Provident Energy Trust said internal accounting controls uncovered an overstatement of petroleum inventory related to transactions between two wholly owned subsidiaries. As a result, the company will restate its financials for the first two quarters of this year.
In addition to the inventory overstatement, the Calgary-based company, which owns and manages oil- and gas-related businesses, discovered a corresponding understatement of cost of goods sold. But Provident assured that the impact on its 2007 results from operations will be “immaterial.”
Provident also said that related cash settlements were all handled correctly with no impact on day-to-day operations or third parties. “The restatement is intended to provide more representative and comparable quarterly information going forward,” the company added in a press release.
For the six months ended June 30, the restatement will not affect cash flow from operations under generally accepted accounting principles. However, it will reduce funds flow from operations by 9 percent, or approximately $18 million. This, in turn, will increase the six-month payout ratio to 88 percent from the 80 percent originally reported.
The energy trust is structured to generate monthly cash distributions to investors. Its current yield is 11.2 percent.