Oil Trains First Responders

Penn West will be restating its earnings for the past four years. (Matthew Brown/ Associated Press)

Calgary-based energy company Penn West says it will be conducting a thorough review of its books and restating past results.

"While this review is not yet completed," the company said in a statement late Tuesday, "the Board of Directors of Penn West has concluded that certain of the Company's historical financial statements and related management's discussion and analysis must be restated, which may result in the release of second quarter 2014 financial results being delayed."

Regulators in the U.S. and Canada have already been notified of the move. But it came as a shock to investors, who pushed shares in the $5 billion company down more than 10 per cent in premarket trading Wednesday.

By late Wednesday, stocks were down 14 per cent, closing at $8.56.

The review stretches back over the last  four fiscal years but does not impact the company's anticipated growth going forward.

The company has hired independent auditors to look at its books and so far they have uncovered:

  • $70 million worth of operating expenses that were reclassified as capital expenditures on things like property, plant and equipment in fiscal 2013;
  • $110 million of similar expenses incorrectly classified in fiscal 2012;
  • $100 million in operating expenses that were incorrectly reclassified as royalty expense in each of the past two years.

The company says the review is still preliminary, so those numbers and findings could change, adding that "The senior finance and accounting personnel believed responsible for the adoption and use of these practices have ceased to be employed by the company." 

Penn West warned in the note it expects its next set of earnings to be delayed because of the review.

Penn West's CEO only took over the top job in June 2013, and is leading a move by the company to sell off as much as $2 billion in assets.