UPDATE 2-Penn West to restate results amid accounting probe, shares slump

Wed Jul 30, 2014 2:05pm EDT
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(Adds details, investor comment, threat of legal action; updates shares)

By Scott Haggett

CALGARY, July 30 (Reuters) - Penn West Petroleum Ltd said it has uncovered accounting irregularities that misclassified nearly C$300 million ($275.05 million)in expenses over the last four years, and the Canadian oil producer will restate its results.

Investors reacted with dismay, sending its shares down 18 percent on Wednesday, while several U.S. law firms said they would assess if there had been violations of securities laws on behalf of Penn West's investors and lawsuits could follow.

Penn West, listed in Toronto and New York, said that a preliminary review of its accounting practices carried out by Chief Financial Office David Dyck, who was appointed May 1, found that C$70 million of operating expenses were classified as capital expenditures in fiscal 2013.

It also found C$111 million of expenses that were listed as capital expenditures in fiscal 2012 while C$100 million of operating expenses were listed as royalty expenses in each of the 2012 and 2013 fiscal years.

The company said it has notified regulators of the irregularities and will restate its financial statements for 2012 and 2013 as well as for the first quarter of this year.

Penn West is in the midst of a restructuring after years of underperforming rivals. Since George, the former chief executive of Suncor Energy Inc, took control of the board last year, the conventional oil producer replaced its chief executive, appointing David Roberts, the former chief operating officer of Marathon Oil Corp. It has also let go senior managers and sold assets to help bring costs under control.

"We think the assets are good ... but unfortunately there continue to be some skeletons in the closet from the previous management team." said Ryan Bushell, an asset manager at Leon Frazer & Associates, which holds about 3 million Penn West shares.   Continued...