Penn West Petroleum Ltd. (PWT), the Canadian energy producer seeking C$2 billion ($1.8 billion) in asset sales, dropped the most in more than eight months after announcing an accounting review going back more than four years.
Penn West plunged 14 percent to C$8.57 at close in Toronto today, the most since Nov. 6, after earlier falling 18 percent. The Calgary-based company said yesterday its board’s audit committee and independent advisers are examining reporting in 2014 and four previous fiscal years, which may delay the release of second-quarter financial results.
Penn West Chief Executive Officer Dave Roberts, who took over in June 2013, is seeking to execute a turnaround plan he announced in November that included asset sales and dividend and job cuts.
“We would continue to await a better entry point on the stock,” Kristopher Zack, an analyst at Desjardins Securities Inc. in Calgary, said in a note today. “At the very least, the review represents another distraction for the board and senior management from the broader task of further improving operational efficiencies and reducing debt levels through asset dispositions.”
The review will result in Penn West restating some past financial statements, which may cause it to reduce capital spending plans, royalty expenses and cash flow assumptions for 2014 and boost its operating cost forecast, the company said yesterday. Penn West also said it’s starting talks with lenders because the revision may cause it to violate agreements covering its debt.
The probe doesn’t affect previously disclosed cash and debt balances, its production target for 2014 and its operations, strategy and future growth plans, the company said. Penn West began the review after Chief Financial Officer David Dyck started in that position on May 1.
Initial findings show that past accounting entries appear to have reduced operating costs and increased capital spending and royalty expenses, without adequate supporting documents, the company said. Penn West said the employees it believes are responsible for the reporting no longer work for the company.
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