Calgary-based Penn West Petroleum is investigating accounting irregularities, the company said Tuesday.

Penn said second-quarter results could be delayed and the audit could prompt the restatement of financials from 2012, 2013 and the first quarter of 2014.

The audit isn’t expected to impact previously disclosed cash and debt balances, 2014 production guidance, operations strategy or growth forecasts.

Penn may increase its operating cost assumptions for 2014 and reduce 2014 cash flow assumptions.

The voluntary internal audit was initiated by Penn’s new Senior Vice President and Chief Financial Officer David Dyck.

Currently, the 2010 to 2014 fiscal years are under review.

The audit targets entries made to reduce operating costs and increase Penn’s reported capital expenditures and royalty expenses.

Preliminary findings have identified $70 million in 2013 and $111 million in 2012 that were improperly reclassified from operating expenses to capital expenditures.

The auditors also found $100 million in operating expenses that were improperly reclassified as royalty expenses throughout 2013.

The findings could change during the course of the review.

The senior finance and accounting personnel believed to be responsible are no longer at Penn.

Penn instituted a trading blackout for all directors, officers and other Penn insiders until second-quarter results and the restated financials are filed.

The company said it was always in compliance with its financial covenants and is talking to lenders about the potential impact of the restatements.

“We have acted quickly and effectively to audit our accounting practices. We will take the steps necessary to correct our historical financial statements and we will take appropriate steps to ensure that we avoid a similar situation in the future,” Chairman of the Board Rick George said.


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