Obsidian Energy is a Canadian business producing natural resources such as oil and natural gas. Obsidian was first founded as Penn West Exploration LTD. The corporation changed its name to Obsidian Energy. It is based out of Calgary, Canada and trades on the Toronto Stock Exchange.
Penn West was a key part of the Canadian Royalty Trust for 6 years from 2005 – 2011. Members of the trust did not need to pay federal income taxes if they made regular income distributions in the form of dividends to their shareholders. Other companies who were part of this trust group include Advantage, ARC Energy, Baytex Energy, Bonavista Energy, Bonterra and Canadian Oil Sands along with other energy producers. In 2011, Penn West converted it’s from a Canadian Royalty trust into a conventional company when the federal government began to require trusts the same taxes as regular corporations.
In 2014, the new Chief Financial Officer David Dyck discovered that there were major irregularities in the accounting practices of Penn West. The corporation had misclassified expenses that totaled almost $300-million, causing the company to be in debt. In light of this major revelation, the company underwent a mandatory restructuring from 2014-2016 in order to resolve their financial obligations. The company successfully met their financial challenges by selling off a majority of their assets to reduce their debt. Visit This Page to learn more.
Penn West immediately contracted an independent auditing firm to review their books. An investigation was immediately launched by independent auditors. They discovered that operating expenses totaling $170 million were reclassified as capital expenditures and operating expenses totaling $200 million were reclassified as royalty expenses. They also found that these “errors” were made by an independent accounting firm, based both in Canada and the United States, who were contracted by Penn West to take care of their financial assets and accounting.