On a conference call to discuss Penn West's (TSX:PWT) belatedly released second-quarter results, executives sought to reassure investors that controls have been put in place to ensure such errors don't occur again, drilling plans remain on track and the company is on solid financial footing.
"The financial and operating health of our organization remains strong," said chief financial officer David Dyck, who brought the irregularities to light shortly after starting his job in May.
Shares in Penn West had been under pressure since the accounting problems were revealed in July. The stock surged as much as 12 per cent on the Toronto Stock Exchange on Thursday before closing up nearly eight per cent or 60 cents at $8.33.
The company restated its financial reports for 2012, 2013 and the first quarter of 2014. On Thursday, Penn West said it was necessary to dig into financial statements as far back as 2007, but hasn't found any further accounting practices that need to be addressed.
"From a financial point of view, we continue to meet all of our financial covenants. Our debt and cash positions were not impacted by the restatement. We continue to meet all of our commitments as they come due," Dyck said.
In its review, Penn West found some expenses were incorrectly classified as property, plant and equipment costs instead of operating expenses, while others were incorrectly classified as royalties instead of operating expenses.
Penn West has beefed up its oversight, Dyck said.
"Specifically, senior management is focused on improving processes and controls by conducting ongoing compliance, accounting policy and controls training for its accounting and finance staff and increasing awareness in ensuring effectiveness in the company's whistleblower line."
Penn West also said it's reclassifying some $80 million of its capital budget this year as operating expenses following the internal review. The change means the company's 2014 capital budget will be $820 million instead of $900 million, however it said its drilling plans for this year remain unchanged.
The net result of the changes cut the company's 2012 net income by $24 million or 16 per cent, but increased its 2013 net income by $29 million or three per cent. Penn West's net income for the first quarter of 2014 was increased by $7 million or seven per cent.
Penn West reported Thursday a second-quarter profit of $143 million, or 29 cents per share, compared with a loss of $53 million, or 11 cents per share, in the same quarter last year.
Revenue totalled $650 million, down from $745 million a year ago.
Penn West is facing several lawsuits over the restatements
"Clearly we take seriously any and all litigation that Penn West is involved in," said Keith Luft, general counsel and vice-president of corporate services.
"We've taken efforts to retain what we believe are extremely competent counsel both in the United States and Canada and we will defend these actions vigorously."
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