CALGARY -- Shares in Penn West Petroleum dropped sharply Wednesday morning after the U.S. Securities and Exchange Commission announced it had filed fraud-related charges against it and three former finance executives.
The Calgary-based oil and gas firm's stock fell by as much as 10.34 per cent, or 18 cents, to a 52-week low of $1.56 after it was briefly halted on the Toronto Stock Exchange for the announcement of the SEC filing.
The news comes two day after Penn West changed its name to Obsidian Energy Ltd., vowing to distance itself from its debt-burdened and scandal-tainted past.
Commenting on the SEC charges, CEO David French says Penn West is co-operating with the U.S. agency.
"Our expectations are that there will be a discussion around remedy," he said.
"We don't see there being a material effect to the business and we don't think that there was intention in any way with what Penn West did at the time," French added.
The SEC alleges the company and the three executives participated in a "multi-year accounting fraud" where hundreds of millions of dollars were moved from operating expense accounts to capital expenditure accounts to improve the appearance of its operating metrics.
None of the allegations against Penn West and the former executives have been proven in court.
The SEC charges involve accounting issues that led to the company reporting in September 2014 that it would restate its financial statements from 2012 to the first quarter of 2014.
Last year, Penn West paid C$53 million to settle resulting class action lawsuits by Canadian and American shareholders.
French said he is "disappointed" that an issue thought to have been resolved in the past has emerged when the company is trying to adopt a new path forward. He added that the issues that led to the accounting scandal have long been resolved by the appointing of new auditors and adoption of new accounting control practices.
The SEC alleges that the accounting errors were orchestrated by former chief financial officer Todd Takeyasu, former vice-president of accounting and reporting Jeffery Curran, and former operations controller Waldemar Grab.
They, along with the company, are charged with violating "anti-fraud, reporting, books and records and internal controls provisions" of U.S. securities laws.
"The SEC seeks permanent injunctions and monetary relief against all the defendants, officer-and-director bars from Takeyasu and Curran, and a clawback of incentive-based compensation awarded to Takeyasu," it said in a news release.
It said Grab is co-operating with the litigation and has agreed without admission of guilt to a settlement including permanent injunctions and a ban on acting as an officer or director.
Phone messages left for Takeyasu and Grab were not immediately returned. Attempts to contact Curran have been unsuccessful.
The SEC's said its investigation found no personal misconduct by two former Penn West CEOs, Murray Nunns and David Roberts, who reimbursed the company for cash bonuses and certain stock awards they received during the period of the alleged violations.
