, net of certain permitted costs and deductions. The Royalty does not
constitute an interest in land.
17
The Royalty created by the Royalty Agreements attaches not only to
the properties presently owned by PrimeWest, but also to the properties
PrimeWest acquires from time to time. In the event of a future acquisition,
the Royalty Agreements require the Trust to make certain payments to PrimeWest
in an amount equal to 99% of the aggregate of the portion of the acquisition
costs attributable to Canadian resource properties and certain of the capital
expenditures in respect of the properties being acquired. These payments are
referred to as "deferred purchase price obligations" and are payable provided
that, among other things, the Trust is able to fund the deferred purchase
price obligations from the issuance of additional Trust Units, borrowings, the
proceeds of dispositions from other properties or the proceeds of dispositions
of the royalty sold in a concurrent disposition. As a result of the deferred
purchase price obligation, the Trust will provide PrimeWest with 99% of the
funding it requires to acquire additional resource properties. The remaining
1% of the cost of such properties will be borne by PrimeWest using its own
working capital or funds borrowed by it for such purposes.
PLAN OF DISTRIBUTION
The Trust may sell the Trust Units (i) through underwriters or
dealers, (ii) directly to one or more purchasers pursuant to applicable
statutory exemptions, or (iii) through agents in Canada, the United States and
elsewhere where permitted by law for cash or other consideration. The Trust
Units may be sold at fixed prices or non-fixed prices, such as prices
determined by reference to the prevailing price of the Trust Units in a
specified market, at market prices prevailing at the time of sale or at prices
to be negotiated with purchasers, which prices may vary as between purchasers
and during the period of distribution of the Trust Units. The Prospectus
Supplement for any of the Trust Units being offered thereby will set forth the
terms of the offering of such Trust Units, including the name or names of any
underwriters, dealers or agents, the purchase price of such Trust Units, the
proceeds to the Trust from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any public offering price and
any discounts or concessions allowed or re-allowed or paid to dealers or
agents. Only underwriters so named in the relevant Prospectus Supplement are
deemed to be underwriters in connection with the Trust Units offered thereby.
If underwriters are used in the sale, the Trust Units will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase such Trust Units will be
subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Trust Units offered by the Prospectus Supplement
if any of such Trust Units are purchased. Any public offering price and any
discounts or concessions allowed or re-allowed or paid to dealers may be
changed from time to time.
In connection with any offering of Trust Units, the underwriters or
dealers, as the case may be, may over-allot or effect transactions intended to
fix or stabilize the market price of the Trust Units at a level above that
which might otherwise prevail in the open market. Such transactions, if
commenced, may be discontinued at any time.
The Trust Units may also be sold directly by the Trust at such prices
and upon such terms as agreed to by the Trust and the purchaser or through
agents designated by the Trust from time to time. Any agent involved in the
offering and sale of the Trust Units in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Trust to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any agent would be acting on a best
efforts basis for the period of its appointment.
The Trust may agree to pay the underwriters a commission for various
services relating to the issue and sale of any Trust Units offered hereby. Any
such commission will be paid out of the general funds of the Trust.
Underwriters, dealers and agents who participate in the distribution of the
Trust Units may be entitled under agreements to be entered into with the Trust
to indemnification by the Trust against certain liabilities, including
liabilities under securities legislation, or to contribution with respect to
payments which such underwriters, dealers or agents may be required to make in
respect thereof.
18
CASH DISTRIBUTIONS ON TRUST UNITS
RECORD OF CASH DISTRIBUTIONS ON TRUST UNITS
The following table sets forth the per Trust Unit amount of monthly
cash distributions paid by the Trust since January 2004.
DISTRIBUTION DATE MONTH 2006 2005 2004
- ------------------- -------------- ------------- ----------- ------------
February 15 January $ 0.36 $ 0.30 $ 0.32
March 15 February 0.36 0.30 0.25
April 15 March 0.36 0.30 0.25
May 15 April 0.36(1) 0.30 0.25
June 15 May 0.36(2) 0.30 0.25
July 15 June 0.30 0.25
August 15 July 0.30 0.25
September 15 August 0.30 0.275
October 15 September 0.30 0.30
November 15 October 0.30 0.30
December 15 November 0.30 0.30
January 15 December 0.36 0.30
Notes:
(1) Payment will be made on May 15, 2006 to Unitholders of record on April 24,
2006.
(2) Payment will be made on June 15, 2006 to Unitholders of record on May 25,
2006.
DISTRIBUTION POLICY
Cash distributions to Unitholders are at the discretion of the board
of directors of PrimeWest and can fluctuate depending on the cash flow
generated from operations. The cash flow available for distribution is
dependent upon many factors, including fluctuations in the quantity of
petroleum and natural gas substances produced, prices received for that
production, hedging contract receipts and payments, currency exchange rates,
taxes and direct expenses of the Trust, as well as reclamation fund
contributions, current and future capital expenditures and operating costs,
debt service charges and general and administrative expenses determined
necessary by PrimeWest. The Trust receives monthly revenues pursuant to the
Royalty in an amount determined, in part, by the directors of PrimeWest, as
well as income from other sources, and distributes a portion of these revenues
to Unitholders monthly. See "Description of the Royalty" above.
Since August 2003, the Trust has followed a strategy of maintaining a
distribution payout ratio within 70 - 90% of cash flow, calculated on an
annual basis, recognizing that, during periods of volatile commodity prices,
the payout ratio may temporarily move out of range. The board of directors of
PrimeWest considers a variety of factors in establishing the monthly
distribution level, including, but not limited to: commodity price outlook,
cash flow forecast, capital development plans, debt levels, tax considerations
and competitive industry distribution practices. The Trust believes that this
strategy provides the Trust with greater financial flexibility while reducing
the cost and potential dilution associated with financing activities.
CERTAIN INCOME TAX CONSIDERATIONS
The applicable Prospectus Supplement will describe certain Canadian
federal income tax consequences to an investor who is a resident of Canada or
who is a non-resident of Canada of acquiring, owning or disposing of any Trust
Units offered thereunder, including to the extent applicable, whether the
distributions relating to the Trust Units will be subject to Canadian
non-resident withholding tax.
The applicable Prospectus Supplement will also describe certain
United States federal income tax consequences of the ownership and disposition
of any Trust Units offered thereunder by an initial investor who is a United
States person (within the meaning of the United States Internal Revenue Code).
19
LEGAL MATTERS
Certain legal matters in connection with the Trust Units offered
hereby will be passed upon on behalf of the Trust by Stikeman Elliott LLP,
Calgary, Alberta and Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York,
New York.
INTERESTS OF EXPERTS
Reserve estimates contained in the AIF, and incorporated by reference
into this Prospectus, are based upon the report of GLJ Petroleum Consultants
Ltd. ("GLJ") dated January 23, 2006 evaluating, as at December 31, 2005, the
reserves of crude oil, natural gas and associated products attributed to the
properties. The principals of GLJ, as a group, own, directly or indirectly,
less than 1% of the outstanding Trust Units.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Trust are PricewaterhouseCoopers LLP, Chartered
Accountants, 111 - 5th Avenue S.W., Suite 3100, Calgary, Alberta T2P 5L3.
The transfer agent and registrar for the Trust Units is Computershare
Trust Company of Canada at its principal offices in Toronto and Calgary.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of the
registration statement of which this Prospectus is a part insofar as required
by the SEC's Form F-10:
(a) the documents listed under "Documents Incorporated by Reference";
(b) the consent of PricewaterhouseCoopers LLP;
(c) the consent of GLJ;
(d) powers of attorney from PrimeWest's directors and officers; and
(e) the Declaration of Trust.
20
AUDITORS' CONSENT
We have read the short form base shelf prospectus of PrimeWest Energy
Trust (the "TRUST") dated May 12, 2006 (the "PROSPECTUS") relating to the
issue and sale of up to $750,000,000 of trust units of the Trust. We have
complied with Canadian generally accepted standards for an auditor's
involvement with offering documents.
We consent to the incorporation by reference in the above-mentioned
Prospectus of our report to the Unitholders of the Trust on the consolidated
balance sheets of the Trust as at December 31, 2005 and 2004 and the
consolidated statements of income, changes in unitholders' equity and cash
flows for the three years ended December 31, 2005. Our report is dated
February 10, 2006.
Calgary, Alberta (signed) PricewaterhouseCoopers LLP
May 12, 2006 Chartered Accountants
21
[GRAPHIC OMITTED -- LOGO]
P R I M E W E S T
E N E R G Y T R U S T
PART II
INFORMATION NOT REQUIRED TO BE
DELIVERED TO OFFEREES OR PURCHASERS
Section 124 of the Business Corporations Act (Alberta) provides as follows:
124(1) Except in respect of an action by or on behalf of the
corporation or body corporate to procure a judgment in its favour, a corporation
may indemnify a director or officer of the corporation, a former director or
officer of the corporation or a person who acts or acted at the corporation's
request as a director or officer of a body corporate of which the corporation is
or was a shareholder or creditor, and the director's or officer's heirs and
legal representatives, against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, reasonably incurred by
the director or officer in respect of any civil, criminal or administrative
action or proceeding to which the director or officer is made a party by reason
of being or having been a director or officer of that corporation or body
corporate, if
(a) the director or officer acted honestly and in good faith
with a view to the best interests of the corporation,
and
(b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, the
director or officer had reasonable grounds for believing
that the director's or officer's conduct was lawful.
(2) A corporation may with the approval of the Court indemnify a
person referred to in subsection (1) in respect of an action by or on behalf of
the corporation or body corporate to procure a judgment in its favour, to which
the person is made a party by reason of being or having been a director or an
officer of the corporation or body corporate, against all costs, charges and
expenses reasonably incurred by the person in connection with the action if the
person fulfills the conditions set out in subsection (1)(a) and (b).
(3) Notwithstanding anything in this section, a person referred to
in subsection (1) is entitled to indemnity from the corporation in respect of
all costs, charges and expenses reasonably incurred by the person in connection
with the defence of any civil, criminal or administrative action or proceeding
to which the person is made a party by reason of being or having been a director
or officer of the corporation or body corporate, if the person seeking indemnity
(a) was substantially successful on the merits in the
person's defence of the action or proceeding,
(b) fulfills the conditions set out in subsection (1)(a) and
(b), and
(c) is fairly and reasonably entitled to indemnity.
(3.1) A corporation may advance funds to a person in order to defray
the costs, charges and expenses of a proceeding referred to in
subsection (1) or (2), but if the person does not meet the
conditions of subsection (3) he or she shall repay the funds
advanced.
(4) A corporation may purchase and maintain insurance for the
benefit of any person referred to in subsection (1) against any liability
incurred by the person
(a) in the person's capacity as a director or officer of the
corporation, except when the liability relates to the
person's failure to act honestly and in good faith with
a view to the best interests of the corporation, or
(b) in the person's capacity as a director or officer of
another body corporate if the person acts or acted in
that capacity at the corporation's request, except when
the liability relates to the person's failure to act
honestly and in good faith with a view to the best
interests of the body corporate.
(5) A corporation or a person referred to in subsection (1) may
apply to the Court for an order approving an indemnity under this section and
the Court may so order and make any further order it thinks fit.
II-1
(6) On an application under subsection (5), the Court may order
notice to be given to any interested person and that person is entitled to
appear and be heard in person or by counsel.
Section 5 of the bylaws of PrimeWest Energy Inc., the duly authorized
attorney of the Trust, contains the following provisions with respect to
indemnification of PrimeWest Energy Inc.'s directors and officers:
5.01 Limitation of Liability. No director or officer for the time
being of the Corporation shall be liable for acts, receipts, neglects or
defaults of any other director or officer or employee, or for joining in any
receipt or act for conformity, or for any loss, damage or expense happening to
the Corporation through the insufficiency or deficiency of title to any property
acquired by the Corporation or for or on behalf of the Corporation or for the
insufficiency of deficiency of any security in or upon which any of the moneys
of or belonging to the Corporation shall be placed or invested, or for any loss
or damage arising from the bankruptcy, insolvency or tortuous act of any person,
firm or corporation including any person, firm or corporation with whom or with
which any moneys, security or effects shall be lodged or deposited, or for any
loss, conversion, misapplication or misappropriation of or any damage resulting
from any dealings with any moneys, securities or other assets of or belonging to
the Corporation or for any other loss, damage or misfortune whatsoever which may
happen in the execution of the duties of his respective office or trust or in
relation thereto unless the same shall happen by or through his failure to
exercise the powers and to discharge the duties of his office honestly, in good
faith and with a view to the best interest of the Corporation and to exercise
the care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
5.02 Indemnity. The Corporation shall, to the maximum extent
permitted under the Act, indemnify a director or officer, a former director or
officer, and a person who acts or acted at the Corporation's request as a
director or officer of a body corporate of which the Corporation is or was a
shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including any amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Corporation or such body
corporate, including (without limitation) any such action by or on behalf of the
Corporation or such body corporate to procure a judgment in its favour, and the
Corporation shall use its reasonable best efforts to obtain any approval or
approvals necessary for such indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-2
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.1 The Registrant's renewal annual information form dated March
15, 2006 (incorporated by reference to the Registrant's Form
40-F filed with the Commission on March 30, 2006, Commission
File No. 333-13238).
4.2 The Registrant's audited consolidated financial statements
for the years ended December 31, 2005, 2004 and 2003,
together with the notes thereto and the auditors' report
thereon (excluding those portions thereof which appear under
the headings "Trading Performance," "Five Year Financial
Summary," "Five Year Operating Summary," "Five Year Trading,
Performance and Distribution Summary," "Three Year
Distribution History," "Income Tax Considerations," "Premium
Distribution, Distribution Reinvestment and Optional Trust
Unit Purchase Plan," "Definitions," "PrimeWest Structure"
and "Corporate Information," none of which form a part of
the Registrant's audited consolidated financial statements),
and management's discussion and analysis of the financial
condition and operations for the year ended December 31,
2005 (incorporated by reference to the Registrant's Form
40-F filed with the Commission on March 30, 2006, Commission
File No. 333-13238).
4.3 The Registrant's Management Proxy Circular dated March 15,
2006, relating to the annual general and special meeting of
the Unitholders held on May 4, 2006 (incorporated by
reference to the Registrant's Form 6-K filed with the
Commission on March 30, 2006, Commission File No.
333-13238).
4.4 The Registrant's unaudited comparative consolidated
financial statements for the three months ended March 31,
2006, together with the notes thereto, and management's
discussion and analysis of the financial condition and
operations for the three months ended March 31, 2006
(incorporated by reference to the Registrant's Form 6-K
filed with the Commission on May 3, 2006, Commission File
No. 333-13238).
5.1 Consent of PricewaterhouseCoopers LLP
5.2* Consent of GLJ Petroleum Consultants Ltd.
6.1* Powers of Attorney.
7.1 Declaration of Trust dated as of the 2nd day of August,
1996, restated as of November 6, 2002 and amended as of May
6, 2004 between PrimeWest Energy Trust and Computershare
Trust Company of Canada (incorporated by reference to the
Registrant's Form F-3 filed with the Commission on September
8, 2005, Commission File No. 333-128185).
- ---------------------
*Previously filed.
II-3
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
ITEM 1. UNDERTAKING
The Registrant undertakes to make available, in person or by
telephone, representatives to respond to inquiries made by the Commission
staff, and to furnish promptly, when requested to do so by the Commission
staff, information relating to the securities registered pursuant to Form F-10
or to transactions in said securities.
ITEM 2. CONSENT TO SERVICE OF PROCESS
Concurrent with the filing of the Registration Statement on Form F-10
dated May 4, 2006, the Registrant filed with the Commission a written
irrevocable consent and power of attorney on Form F-X.
Concurrent with the filing of the Registration Statement on Form F-10
dated May 4, 2006, the trustee for the Trust Units, Computershare Trust
Company of Canada, filed with the Commission a written irrevocable consent and
power of attorney on Form F-X.
Any change to the name or address of the agent for service of process
of the Registrant shall be communicated promptly to the Securities and
Exchange Commission by an amendment to the Form F-X referencing the file
number of the relevant registration statement.
III-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form F-10 and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Calgary, Province of
Alberta, Canada, on the 12th day of May, 2006.
PRIME WEST ENERGY TRUST, BY ITS AUTHORIZED
ATTORNEY, PRIMEWEST ENERGY INC.
By: /s/ Dennis G. Feuchuk
------------------------------------
Name: Dennis G. Feuchuk
Title: Vice President, Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities indicated on May 12, 2006.
SIGNATURE TITLE
*
- --------------------------------- President and Chief Executive Officer
Donald A. Garner
/s/ Dennis G. Feuchuk Vice President, Finance and Chief Financial
- --------------------------------- Officer (Principal Financial Officer,
Dennis G. Feuchuk Principal Accounting Officer)
*
- --------------------------------- Director
James W. Patek
*
- --------------------------------- Director
Harold P. Milavsky
*
- --------------------------------- Director
Barry E. Emes
- --------------------------------- Director
Harold N. Kvisle
*
- --------------------------------- Director
Michael W. O'Brien
*
- --------------------------------- Director
Kent J. MacIntyre
III-2
*
- --------------------------------- Director
W. Glen Russell
*
- --------------------------------- Director
Peter Valentine
*By: Dennis G. Feuchuk
----------------------------
Name: Dennis G. Feuchuk
Attorney-in-fact
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act of
1933, the undersigned has signed this Amendment to the Registration Statement,
in the capacity of the duly authorized representative of the Registrant in the
United States, on May 12, 2006.
PRIMEWEST ENERGY (USA) INC.
By: /s/ Dennis G. Feuchuk
------------------------------------
Name: Dennis G. Feuchuk
Title: Vice President, Finance
and Chief Financial Officer
III-4
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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4.1 The Registrant's renewal annual information form dated March
15, 2006 (incorporated by reference to the Registrant's Form
40-F filed with the Commission on March 30, 2006, Commission
File No. 333-13238).
4.2 The Registrant's audited consolidated financial statements
for the years ended December 31, 2005, 2004 and 2003,
together with the notes thereto and the auditors' report
thereon (excluding those portions thereof which appear under
the headings "Trading Performance," "Five Year Financial
Summary," "Five Year Operating Summary," "Five Year Trading,
Performance and Distribution Summary," "Three Year
Distribution History," "Income Tax Considerations," "Premium
Distribution, Distribution Reinvestment and Optional Trust
Unit Purchase Plan," "Definitions," "PrimeWest Structure"
and "Corporate Information," none of which form a part of
the Registrant's audited consolidated financial statements),
and management's discussion and analysis of the financial
condition and operations for the year ended December 31,
2005 (incorporated by reference to the Registrant's Form
40-F filed with the Commission on March 30, 2006, Commission
File No. 333-13238).
4.3 The Registrant's Management Proxy Circular dated March 15,
2006, relating to the annual general and special meeting of
the Unitholders held on May 4, 2006 (incorporated by
reference to the Registrant's Form 6-K filed with the
Commission on March 30, 2006, Commission File No.
333-13238).
4.4 The Registrant's unaudited comparative consolidated
financial statements for the three months ended March 31,
2006, together with the notes thereto, and management's
discussion and analysis of the financial condition and
operations for the three months ended March 31, 2006
(incorporated by reference to the Registrant's Form 6-K
filed with the Commission on May 3, 2006, Commission File
No. 333-13238).
5.1 Consent of PricewaterhouseCoopers LLP
5.2* Consent of GLJ Petroleum Consultants Ltd.
6.1* Powers of Attorney.
7.1 Declaration of Trust dated as of the 2nd day of August,
1996, restated as of November 6, 2002 and amended as of May
6, 2004 between PrimeWest Energy Trust and Computershare
Trust Company of Canada (incorporated by reference to the
Registrant's Form F-3 filed with the Commission on September
8, 2005, Commission File No. 333-128185).
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*Previously filed.
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