Penn West Petroleum (TSE: PWT) stock tumbled 4.60% on Wednesday. SEC is charging ex-executives at the company for accounting fraud. U.S. securities regulators are filing charges against the Canadian oil and gas company for alleged civil accounting fraud.
The company, which changed name to Obsidian Energy this week, allegedly moved money from operating expense accounts to capital expenditure accounts. The alleged fraud is to the tune of hundreds of millions of dollars.
The move reduced the company’s operating costs by nearly 20% at times and made the company’s extraction business seem more efficient, according to reports. The company is claiming that the filing is baseless and that the problem was discovered and corrected after it was reported to the SEC in July 2014.
Changes to accounting methods are common, with GAAP undergoing several major changes each year.
The company states that they find this matter dissapointing and that all employees involved in the accounting issue left the company.
Three Executives Charged
The SEC is charging former Chief Financial Officer Todd Takeyasu, former operations controller Waldemar Grab, and former VP of accounting and reporting Jeffrey Curran. The SEC alleges that the three manipulated the company’s operations expenses to mask the true cost of the company’s oil extraction process.
Penn West, at the time of the offenses was producing 100,000 barrels of oil per day. The company’s operations have since been reduced by more than 66%, and is now producing 31,000 barrels per day.
Grab is a key figure who has been cooperating with the SEC to reach a settlement in the case. The settlement will not include Grab admitting or denying that he partook in any wrongdoing at the time.
Curran’s lawyer states that her client’s portrayal in the matter is nowhere near reality.
Penn West’s stock has tumbled since the accusations. The stock fell from nearly $9 a share in 2014 to just $1.66 a share. The decline marks an over 75% decline in the company’s stock.
The stock remains down over 8% in the trailing 12-month period as operations continue to slow. Penn West’s stock is down over 24% in the past 90-day period and over 15% in the trailing 30 days.
The company’s recent name change is an effort to transition forward after the company’s troubled past. The company also announced a leadership change a little over a week ago. Penn West is bringing in Bankers Petroleum CEO David French to lead the company.
Shareholder sentiment remained low after the announcement, with the stock slumping 5.29% the next day.