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What changed in BARNWELL INDUSTRIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BARNWELL INDUSTRIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+277 added−286 removedSource: 10-K (2024-12-17) vs 10-K (2023-12-18)

Top changes in BARNWELL INDUSTRIES INC's 2024 10-K

277 paragraphs added · 286 removed · 187 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

69 edited+29 added−35 removed45 unchanged
Biggest changeAs of September 30, 2023 For the year ended September 30, 2023 Net Proved Producing Reserves Net Proved Reserves Net Production Net Revenues Property Name Oil & NGL (MBbls) Gas (MMcf) Oil & NGL (MBbls) Gas (MMcf) Oil & NGL (MBbls) Gas (MMcf) Oil & NGL Gas Canada: Twining 656 3,024 813 3,882 192 902 $ 12,605,000 $ 2,581,000 Bonanza/Balsam 27 24 27 24 4 15 265,000 30,000 Kaybob 22 101 22 101 3 14 211,000 42,000 Medicine River 58 623 58 623 5 20 216,000 50,000 Thornbury — 287 — 344 — 52 — 136,000 Wood River 17 33 17 33 6 9 436,000 32,000 Other properties — 4 — 3 — 11 2,000 24,000 United States: Oklahoma 116 734 116 734 22 119 1,037,000 355,000 Texas 173 957 173 957 24 121 1,163,000 191,000 Total 1,069 5,787 1,226 6,701 256 1,263 $ 15,935,000 $ 3,441,000 Net proved reserves that are attributable to existing producing wells are primarily determined using decline curve analysis and rate transient analysis, which incorporates the principles of hydrocarbon flow.
Biggest changeAs of September 30, 2024 Net Proved Producing Reserves Net Proved Reserves Property Name Oil (MBbls) NGL (MBbls) Gas (MMcf) Oil (MBbls) NGL (MBbls) Gas (MMcf) Canada: Twining 710 126 3,637 867 156 4,549 Medicine River 23 43 366 23 43 366 Thornbury — — 2 — — 26 Other properties 2 — — 2 — — United States: Oklahoma 33 86 699 33 86 699 Texas 57 78 815 57 78 815 Total 825 333 5,519 982 363 6,455 For the year ended September 30, 2024 Net Production Net Revenues Property Name Oil (MBbls) NGL (MBbls) Gas (MMcf) Oil NGL Gas Canada: Twining 160 23 944 $ 11,241,000 $ 1,190,000 $ 1,619,000 Medicine River 2 4 18 171,000 107,000 26,000 Thornbury — — 52 — — 39,000 Other properties 22 9 71 633,000 9,000 58,000 United States: Oklahoma 5 12 99 406,000 252,000 190,000 Texas 14 16 160 1,058,000 322,000 75,000 Total 203 64 1,344 $ 13,509,000 $ 1,880,000 $ 2,007,000 8 Net proved reserves that are attributable to existing producing wells are primarily determined using decline curve analysis.
Capital Expenditures and Acquisitions Barnwell invested $10,729,000 in oil and natural gas properties during fiscal 2023, including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations. Barnwell’s capital expenditures were primarily for the drilling of new wells in Texas and the Twining area.
Barnwell invested $10,729,000 in oil and natural gas properties during fiscal 2023, including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations. Barnwell’s capital expenditures were primarily for the drilling of new wells in Texas and the Twining area.
All of Barnwell’s Canadian gross revenues were derived from properties located within Alberta, which charges oil and natural gas producers a royalty for production within the province. Provincial royalties are calculated as a percentage of revenue and vary depending on production volumes, selling prices and the date of discovery.
All of Barnwell’s Canadian gross revenues were derived from properties located within Alberta, which charges oil and natural gas producers a royalty for production within the province. Provincial 12 royalties are calculated as a percentage of revenue and vary depending on production volumes, selling prices and the date of discovery.
These laws, which are constantly changing, regulate the discharge of materials into the environment and maintenance of surface conditions and may require Barnwell to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites where it has a working interest.
These laws, which are constantly changing, regulate the discharge of materials into the environment and maintenance of surface conditions and may require Barnwell to remove or mitigate the environmental 17 effects of the disposal or release of petroleum or chemical substances at various sites where it has a working interest.
Our oil and natural gas segment revenues, profitability, and future rate of growth are dependent upon oil and natural gas prices and the Company’s ability to use its current cash, obtain external financing or generate sufficient cash flows to fund the development of our reserves.
Operations Our oil and natural gas segment revenues, profitability, and future rate of growth are dependent upon oil and natural gas prices and the Company’s ability to use its current cash, obtain external financing or generate sufficient cash flows to fund the development of our reserves.
Five gross (1.4 10 net) wells were producing at September 30, 2022 and the remaining one gross (0.3 net) well was awaiting tie-in and started producing in fiscal 2023. The Company drilled one gross (1.0 net) operated development well in the Twining area which was producing at September 30, 2022.
Five gross (1.4 net) wells were producing at September 30, 2022 and the remaining one gross (0.3 net) well was awaiting tie-in and started producing in fiscal 2023. The Company drilled one gross (1.0 net) operated development well in the Twining area which was producing at September 30, 2022.
The principal factors affecting competition are the location of the project and pricing. Barnwell is a minor participant in the land development industry and competes in its land investment activities with many other entities having far greater financial and other resources.
The principal factors affecting competition are the location of the project and pricing. Barnwell is a minor 15 participant in the land development industry and competes in its land investment activities with many other entities having far greater financial and other resources.
The arrangement 15 also gives Barnwell rights to three single-family residential lots in Phase 2A of Increment II, and four single-family residential lots in phases subsequent to Phase 2A when such lots are developed by KD II, all at no cost to Barnwell.
The arrangement also gives Barnwell rights to three single-family residential lots in Phase 2A of Increment II, and four single-family residential lots in phases subsequent to Phase 2A when such lots are developed by KD II, all at no cost to Barnwell.
Contract revenues are not dependent upon the discovery of water or other 16 similar targets, and contracts are not subject to renegotiation of profits or termination at the election of the governmental entities involved. Contracts provide for arbitration in the event of disputes.
Contract revenues are not dependent upon the discovery of water or other similar targets, and contracts are not subject to renegotiation of profits or termination at the election of the governmental entities involved. Contracts provide for arbitration in the event of disputes.
Capital expenditures incurred for the drilling of these two wells totaled approximately $4,293,00 during the year ended September 30, 2023. The Company did not drill or participate in the drilling of wells in Oklahoma during the year ended September 30, 2023.
Capital expenditures incurred for the drilling of these two wells totaled approximately 10 $4,293,00 during the year ended September 30, 2023. The Company did not drill or participate in the drilling of wells in Oklahoma during the year ended September 30, 2023.
Two residential lots of approximately two to three acres in size fronting the ocean were developed within Increment II and sold by KD II, and the remaining acreage within Increment II is not yet under development.
Two residential lots of approximately two to three acres in size 14 fronting the ocean were developed within Increment II and sold by KD II, and the remaining acreage within Increment II is not yet under development.
Barnwell operates in the following three principal business segments: • Oil and Natural Gas Segment - Barnwell engages in oil and natural gas development, production, acquisitions and sales in Canada and in the U.S. states of Oklahoma and Texas. • Land Investment Segment - Barnwell invests in land interests in Hawaii. • Contract Drilling Segment - Barnwell provides well drilling services and water pumping system installation and repairs in Hawaii.
Barnwell operates in the following three principal business segments: • Oil and Natural Gas Segment - Barnwell engages in oil and natural gas development, production, acquisitions and sales in Canada and in the U.S. states of Oklahoma and Texas. • Land Investment Segment - Barnwell owns land interests in Hawaii. • Contract Drilling Segment - Barnwell provides well drilling services and water pumping system installation and repairs in Hawaii.
In fiscal 2023 and 2022, Barnwell took most of its Canadian oil, natural gas liquids and natural gas “in kind” where Barnwell markets the products instead of having the operator of a producing property market the products on Barnwell’s behalf. We sell oil, natural gas and natural gas liquids to a variety of energy marketing companies.
In fiscal 2024 and 2023, Barnwell took most of its Canadian oil, natural gas liquids and natural gas “in kind” where Barnwell markets the products instead of having the operator of a producing property market the products on Barnwell’s behalf. We sell oil, natural gas and natural gas liquids to a variety of energy marketing companies.
It is uncertain when or if KD II will develop the other areas of Increment II, and there is no assurance with regards to the amounts of future sales from Increments I and II. The remaining 420 developable acres at Increment II are entitled for up to 350 homesites.
It is uncertain when or if KD II will develop the other areas of Increment II, and there is no assurance with regards to the amounts of future sales from Increment II. The remaining 420 developable acres at Increment II are entitled for up to 350 homesites.
Barnwell believes it can continue to manage its operations to maintain a favorable ranking. Importantly, an inventory reduction program also has been implemented which requires mandatory annual minimum expenditures towards outstanding decommissioning and reclamation obligations in accordance with AER targets which are adjusted by the AER on an annual basis.
Barnwell believes it can continue to manage its operations to maintain a favorable ranking. A program has also been implemented by the AER which requires mandatory annual minimum expenditures towards outstanding decommissioning and reclamation obligations in accordance with AER targets which are adjusted by the AER on an annual basis.
The amounts set forth in the following table, based on our independent reserve engineers’ evaluation of our reserves, summarize our estimated proved reserves of oil (including natural gas liquids) and natural gas as of September 30, 2023 for all properties located in Canada and the U.S. in which Barnwell has an interest.
The amounts set forth in the following table, based on our independent reserve engineers’ evaluation of our reserves, summarize our estimated proved reserves of oil, natural gas liquids, and natural gas as of September 30, 2024 for all properties located in Canada and the U.S. in which Barnwell has an interest.
No definitive development plans have been made by KDII, the developer of Increment II, as of the date of this report. Kaupulehu Developments is entitled to receive payments from KD I based on 10% of the gross receipts from KD I's sales of single-family residential lots in Increment I.
No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report. Kaupulehu Developments was entitled to receive payments from KD I based on 10% of the gross receipts from KD I's sales of single-family residential lots in Increment I.
Production amounts reported are net of royalties. All of Barnwell’s net production in fiscal 2023 was derived in Alberta, Canada and in the U.S. states of Oklahoma and Texas. Barnwell’s net production in fiscal 2022 and 2021 was derived in Alberta, Canada and in Oklahoma.
Production amounts reported are net of royalties. All of Barnwell’s net production in fiscal 2024 and 2023 was derived in Alberta, Canada and in the U.S. states of Oklahoma and Texas. Barnwell’s net production in fiscal 2022 was derived in Alberta, Canada and in Oklahoma.
Factors considered are grouped into six factor groups, these being current financial distress, liability magnitude, resources lifespan, operations compliance, closure efficiency, and administrative compliance. These factors are compared to peer operators and ranked into three “Tiers.” Barnwell’s assessment under the LCA Program is currently favorable with Tier 1 or 2 overall rankings in the six factor groups.
Factors considered by the AER are combined into six groups, these being current financial distress, liability magnitude, resources lifespan, operations compliance, closure efficiency, and administrative compliance. These factors are compared to peer operators and ranked into three “Tiers.” Barnwell’s assessment under the LCA Program is currently favorable with Tier 1 or Tier 2 overall rankings in the six factor groups.
Additionally, Barnwell has interests in seven gross (0.2 net) and two gross (0.3 net) producing oil wells in Oklahoma and Texas, respectively, as of September 30, 2023.
Additionally, Barnwell has interests in seven gross (0.2 net) and two gross (0.3 net) producing oil wells in Oklahoma and Texas, respectively, as of September 30, 2024.
Marketing of Oil and Natural Gas Barnwell sells its Canadian oil, natural gas, and natural gas liquids production, including under short-term contracts between itself and two main oil purchasers, one natural gas purchaser, and one natural gas liquids purchaser.
Marketing of Oil and Natural Gas Barnwell sells its Canadian oil, natural gas, and natural gas liquids production under short-term contracts between itself and two main oil purchasers, one natural gas purchaser, and one natural gas 11 liquids purchaser.
Total capital expenditures for the year ended September 30, 2023 totaled approximately $4,770,000 and included the drilling, completion and equipping of the three gross (0.9 net) wells along with various upgrades to the Twining facilities. Additionally, the Company participated in the drilling of two gross (0.3 net) non-operated development oil wells in Texas which began producing in late April 2023.
Total capital expenditures for the year ended September 30, 2023 totaled approximately $4,770,000 and included the drilling, completion and equipping of the three gross (0.9 net) wells along with various upgrades to the Twining facilities. Additionally, the Company participated in the drilling of two gross (0.3 net) non-operated development oil wells in Texas.
Since Barnwell’s entry into the Twining property, we have participated in drilling 11 gross horizontal development wells that were completed with multi-stage sand fracs, all of which have been or are forecast to be profitable. Of these 11 wells, two are 100%-owned operated wells in locations selected by Barnwell and nine gross (2.6 net) are non-operated wells.
Since Barnwell’s entry into the Twining property, we have participated in drilling 12 gross horizontal development wells that were completed with multi-stage sand fracs, which have cumulatively been or are forecast to be profitable. Of these 12 wells, three are 100%-owned operated wells in locations selected by Barnwell and nine gross (2.6 net) are non-operated wells.
Barnwell has a Reserves Committee consisting of two independent directors and Barnwell's CEO. The Reserves Committee was established to ensure the independence of the Company’s petroleum reserve engineers.
Barnwell has a Reserves Committee consisting of two independent directors and Barnwell's Corporate Secretary. The Reserves Committee was established to ensure the independence of the Company’s petroleum reserve engineers.
There can be no assurance that Barnwell will be successful in renewing its leasehold interests in the event of expiration. Barnwell’s undeveloped acreage includes a significant concentration in the Twining area (4,040 net acres).
There can be no assurance that Barnwell will be successful in renewing its leasehold interests in the event of expiration. Barnwell’s undeveloped acreage includes a significant concentration in the Twining area (2,810 net acres).
Developed Acreage and Undeveloped Acreage The following table sets forth the gross and net acres of both developed and undeveloped oil and natural gas leases in Canada which Barnwell held as of September 30, 2023.
Developed Acreage and Undeveloped Acreage The following table sets forth the gross and net acres of both developed and undeveloped oil and natural gas leases in the province of Alberta, Canada which Barnwell held as of September 30, 2024.
“Undeveloped Acreage” includes acres covered by leases upon which there are no producing wells and which are maintained by the payment of delay rentals or the commencement of drilling thereon. Eighty-three percent of Barnwell’s undeveloped acreage is not subject to expiration at September 30, 2023.
“Undeveloped Acreage” includes acres covered by leases upon which there are no producing wells and which are maintained by the payment of delay rentals or the commencement of drilling thereon. Seventy-seven percent of Barnwell’s undeveloped acreage is not subject to expiration at September 30, 2024.
Operations Water Resources owns and operates three water well drilling rigs, two pump rigs and other ancillary drilling and pump equipment. Additionally, Water Resources leases month-to-month a storage facility in Honolulu, Hawaii, and a one-acre maintenance and storage facility with 2,800 square feet of interior space in Kawaihae, Hawaii.
Operations Water Resources owns and operates three water well drilling rigs, two pump rigs and other ancillary drilling and pump equipment. Additionally, Water Resources leases short-term a storage facility in Waipahu, Hawaii, and a one-acre maintenance and storage facility with 2,800 square feet of interior space in Kawaihae, Hawaii.
The following table sets forth Barnwell’s oil and natural gas net reserves at September 30, 2023, by location and property name, based on information prepared by our independent reserve engineers, as well as net production and net revenues by location and property name for the year ended September 30, 2023.
The following tables set forth Barnwell’s oil and natural gas net reserves at September 30, 2024, by location and property name, based on information prepared by our independent reserve engineers, as well as net production and net revenues by location and property name for the year ended September 30, 2024.
Financial Information About Industry Segments and Geographic Areas Note 11 in the “Notes to Consolidated Financial Statements” in Item 8 contains information on our segments and geographic areas. Employees At December 1, 2023, Barnwell employed 37 individuals; 36 on a full time basis and 1 on a part-time basis. Environmental Costs Barnwell is subject to extensive environmental laws and regulations.
Financial Information About Industry Segments and Geographic Areas Note 12 in the “Notes to Consolidated Financial Statements” in Item 8 contains information on our segments and geographic areas. Employees At December 1, 2024, Barnwell employed 28 individuals; 27 on a full time basis and 1 on a part-time basis. Environmental Costs Barnwell is subject to extensive environmental laws and regulations.
The reserve data in this table is based on constant dollars where reserve estimates are based on sales prices, costs and statutory tax rates using a historical average price of the first day pricing of the last 12-months ending with September 2023.
The reserve data in these tables are based on constant dollars where reserve estimates are based on sales prices, costs and statutory tax rates using a historical average price of the first day pricing of the last 12-months ending with September 2024.
Seventeen percent of Barnwell’s leasehold interests in undeveloped acreage is subject to expiration and may expire over the next five fiscal years, if not developed, as follows: 6% expire during fiscal 2024; no expirations during fiscal 2025; 2% expire during fiscal 2026; 5% expire during fiscal 2027; and 4% expire during fiscal 2028.
Twenty-three percent of Barnwell’s leasehold interests in undeveloped acreage is subject to expiration and may expire over the next five fiscal years, if not developed, as follows: 4% expire during fiscal 2025; 9% expire during fiscal 2026; 6% expire during fiscal 2027; 4% expire during fiscal 2028; and no expirations during fiscal 2029.
ITEM 1. BUSINESS Overview Barnwell was incorporated in Delaware in 1956 and fiscal 2023 represented Barnwell’s 67th year of operations.
ITEM 1. BUSINESS Overview Barnwell was incorporated in Delaware in 1956 and fiscal 2024 represented Barnwell’s 68th year of operations.
For a discussion regarding our total annual production volumes, average sales prices, and related production costs, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 9 Year ended September 30, 2023 2022 2021 Annual net production: Natural gas (Mcf) 1,263,000 964,000 694,000 Oil (Bbls) 204,000 182,000 147,000 Natural gas liquids (Bbls) 52,000 48,000 24,000 Total (Boe) 467,000 396,000 291,000 Total (Mcfe) 2,799,000 2,296,000 1,685,000 Annual average sales price per unit of production: Mcf of natural gas* $2.64 $4.63 $2.62 Bbl of oil** $69.77 $86.73 $51.74 Bbl of natural gas liquids** $32.24 $48.06 $31.92 Annual average production cost per Boe produced*** $22.10 $23.66 $22.40 Annual average production cost per Mcfe produced*** $3.68 $4.08 $3.86 ______________________________________________________ * Calculated on revenues net of pipeline charges before royalty expense divided by gross production. ** Calculated on revenues before royalty expense divided by gross production. *** Calculated on production costs, excluding natural gas pipeline charges, divided by the combined total production of natural gas liquids, oil and natural gas.
For a discussion regarding our total annual production volumes, average sales prices, and related production costs, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 9 Year ended September 30, 2024 2023 2022 Annual net production: Natural gas (Mcf) 1,344,000 1,263,000 964,000 Oil (Bbls) 203,000 204,000 182,000 Natural gas liquids (Bbls) 64,000 52,000 48,000 Total (Boe) 491,000 467,000 396,000 Total (Mcfe) 2,946,000 2,799,000 2,296,000 Annual average sales price per unit of production: Mcf of natural gas* $1.41 $2.64 $4.63 Bbl of oil** $66.49 $69.77 $86.73 Bbl of natural gas liquids** $29.38 $32.24 $48.06 Annual average production cost per Boe produced*** $19.82 $22.10 $23.66 Annual average production cost per Mcfe produced*** $3.30 $3.68 $4.08 ______________________________________________________ * Calculated on revenues net of pipeline charges before royalty expense divided by gross production. ** Calculated on revenues before royalty expense divided by gross production. *** Calculated on production costs, excluding natural gas pipeline charges, divided by the combined total production of natural gas liquids, oil and natural gas.
Barnwell invested $11,052,000 in oil and natural gas properties during fiscal 2022, including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations.
Capital Expenditures and Acquisitions Barnwell invested $4,805,000 in oil and natural gas properties during fiscal 2024, including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations.
An estimate of fair value would also consider, among other items, the value of Barnwell’s undeveloped land position, the recovery of reserves not presently classified as proved, anticipated future changes in oil and natural gas prices (these amounts were based on a natural gas price of $2.54 per Mcf and an oil price of $69.66 per Bbl) and costs, and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.
An estimate of fair value would also consider, among other items, the recovery of reserves not presently classified as proved, anticipated future changes in oil and natural gas prices (these amounts were based on a natural gas price of $1.16 per Mcf and an oil price of $70.78 per Bbl) and costs, and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.
The President and Chief Operating Officer of Barnwell of Canada and Octavian Oil is a professional engineer with over 25 years of relevant experience in the oil and natural gas industry in Canada and is a member of the Association of Professional Engineers and Geoscientists of Alberta.
The President and Chief Operating Officer of Barnwell of Canada and Octavian Oil, who also serves as the President and Chief Executive Officer of Barnwell effective April 1, 2024, is a professional engineer with over 25 years of relevant experience in the oil and natural gas industry in Canada and is a member of the Association of Professional Engineers and Geoscientists of Alberta.
Capital expenditures incurred by the Company for this operated well was $2,852,000. The Company did not drill or participate in the drilling of wells in Oklahoma during the year ended September 30, 2022. In fiscal 2021, the Company participated in the drilling of seven gross (0.2 net) non-operated development wells in Oklahoma.
Capital expenditures incurred by the Company for this operated well was $2,852,000. The Company did not drill or participate in the drilling of wells in Oklahoma during the year ended September 30, 2022.
The LCA is intended to be a more comprehensive assessment of corporate health and considers a wider variety of factors than those considered under the LLP and establishes clear expectations for industry with regards to the management of liabilities throughout the entire lifecycle of oil and gas projects.
The LCA is intended to be a comprehensive assessment of corporate health and considers a wide variety of factors and establishes guidelines for the industry with regards to the management of liabilities throughout the entire lifecycle of oil and gas projects.
Reserves At September 30, 2023, Barnwell’s reserves were approximately 43% operated and consisted of 52% conventional oil and natural gas liquids and 48% natural gas. At September 30, 2022, Barnwell’s reserves were approximately 54% operated and consisted of 56% conventional oil and natural gas liquids and 44% natural gas.
Reserves At September 30, 2024, Barnwell’s reserves were approximately 52% operated and consisted of 41% conventional oil, 15% conventional natural gas liquids, and 44% natural gas. At September 30, 2023, Barnwell’s reserves were approximately 43% operated and consisted of 38% conventional oil, 14% conventional natural gas liquids, and 48% natural gas.
Year ending September 30, 2024 $ 7,993,000 2025 5,654,000 2026 3,900,000 Thereafter 2,413,000 Undiscounted future net cash flows, after income taxes $ 19,960,000 Standardized measure of discounted future net cash flows $ 19,913,000 * _______________________________________________ * This amount does not purport to represent, nor should it be interpreted as, the fair value of Barnwell’s oil and natural gas reserves.
Year ending September 30, 2025 $ 5,208,000 2026 4,802,000 2027 3,301,000 Thereafter 2,646,000 Undiscounted future net cash flows, after income taxes $ 15,957,000 Standardized measure of discounted future net cash flows $ 15,850,000 * _______________________________________________ * This amount does not purport to represent, nor should it be interpreted as, the fair value of Barnwell’s oil and natural gas reserves.
In fiscal 2023, the Kukio Resort Land Development Partnerships sold one lot in Increment I and as a result of the lot sale, made cash distributions to its partners of which Barnwell received $758,000 resulting in a net amount of $674,000, after distributing $84,000 to non-controlling interests.
In fiscal 2024, the Kukio Resort Land Development Partnerships sold the last two remaining lots in Increment I and as a result of the lot sales, made cash distributions to its partners of which Barnwell received $1,071,000 resulting in a net amount of $953,000, after distributing $118,000 to non-controlling interests.
All information with respect to the Company’s U.S. reserves in this Form 10-K is derived from the reports of Ryder Scott, which are filed with this Form 10-K as Exhibits 99.2 and 99.3. 6 The preparation of data used by the independent petroleum reserve engineers to compile our oil and natural gas reserve estimates was completed in accordance with various internal control procedures which include verification of data input into reserves evaluation software, reconciliations and reviews of data provided to the independent petroleum reserve engineers to ensure completeness, and management review controls, including an independent internal review of the final reserve report for completeness and accuracy.
The preparation of data used by the independent petroleum reserve engineers to compile our oil and natural gas reserve estimates was completed in accordance with various internal control procedures which include verification of data input into reserves evaluation software, reconciliations and reviews of data provided to the independent petroleum reserve engineers to ensure completeness, and management 6 review controls, including an independent internal review of the final reserve report for completeness and accuracy.
In March 2019, KD II admitted a new development partner, Replay Kaupulehu Development, LLC (“Replay”), a party unrelated to Barnwell, in an effort to move forward with development of the remainder of Increment II at Kaupulehu.
In fiscal 2024, the last two remaining single-family lots of the 80 lots developed within Increment I were sold. In March 2019, KD II admitted a new development partner, Replay Kaupulehu Development, LLC (“Replay”), a party unrelated to Barnwell, in an effort to move forward with development of the remainder of Increment II at Kaupulehu.
In fiscal 2023, Water Resources started two well drilling and three pump installation and repair contracts and completed three well drilling and nine pump installation and repair contracts. Of the three completed well drilling contracts, two were started in fiscal 2021 and one was started in fiscal 2022.
In fiscal 2024, Water Resources started three pump installation and repair contracts and completed two well drilling and five pump installation and repair contracts. The two completed well drilling contracts were both started in fiscal 2023.
Additionally, through its wholly-owned subsidiaries BOK Drilling, LLC (“BOK”), established in February 2021, and Barnwell Texas, LLC (“Barnwell Texas”), established in November 2022, Barnwell is involved in oil and natural gas investments in Oklahoma and Texas, respectively.
Additionally, through its wholly-owned subsidiaries BOK Drilling, LLC (“BOK”), established in February 2021, and Barnwell Texas, LLC (“Barnwell Texas”), established in November 2022, Barnwell is involved in oil and natural gas investments in Oklahoma and Texas, respectively. Strategy Twining represents 70% of Barnwell’s fiscal 2024 production (Boe) and consists of assets in the Twining field, in Alberta, Canada.
The approximate dollar amount of Water Resources’ backlog of firm well drilling and pump installation and repair contracts at December 1, 2023 and 2022 was as follows: December 1, 2023 2022 Well drilling $ 5,900,000 $ 10,000,000 Pump installation and repair 900,000 1,200,000 $ 6,800,000 $ 11,200,000 Of the contracts in backlog at December 1, 2023, $6,300,000 is expected to be recognized in fiscal 2024 with the remainder to be recognized in the following fiscal year.
At September 30, 2024, there was a backlog of one well drilling and two pump installation and repair contracts and all of the contracts were in progress as of September 30, 2024. 16 The approximate dollar amount of Water Resources’ backlog of firm well drilling and pump installation and repair contracts at December 1, 2024 and 2023 was as follows: December 1, 2024 2023 Well drilling $ 800,000 $ 5,900,000 Pump installation and repair 300,000 900,000 $ 1,100,000 $ 6,800,000 All of the contract drilling revenues in backlog at December 1, 2024 is expected to be recognized in fiscal 2025.
(“Ryder Scott”) in the U.S., in accordance with generally accepted petroleum engineering and evaluation principles and techniques and rules and regulations of the SEC. All information with respect to the Company’s Canadian reserves in this Form 10-K is derived from the report of InSite, which is filed with this Form 10-K as Exhibit 99.1.
All information with respect to the Company’s Canadian reserves in this Form 10-K is derived from the report of InSite, which is filed with this Form 10-K as Exhibit 99.1.
Minimal capital is expected to be invested in these properties. In Oklahoma, which produced 9% of Barnwell’s fiscal 2023 Boe production, the Company has non-operated working interests in seven wells varying from 1.2% to 4.2% and a minor overriding royalty interest, 0.07%, in one well.
Barnwell is continually reviewing the market and evaluating opportunities to add to our production and development portfolio. The Company has non-operated working interests in seven wells varying from 1.2% to 4.2% and a minor overriding royalty interest, 0.07%, in one well in Oklahoma. Our interests in Oklahoma produced 7% of Barnwell’s fiscal 2024 production (Boe).
Increment I is an area of 80 single-family lots, 78 of which were sold from 2006 to 2023, and a beach club on the portion of the property bordering the Pacific Ocean.
Operations Increment I is an area of 80 single-family lots, all of which were sold from 2006 to 2024, and a beach club on the portion of the property bordering the Pacific Ocean. Increment II is the remaining portion of the approximately 870-acre property and is zoned for single-family and multi-family residential units and a golf course and clubhouse.
Competition Water Resources competes with other drilling contractors in Hawaii, some of which use drill rigs similar to Water Resources’. These competitors also are capable of installing and repairing vertical turbine and submersible water pumping systems in Hawaii. These contractors compete actively with Water Resources for government and private contracts.
These competitors also are capable of installing and repairing vertical turbine and submersible water pumping systems in Hawaii. These contractors compete actively with Water Resources for government and private contracts. Pricing is Water Resources’ major method of competition; reliability of service also is a significant factor.
Producing Wells As of September 30, 2023, Barnwell has interests in 145 gross (65.7 net) producing wells in Alberta, Canada, of which 95 gross (59.3 net) were oil wells and 50 gross (6.4 net) were natural gas wells.
Producing Wells As of September 30, 2024, Barnwell has interests in 141 gross (69.3 net) producing wells in Alberta, Canada, of which 93 gross (63.3 net) were oil wells and 48 gross (6.0 net) were natural gas wells.
Fifty-two percent of well drilling and pump installation and repair jobs, representing 8% of total contract drilling revenues in fiscal 2023, have been pursuant to government contracts.
Of the five completed pump installation and repair contracts, two were started in fiscal 2017, one was started in fiscal 2019, and two were started in the current year. Fifty-four percent of well drilling and pump installation and repair jobs, representing 18% of total contract drilling revenues in fiscal 2024, have been pursuant to government contracts.
Technologies relied on to establish reasonable certainty of economic producibility include electrical logs, radioactivity logs, core analyses, geologic maps and available production data, seismic data and well test data. 8 Standardized Measure of Discounted Future Net Cash Flows The following table sets forth Barnwell’s “Estimated Future Net Revenues” from total proved oil, natural gas and natural gas liquids reserves located in Canada and the U.S. and the present value of Barnwell’s “Estimated Future Net Revenues” (discounted at 10%) as of September 30, 2023.
Standardized Measure of Discounted Future Net Cash Flows The following table sets forth Barnwell’s “Estimated Future Net Revenues” from total proved oil, natural gas and natural gas liquids reserves located in Canada and the U.S. and the present value of Barnwell’s “Estimated Future Net Revenues” (discounted at 10%) as of September 30, 2024.
The target for 2024 is 6.6% of an individual company’s inactive liability. These targets became effective January 1, 2022. Barnwell believes the targets assessed by the AER are within estimated forecasts for Barnwell’s future ARO spending and therefore the Company will be in compliance with spend targets under the Inventory Reduction Program.
The target for calendar 2025 is 6.2% of an individual company’s inactive liability. This amount for Barnwell is approximately $244,000. Barnwell believes the targets assessed by the AER are within estimated forecasts for Barnwell’s future ARO spending and therefore the Company expects to be in compliance with AER spending targets under their mandatory spend requirements.
This lower capital requirement along with the fact that the land is largely held indefinitely, enables development drilling to be done when commodity prices support it.
The oil wells operated by the Company largely have less than 15% per year decline rates, and due to these lower decline rates, require less capital investment to replace decline. This lower capital requirement along with the fact that the land is largely held indefinitely, enables development drilling to be done when commodity prices support it.
Well Drilling Activities The Company participated in the drilling of three gross (0.9 net) non-operated development wells in the Twining area of Alberta, Canada during the year ended September 30, 2023.
Capital expenditures incurred by the Company for this well totaled approximately $3,183,000. The Company did not drill or participate in the drilling of wells in Texas or in Oklahoma during the year ended September 30, 2024. In fiscal 2023, the Company participated in the drilling of three gross (0.9 net) non-operated development wells in the Twining area of Alberta, Canada.
The prices received are freely negotiated between buyers and sellers and are 11 determined from transparent posted prices adjusted for quality and transportation differentials. In fiscal 2023, 95% of Barnwell’s Canadian oil and natural gas revenues were from products sold at spot prices.
The prices received are freely negotiated between buyers and sellers and are determined from transparent posted prices adjusted for quality and transportation differentials.
Developed Acreage* Undeveloped Acreage* Total Location Gross Net Gross Net Gross Net Canada 136,220 33,980 27,110 8,710 163,330 42,690 _________________________________________________ * “Developed Acreage” includes the acres covered by leases upon which there are one or more producing wells.
Developed Acreage* Undeveloped Acreage* Total Location Gross Net Gross Net Gross Net Alberta, Canada 131,590 30,730 26,210 7,410 157,800 38,140 _________________________________________________ * “Developed Acreage” includes the acres covered by leases upon which there are one or more producing wells.
In November 2023, to provide partial protection against the risk of declining natural gas prices during the second half of our fiscal 2024, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on a portion of the natural gas it sells to a fixed price during the period from April 1, 2024 to October 31, 2024.
In the quarter ended December 31, 2023, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 1,055 gross Mcf per day of the Canadian natural gas that it sells during the period from April 1, 2024 to October 31, 2024 to a fixed index price before differentials of $2.55 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices.
As at September 30, 2023, the Company recognized a cumulative reduction in the deposit balance of $300,000 for work performed under this program. 13 Over the past seven years, the Company has worked to reduce its abandonment and reclamation obligations associated with its oil and natural gas segment, both by divesting low-productivity assets and actively closing wells and sites.
Over the past eight years, the Company has worked to reduce its abandonment and reclamation obligations associated with its oil and natural gas segment, both by divesting low-productivity assets and actively closing wells and sites. Twenty-four Barnwell-operated sites have been certified as fully reclaimed or exempt since 2016.
Barnwell’s capital expenditures were primarily for the drilling of wells in the Twining area, for facilities expansion and upgrade costs in the Twining area and the acquisition of additional working interests in several wells in the Twining area.
Barnwell’s capital expenditures were primarily for the drilling of a new well and for equipment and upgrades to facilities, all of which were in the Twining area.
Additionally, in December 2023, the Company amended certain of its Canadian purchase and sales contract to change the sales price on a portion of the oil it sells to a fixed price during the period from January 1, 2024 to June 30, 2024.
In the quarter ended December 31, 2023, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 225 gross barrels per day of the Canadian oil for sale for the period from January 1, 2024 to June 30, 2024 to a fixed index price before differentials of $69.46 per net barrel, with remaining volumes continuing to be sold at spot prices.
No estimates of total proved net oil or natural gas reserves have been filed with, or included in reports to, any federal authority or agency, other than the SEC, since October 1, 2022. 7 As of September 30, 2023 Estimated Net Proved Developed Reserves Estimated Net Proved Undeveloped Reserves Estimated Net Proved Reserves Oil, including natural gas liquids (Bbls) 1,116,000 110,000 1,226,000 Natural gas (Mcf) 6,093,000 608,000 6,701,000 Total (Boe) 2,132,000 211,000 2,343,000 During fiscal 2023, Barnwell’s total net proved developed reserves of oil and natural gas liquids increased by 70,000 Bbls (7%) and total net proved developed reserves of natural gas increased by 1,236,000 Mcf (25%), for a combined increase of 249,000 Boe (13%).
No estimates of total proved net oil or natural gas reserves have been filed with, or included in reports to, any federal authority or agency, other than the SEC, since October 1, 2023.
The Legacy assets are located throughout Alberta, Canada, and produce shallow gas and conventional oil from a variety of pools. These assets have been accumulated over decades of Barnwell activity. Barnwell continues to evaluate opportunities to either divest the legacy Canadian assets or add to them through acquiring working interests depending on technical and economic evaluations.
Barnwell also has some minor legacy assets that represent 14% of Barnwell’s fiscal 2024 production (Boe) and consist of the largely non-operated oil and natural gas assets located throughout Alberta, Canada, and produce shallow gas or conventional oil from a variety of pools. These assets have been accumulated over decades of Barnwell activity.
In fiscal 2023, 76% of Canadian royalties were related to Alberta government charges and 24% of royalties were related to freehold, overriding royalties and other charges. 12 In fiscal 2023, the weighted-average royalty rate paid on all of Barnwell’s Canadian natural gas was 10%, and the weighted-average royalty rate paid on oil was 17%.
In fiscal 2024, the weighted-average royalty rate paid on all of Barnwell’s Canadian natural gas was 6%, and the weighted-average royalty rate paid on oil was 21%. In fiscal 2024, the weighted-average royalty rate paid on all of Oklahoma’s and Texas’s production was 23% and 26%, respectively.
Barnwell plans to continue to develop the pool with more horizontal wells if commodity prices continue to support their profitability. 5 The Legacy assets represent 8% of Barnwell’s fiscal 2023 Boe production and consist of the largely non-operated Canadian oil and natural gas assets not in the Twining area.
Barnwell plans to continue to develop the pool with more horizontal wells if commodity prices continue to support their profitability.
Post payout royalties vary with commodity prices and well production rates.
Post payout royalties vary with commodity prices and well production rates. In fiscal 2024, 75% of Canadian royalties were related to Alberta government charges and 25% of royalties were related to freehold, overriding royalties and other charges.
KD I is the developer of Increment I, and KD II is the developer of Increment II.
KD I is the developer of Increment I, and KD II is the developer of Increment II. Barnwell's ownership interests in the Kukio Resort Land Development Partnerships are accounted for using the equity method of accounting.
Removed
Strategy Barnwell’s Canadian oil and natural gas assets are currently managed as two categories based on their differing attributes and strategies: Twining and Legacy. Twining represents 73% of Barnwell’s fiscal 2023 Boe production and consists of assets in the Twining field, in Alberta, Canada. These assets were purchased in August 2018 and were augmented with subsequent smaller acquisitions of partners.
Added
These assets were purchased in August 2018 and were augmented with subsequent smaller acquisitions of partners. These assets are partially operated by the Company and partially operated by Pine Cliff Energy Ltd.
Removed
These assets are partially operated by the Company and partially operated by Pine Cliff Energy Ltd. The oil wells operated by the Company have largely less than 15% per year decline rates, and due to these lower decline rates, require less capital investment to replace decline.
Added
Barnwell has divested many of these properties in 5 fiscal 2024 in order to reduce risk and increase focus in the Twining area. Barnwell will continue to opportunistically divest our remaining legacy Canadian assets and minimal capital is expected to be invested in these properties.
Removed
In December 2022, the Company entered into a purchase and sale agreement with an independent third party to acquire a 22.3% non-operated working interest in oil and natural gas leasehold acreage in the Permian Basin in Texas.
Added
The Company has a 15.4% non-operated working interest in two wells in the Permian Basin in Texas. Our interests in Texas produced 9% of Barnwell’s fiscal 2024 production (Boe).
Removed
In connection with the purchase of such leasehold interests, Barnwell acquired a 15.4% non-operated working interest in two oil wells in the Wolfcamp Formation in Loving and Ward Counties, Texas. Two gross (0.3 net) wells were drilled and began producing in late April 2023. Additional drilling opportunities in the U.S. are being investigated.
Added
Oil prices received in Canada are impacted by differentials in price to West Texas Intermediate (“WTI”). In recent history this meant that Barnwell at times received prices at a significant discount to WTI. In 2024, additional oil export pipeline capacity was made available in Canada which greatly reduced this differential.
Removed
These wells produced 10% of Barnwell’s fiscal 2023 Boe production, but were only producing for five months.
Added
Gas prices received in Canada are based on published AECO hub prices and are also impacted by local market conditions that result in a discount to U.S. Henry Hub pricing. Oil prices received from the Texas and Oklahoma properties are generally in line with WTI pricing.
Removed
Operations All acquisitions, operational and developmental activities in the Twining area are the responsibility of the President and Chief Operating Officer of Barnwell of Canada and Octavian Oil with approvals for major expenditures secured from Barnwell’s executive management and, when applicable, the Board of Directors.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBarnwell's oil and natural gas segment is subject to the provisions of the AER’s Licensee Life-Cycle Management Program via a Licensee Capability Assessment (“LCA”). Under this program the AER assesses the corporate health of the Company and considers a wider variety of factors than those considered under the previous program.
Biggest changeUnder this program the AER assesses the corporate health of the Company and considers a wider variety of factors than those considered under the previous program. The LCA establishes clear expectations for industry with regards to the management of liabilities throughout the entire lifecycle of oil and gas projects.
If future oil and natural gas segment acquisition and development activities are not successful it could have an adverse effect on our future results of operations and financial condition. 21 Oil and natural gas prices are highly volatile and further declines, or extended low prices will significantly affect our financial condition and results of operations.
If future oil 21 and natural gas segment acquisition and development activities are not successful it could have an adverse effect on our future results of operations and financial condition. Oil and natural gas prices are highly volatile and further declines, or extended low prices will significantly affect our financial condition and results of operations.
Ultimately, the success of these drilling and completion techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently 25 long time period.
Ultimately, the success of these drilling and completion techniques can only be 25 evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period.
In particular, GHG emissions-related legislation, regulations, and other government actions and shifting consumer preferences and other private efforts aimed at reducing GHG emissions may result in increased and substantial capital, compliance, operating, and maintenance costs and could, among other things, reduce demand for the Company’s oil and natural gas; adversely affect the economic feasibility of the Company’s resources; impact or limit our 27 business plans; and adversely affect the Company’s sales volumes, revenues, margins and reputation.
In particular, GHG emissions-related legislation, regulations, and other government actions and shifting consumer preferences and other private efforts aimed at reducing GHG emissions may result in increased and substantial capital, compliance, operating, and maintenance costs and could, among other things, reduce demand for the Company’s oil and natural gas; adversely affect the economic feasibility of the Company’s resources; impact or limit our business plans; and adversely affect the Company’s sales volumes, revenues, margins and reputation.
Barnwell may experience challenges from the impacts of international and domestic legislation, regulation, or other government actions relating to GHG emissions (e.g., carbon dioxide and methane) and climate change. International agreements and national, regional, and state legislation and regulatory measures that aim to directly or indirectly limit or reduce GHG emissions are in various stages of implementation.
Barnwell may experience challenges from the impacts of international and domestic legislation, regulation, or other government actions relating to GHG emissions (e.g., carbon dioxide and methane) and 27 climate change. International agreements and national, regional, and state legislation and regulatory measures that aim to directly or indirectly limit or reduce GHG emissions are in various stages of implementation.
The occurrence of a natural disaster could also cause property and flood insurance rates and deductibles to increase, which could reduce demand for real estate in Hawaii. Risks Related to Contract Drilling Segment Demand for water well drilling and/or pump installation is volatile. A decrease in demand for our services could adversely affect our revenues and results of operations.
The occurrence of a natural disaster could also cause property and flood insurance rates and deductibles to increase, which could reduce demand for real estate in Hawaii. 29 Risks Related to Contract Drilling Segment Demand for water well drilling and/or pump installation is volatile. A decrease in demand for our services could adversely affect our revenues and results of operations.
Demand for services is highly dependent upon land development activities in the state of Hawaii. The real estate development industry is cyclical in nature and is particularly vulnerable to shifts in local, regional, and national economic conditions outside of our control such as interest rates, housing demand, 29 population growth, employment levels and job growth and property taxes.
Demand for services is highly dependent upon land development activities in the state of Hawaii. The real estate development industry is cyclical in nature and is particularly vulnerable to shifts in local, regional, and national economic conditions outside of our control such as interest rates, housing demand, population growth, employment levels and job growth and property taxes.
In connection with these assessments, we perform a review of the subject properties that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to fully assess their deficiencies and potential recoverable reserves.
In connection with these assessments, we perform a review of the subject properties that we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems nor will it permit us to become sufficiently familiar with the properties to fully assess 23 their deficiencies and potential recoverable reserves.
The shortage of and/or delay in delivery of such equipment, such as pumps, interruptions in supply, and price increases of such equipment and materials due to supply chain issues and manufacturing disruptions could adversely impact our gross margin and results of operations. Awarding of contracts is dependent upon our ability to obtain contract bid and performance bonds from insurers.
The shortage of and/or delay in delivery of such equipment, such as pumps, 30 interruptions in supply, and price increases of such equipment and materials due to supply chain issues and manufacturing disruptions could adversely impact our gross margin and results of operations. Awarding of contracts is dependent upon our ability to obtain contract bid and performance bonds from insurers.
We often are not entitled to contractual 23 indemnification for environmental liabilities or title defects in excess of the amounts claimed by us before closing and acquire properties on an “as is” basis.
We often are not entitled to contractual indemnification for environmental liabilities or title defects in excess of the amounts claimed by us before closing and acquire properties on an “as is” basis.
If such a defect were to occur, our entitlement to the production from such purchased assets could be jeopardized. Risks Related to Land Investment Segment Receipt of future payments from KD I and KD II and cash distributions from the Kukio Resort Land Development Partnerships is dependent upon the developer’s continued efforts and ability to develop and market the property.
If such a defect were to occur, our entitlement to the production from such purchased assets could be jeopardized. Risks Related to Land Investment Segment Receipt of future payments from KD II and cash distributions from the Kukio Resort Land Development Partnerships is dependent upon the developer’s continued efforts and ability to develop the property.
Under the LCA Program, an inventory reduction program has also been implemented which requires mandatory annual minimum expenditures towards outstanding decommissioning and reclamation obligations in accordance with AER targets which are adjusted by the AER on an annual basis. The target for 2024 is 6.6% of an individual company’s inactive liability. These targets became effective January 1, 2022.
Under the LCA Program, an inventory reduction program has also been implemented which requires mandatory annual minimum expenditures towards outstanding decommissioning and reclamation obligations in accordance with AER targets which are adjusted by the AER on an annual basis. The target for 2025 is 6.2% of an individual company’s inactive liability. These targets became effective January 1, 2022.
We are entitled to receive future payments based on a percentage of the sales prices of residential lots sold within the Kaupulehu area by KD I and KD II as well as a percentage of future distributions KD II makes to its members.
We are entitled to receive future payments based on a percentage of the sales prices of residential lots sold within the Kaupulehu area by KD II as well as a percentage of future distributions KD II makes to its members.
It is uncertain when or if KD II will develop or sell the remaining portion of Increment II, and there is no assurance with regards to the amounts of future sales from Increments I and II. We do not have a controlling interest in the partnerships, and therefore are dependent on the general partner for development decisions.
It is uncertain when or if KD II will develop or sell the remaining portion of Increment II, and there is no assurance with regards to the amounts of future sales from Increment II. We 28 do not have a controlling interest in the partnerships, and therefore are dependent on the general partner for development decisions.
We derive a significant portion of our revenues from our operations in Canada; 67% in fiscal 2023. Additionally, our ability to compete in the Canadian oil and natural gas industry may be adversely affected by governmental regulations or other policies that favor the awarding of contracts to contractors in which Canadian nationals have substantial ownership interests.
We derive a significant portion of our revenues from our operations in Canada; 70% in fiscal 2024. Additionally, our ability to compete in the Canadian oil and natural gas industry may be adversely affected by governmental regulations or other policies that favor the awarding of contracts to contractors in which Canadian nationals have substantial ownership interests.
A significant portion of our contract drilling division revenues is derived from water and infrastructure contracts with governmental entities or agencies; 8% in fiscal 2023. Reduced tax revenues and governmental budgets may limit spending by local governments which in turn will affect the demand for our services.
A significant portion of our contract drilling division revenues is derived from water and infrastructure contracts with governmental entities or agencies; 18% in fiscal 2024. Reduced tax revenues and governmental budgets may limit spending by local governments which in turn will affect the demand for our services.
The occurrence of a natural disaster in Hawaii such as, but not limited to, earthquakes, landslides, hurricanes, tornadoes, tsunamis, volcanic activity, droughts and floods, could have a material adverse effect on our ability to complete our contracts. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
The occurrence of natural disasters in Hawaii could adversely affect our business. The occurrence of a natural disaster in Hawaii such as, but not limited to, earthquakes, landslides, hurricanes, tornadoes, tsunamis, volcanic activity, droughts and floods, could have a material adverse effect on our ability to complete our contracts. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Our backlog consists of the uncompleted portion of services to be performed under contracts that have been started and new contracts not yet started. Our contracts are subject to change orders and cancellations, and such changes could adversely affect our operations. The occurrence of natural disasters in Hawaii could adversely affect our business.
The contracts in our backlog are subject to change orders and cancellation. Our backlog consists of the uncompleted portion of services to be performed under contracts that have been started and new contracts not yet started. Our contracts are subject to change orders and cancellations, and such changes could adversely affect our operations.
However, in order to collect such payments we are reliant upon the developer, KD I and KD II, in which we own a non-controlling ownership interest, to continue to market the remaining lots within Increment I and to proceed with the development or sale of the remaining portion of Increment II.
However, in order to collect such payments we are reliant upon the developer, KD II, in which we own a non-controlling ownership interest, to proceed with the development or sale of the remaining portion of Increment II.
The receipt of future payments and cash distributions could be jeopardized if the developer fails to proceed with development and marketing of the property. 28 We hold investment interests in unconsolidated land development partnerships, which are accounted for using the equity method of accounting, in which we do not have a controlling interest.
The receipt of future payments and cash distributions could be jeopardized if the developer fails to proceed with development of the property. We hold investment interests in unconsolidated land development partnerships, which are accounted for using the equity method of accounting, in which we do not have a controlling interest. These investments involve risks and are highly illiquid.
Additionally, future cash distributions from the Kukio Resort Land Development Partnerships, which includes KD I and KD II, are also dependent on future lot sales in Increment I by KD I and the development or sale of Increment II by KD II.
Additionally, future cash distributions from the Kukio Resort Land Development Partnerships, which includes KD II, are also dependent on the development or sale of Increment II by KD II.
Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects, as the information we provide to stockholders may be different from what one might receive from other public companies in which one hold shares.
Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects, as the information we provide to stockholders may be different from what one might receive from other public companies in which one hold shares. As a smaller reporting company, we are not required to provide this information.
A related effect of such issuances may enhance existing large stockholders’ influence on the Company, including that of Alexander Kinzler, our Chief Executive Officer. A small number of stockholders, including our CEO, own a significant amount of our common stock and may have influence over the Company.
A related effect of such issuances may enhance existing large stockholders’ influence on the Company, including that of Alexander Kinzler, our General Counsel and Secretary. A small number of stockholders, including our General Counsel and Secretary, own a significant amount of our common stock and may have influence over the Company.
As of September 30, 2023, the CEO, who is a member of the Board of Directors, and two other stockholders hold approximately 44% of our outstanding common stock. The interests of one or more of these stockholders may not always coincide with the interests of other stockholders.
As of September 30, 2024, our General Counsel and Secretary, who is the Executive Chairman of the Board of Directors, and two other stockholders hold approximately 48% of our outstanding common stock. The interests of one or more of these stockholders may not always coincide with the interests of other stockholders.
In addition, there can be no assurance that insurance will continue to be available to cover any or all of these risks, or, even if available, that insurance premiums or other costs will not rise significantly in the future, so as to make the cost of such insurance prohibitive. 26 Deficiencies in operating practices and record keeping, if any, may increase our risks and liabilities relating to incidents such as spills and releases and may increase the level of regulatory enforcement actions.
In addition, there can be no assurance that insurance will continue to be available to cover any or all of these risks, or, even if available, that 26 insurance premiums or other costs will not rise significantly in the future, so as to make the cost of such insurance prohibitive.
Retirement plan cash funding obligations and plan expenses and obligations are subject to a high degree of uncertainty and could increase in future years depending on numerous factors, including the performance of the financial markets, specifically the equity markets, levels of interest rates, and the cost of health care insurance premiums. 19 The price of our common stock has been volatile and could continue to fluctuate substantially.
Retirement plan cash funding obligations and plan expenses and obligations are subject to a high degree of uncertainty and could increase in future years depending on numerous factors, including the performance of the financial markets, specifically the equity markets and levels of interest rates. 19 Declines in the price of our common stock could adversely affect the value of an asset on our balance sheet and our stockholders’ equity.
The LCA establishes clear expectations for industry with regards 22 to the management of liabilities throughout the entire lifecycle of oil and gas projects. Factors considered are grouped into six factor groups, these being current financial distress, liability magnitude, resources lifespan, operations compliance, closure efficiency and administrative compliance. These factors are compared to peer operators and ranked into three “Tiers”.
Factors considered are grouped into six factor groups, these being current financial distress, liability magnitude, resources lifespan, operations compliance, closure efficiency and administrative compliance. These factors are compared to peer operators and ranked into three “Tiers”.
We are a smaller reporting company and benefit from certain reduced governance and disclosure requirements, including that our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting.
Further, there are significant personal liability risks to Barnwell of Canada's individual officers and directors related to well clean-up costs that may affect our ability to attract or retain the necessary people. 20 We are a smaller reporting company and benefit from certain reduced governance and disclosure requirements, including that our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting.
Although we have recorded a provision in our financial statements relating to our estimated future environmental and reclamation obligations that we believe is reasonable, we cannot guarantee that we will be able to satisfy our actual future environmental and reclamation obligations.
Although we have recorded a provision in our financial statements relating to our estimated future environmental and reclamation obligations that we believe is reasonable, we cannot guarantee that we will be able to satisfy our actual future environmental and reclamation obligations. 22 Barnwell's oil and natural gas segment is subject to the provisions of the Alberta Energy Regulator’s (“AER”) Licensee Life-Cycle Management Program via a Licensee Capability Assessment (“LCA”).
Additionally, bonding insurance rates may increase and have an impact on our ability to win competitive bids, which could have a corresponding material impact on contract drilling operating results. 30 The contracts in our backlog are subject to change orders and cancellation.
There can be no assurance that our ability to obtain such bonds will continue on the same basis as the past. Additionally, bonding insurance rates may increase and have an impact on our ability to win competitive bids, which could have a corresponding material impact on contract drilling operating results.
Our business could be adversely affected by an inability to retain personnel or upward pressure on wages as a result of the highly competitive labor market. Further, there are significant personal liability risks to Barnwell of Canada's individual officers and directors related to well clean-up costs that may affect our ability to attract or retain the necessary people.
Our business could be adversely affected by an inability to retain personnel or upward pressure on wages as a result of the highly competitive labor market.
Our operations are subject to domestic and foreign government regulation and other risks, particularly in Canada and the U.S.
Deficiencies in operating practices and record keeping, if any, may increase our risks and liabilities relating to incidents such as spills and releases and may increase the level of regulatory enforcement actions. Our operations are subject to domestic and foreign government regulation and other risks, particularly in Canada and the U.S.
Removed
As a smaller reporting company, we are not required to provide this information. 20 We face various risks and uncertainties related to public health crises, including the COVID-19 pandemic. The COVID-19 pandemic and its consequences may have a material adverse effect on us.
Added
Currently, Barnwell’s pension plan is overfunded, meaning that the current fair value of the assets held by the pension plan exceeds the estimated current accumulated benefit obligation of the pension plan.
Removed
We face various risks and uncertainties related to public health crises, including the global COVID-19 pandemic, which has disrupted financial markets and significantly impacted worldwide economic activity.
Added
The overfunded amount is included on our balance sheet as an asset titled “Asset for retirement benefits.” As of September 30, 2024, the value of that asset was $4,899,000, which represented 16% of the Company’s total assets of $30,669,000 and 38% of our stockholders’ equity.
Removed
The future impact of the COVID-19 pandemic as well as mandatory and voluntary actions taken to mitigate the public health impact of the pandemic may have a material adverse effect on our financial condition. The COVID-19 pandemic and social and governmental responses to the pandemic have caused, and may continue to cause, severe economic, market and other disruptions worldwide.
Added
A decline in the value of our pension plan’s investments overall, or of any one investment, could reduce the value of “Asset for retirement benefits.” A portion of the pension plan’s investments is in publicly traded stocks, one of which is Barnwell’s common stock.
Removed
Although the COVID-19 pandemic and related societal and government responses have not, to date, had a material impact on our business or financial results, the extent to which COVID-19 and related actions may, in the future, impact our operations cannot be predicted with any degree of confidence.
Added
As of September 30, 2024, the value of the Barnwell common stock held by the pension plan was $934,000, representing approximately 7% of the fair market value of the pension plan’s assets.
Removed
As a result, we cannot at this time predict the direct or indirect impact on us of the COVID-19 pandemic, but it could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
Added
A decline in the price of our common stock would also have the effect of reducing the value of our “Asset for retirement benefits,” total assets and our stockholders’ equity. The price of our common stock has been volatile and could continue to fluctuate substantially.
Removed
These investments involve risks and are highly illiquid.
Added
Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect our business, prospects, financial condition, and operating results. There is currently significant uncertainty about the future relationship between the United States and Canada, including potential changes with respect to trade policies, treaties, tariffs, taxes, and other limitations on cross-border operations.
Removed
There can be no assurance that our ability to obtain such bonds will continue on the same basis as the past.
Added
Because most of our oil and natural gas production is in Canada, changes in tariffs, trade barriers, and other regulatory requirements could have an adverse effect on our business, prospects, financial condition and operating results, the extent of which cannot be predicted with certainty at this time.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Oil and Natural Gas and Land Investment Properties The location and character of Barnwell’s oil and natural gas properties and its land investment properties, are described above under Item 1, “Business.” Corporate Offices Barnwell's corporate headquarters is located in Honolulu, Hawaii, in a commercial office building under a lease that expires in February 2024.
Biggest changeITEM 2. PROPERTIES Oil and Natural Gas and Land Investment Properties The location and character of Barnwell’s oil and natural gas properties and its land investment properties, are described above under Item 1, “Business.” Corporate Offices Barnwell's corporate headquarters is located in Honolulu, Hawaii, in a commercial office building under a lease that expires in February 2026.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBarnwell’s management is not aware of any claims or litigation involving Barnwell that are likely to have a material adverse effect on its results of operations, financial position or liquidity. ITEM 4. MINE SAFETY DISCLOSURES Disclosure is not applicable to Barnwell. 31 PART II
Biggest changeBarnwell’s management is not aware of any claims or litigation involving Barnwell that are likely to have a material adverse effect on its results of operations, financial position or liquidity. ITEM 4. MINE SAFETY DISCLOSURES Disclosure is not applicable to Barnwell. 32 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The principal market on which Barnwell’s common stock is being traded is the NYSE American under the ticker symbol “BRN.” The following tables present the quarterly high and low sales prices, on the NYSE American, for Barnwell’s common stock during the periods indicated: Quarter Ended High Low Quarter Ended High Low December 31, 2021 $3.50 $2.30 December 31, 2022 $3.33 $2.70 March 31, 2022 $6.38 $2.38 March 31, 2023 $2.97 $1.89 June 30, 2022 $3.40 $2.29 June 30, 2023 $3.10 $2.47 September 30, 2022 $3.32 $2.12 September 30, 2023 $2.79 $2.18 Holders As of December 12, 2023, there were 10,000,106 shares of common stock, par value $0.50, outstanding.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The principal market on which Barnwell’s common stock is being traded is the NYSE American under the ticker symbol “BRN.” The following tables present the quarterly high and low sales prices, on the NYSE American, for Barnwell’s common stock during the periods indicated: Quarter Ended High Low Quarter Ended High Low December 31, 2022 $3.33 $2.70 December 31, 2023 $2.78 $2.06 March 31, 2023 $2.97 $1.89 March 31, 2024 $2.53 $2.15 June 30, 2023 $3.10 $2.47 June 30, 2024 $3.20 $2.30 September 30, 2023 $2.79 $2.18 September 30, 2024 $2.53 $2.12 Holders As of December 13, 2024, there were 10,053,534 shares of common stock, par value $0.50, outstanding.
Securities Authorized for Issuance Under Equity Compensation Plans See information included in Part III, Item 12, under the caption “Equity Compensation Plan Information.” Stock Performance Graph and Cumulative Total Return Disclosure is not required as Barnwell qualifies as a smaller reporting company. 32 ITEM 6. [RESERVED] 33
Securities Authorized for Issuance Under Equity Compensation Plans See information included in Part III, Item 12, under the caption “Equity Compensation Plan Information.” Stock Performance Graph and Cumulative Total Return Disclosure is not required as Barnwell qualifies as a smaller reporting company. 33 ITEM 6. [RESERVED] 34
Record Date Date of Payment Dividend Paid August 24, 2023 September 11, 2023 $0.015 May 25, 2023 June 12, 2023 $0.015 February 23, 2023 March 13, 2023 $0.015 December 27, 2022 January 11, 2023 $0.015 August 23, 2022 September 6, 2022 $0.015 The payment of future cash dividends will depend on, among other things, our financial condition, operating cash flows, the amount of cash inflows from land investment activities, and the level of our oil and natural gas capital expenditures and any other investments.
Record Date Date of Payment Dividend Paid August 24, 2023 September 11, 2023 $0.015 May 25, 2023 June 12, 2023 $0.015 February 23, 2023 March 13, 2023 $0.015 December 27, 2022 January 11, 2023 $0.015 The payment of future cash dividends will depend on, among other things, our financial condition, operating cash flows, and the level of our oil and natural gas capital expenditures and any other investments.
As of December 12, 2023, there were approximately 81 shareholders of record and approximately 1,000 beneficial owners. Dividends The following table sets forth the cash dividends paid per share of common stock during fiscal 2023 and 2022.
As of December 13, 2024, there were approximately 80 shareholders of record and approximately 1,000 beneficial owners. Dividends No dividends were declared or paid during the year ended September 30, 2024. The following table sets forth the cash dividends paid per share of common stock during the year ended September 30, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following factors affected the results of operations for the current fiscal year as compared to the prior fiscal year: • A $5,863,000 decrease in oil and natural gas segment operating results, before income taxes, due to significant decreases in natural gas, oil, and natural gas liquid prices.
Biggest changeThe following factors affected the results of operations for the current fiscal year as compared to the prior fiscal year: • A $4,958,000 decrease in oil and natural gas segment operating results, before income taxes, primarily attributable to a $2,885,000 non-cash ceiling test impairment in the current year and due to decreases in natural gas, oil, and natural gas prices in the current year period as compared to the same period in the prior year; • A $599,000 decrease in contract drilling segment operating results, before income taxes, primarily resulting from decreased activity and an increase in drilling difficulties and labor costs as compared to the same period in the prior year; • A $551,000 gain recognized in the prior year period from the sale of a contract drilling segment drilling rig, whereas there was no such gain in the current year period; and • Results improved as general and administrative expenses decreased $1,358,000 primarily due to decreases in stockholder costs and professional fees in the current year period as compared to the same period in the prior year.
Many factors and assumptions can and do change during a contract performance obligation period which can result in a change to contract profitability including unforeseen underground geological conditions (to the extent that contract remedies are unavailable), the availability and costs of skilled contract labor, the performance of major material suppliers, the performance of major subcontractors, unusual weather conditions and unexpected changes in material costs, changes in the scope and nature of work to be performed, and unexpected construction execution errors, among others.
Many factors and assumptions can and do change during a contract performance obligation period which can 37 result in a change to contract profitability including unforeseen underground geological conditions (to the extent that contract remedies are unavailable), the availability and costs of skilled contract labor, the performance of major material suppliers, the performance of major subcontractors, unusual weather conditions and unexpected changes in material costs, changes in the scope and nature of work to be performed, and unexpected construction execution errors, among others.
Market prices for oil and natural gas products are dependent upon factors such as, but not limited to, changes in market supply and demand, which are impacted by overall 38 economic activity, changes in weather, pipeline capacity constraints, inventory storage levels, and output. Oil and natural gas prices are very difficult to predict and fluctuate significantly.
Market prices for oil and natural gas products are dependent upon factors such as, but not limited to, changes in market supply and demand, which are impacted by overall economic activity, changes in weather, pipeline capacity constraints, inventory storage levels, and output. Oil and natural gas prices are very difficult to predict and fluctuate significantly.
Barnwell recognizes the financial statement effects of tax positions when it is more likely than not that the position will be sustained by a taxing authority. 37 Judgments and Assumptions We make estimates and judgments in determining our income tax expense for each reporting period.
Barnwell recognizes the financial statement effects of tax positions when it is more likely than not that the position will be sustained by a taxing authority. Judgments and Assumptions We make estimates and judgments in determining our income tax expense for each reporting period.
The Company operates two subsidiaries in Canada, one of which is a U.S. corporation operating as a branch in Canada that is treated as a non-resident for Canadian tax purposes and thus has operating results that cannot be offset against or combined with the other Canadian subsidiary that files as a resident for Canadian tax purposes.
The Company 48 operates two subsidiaries in Canada, one of which is a U.S. corporation operating as a branch in Canada that is treated as a non-resident for Canadian tax purposes and thus has operating results that cannot be offset against or combined with the other Canadian subsidiary that files as a resident for Canadian tax purposes.
Barnwell recognizes revenue from well drilling or the installation of pumps over time based on total costs incurred on the projects relative to the total expected costs to satisfy the performance obligation as management believes this is an accurate representation of the percentage of completion as control is continuously transferred to the customer.
Barnwell 36 recognizes revenue from well drilling or the installation of pumps over time based on total costs incurred on the projects relative to the total expected costs to satisfy the performance obligation as management believes this is an accurate representation of the percentage of completion as control is continuously transferred to the customer.
The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis. 36 Judgments and Assumptions Management evaluates the performance of contracts on an individual basis.
The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis. Judgments and Assumptions Management evaluates the performance of contracts on an individual basis.
This could result in a charge to, or an increase in, income in the period such determination is made, and the impact of these changes could be material. In addition, Barnwell operates within the U.S. and Canada and is subject to audit by taxing authorities in these jurisdictions.
This could result in a charge to, or an increase in, income in the period such determination is made, and the impact of these changes could be material. 38 In addition, Barnwell operates within the U.S. and Canada and is subject to audit by taxing authorities in these jurisdictions.
No definitive development plans have been made by KDII, the developer of Increment II, as of the date of this report. • An indirect 19.6% non-controlling ownership interest in KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD I and an indirect 10.8% non-controlling ownership interest in KD II through KDK.
No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report. • An indirect 19.6% non-controlling ownership interest in KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD I and an indirect 10.8% non-controlling ownership interest in KD II through KDK.
While the quantities of proved reserves require substantial judgment, the associated prices of oil, natural gas and natural gas liquids reserves are the average first-day-of-the-month prices during the 12- 35 month period ending in the reporting period on a constant basis as prescribed by SEC regulations.
While the quantities of proved reserves require substantial judgment, the associated prices of oil, natural gas and natural gas liquids reserves are the average first-day-of-the-month prices during the 12-month period ending in the reporting period on a constant basis as prescribed by SEC regulations.
Accordingly, the assets, liabilities, stockholders’ equity and revenues and expenses of Barnwell’s subsidiaries operating in Canada have been adjusted to reflect the change in the exchange rates. Other comprehensive income and losses are not included in net earnings and net loss.
Accordingly, the assets, liabilities, stockholders’ equity and revenues and expenses of Barnwell’s subsidiaries operating in Canada have been 42 adjusted to reflect the change in the exchange rates. Other comprehensive income and losses are not included in net earnings and net loss.
In the last three fiscal years, annual revisions to our reserve volume estimates have averaged 31% of the previous year’s estimate, due in large part to the impacts of volatile oil and natural gas prices which change the economic viability of producing such reserves and changes in estimated proved undeveloped reserves which can fluctuate from year to year depending upon the Company's plans and ability to fund the capital expenditures necessary to develop such reserves.
In the last three fiscal years, annual revisions to our reserve volume estimates have averaged 18% of the previous year’s estimate, due in large part to the impacts of volatile oil and natural gas prices which change the economic viability of producing such reserves and changes in estimated proved undeveloped reserves which can fluctuate from year to year depending upon the Company's plans and ability to fund the capital expenditures necessary to develop such reserves.
Barnwell is 39 committed to commence construction of improvements within 90 days of the transfer of the four lots in the phases subsequent to Phase 2A as a condition of the transfer of such lots.
Barnwell is committed to commence construction of improvements within 90 days of the transfer of the four lots in the phases subsequent to Phase 2A as a condition of the transfer of such lots.
Oil and natural gas prices continue to be volatile over time 40 and thus, the Company is unable to reasonably predict future prices and the impacts future prices will have on the Company.
Oil and natural gas prices continue to be volatile over time and thus, the Company is unable to reasonably predict future prices and the impacts future prices will have on the Company.
The total cash deposit amount was calculated to be approximately $1,525,000 and the Company paid $888,000 of the total deposit in July and August 2021 and may need to pay the remaining balance of $637,000 by August 2024. The Company revised its Manyberries ARO liability based on the OWA’s revised abandonment and reclamation estimates.
The total cash deposit amount was calculated to be approximately $1,525,000 and the Company paid $888,000 of the total deposit in July and August 2021 and may need to pay the remaining balance of $637,000 by August 2025. The Company revised its Manyberries ARO liability based on the OWA’s revised abandonment and reclamation estimates.
In the quarter ended June 30, 2021, the Company received cumulative distributions from the Kukio Resort Land Development Partnerships in excess of our investment balance and in accordance with applicable accounting guidance, the Company suspended its equity method earnings recognition and the Kukio Resort Land Development Partnership investment balance was reduced to zero with the distributions received in excess of our investment balance recorded as equity in income of affiliates 47 because the distributions are not refundable by agreement or by law and the Company is not liable for the obligations of or otherwise committed to provide financial support to the Kukio Resort Land Development Partnerships.
In the quarter ended June 30, 2021, the Company received cumulative distributions from the Kukio Resort Land Development Partnerships in excess of our investment balance and in accordance with applicable accounting guidance, the Company suspended its equity method earnings recognition and the Kukio Resort Land Development Partnerships’ investment balance was reduced to zero with the distributions received in excess of our investment balance recorded as equity in income of affiliates because the distributions are not refundable by agreement or by law and the Company is not liable for the obligations of or otherwise committed to provide financial support to the Kukio Resort Land Development Partnerships.
Overview Barnwell is engaged in the following lines of business: 1) acquiring, developing, producing and selling oil and natural gas in Canada and the U.S. (oil and natural gas segment), 2) investing in land interests in Hawaii (land investment segment), and 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling segment).
Overview Barnwell is engaged in the following lines of business: 1) acquiring, developing, producing and selling oil and natural gas in Canada and the U.S. (oil and natural gas segment), 2) leasehold land interests in Hawaii (land investment segment), and 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling segment).
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is intended to assist in the understanding of the Consolidated Balance Sheets of Barnwell Industries, Inc. and subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us” or the “Company”) as of September 30, 2023 and 2022, and the related Consolidated Statements of Operations, Comprehensive (Loss) Income, Equity, and Cash Flows for the years ended September 30, 2023 and 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is intended to assist in the understanding of the Consolidated Balance Sheets of Barnwell Industries, Inc. and subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us” or the “Company”) as of September 30, 2024 and 2023, and the related Consolidated Statements of Operations, Comprehensive Loss, Equity, and Cash Flows for the years ended September 30, 2024 and 2023.
During the year ended September 30, 2023, Barnwell received cash distributions of $758,000 from the Kukio Resort Land Development Partnership resulting in a net amount of $674,000, after distributing $84,000 to non-controlling interests.
During the year ended September 30, 2023, Barnwell received cash distributions of $758,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $674,000, after distributing $84,000 to non-controlling interests.
The foreign currency gains and losses from intercompany balances are included in our consolidated statement of operations as the intercompany balances were not considered long-term in nature because management estimates that these intercompany balances will be settled in the future.
The foreign currency gains from intercompany balances are included in our consolidated statement of operations as the intercompany balances were not considered long-term in nature because management estimates that these intercompany balances will be settled in the future.
Sale of interest in leasehold land Kaupulehu Developments is entitled to receive a percentage of the gross receipts from the sales of lots and/or residential units in Increment I by KD I.
Sale of interest in leasehold land Kaupulehu Developments was entitled to receive a percentage of the gross receipts from the sales of lots and/or residential units in Increment I by KD I.
The ceiling limitation is the sum of 1) the discounted present value (at 10%), using average first-day-of-the-month prices during the 12-month period ending as of the balance sheet date held constant over the life of the reserves, of Barnwell’s estimated future net cash flows from estimated production of proved oil and natural gas reserves, less estimated future expenditures to be incurred in developing and producing the proved reserves but excluding future cash outflows associated with settling 34 asset retirement obligations with the exception of those associated with proved undeveloped reserves from wells that are to be drilled in the future; plus 2) the cost of major development projects and unproven properties not subject to depletion, if any; plus 3) the lower of cost or estimated fair value of unproven properties included in costs subject to depletion; less 4) related income tax effects.
The ceiling limitation is the sum of 1) the discounted present value (at 10%), using average first-day-of-the-month prices during the 12-month period ending as of the balance sheet date held constant over the life of the reserves (except where prices are defined by contractual arrangements), of Barnwell’s estimated future net cash flows from estimated production of proved oil and natural gas reserves, less estimated future expenditures to be incurred in developing and producing the proved reserves but excluding future cash outflows associated with settling asset retirement obligations with the exception of those associated with proved undeveloped reserves from wells that are to be drilled in the future; plus 2) the cost of major development projects and unproven properties not subject to depletion, if any; plus 3) the lower of cost or estimated fair value of unproven properties included in costs subject to depletion; less 4) related income tax effects.
A remaining excess deposit, if any, would ultimately be refunded to 52 the Company upon completion of all of the work. As at September 30, 2023, the Company recognized a cumulative reduction in the deposit balance of $300,000 for work performed under this program. Contractual Obligations Disclosure is not required as Barnwell qualifies as a smaller reporting company.
A remaining excess deposit, if any, would ultimately be refunded to the Company upon completion of all of the work. As of September 30, 2024, the Company recognized a cumulative reduction in the deposit balance of $353,000 for work performed under this program. 52 Contractual Obligations Disclosure is not required as Barnwell qualifies as a smaller reporting company.
Conversely, the higher the estimated reserves, the lower the depletion rate per unit of production. If reported reserve volumes were revised downward by 5% as of the beginning of fiscal 2023, depletion for fiscal 2023 would have increased by approximately $211,000.
Conversely, the higher the estimated reserves, the lower the depletion rate per unit of production. If reported reserve volumes were revised downward by 5% as of the beginning of fiscal 2024, depletion for fiscal 2024 would have increased by approximately $222,000.
Land Investment Segment Future revenues from the sale of interest in leasehold land and any future cash distributions from our investment in the Kukio Resort Land Development Partnerships are dependent upon the sale of the remaining two residential lots within Increment I by KD I and potential future development or sale of the remaining portion of Increment II by KD II of Kaupulehu Lot 4A.
Land Investment Segment Future revenues from the sale of interest in leasehold land and any future cash distributions from our investment in the Kukio Resort Land Development Partnerships are dependent upon the potential future development or sale of the remaining portion of Increment II by KD II of Kaupulehu Lot 4A.
Accordingly, the amount of equity in income of affiliates recognized in the year ended September 30, 2023 was equivalent to the $758,000 of distributions received in that period. Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $708,000 at September 30, 2023 and $958,000 at September 30, 2022.
Accordingly, the amount of equity in income of affiliates recognized in the year ended September 30, 2024 was equivalent to the $1,071,000 of distributions received in that period. Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $373,000 at September 30, 2024 and $708,000 at September 30, 2023.
Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for fiscal 2023 was $2,000, a $38,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $40,000 in fiscal 2022.
Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for fiscal 2024 was nil, a $2,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $2,000 in fiscal 2023.
Net earnings attributable to non-controlling interests totaled $150,000 in fiscal 2023, as compared to net earnings attributable to non-controlling interests of $659,000 in fiscal 2022.
Net earnings attributable to non-controlling interests totaled $234,000 in fiscal 2024, as compared to net earnings attributable to non-controlling interests of $150,000 in fiscal 2023.
If reported reserve volumes were revised downward by 5% at the end of fiscal 2023, the ceiling limitation would have decreased approximately $1,329,000 before income taxes, which would not have resulted in a ceiling impairment before income taxes due to sufficient room between the ceiling and the carrying value of oil and natural gas properties at the end of fiscal 2023 of approximately $5,428,000.
If reported reserve volumes were revised downward by 5% at the end of fiscal 2024, the ceiling limitation for Canada would have decreased approximately $906,000 which would not have resulted in a ceiling impairment before income taxes due to sufficient room between the ceiling and the carrying value of Canadian oil and natural gas properties at the end of fiscal 2024 of approximately $4,658,000.
Income taxes The components of (loss) earnings before income taxes, after adjusting the (loss) earnings for non-controlling interests, are as follows: Year ended September 30, 2023 2022 United States $ (2,414,000) $ 739,000 Canada 1,400,000 5,121,000 $ (1,014,000) $ 5,860,000 Barnwell’s effective consolidated income tax benefit rate for fiscal 2023, after adjusting loss before income taxes for non-controlling interests, was 5%, as compared to an effective consolidated income tax rate of 6% for fiscal 2022.
Income taxes The components of loss before income taxes, after adjusting the loss for non-controlling interests, are as follows: Year ended September 30, 2024 2023 United States $ (2,820,000) $ (2,414,000) Canada (2,532,000) 1,400,000 $ (5,352,000) $ (1,014,000) Barnwell’s effective consolidated income tax rate for fiscal 2024, after adjusting loss before income taxes for non-controlling interests, was (4)%, as compared to an effective consolidated income tax benefit rate of 5% for fiscal 2023.
The contract drilling segment generated a $428,000 operating loss before general and administrative expenses during fiscal 2023, a decrease in operating results of $206,000 as compared to an operating loss before general and administrative expenses of $222,000 in fiscal 2022.
The contract drilling segment generated a $1,027,000 operating loss before general and administrative expenses during fiscal 2024, a decrease in operating results of $599,000 as compared to an operating loss before general and administrative expenses of $428,000 in fiscal 2023.
Capital expenditures incurred for the drilling of these wells and Twining facilities during the year ended September 30, 2023 totaled approximately $4,770,000. In fiscal 2022, the Company participated in the drilling of six gross (1.7 net) non-operated wells in the Twining area.
In fiscal 2023, the Company participated in the drilling of three gross (0.9 net) non-operated wells in the Twining area of Alberta, Canada. Capital expenditures incurred for the drilling of these wells and Twining facilities during the year ended September 30, 2023 totaled approximately $4,770,000.
The average exchange rate of the Canadian dollar to the U.S. dollar decreased 5% in fiscal 2023, as compared to fiscal 2022, and the exchange rate of the Canadian dollar to the U.S. dollar increased 1% at September 30, 2023, as compared to September 30, 2022.
The average exchange rate of the Canadian dollar to the U.S. dollar decreased 1% in fiscal 2024, as compared to fiscal 2023 and the exchange rate of the Canadian dollar to the U.S. dollar remained unchanged at September 30, 2024, as compared to September 30, 2023.
The decrease was partially offset by 12% and 31% increases in oil and natural gas production, respectively, as compared to the same period in the prior year.
The decrease was partially offset by 6% and 23% increases in natural gas and natural gas liquid production, respectively, as compared to the same period in the prior year.
The following table summarizes the revenues received from KD I and the amount of fees directly related to such revenues: Year ended September 30, 2023 2022 Sale of interest in leasehold land: Revenues - sale of interest in leasehold land $ 265,000 $ 1,295,000 Fees - included in general and administrative expenses (32,000) (158,000) Sale of interest in leasehold land, net of fees paid $ 233,000 $ 1,137,000 During the year ended September 30, 2023, Barnwell received $265,000 in percentage of sales payments from KD I from the sale of one single-family lot within Increment I.
The following table summarizes the revenues received from KD I and the amount of fees directly related to such revenues: Year ended September 30, 2024 2023 Sale of interest in leasehold land: Revenues - sale of interest in leasehold land $ 500,000 $ 265,000 Fees - included in general and administrative expenses (61,000) (32,000) Sale of interest in leasehold land, net of fees paid $ 439,000 $ 233,000 During the year ended September 30, 2024, Barnwell received $500,000 in percentage of sales payments from KD I from the sale of the last two single-family lots within Increment I.
Land Investment Segment Through Barnwell’s 77.6% interest in Kaupulehu Developments, 75% interest in KD Kona, and 34.45% non-controlling interest in KKM Makai, the Company’s land investment interests include the following: • The right to receive percentage of sales payments from KD I resulting from the sale of single-family residential lots by KD I, within Increment I of the Kaupulehu Lot 4A area located in the North Kona District of the island of Hawaii.
Due to the nature of oil and natural gas exploration and development, significant uncertainty exists as to the ultimate success of any drilling effort. 39 Land Investment Segment Through Barnwell’s 77.6% interest in Kaupulehu Developments, 75% interest in KD Kona, and 34.45% non-controlling interest in KKM Makai, the Company’s land investment interests include the following: • The right to receive percentage of sales payments from KD I resulting from the sale of single-family residential lots by KD I, within Increment I of the Kaupulehu Lot 4A area located in the North Kona District of the island of Hawaii.
The $509,000 (77%) decrease is primarily due to decreases in the amount of equity in income of affiliates and percentage of sales revenue received in the current year period as compared to the same period in the prior year.
The $84,000 (56%) increase is primarily due to increases in the amount of equity in income of affiliates and percentage of sales revenue received in the current year period as compared to the same period in the prior year.
Foreign currency (gain) loss Foreign currency gain was $76,000 during the year ended September 30, 2023, as compared to a foreign currency loss of $484,000 during the year ended September 30, 2022 due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of the weakening of the U.S. dollar against the Canadian dollar.
Foreign currency gain Foreign currency gain was $10,000 and $76,000 during the years ended September 30, 2024 and 2023, respectively, due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of changes in the U.S. dollar against the Canadian dollar.
Cash flows used in investing activities totaled $11,180,000 for fiscal 2023, as compared to cash flows used in investing activities of $7,112,000 for fiscal 2022.
Cash flows used in investing activities totaled $2,832,000 for fiscal 2024, as compared to cash flows used in investing activities of $11,180,000 for fiscal 2023.
Barnwell recognized equity in income of affiliates of $758,000 for the year ended September 30, 2023, as compared to equity in income of affiliates of $3,400,000 for the year ended September 30, 2022.
Barnwell recognized equity in income of affiliates of $1,071,000 for the 47 year ended September 30, 2024, as compared to equity in income of affiliates of $758,000 for the year ended September 30, 2023.
The decrease in partnership income is primarily due to the Kukio Resort Land Development Partnerships' sale of one lot during the current year period, as compared to six lot sales in the prior year period.
The increase in partnership income is primarily due to the Kukio Resort Land Development Partnerships' sale of the last two lots in Increment I during the current year period, as compared to one lot sale in the prior year period.
The amount and timing of future land investment segment proceeds from percentage of sales payments and cash distributions from the Kukio Resort Land Development Partnerships are highly uncertain and out of our control, and there is no assurance with regards to the amounts of future sales of residential lots within Increments I and II.
The amount and timing of future land investment segment proceeds from percentage of sales payments and cash distributions from the Kukio Resort Land Development Partnerships are highly uncertain and out of 41 our control, and there is no assurance with regards to the amounts of future payments from Increment II to be received or that the remaining acreage within Increment II will be developed.
During the year ended September 30, 2022, Barnwell received cash distributions of $3,400,000 from the Kukio Resort Land Development Partnership resulting in a net amount of $3,028,000, after distributing $372,000 to non-controlling interests.
During the year ended September 30, 2024, Barnwell received cash distributions of $1,071,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $953,000, after distributing $118,000 to non-controlling interests.
Cash Dividends The following table sets forth the cash dividends paid per share of common stock during fiscal 2023 and 2022.
The following table sets forth the cash dividends paid per share of common stock during the year ended September 30, 2023.
Oil and Natural Gas Segment Barnwell realized an average price for oil of $69.77 per barrel during the year ended September 30, 2023, a decrease of 20% from $86.73 per barrel realized during the prior year and realized an average price for natural gas of $2.64 per Mcf during the year ended September 30, 2023, a decrease of 43% from $4.63 per Mcf realized during the prior year.
Oil and Natural Gas Segment Barnwell realized an average price for oil of $66.49 per barrel during the year ended September 30, 2024, a decrease of 5% from $69.77 per barrel realized during the prior year and realized an average price for natural gas of $1.41 per Mcf during the year ended September 30, 2024, a decrease of 47% from $2.64 per Mcf realized during the prior year.
During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization.
During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization. 35 Judgments and Assumptions The estimate of our oil and natural gas reserves is a major component of the ceiling calculation and represents the component that requires the most subjective judgments.
Results of Operations Summary Net loss attributable to Barnwell for fiscal 2023 totaled $961,000, a $6,474,000 decrease from net earnings of $5,513,000 in fiscal 2022.
Results of Operations Summary Net loss attributable to Barnwell for fiscal 2024 totaled $5,565,000, a $4,604,000 increase in net loss from a net loss of $961,000 in fiscal 2023.
The developer had consolidated these two remaining lots into one large lot but has since split them back into the original two lots. • The right to receive 15% of the distributions of KD II, the cost of which is to be solely borne by KDK out of its 55% ownership interest in KD II, plus a priority payout of 10% of KDK's cumulative net profits derived from Increment II sales subsequent to Phase 2A, up to a maximum of $3,000,000.
Increment I is an area zoned for approximately 80 single-family lots. • The right to receive 15% of the distributions of KD II, the cost of which is to be solely borne by KDK out of its 55% ownership interest in KD II, plus a priority payout of 10% of KDK's cumulative net profits derived from Increment II sales subsequent to Phase 2A, up to a maximum of $3,000,000.
Oil and natural gas segment depletion increased $1,663,000 (64%) from $2,606,000 in fiscal 2022 to $4,269,000 in fiscal 2023, primarily due to depletion attributable to production in Texas, whereas there was no such depletion in the prior year period, and an increase in the depletion rate for Canadian properties and also new production from those properties, both of which were the result of the drilling of new wells and facilities expansion and upgrade costs, all in the Twining area.
Oil and natural gas segment depletion increased $678,000 (16%) from $4,269,000 in fiscal 2023 to $4,947,000 in fiscal 2024, primarily due to an increase in the depletion rate for Canadian properties and also increased production from those properties, both of which were the result of the wells drilled in fiscal 2023 and late fiscal 2024, and facilities expansion and upgrade costs, all in the Twining area.
A portion of the revisions are attributable to changes in the rolling 12-month average first-day-of-the-month prices, which impact the economics of producible reserves.
The passage of time provides more quantitative and qualitative information regarding estimates of reserves, and revisions are made to prior estimates to reflect updated information. A portion of the revisions are attributable to changes in the rolling 12-month average first-day-of-the-month prices, which impact the economics of producible reserves.
General and administrative expenses General and administrative expenses decreased $1,088,000 (14%) to $6,956,000 in fiscal 2023, as compared to $8,044,000 in fiscal 2022.
General and administrative expenses General and administrative expenses decreased $1,358,000 (20%) to $5,598,000 in fiscal 2024, as compared to $6,956,000 in fiscal 2023.
The increase in oil and natural gas depletion was partially offset by a decrease in depletion for Oklahoma properties due to the decrease in production from wells in Oklahoma in the current year period as compared to the prior year period.
The decrease in oil and natural gas operating expenses was partially offset by an increase in costs due to higher production and an increase in workovers and maintenance costs in the current year period as compared to the same period in the prior year.
The decrease in general and administrative expenses was partially offset by an increase of $495,000 in stockholders costs primarily attributed to the cooperation and support agreement and associated fees to certain directors, as discussed below, in the current year period as compared to the same period in the prior year.
The decrease was primarily due to decreases of $962,000 in professional fees primarily related to legal and consulting services and $533,000 in stockholders costs primarily attributed to the cooperation and support agreement and associated fees to certain directors in the prior year period as compared to the same period in the current year.
The process of estimating oil and natural gas reserves requires substantial judgment, resulting in imprecise determinations, particularly for new discoveries. Our reserve estimates are prepared at least annually by independent petroleum reserve engineers. The passage of time provides more quantitative and qualitative information regarding estimates of reserves, and revisions are made to prior estimates to reflect updated information.
Estimates of reserves are forecasts based on engineering data, historical data, projected future rates of production and the timing of future expenditures. The process of estimating oil and natural gas reserves requires substantial judgment, resulting in imprecise determinations, particularly for new discoveries. Our reserve estimates are prepared at least annually by independent petroleum reserve engineers.
Additionally, the change was also due to a decrease in distributions of income from the Kukio Resort Land Development Partnerships in the current year period as compared to the prior year period and fluctuations in working capital.
The change was also due to an increase in distributions of income from the Kukio Resort Land Development Partnerships and a decrease in general and administrative costs in the current year period as compared to the prior year period, partially offset by lower operating results for the oil and natural gas and contract drilling segments in the current year period as compared to the same period in the prior year.
Oil and Natural Gas Capital Expenditures Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations, decreased $323,000 from $11,052,000 in fiscal 2022 to $10,729,000 in fiscal 2023.
Record Date Date of Payment Dividend Paid August 24, 2023 September 11, 2023 $0.015 May 25, 2023 June 12, 2023 $0.015 February 23, 2023 March 13, 2023 $0.015 December 27, 2022 January 11, 2023 $0.015 Oil and Natural Gas Capital Expenditures Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations, decreased $5,924,000 from $10,729,000 in fiscal 2023 to $4,805,000 in fiscal 2024.
Cash outlays for capital expenditures are largely discretionary, however, a minimum level of capital expenditures is required to replace depleting reserves. Due to the nature of oil and natural gas exploration and development, significant uncertainty exists as to the ultimate success of any drilling effort.
Cash outlays for capital expenditures are largely discretionary, however, a minimum level of capital expenditures is required to replace depleting reserves.
The Company does not have a controlling interest in Increments I and II, and there is no assurance with regards to the amounts of future sales from Increments I and II, or that the remaining 44 acreage within Increment II will be developed.
There is no assurance with regards to the amounts of future sales from Increment II or that the remaining acreage within Increment II will be developed. No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report.
There were no taxes on other comprehensive loss due to foreign currency translation adjustments in fiscal 2023 and 2022 due to a full valuation allowance on the related deferred tax assets. 42 Oil and natural gas Selected Operating Statistics The following tables set forth Barnwell’s annual average prices per unit of production and annual net production volumes for fiscal 2023 as compared to fiscal 2022.
There were no taxes on other comprehensive loss due to foreign currency translation adjustments in fiscal 2024 and 2023 due to a full valuation allowance on the related deferred tax assets.
This $5,348,000 change in operating cash flows was due to significantly lower operating results for the oil and 49 natural gas segment in the current year period as compared to the prior year period.
This $2,767,000 change in operating cash flows was due to fluctuations in working capital in the current year period as compared to the prior year period.
Capital expenditures incurred by the Company for these non-operated wells totaled $4,366,000 for the year ended September 30, 2022. Additionally, the Company drilled one gross (1.0 net) 51 operated well in the Twining area and capital expenditures incurred by the Company for this well was $2,852,000 for the year ended September 30, 2022.
During the year ended September 30, 2024, the Company participated in the drilling of one gross (1.0 net) operated development oil well in the Twining area. Capital expenditures incurred for the drilling of this well during the year ended September 30, 2024 totaled approximately $3,183,000.
Annual Average Price Per Unit Increase (Decrease) 2023 2022 $ % Natural gas (Mcf)* $ 2.64 $ 4.63 $ (1.99) (43)% Oil (Bbls) $ 69.77 $ 86.73 $ (16.96) (20)% Natural gas liquids (Bbls) $ 32.24 $ 48.06 $ (15.82) (33)% Annual Net Production Increase (Decrease) 2023 2022 Units % Natural gas (Mcf) 1,263,000 964,000 299,000 31% Oil (Bbls) 204,000 182,000 22,000 12% Natural gas liquids (Bbls) 52,000 48,000 4,000 8% _________________________________________________ * Natural gas price per unit is net of pipeline charges.
Annual Average Price Per Unit Increase (Decrease) 2024 2023 $ % Natural gas (Mcf)* $ 1.41 $ 2.64 $ (1.23) (47)% Oil (Bbls) $ 66.49 $ 69.77 $ (3.28) (5)% Natural gas liquids (Bbls) $ 29.38 $ 32.24 $ (2.86) (9)% Annual Net Production Increase (Decrease) 2024 2023 Units % Natural gas (Mcf) 1,344,000 1,263,000 81,000 6% Oil (Bbls) 203,000 204,000 (1,000) —% Natural gas liquids (Bbls) 64,000 52,000 12,000 23% _________________________________________________ * Natural gas price per unit is net of pipeline charges.
The $2,346,000 change in financing cash flows was due to a $450,000 increase in payment of dividends and a $2,356,000 decrease in proceeds from issuance of common stock, net of costs, related to the Company's at-the-market offering in the prior year period, partially offset by a $490,000 decrease in distributions to non-controlling interests in the current year period as compared to the same period in the prior year.
The $560,000 change in financing cash flows was due to a decrease of $599,000 in payment of dividends, partially offset by an increase of $69,000 in distributions to non-controlling interests in the current year period as compared to the same period in the prior year. Cash Dividends No dividends were declared or paid during the year ended September 30, 2024.
In November 2023, to provide partial protection against the risk of declining natural gas prices during the second half of our fiscal 2024, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on a portion of the natural gas it sells to a fixed price during the period from April 1, 2024 to October 31, 2024.
In the quarter ended December 31, 2023, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 1,055 gross Mcf per day of the Canadian natural gas that it sells during the period from April 1, 2024 to October 31, 2024 to a fixed index price before differentials of $2.55 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices.
Depletion, depreciation, and amortization Depletion, depreciation, and amortization increased $1,679,000 (60%) from $2,778,000 in fiscal 2022 to $4,457,000 in fiscal 2023, due to an increase in the depletion rate for Canadian properties and also 46 new production from those properties and the depletion attributable to production in Texas, partially offset by a decrease in depletion for Oklahoma properties as discussed in the “Oil and natural gas” section above.
Depletion, depreciation, and amortization Depletion, depreciation, and amortization increased $649,000 (15%) from $4,457,000 in fiscal 2023 to $5,106,000 in fiscal 2024, primarily due to increases in the depletion rate for Canadian properties and also new production from those properties and due to depletion attributable to production in Texas as discussed in the “Oil and natural gas” section above. 46 Impairment of assets Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations.
At September 30, 2023, there was a backlog of four well drilling and seven pump installation and repair contracts, of which three well drilling and four pump installation and repair contracts were in progress as of September 30, 2023.
At September 30, 2024, there was a backlog of one well drilling and two pump installation and repair contracts and all of the contracts were in progress as of September 30, 2024. The backlog of contract drilling revenues as of December 1, 2024 was approximately $1,100,000, all of which is expected to be realized in fiscal 2025.
Kaupulehu Developments is entitled to receive payments from KD I based on 10% of the gross receipts from KD I’s sales at Increment I. Increment I is an area zoned for approximately 80 single-family lots, of which two remained to be sold at September 30, 2023.
However, in the quarter ended March 31, 2024, the last two remaining single-family lots in Increment I were sold and there are no more lots available for sale in Increment I. Kaupulehu Developments was entitled to receive payments from KD I based on 10% of the gross receipts from KD I’s sales at Increment I.
The partnerships derive income from the sale of residential parcels, of which two remained to be sold at September 30, 2023, as well as from commissions on real estate sales by the real estate sales office and revenues resulting from the sale of private club memberships. • Approximately 1,000 acres of vacant leasehold land zoned conservation in the Kaupulehu Lot 4C area, which currently has no development potential without both a development agreement with the lessor and zoning reclassification.
No percentage of sales payments will be earned by Barnwell on any future recognition of Increment I deferred profit as such payments were already fully earned and received based on cash received by the Kukio Resort Land Development Partnerships as the Increment I lots were sold. • Approximately 1,000 acres of vacant leasehold land zoned conservation in the Kaupulehu Lot 4C area, which currently has no development potential without both a development agreement with the lessor and zoning reclassification.
No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report. Contract drilling Contract drilling revenues and costs are associated with well drilling and water pump installation, replacement and repair in Hawaii.
In addition, no definitive development plans have been made by the developer of Increment II as of the date of this report and thus future cash inflows from the land investment segment are uncertain.
Additionally, in December 2023, the Company amended certain of its Canadian purchase and sales contract to change the sales price on a portion of the oil it sells to a fixed price during the period from January 1, 2024 to June 30, 2024.
In the quarter ended December 31, 2023, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 225 gross barrels per day of the Canadian oil for sale for the period from January 1, 2024 to June 30, 2024 to a fixed index price before differentials of $69.46 per net barrel, with remaining volumes continuing to be sold at spot prices.
This $4,068,000 change in investing cash flows was due to an increase of $2,697,000 in cash paid for oil and natural gas capital expenditures, a decrease of $904,000 in proceeds from the sale of interest in leasehold land, net of costs paid, and a decrease of $1,741,000 in proceeds related to the sale of assets in the current year period as compared to same period in the prior year, partially offset by a $1,563,000 decrease in payments to acquire oil and natural gas properties in the current year period as compared to the same period in the prior year.
This $8,348,000 change in investing cash flows was primarily due to a decrease of $7,790,000 in cash paid for investments in oil and natural gas properties in the current year period as compared to the same period in the prior year and a $441,000 increase in proceeds from the sale of oil and natural gas properties in the current year period as compared to the prior year period. 50 Cash flows used in financing activities totaled $226,000 for fiscal 2024, as compared to cash flows used in financing activities of $786,000 for fiscal 2023.
The following table sets forth Barnwell’s oil and natural gas segment operating profit before general and administrative expenses by geographic location: Year ended September 30, 2023 2022 Operating profit (before general and administrative expenses) Canada $ 3,171,000 $ 7,869,000 Oklahoma 1,006,000 2,667,000 Texas 496,000 — Total operating profit $ 4,673,000 $ 10,536,000 Oil and natural gas revenues decreased $3,205,000 (14%) from $22,581,000 in fiscal 2022 to $19,376,000 in fiscal 2023, primarily due to significant decreases in natural gas, oil, and natural gas liquid prices, which decreased 43%, 20%, and 33%, respectively, as compared to the same period in the prior year.
The oil and natural gas segment generated a $285,000 operating loss in fiscal 2024 before general and administrative expenses, a decrease in operating results of $4,958,000 as compared to $4,673,000 of operating profit in fiscal 2023. 43 The following table sets forth Barnwell’s oil and natural gas segment operating (loss) profit before general and administrative expenses by geographic location: Year ended September 30, 2024 2023 Operating (loss) profit (before general and administrative expenses) Canada (1) $ (440,000) $ 3,171,000 United States (2) 155,000 1,502,000 Total operating (loss) profit $ (285,000) $ 4,673,000 ________________________ (1) The operating loss for Canada for the year ended September 30, 2024 includes a non-cash ceiling test impairment of $2,164,000.
The increase in total contract drilling costs was partially offset by a decrease in expenses recognized from previously uninstalled materials during the current year period as compared the same period in the prior year.
The decreases in contract drilling revenues and contract drilling costs for the current year period as compared to the same period in the prior year were primarily due to decreased activity and a decrease in 45 revenues and costs recognized from materials deliveries and installations as compared to the same period in the prior year.
Oil and natural gas operating expenses increased $995,000 (11%) from $9,439,000 in fiscal 2022 to $10,434,000 in fiscal 2023, primarily due to costs associated with new production from wells drilled in the Twining area and from new wells drilled in Texas and an increase in workover costs in the current year period as compared to the same period in the prior year.
Oil and natural gas operating expenses decreased $585,000 (6%) from $10,434,000 in fiscal 2023 to $9,849,000 in fiscal 2024, primarily due to decreases in repairs, electricity and chemical costs in the current year period as compared to the same period in the prior year and due to optimization as a result of 44 certain capital expenditures made earlier in the current year.
During the year ended September 30, 2022, Barnwell received $1,295,000 in percentage of sales payments from KD I from the sale of six single-family lots within Increment I. As of September 30, 2023, two single-family lots of the 80 lots developed within Increment I remained to be sold.
During the year ended September 30, 2023, Barnwell received $265,000 in percentage of sales payments from KD I from the sale of one single-family lot within Increment I. There is an Increment II owned by KD II in which the Company has a 10.8% indirect non-controlling ownership interest.
This discussion should be read in conjunction with the consolidated financial statements and related Notes to Consolidated Financial Statements included in this report. Current Outlook Impact of COVID-19 We face various risks and uncertainties related to public health crises, including the global COVID-19 pandemic, which has disrupted financial markets and significantly impacted worldwide economic activity.
This discussion should be read in conjunction with the consolidated financial statements and related Notes to Consolidated Financial Statements included in this report.
At September 30, 2023, Barnwell had $2,487,000 in working capital. Cash Flows Cash flows provided by operating activities totaled $1,943,000 for fiscal 2023, as compared to cash flows provided by operating activities of $7,291,000 for the same period in fiscal 2022.
However, the aforementioned factors will influence the Company’s liquidity beyond that twelve month period. Cash Flows Cash flows provided by operating activities totaled $4,710,000 for fiscal 2024, as compared to cash flows provided by operating activities of $1,943,000 for fiscal 2023.
The two gross (0.3 net) non-operated wells began producing in late April 2023 and the Company’s share of net production from these wells totaled 12,000 barrels of oil, 12,000 barrels of natural gas liquids, and 121,000 Mcf of natural gas during the year ended September 30, 2023.
Additionally, the Company participated in the drilling of two gross (0.3 net) non-operated development oil wells in Texas. Capital expenditures incurred for the drilling of these two wells totaled approximately $4,293,00 during the year ended September 30, 2023.
The increase was partially offset by a decrease in production from wells in Oklahoma in the current year period as compared to the prior year period.
The adjustment in operating cash flows due to the effect of changes in current assets and liabilities was an increase of $2,780,000 in the current year period as compared to a decrease of $393,000 in the prior year period.
Oil and Natural Gas Property Acquisitions and Dispositions Fiscal 2022 In the quarter ended December 31, 2021, Barnwell acquired working interests in oil and natural gas properties located in the Twining area of Alberta, Canada, for cash consideration of $317,000.
Oil and Natural Gas Property Dispositions In the quarter ended June 30, 2024, Barnwell entered into and completed a purchase and sale agreement with an independent third party and sold its interests in certain natural gas and oil properties located in the Kaybob area of Alberta, Canada.

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