Background on the Penn West Securities Class Litigation
The actions charge Penn West and certain of its senior officers with
violations of the Securities Exchange Act of 1934. Penn West is one of
the largest conventional oil and natural gas producers in Canada.
The complaints allege that during the Class Period, defendants made
materially false and/or misleading statements about Penn West's
business, operational and compliance policies.
On July 29, 2014, Penn West announced that it had launched an internal
review of its accounting practices and that its Board of Directors had
concluded that the Company's financial statements for at least the years
ended December 31, 2012 and 2013, and for the three months ended March
31, 2013 and 2014, and related management's discussion and analysis
("MD&A") must be restated. According to Penn West, its Audit Committee
found that for 2012 and 2013, approximately $181 million in operating
expenses were reclassified to property, plant and equipment as capital
expenditures without adequate support, and that the Company had
"incorrectly reclassified" approximately $200 million in additional
operating expenses as royalty expenses. According to Penn West, these
practices appeared to have existed in prior years, necessitating a
review of all financial statements issued for the fiscal years 2010
Penn West further disclosed that as a result of identified accounting
practices and the Company's decision to restate certain historical
financial statements and possibly delay the release of its second
quarter 2014 financial results, Penn West may not be in compliance with
certain of its covenants under its unsecured, revolving syndicated bank
facility and the terms of its senior unsecured notes.
On this news, the price of Penn West stock trading on the NYSE fell
$1.30 per share, or 14.21%, from a previous close of $9.15 on July 29,
2014, to close at $7.85 per share on July 30, 2014, on extremely heavy
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