Penn West Petroleum Ltd. (PWE) plunged 14.8% over the last two trading sessions to close at $7.85 on Jul 30. The fall was precipitated by the announcement on Jul 29 of an internal review of financial results in 2014 and four previous years. In the review, the historical numbers would be examined by the board’s audit committee and independent advisors. This review process however would delay the release of second-quarter financial results.
The review arises from accounting practices that came to the attention of the company's new senior vice president and chief financial officer, David Dyck, who assumed that position on May 1, 2014. The bone of contention in for the review includes certain entries which appear to have been made to reduce operating costs and increase the reported capital expenditures and royalty expense.
This will result in the company restating its historical capital expenditure plans, royalty expenses, cash flow and raise its operating cost forecast for 2014. However the restatement may also result in the company exceeding its debt agreements. To mitigate this, management has already inititated discussion with its lenders to revise the ongoing debt agreements.
The internal review came over the heels of the ongoing turnaround attempt by the Chief Executive Officer Dave Roberts who came at the helm only in Jun 2013. The incumbent management’s effort for the turnaround which included asset sales, slashing dividends and job cuts, so far has not been successful. The Calgary-based company reported number in the red in the last three out of four quarters.
Penn West Petroleum is an exploration and production company, acquires, explores, develops, exploits, and holds interests in petroleum and natural gas properties and related assets in western Canada. Its properties are located in Alberta, British Columbia, Saskatchewan, Manitoba, and the Northwest Territories, Canada; and Wyoming in the U.S.
Penn West Petroleum currently carries a Zacks Rank #3 (Hold). Other better-ranked stocks in the same sector include Newfield Exploration Co. (NFX), Weatherford International plc (WFT) and Cameron International Corp. (CAM). All these stocks sport a Zacks Rank #1 (Strong Buy).