Someone has, for whatever reason, been hand-punching "WATER SA" onto things. Perhaps this is the only penny they made, who can tell, but they were definitely punching it onto lots of other things. Because the "anvil" used for punching this penny was covered in punch-marks from those same letters. That is why, on the other side of this penny, there are pieces from the same letters "WATER SA", but jumbled up, raised, and reversed.
Presumably whoever created this penny was unaware of the law against stamping advertisements onto coins. But since we can't figure out exactly what "WATER SA" is, it doesn't seem to be a very good "advertisement". My best guess: the San Antonio Water System?

If it wasn't an American coin, I would have guessed South Australia, or South Africa.
Perhaps it wasn't even a deliberate attempt to "vandalize a coin", but rather, just somebody needing to get some practice with hand-stamping some letters, so they just grabbed a random piece of handy scrap metal - a low-denomination coin - and used it.
When was it done? Well, the incuse counterstamps are black and dull, so it's not recent. Presumably it was made a lot closer to 1967 than today. It's possible that after being made, it went back into circulation for a bit before being souvenired.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis