More bad news from Penn West

[msommers]

By Lauren Krugel, The Canadian Press

CALGARY - Shares in Penn West Petroleum Ltd. (TSX:PWT.TO - News) fell sharply Wednesday after the company announced it's reviewing its accounting practices going back several years and will have to restate some of its past financial reports.

The stock was down more than 17 per cent at $8.24 in midday trading on the Toronto Stock Exchange.

Late Tuesday, the Calgary-based oil and gas producer said chief financial officer David Dyck, who started in the role on May 1, found inadequate documentation to support how some of its expenses were classified in the past.

The review will result in a restatement of previous financial reports for at least 2012 and 2013, as well as for the first quarter of 2014, and may delay completion of its full second-quarter report.

The review covers 2014 so far and the four previous fiscal years.

"We have acted quickly and effectively to review our accounting practices. We will take the steps necessary to correct our historical financial statements and we will take appropriate steps to ensure that we avoid a similar situation in the future," board chairman Rick George, the former CEO of Suncor Energy Inc. (TSX:SU.TO - News), said in a statement.

Among other things, the board's audit committee and its independent advisers have identified $111 million of operating expenses that were classified without adequate support as capital expenditures in property, plant and equipment in 2012 and a further $70 million in 2013.

They also found about $100 million in operating expenses that were incorrectly reclassified as royalty expenses.

Penn West said the review may require it to reduce its 2014 capital spending and royalty expense assumptions, as well as increase operating cost assumptions. That would result in lower funds flow this year than anticipated.

However, its cash and debt balances, production guidance and operations are unaffected.

Separately, Penn said its 2014 production guidance remains between the equivalent of 101,000 and 106,000 barrels per day of crude, gas and liquids.

In the quarter ended June 30, Penn West says it produced the equivalent of about 108,130 barrels per day.

"If you read that release, you will find that our asset quality and execution capability remain strong, our long-term plan for the company remains intact, and importantly today, we are on target to deliver on our promises to our stakeholders," said CEO Dave Roberts.

"As a result of the improvements we have made to the business in the past year, we are a more resilient organization today."

Desjardins analyst Kristopher Zack said the production figures were positive, but the accounting review is just "another distraction" for a company that has been trying to turn itself around.

"Although the company has continued to make solid progress by improving operating efficiencies in its key focus areas, we believe the accounting review will provide another overhang on the stock," he said in a note to clients.

Analysts at Dundee Capital Markets said the financial restatements shouldn't have a material impact. They said the Penn West ship is "heading in the right direction," but it's "not at full steam (yet)."

Penn West has had a tumultuous ride over the past year or so, replacing its CEO, slashing its dividend, cutting its workforce and selling assets.

https://ca.finance.yahoo.com/news/pe...163726673.html

[OU812]

the sky is falling the sky is falling!!! house price bust here we come.

[msommers]

Uhh...

Maybe if you're an accountant at PW the sky is falling lol.

[killramos]

Anyone here still stuck there?

In all seriousness it's probably a good time to make a quick 10%. 14% drop seems exaggerated.

[BigMass]

Originally posted by OU812
the sky is falling the sky is falling!!! house price bust here we come.

most O&G people on this forum seem to be working for producers which has a much more stable work force and a longer lag time before they're affected by layoffs. However, the crap going down is really affecting EPCMs which are seeing less work trickle down due to budget cuts so they have to lay people off. Also, growth is zero and the only way most of these smaller companies can increase profits is to fire people and have the people that are left work twice as hard to produce the same amount of work as before. At my previous office, the few people that remained have horrible morale due to the ever stressful work environment and the shoddy job security. It kind of sucks right now for people I know personally, but im sure most beyond ballers are booming to new heights daily.

[killramos]

And apparently the vultures have descended!

The number of law firms looking into a class action is shocking...

[flipstah]

Originally posted by BigMass


most O&G people on this forum seem to be working for producers which has a much more stable work force and a longer lag time before they're affected by layoffs. However, the crap going down is really affecting EPCMs which are seeing less work trickle down due to budget cuts so they have to lay people off. Also, growth is zero and the only way most of these smaller companies can increase profits is to fire people and have the people that are left work twice as hard to produce the same amount of work as before. At my previous office, the few people that remained have horrible morale due to the ever stressful work environment and the shoddy job security. It kind of sucks right now for people I know personally, but im sure most beyond ballers are booming to new heights daily.

EPCM's always get hit first when it comes to situations like these

Also, irregularities goes back 4 years? I guess someone was cooking the books and someone narc'd internally.

[Sugarphreak]

...

[HiTempguy1]

Originally posted by BigMass


most O&G people on this forum seem to be working for producers which has a much more stable work force and a longer lag time before they're affected by layoffs. However, the crap going down is really affecting EPCMs which are seeing less work trickle down due to budget cuts so they have to lay people off. Also, growth is zero and the only way most of these smaller companies can increase profits is to fire people and have the people that are left work twice as hard to produce the same amount of work as before. At my previous office, the few people that remained have horrible morale due to the ever stressful work environment and the shoddy job security. It kind of sucks right now for people I know personally, but im sure most beyond ballers are booming to new heights daily.

So, in short, people took jobs to earn mad skrilla when the times were good and the job security/risk with these jobs was high risk/poor job security, and they are... what, surprised?

As I've pointed out before, nobody should have a 30 year career in new construction.

There are only so many oilsands plants that can be built up north. At somepoint, that shit stops getting built, and all the newfies go back home.

[BigMass]

Originally posted by HiTempguy1


So, in short, people took jobs to earn mad skrilla when the times were good and the job security/risk with these jobs was high risk/poor job security, and they are... what, surprised?

As I've pointed out before, nobody should have a 30 year career in new construction.

There are only so many oilsands plants that can be built up north. At somepoint, that shit stops getting built, and all the newfies go back home.

lol dude.. most people work because they need a fucking job Its really that simple. Not, "mad skrilla" or some imaginary job security or other delusions about an oil and gas career. People just want a damn job so they can pay their damn bills, support their damn family / kids and live their damn lives. Sure some people in Calgary have it made in the shade with expensive cars and houses. But that's not everyone. That's definitely not me and my friends. We're regular guys with families and bills to pay that just want regular jobs and to live regular lives. And this type of up and down shit is damn stressful. If I could go back 20 years and chose a different path would I? Maybe. it's pointless to think about it, just deal with it now and move on. But don't make out everyone working in O&G to be some big baller rolling in cash while exploiting high salaries and oil sands and shit, because that's just not true.

Plus this isn't just O&G anymore. The economy is changing and the days of job security is over no matter what. Every type of business is looking at increasing profits through the easiest means possible. Layoffs, automation and efficiencies. It's an unavoidable progression of humanity. Happening all throughout tech now as well, retail, restaurants etc. Long waits everywhere because everyone is understaffed. Why, because they can't find employees? Nah, because they just don't want to hire more people and cut into their bottom line.

[XylathaneGTR]

Originally posted by HiTempguy1


So, in short, people took jobs to earn mad skrilla when the times were good and the job security/risk with these jobs was high risk/poor job security, and they are... what, surprised?

Like BigMass said...starting as a new grad/junior at an EPC, you're just looking for a job man and I wouldn't call a 55-60k start "mad skrilla." Not bad, but you're not going to be making it rain very heavy with that.

[01RedDX]

.

[BigMass]

Originally posted by XylathaneGTR

Like BigMass said...starting as a new grad/junior at an EPC, you're just looking for a job man and I wouldn't call a 55-60k start "mad skrilla." Not bad, but you're not going to be making it rain very heavy with that.

Yep. A lot of guys I know with many years of work experience are making 70k-80k have wife (often stay at home), couple kids, don't even own a place because with Manhattan type rents and huge cost of living, they're lucky to have anything left over at the end of the month to save for a down payment. The lucky ones break even, a lot are in debt up to their eyeballs.

Most ballers rolling in cash often aren't supporting someone (kids, wife, sick parents), and often have purchased their homes pre-boom so even if they're not making huge salaries they have tons of home equity they can use to invest. That's hardly the story of everyone living in Calgary now.

[HiTempguy1]

Originally posted by XylathaneGTR

Like BigMass said...starting as a new grad/junior at an EPC, you're just looking for a job man and I wouldn't call a 55-60k start "mad skrilla." Not bad, but you're not going to be making it rain very heavy with that.

That is a shit-ton of money for some snot-nosed 22 year old university grad. I'd know, as I'm only 26

There is no reason a recent grad can't live on that money. I lived on $45k/year when I first graduated and did all the things.

By the time you are having a kid(s), you should be well over $80k. And if you have a stay at home wife... only 1 out of 5 Canadian couples did this as of 2010 (if they had children in the house).

So, I honestly don't see your point. You (general you applied to all Albertans) are making bank compared to the rest of the country, Alberta's cost of living isn't THAT nuts (detached housing and condos are still quite cheap for what you get)... so I don't see the problem.

If you are over the age of 30, with a degree, and are not making over $80k/year in this province... that isn't anyone's fault but your own.

That isn't to say that maybe you are sacrificing the big bucks to have a better life balance? But those are the tradeoffs. Life is full of lessons. Don't pop out kids until you get a bit of financial security under you. Don't spend all the money, put some into equity in your property so your payments aren't crazy. Have the wife work a part time job/side business or (god forbid) work like the other 80% of couples do in Canada.

I dunno man, its hard to see the issue here. I get it that at the end of the day, someone has to work these jobs, and it might just so happen to be YOU or ME. But there are risks/rewards to everything. A smart, driven individual will make it work. And should have thought of the risks/rewards before plopping down $40k and 4 years of their life for a degree that may not be getting them where they want to be.

Alberta is f*&king nuts right now in shortages of everything practically. The economy slowing down isn't bad, it just returns everything to what a normal economy looks like. Hence my comment all the newfies leave; this gravy train will not keep rolling forever, and when it dies down, there will be a lot of people who realized they made a mistake of putting all their eggs in one basket.

[killramos]

Originally posted by HiTempguy1


That is a shit-ton of money for some snot-nosed 22 year old university grad. I'd know, as I'm only 26

There is no reason a recent grad can't live on that money. I lived on $45k/year when I first graduated and did all the things.

By the time you are having a kid(s), you should be well over $80k. And if you have a stay at home wife... only 1 out of 5 Canadian couples did this as of 2010 (if they had children in the house).

So, I honestly don't see your point. You (general you applied to all Albertans) are making bank compared to the rest of the country, Alberta's cost of living isn't THAT nuts (detached housing and condos are still quite cheap for what you get)... so I don't see the problem.

If you are over the age of 30, with a degree, and are not making over $80k/year in this province... that isn't anyone's fault but your own.

That isn't to say that maybe you are sacrificing the big bucks to have a better life balance? But those are the tradeoffs. Life is full of lessons. Don't pop out kids until you get a bit of financial security under you. Don't spend all the money, put some into equity in your property so your payments aren't crazy. Have the wife work a part time job/side business or (god forbid) work like the other 80% of couples do in Canada.

I dunno man, its hard to see the issue here. I get it that at the end of the day, someone has to work these jobs, and it might just so happen to be YOU or ME. But there are risks/rewards to everything. A smart, driven individual will make it work. And should have thought of the risks/rewards before plopping down $40k and 4 years of their life for a degree that may not be getting them where they want to be.

Alberta is f*&king nuts right now in shortages of everything practically. The economy slowing down isn't bad, it just returns everything to what a normal economy looks like. Hence my comment all the newfies leave; this gravy train will not keep rolling forever, and when it dies down, there will be a lot of people who realized they made a mistake of putting all their eggs in one basket.

ANNNNNDDDDDD It's all Penn Wests fault!

[Feruk]

Back on topic. As someone who used to work at Penn West, it always surprised me how much of what should've been operating expenses they were allowed to capitalize... Guess they actually weren't. What's more scary is reclassifying operating expenses as royalty expenses. The reason the stock tanked wasn't just historic. There's a good chance they were understating operating expenses this year as well and 2014 net income might be lower. There's a saying I heard from an ex Penn West employee: "I've never met an ex Penn West employee who wishes they were still working there." Holds even more true today.

What makes me especially mad is I bought some Jan 2015 calls on the company thinking Q2 was gonna be good. Now it doesn't matter if Q2 will be good. Went from 100% return to 67% loss. Fuck!

[ExtraSlow]

What's also interesting about that company is that they are still agressively recruiting for a few positions.

[2000impreza]

I wonder how KPMG, their auditors missed this for so many years.

[Feruk]

Originally posted by ExtraSlow
What's also interesting about that company is that they are still agressively recruiting for a few positions.

Most of the "good" people quit on their own. Why wouldn't you when the company's going to shit, there is round after round of layoffs, and you can get a job easily somewhere else? This is especially true of their facilities engineerings, which usually never stayed very long.

[lasimmon]

Originally posted by 2000impreza
I wonder how KPMG, their auditors missed this for so many years.

Now I am not trained in the auditing department but my gf and a couple friends are with the big 4. They mentioned that its not the auditors job to determine if someone is cooking the books per se. But to just check and make sure the numbers are right. As in they could "check out" but still not be true?

I could be way off, as honestly I don't really listen when they talk accounting...