US Holders
Below is subject to the limitations outlined in the May 10, 2010 Information Circular, as specified in the sections entitled "Certain US Federal Income Tax Considerations for Provident Unitholders" and “Certain US Federal Income Tax Considerations for Midnight Shareholders”.
Provident Energy Trust Unitholders
Subject to the limitations outlined in the May 10, 2010 Information Circular, under “Certain U.S. Federal Income Tax Considerations for Provident Unitholders” the exchange of the share consideration percentage of each Provident unit for Pace shares will more likely than not qualify as a tax deferred transaction and as such no gain or loss would be recognized by the U.S. Holder.
All Provident Energy Trust Unitholders of record on July 9, 2010 received 0.12225 Pace Oil & Gas Ltd. shares for each Provident Trust unit held on a share for unit exchange. Provident subdivided the remaining Provident Units after the Arrangement so Provident Unitholders would continue to hold the same number of Provident Units as previouly held immediately prior to the Arrangement. The Provident Energy Trust Units adjusted cost base (“ACB”) should be reduced by the ACB allocated to the Pace shares. The allocation of the ACB may be done on a percentage basis with 15.96% (the “Share Consideration Percentage”) of the ACB being allocated to the Pace shares, with Provident Unitholders receiving 0.12225 Pace shares for every unit held.
For example, a U.S. Holder who owned 1,000 Provident units with an aggregate tax basis of $8,000 would have received 1,000 x 0.12225 = 122 Pace shares. The Holder would allocate 15.96% of their cost base or $1,276.80 to the Pace shares, which becomes the adjusted cost base of the Pace shares received, and reduce the tax basis of their Provident units by this same amount resulting in a tax basis of $6,723.20 for their Provident units.
The U.S. Holder’s holding period in the Pace shares acquired in exchange for Provident Units pursuant to the Arrangement will include the U.S. Holder’s holding period for the Provident units exchanged. A U.S. holder that exchanged Provident Units for Pace shares may be required to report certain information to the IRS on their U. S. federal income tax returns and retain certain records relating to the Arrangement.
Midnight Oil Exploration Ltd. Shareholders
Subject to the limitations outlined in the May 10, 2010 Information Circular, under “Certain U.S. Federal Income Tax Considerations for Midnight Shareholders” the Arrangement should qualify as a tax deferred transaction and as such no gain or loss would be recognized by the U.S. Holder.
As part of the Arrangement, Midnight shares were consolidated on the basis of one post-consolidation share for every ten pre-consolidation share (10:1). Therefore the number of shares previously held is divided by 10 and the aggregate adjusted cost base of the shares remains the same.
For example if a U.S. Holder had 1,000 Midnight shares with an aggregate tax basis of $1,000 (average of $1.00 per share) prior to the arrangement, the Holder would have 100 Pace shares with an aggregate tax basis of $1,000 (average of $10.00 per share) after the arrangement.
The U.S. Holder’s holding period in the Pace shares will include the U.S. Holder’s holding period for the Midnight shares exchanged. A U.S. holder that exchanged Midnight shares for Pace shares may be required to report certain information to the IRS on their U.S. federal income tax returns and retain certain records relating to the Arrangement.
All Shareholders
The tax information provided does not constitute and is not intended to be legal or tax advice to any particular holder or potential holder of Pace Oil & Gas Ltd. (“Pace”) shares. Holders or potential holders of Pace shares are urged to consult their own legal and tax advisors as to their particular income tax consequences of holding Pace shares. All information provided is subject to the limitations outlined in the Information Circular dated May 10, 2010.
Pace had no distributions or dividends in 2010.
CONTACT US
Spyglass Resources Corp.
Livingston Place | West Tower
1700, 250 - 2nd Street SW
Calgary, Alberta T2P 0C1
M 403 303 8500 | F 403 264 0085
General Inquiries
info@spyglassresources.com
Investor Inquiries
ir@spyglassresources.com
E-mail Updates
Receive an e-mail containing the full text of Spyglass' news releases as they are published.
Register