US Charges Penn West Petroleum with Accounting Fraud

 

The U.S. Securities and Exchange Commission alleged Penn West Petroleum, which this week changed its name to Obsidian Energy, moved hundreds of millions of dollars from operating expense accounts to capital expenditure accounts. That maneuver, the SEC said, artificially reduced the company's operating costs by as much as 20 percent at times, and improved metrics for oil extraction efficiency.

 

The company issued a statement saying the lawsuit was based on "historic" accounting practices that were discovered and reported to the SEC in July 2014.

 

The company restated its financial statements in September that same year.

 

"We are naturally disappointed that the SEC has chosen to pursue these past matters which we reported to them and fully remediated years ago," Chief Executive Officer David French said, adding that employees involved in the accounting issue had left the company.

 

Penn West was one of Canada's largest oil and gas producers at the time of the alleged offences, producing around 100,000 barrels of oil equivalent per day. It has since downsized by selling the bulk of its assets and now produces 31,000 boepd, primarily in Alberta's Cardium, Peace River and Viking plays.

 

The SEC's complaint, filed in federal court in Manhattan, charged former Chief Financial Officer Todd Takeyasu, former vice president of accounting and reporting Jeffery Curran, and former operations controller Waldemar Grab.

 

The SEC said the three manipulated operating expenses to lower a key metric related to the cost of oil extraction.

 

Grab, the SEC said, is cooperating with the agency and has agreed to settle the case without admitting or denying wrongdoing.

 

Richard Albert, an attorney for Takeyasu, said his client was confident "the SEC's claims against him are meritless and he looks forward to defending this case vigorously and prevailing in court."

 

Helen Gredd, an attorney for Curran, said the SEC's portrayal of her client "bears no resemblance to reality" and he will be vindicated.

 

An attorney for Grab could not immediately be reached for comment.

 

The Alberta Securities Commission conducted an investigation into Penn West but has not brought charges.

 

"Our investigation led us to a different conclusion to that of the SEC," said spokeswoman Alison Trollope.

 

Penn West shares were down 6.9 percent on the Toronto Stock Exchange at C$1.62.