Lawsuits the latest challenge for Penn West

As executivesof Canadian oil producer Penn West continue to try to turn around the company, they are having to defend against several lawsuits.

The Calgary-based company admitted to accounting irregularitieslast year. The company said it currently faces six different lawsuits from investors in Canada and one consolidated lawsuit in the United States. More recently, the company was hit with a lawsuit regardingallegations of stock option manipulation.

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"The biggest problem with lawsuits is it chews up a lot of management time," said Sam La Bell, analyst withVeritasInvestment Research."In the end, a lot of these lawsuits are settled for not material amounts relative to the size of the company."

Shareholders are worried about the lawsuits.

They have a big company that is very hard to turn around.- Sam La Bell,VeritasInvestment Research

At the company's annual general meeting in Calgary on Wednesday, the first question to the company was about the legal action related to the accounting problems. CEO Dave Roberts responded by saying Penn Westwill defend itself "with vigour."

When speaking to journalists after the meeting, Roberts refused to discuss the lawsuit relating to stock option manipulation.

Penn West is trying to improve its performance by cutting debt, selling assets and focusing on its most profitable resources.

"The biggest problem with Penn West is that their business model does not work below $70 oil," said La Bell."The cost structure is too high and the profitability too low when oil is down as far as it is. They have a big company that is very hard to turn around."

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La Bell suggestedPenn West is not very attractive to investors because of its large overhead and its limited profitability if oil prices remain at about $60 US a barrel for West Texas Intermediate, the North American benchmark.

Penn West's chair Richard George, told shareholders the company is "viable" even if oil prices remain at current levels.

Shares of Penn West are down more than 80 per centin the last year.

Since taking over as CEO in June 2013, Roberts says the company's workforce has been reduced from about 2350 employees to 1100.