On August 15, 2014, Rochon Genova LLP commenced a class action on behalf of shareholders against Penn West Petroleum Ltd. ("Penn West" or the "Company") (TSX - PWT; NYSE - PWE).
The action relates to the July 29, 2014 announcement by Penn West, one of Canada's largest energy companies, that it had launched a review of its financial statements for 2014 and the four previous fiscal years, and that those statements could no longer be relied upon.
Penn West's Audit Committee found that certain accounting entries, which had the effect of reducing operating costs and increasing the Company's reported capital expenditures and royalty expenses, had been made without adequate supporting documentation. The practices which led to the improper classification of operating expenses in the fiscal years 2012 and 2013 appeared to have existed in prior years, necessitating a review of all financial statements issued for the fiscal years 2010 through 2014. As a result of the Audit Committee's review, Penn West decided to restate the Company's audited annual financial statements for at least the years ended December 31, 2012 and 2013, unaudited interim financial statements for the three months ended March 31, 2014 and 2013, and all related management's discussion and analysis ("MD&A"). Penn West further stated that it might not be in compliance with certain of its covenants under its unsecured, revolving syndicated bank facility and the terms of its senior unsecured notes.
As a result of the announcement, Penn West's share price on the TSX fell precipitously on heavy trading volume as the market absorbed the news. Penn West lost nearly 20 per cent of its value in just over a week.
Rochon Genova commenced the class action on behalf of purchasers of Penn West securities on the Toronto Stock Exchange. Rochon Genova is working in cooperation with Lieff Cabraser Heimann and Bernstein of New York, which is investigating Penn West on behalf of purchasers on the New York Stock Exchange.