WASHINGTON (Reuters) - U.S. securities regulators on Wednesday filed civil accounting fraud charges against Canada-based oil and gas company Penn West Petroleum Ltd and several of its former top finance executives.
The U.S. Securities and Exchange Commission alleged that Penn West Petroleum, which changed its name earlier this week to Obsidian Energy, had 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.
“This is particularly true since the employees involved in the matters have long since left the company,” he added.
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, which was filed in federal court in Manhattan, also 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 had 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 is confident that “the SEC’s claims against him are meritless and he looks forward to defending this case vigorously and prevailing in court.”
Attorneys for Curran and Grab could not be immediately reached for comment.
The Alberta Securities Commission also conducted an investigation into Penn West but has not brought any charges.
“Our investigation led us to a different conclusion to that of the SEC,” spokeswoman Alison Trollope said in an email.
Penn West shares were last down 6.9 percent on the Toronto Stock Exchange at C$1.62.
Reporting by Sarah N. Lynch; additional reporting by Susan Heavey and Tim Ahmann, and Nia Williams in Calgary; Editing by Phil Berlowitz and Andrew Hay