History
In 1995 Penn West, then an independent exploration and production company called Penn West Petroleum Ltd, was the operator and licensee of a well in Saddle Hills Field, Alberta, where they held rights to an entire DSU.[5][6]
In May 2005, Penn West under the new trade name "Penn West Energy Trust" operated as a Canadian royalty trust (CANROY). According to a 2004 article in The New York Times, the Canadian royalty trusts (CANROY) were "much larger, both in production and in market capitalization", than those in the United States. They produce about 11 percent of the oil and 23 percent of the natural gas in Canada and have a combined market capitalization of 34 billion Canadian dollars, or about $27 billion."[7][8] Penn West was already one of the top ten Canadian oil and gas companies in terms of after tax profits from 2003 through 2007.[9] Penn West Petroleum (PWT) was a Canadian royalty trust (CANROY) from 2005–2011, and as such did not pay federal income taxes.[10]
Calgary-based Penn West Energy Trust acquired publicly-traded trust companies—Petrofund Energy Trust in June 2006, Canetic Resources Trust, a "smaller rival" for $3.6-billion in 2007, Vault Energy Trust in January 2008, and Endev Energy Inc. in July 2008. According to a 2007 CBC News article, Penn West became the largest oil and gas energy trust in North America after its acquisition of Canetic.[11]
On January 1, 2011, the government cracked down on Penn West, one of a group of oil and gas producers, who from 2005 to 2011, through Canadian royalty trusts (CANROYs), did not pay "federal income taxes if they distributed their income to shareholders."[12][13][14]
In response to the government crackdown, in January 2011, Penn West converted from a CANROY to a conventional corporation, a "newly-incorporated entity named Penn West Petroleum Ltd."[15][10] From 2012 to June 2014, Penn West cut back its work force by almost 50%.
The 2013 CBR company listings reported that by 2012, Penn West Petroleum Ltd. was operated as Penn West Exploration, "engaged in the business of acquiring, developing, exploiting and holding interests in petroleum and natural gas properties and assets".[16][17] The board of directors in the fiscal year 2013 included David E. Roberts as President & CEO and David A. Dyck as Senior Vice President & CFO. In July 2014, Dyck had discovered and reported irregularities in the company's accounting practices that "misclassified nearly $300-million in expenses."[18]
Penn West reported that preliminary findings revealed irregularities totaling "$381-million in 2013 and 2012." Penn West notified Canadian and U.S. regulators about the irregularities and expanded their own investigation to review results going back to 2007. Lawsuits tied to the accounting irregularities include those in Canada and a class action lawsuit in the United States.[19] According to CBC News, by the end of July 2014, independent auditors contracted by Penn West to review its books uncovered that "$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 2012 and 2013.[20] The 2012, 2013, and 2014 financial statements were audited by KPMG who were replaced by Ernst & Young (EY) for the audit of the 2015 financial statements.[21]
Penn West's profit in the second quarter of 2014 was $143-million, or 29 cents per share.[18] Rick George who was Suncor's CEO from 1991 to 2012, served as Penn West's CEO from 2013 to 2014. The company laid off 1350 of its 2350 employees since Dave Roberts became CEO.[22]
According to a May 2015 CBC News article, at their May 2015 annual general meeting, Penn West's chair, Richard George, reassured shareholders of the company's viability in spite of a drop of 80% in the value of their shares in 2014/2015 as it struggled with low WTI benchmark prices of $60 US a barrel. At that time the company was facing "six different lawsuits from investors in Canada and one consolidated lawsuit in the United States."[22] In response to the decline in oil prices, on September 2, 2015, Penn West announced cuts of about 400 full-time employees and contractors mainly from the company's headquarters in Calgary which represents 35 per cent of the total workforce at Penn West.[23] Penn West also suspended "dividend payments to its shareholders after its next payment in October [2015] and reduc[ed] compensation for its board of directors."[23]
