BARNWELL INDUSTRIES INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Relevant to Forward-Looking Information For the Purpose Of “Safe Harbor” Provisions Of The Private Securities Litigation Reform Act of 1995 This Form 10-Q, and the documents incorporated herein by reference, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is one which is based on current expectations of future events or conditions and does not relate to historical or current facts. These statements include various estimates, forecasts, projections of Barnwell’s future performance, statements of Barnwell’s plans and objectives, and other similar statements. All such statements we make are forward-looking statements made under the safe harbor of the PSLRA, except to the extent such statements relate to the operations of a partnership or limited liability company. Forward-looking statements include phrases such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates,” “assumes,” “projects,” “may,” “will,” “will be,” “should,” or similar expressions. Although Barnwell believes that its current expectations are based on reasonable assumptions, it cannot assure that the expectations contained in such forward-looking statements will be achieved. Forward-looking statements involve risks, uncertainties and assumptions which could cause actual results to differ materially from those contained in such statements. The risks, uncertainties and other factors that might cause actual results to differ materially from Barnwell’s expectations are set forth in the “Forward-Looking Statements” and “Risk Factors” sections of Barnwell’s Annual Report on Form 10-K for the year ended September 30, 2021 and “Risk Factors” section of this Quarterly Report filed on Form 10-Q. Investors should not place undue reliance on these forward-looking statements, as they speak only as of the date of filing of this Form 10-Q, and Barnwell expressly disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein. Critical Accounting Policies and Estimates Management has determined that our most critical accounting policies and estimates are those related to the full-cost ceiling calculation and depletion of our oil and natural gas properties, the estimation of our contract drilling segment's revenues and expenses, and the calculation of our income taxes, all of which are discussed in our Annual Report on Form 10-K, as amended by our Form 10-K/A Amendment No. 1, for the fiscal year ended September 30, 2021. There have been no significant changes to these critical accounting policies and estimates during the three months ended December 31, 2021. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. Impact of COVID-19 In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic and the United States and Canadian governments declared the virus a national emergency shortly thereafter. The ongoing global health crisis (including resurgences) resulting from the pandemic have, and continue to, disrupt the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis. While the outbreak recently appeared to be trending downward, particularly as vaccination rates increased, new variants of COVID-19 continue emerging, including the Omicron variant, spreading throughout the U.S. and globally 25 and causing significant disruptions. The global economy, our markets and our business have been, and may continue to be, materially and adversely affected by COVID-19. The COVID-19 outbreak materially and adversely affected our business operations and financial condition as a result of the deteriorating market outlook, the global economic recession and weakened liquidity. Although demand for oil and oil prices has recovered from the lows of March through May of 2020, uncertainty regarding future oil prices has impacted and continues to impact the Company’s financial condition and outlook. While the Company’s contract drilling segment remained operational throughout fiscal 2020 and 2021 and continues to work, the continuing potential impact of COVID-19 on the health of our contract drilling segment's crews is uncertain, and any work stoppage or discontinuation of contracts currently in backlog could result in a material adverse impact to the Company’s financial condition and outlook. Though availability of vaccines and reopening of state and local economies has improved the outlook for recovery from COVID-19's impacts, the impact of new, more contagious or lethal variants that may emerge, and the effectiveness of COVID-19 vaccines against variants and the related responses by governments, including reinstated government-imposed lockdowns or other measures, cannot be predicted at this time. Both the health and economic aspects of the COVID-19 pandemic remain highly fluid and the future course of each is uncertain. We cannot foresee whether the outbreak of COVID-19 will be effectively contained on a sustained basis, nor can we predict the severity and duration of its impact. If the outbreak of COVID-19 is not effectively and timely controlled on a sustained basis going forward, our business operations and financial condition may be materially and adversely affected by factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations. Impact of Recently Issued Accounting Standards on Future Filings In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss model with an expected loss model referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables. This ASU is effective for annual reporting periods beginning after December 15, 2022, and interim periods within those annual periods. The FASB has subsequently issued other related ASUs which amend ASU 2016-13 to provide clarification and additional guidance. The Company is currently evaluating the impact of these standards. Overview Barnwell is engaged in the following lines of business: 1) acquiring, developing, producing and selling oil and natural gas in Canada and Oklahoma (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). Oil and Natural Gas Segment Barnwell is involved in the acquisition and development of oil and natural gas properties in Canada where we initiate and participate in acquisition and developmental operations for oil and natural gas on properties in which we have an interest, and evaluate proposals by third parties with regard to 26 participation in exploratory and developmental operations elsewhere. Additionally, through its wholly-owned subsidiary BOK, Barnwell is indirectly involved in several non-operated oil and natural gas investments in Oklahoma. 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. Kaupulehu Developments is entitled to receive payments from KD I based on the following percentages of the gross receipts from KD I’s sales at Increment I: 10% of such aggregate gross proceeds greater than $100,000,000 up to $300,000,000; and 14% of such aggregate gross proceeds in excess of $300,000,000. Increment I is an area zoned for approximately 80 single-family lots, of which six remained to be sold at December 31, 2021, and a beach club on the portion of the property bordering the Pacific Ocean, and is partially developed. • 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. Such interests are limited to distributions or net profits interests and Barnwell does not have any partnership interest in KD II or KDK through its interest in Kaupulehu Developments. Barnwell also has 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. 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. Also, in addition to Barnwell's existing obligations to pay professional fees to certain parties based on percentages of its gross receipts, Kaupulehu Developments is now also obligated to pay an amount equal to 0.72% and 0.20% of the cumulative net profits of KD II to KD Development, LLC and a pool of various individuals, respectively, all of whom are partners of KKM and are unrelated to Barnwell. The remaining acreage within Increment II is not yet under development, and there is no assurance that development of such acreage will in fact occur. No definitive development plans have been made by 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. These entities own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations. KDK was the developer of Kaupulehu Lot 4A Increments I and II. The partnerships derive income from the sale of residential parcels as well as from commission on real estate sales by the real estate sales office and revenues resulting from the sale of private club memberships. 27 • 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. Contract Drilling Segment Barnwell drills water and water monitoring wells and installs and repairs water pumping systems in Hawaii. Contract drilling results are highly dependent upon the quantity, dollar value and timing of contracts awarded by governmental and private entities and can fluctuate significantly. Results of Operations Summary The net earnings attributable to Barnwell for the three months ended December 31, 2021 totaled $1,073,000, a $489,000 increase in operating results from net earnings of $584,000 for the three months ended December 31, 2020. The following factors affected the results of operations for the three months ended December 31, 2021 as compared to the same period in the prior year: • A $1,941,000 improvement in oil and natural gas segment operating results, before income taxes, due in part to a ceiling test impairment of $630,000 in the prior year period, whereas there was no such ceiling test impairment in the current year period. Also contributing to the increase was an increase in oil and natural gas prices in the current period as compared to the same period in the prior year; • A $909,000 decrease in contract drilling segment operating results, before income taxes, primarily due to a significant well drilling contract in the prior year period that was essentially completed as of December 31, 2020; and • A $645,000 increase in general and administrative expenses primarily due to increases in share-based compensation expense, compensation costs and professional fees related to legal and consulting services in the current year period as compared to the same period in the prior year. General Barnwell conducts operations in the U.S. and Canada. Consequently, Barnwell is subject to foreign currency translation and transaction gains and losses due to fluctuations of the exchange rates between the Canadian dollar and the U.S. dollar. Barnwell cannot accurately predict future fluctuations of the exchange rates and the impact of such fluctuations may be material from period to period. To date, we have not entered into foreign currency hedging transactions. The average exchange rate of the Canadian dollar to the U.S. dollar increased 3% in the three months ended December 31, 2021 as compared to the same period in the prior year, and the exchange rate of the Canadian dollar to the U.S. dollar increased 1% at December 31, 2021 as compared to September 30, 2021. 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. Barnwell’s Canadian dollar liabilities are greater than its Canadian dollar assets; therefore, increases or decreases in the value of the Canadian dollar to the U.S. dollar generate other comprehensive loss or income, respectively. Other comprehensive income and losses are not included in net earnings. Other 28 comprehensive loss due to foreign currency translation adjustments, net of taxes, for the three months ended December 31, 2021 was $25,000, a $209,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $234,000 for the same period in the prior year. There were no taxes on other comprehensive loss due to foreign currency translation adjustments in the three months ended December 31, 2021 and 2020 due to a full valuation allowance on the related deferred tax assets. Oil and natural gas The following tables set forth Barnwell’s average prices per unit of production and net production volumes. Production amounts reported are net of royalties. Average Price Per Unit Three months ended Increase December 31, (Decrease) 2021 2020 $ % Natural Gas (Mcf)* $ 4.08 $ 2.12 $ 1.96 92 % Oil (Bbls)** $ 68.50 $ 35.48 $ 33.02 93 % Liquids (Bbls)** $ 31.04 $ 21.96 $ 9.08 41 % Net Production Three months ended Increase December 31, (Decrease) 2021 2020 Units % Natural Gas (Mcf)* 205,000 171,000 34,000 20 % Oil (Bbls)** 39,000 39,000 — — Liquids (Bbls)** 13,000 6,000 7,000 117 % _______________________________________ * Mcf = 1,000 cubic feet. Natural gas price per unit is net of pipeline charges. ** Bbl = stock tank barrel equivalent to 42 U.S. gallons The oil and natural gas segment generated $1,568,000 of operating profit before general and administrative expenses in the three months ended December 31, 2021, an increase in operating results of $1,941,000 as compared to a $373,000 operating loss during the same period of the prior year. There was a $630,000 ceiling test impairment included in the operating loss in the prior year period, whereas there was no ceiling test impairment in the current year period due to an increase in the historical average first-day-of-the-month prices during the 12-month period ended December 31, 2021, as compared to those historical prices in the prior year period. Oil and natural gas revenues increased $2,033,000 (108%) for the three months ended December 31, 2021, as compared to the same period in the prior year, primarily due to 93% and 92% increases in oil and natural gas prices, respectively, and 117% and 20% increases in natural gas liquids and natural gas production, respectively, primarily from new production from Oklahoma properties. New oil production from the Oklahoma properties offset the decline in oil production from Canadian properties. Oil and natural gas operating expenses increased $481,000 (34%) for the three months ended December 31, 2021, as compared to the prior year period, primarily due to higher workovers, repairs, utilities and hauling costs at the Twining area, as well as restart costs for the Twining wells acquired in the previous fiscal year. The increase was partially offset by a decrease in costs due to lower production from Canadian properties in the current year period as compared to the prior year period. Oil and natural gas 29 segment depletion increased $241,000 (124%) for the three months ended December 31, 2021, as compared to the prior year period, primarily due to $157,000 in depletion due to production in Oklahoma, whereas there was no such depletion in the three months ended December 31, 2020 and an increase in the depletion rate due primarily to the drilling of three new wells at the Twining area. The depletion rate prior to the drilling of the three new wells was lower due to impact of prior ceiling test impairments on the depletion base. All seven of the non-operated wells in Oklahoma that the Company participated in drilling in the year ended September 30, 2021 were producing in the three months ended December 31, 2021. The Company’s share of net production from these wells plus one well with a minor overriding royalty interest totaled 6,000 barrels of oil, 9,000 barrels of natural gas liquids, and 67,000 Mcf of natural gas for total revenues of $964,000 during the three months ended December 31, 2021. Our Oklahoma production is from shale oil wells that as a rule have steep production declines and accordingly, we estimate that their production will decline significantly. Oil prices continue to be volatile over time and thus the Company is unable to reasonably predict future oil, natural gas and natural gas liquids prices and the impacts future prices will have on the Company. 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. The following table summarizes the revenues received from KD I and the amount of fees directly related to such revenues: Three months ended December 31, 2021 2020 Sale of interest in leasehold land: Revenues – sale of interest in leasehold land $ 600,000 $ 485,000 Fees - included in general and administrative expenses (73,000) (59,000) Sale of interest in leasehold land, net of fees paid $ 527,000 $ 426,000 During the three months ended December 31, 2021, Kaupulehu Developments received $600,000 in percentage of sales payments from KD I from the sale of three single-family lots within Phase II of Increment I. During the three months ended December 31, 2020, Kaupulehu Developments received $485,000 in percentage of sales payments from KD I from the sale of two single-family lots within Phase II of Increment I. As of December 31, 2021, six single-family lots of the 80 lots developed within Increment I remained to be sold. 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 acreage within Increment II will be developed. No definitive development plans have been made by the developer of Increment II as of the date of this report. 30 Contract drilling Contract drilling revenues and contract drilling costs decreased $1,066,000 (55%) and $128,000 (12%), respectively, for the three months ended December 31, 2021, as compared to the same period in the prior year. The contract drilling segment generated a $151,000 operating loss before general and administrative expenses in the three months ended December 31, 2021, a decrease in operating results of $909,000 as compared to a $758,000 operating profit during the same period of the prior year. The decrease in contract drilling revenues and contract drilling costs for the three months ended December 31, 2021 as compared to the same period in the prior year is primarily due to a significant well drilling contract in the prior year period. The significant well drilling contract was for multiple wells and was based on a fixed rate per day or fixed rate per hour, depending upon the activity, as opposed to the Company's typical contracts that are based on a fixed price per lineal foot drilled. Up to two drilling rigs were being used at this job during the prior year period with crews working extended hours. However, activity related to this contract was essentially completed in the quarter ended December 31, 2020 and thus contract drilling revenues and costs have decreased in the current year period as compared to the same period of the prior year. In the three months ended December 31, 2021, it was determined that a contract drilling segment well completed in the period did not meet the contract specifications for plumbness under a gyroscopic plumbness test which the contract required. While the well did pass the cage plumbness test, the contract uses the gyroscopic test as the measure of plumbness. Barnwell and the customer currently have a verbal arrangement where Barnwell will provide for centralizers and armored cabling and a warranty agreement, however Barnwell’s management believes the plumbness deviation is not impactful to the performance of the submersible pumps that will be installed in the well. Accordingly, while costs for the centralizers and armored cabling have been accrued, no accrual has been recorded as of December 31, 2021 for the warranty as there is no probable or estimable contingent liability. There has been a significant decrease in demand for water well drilling contracts in recent years that has generally led to increased competition for available contracts and lower margins on awarded contracts. The Company is unable to predict the near-term and long-term availability of water well drilling and pump installation and repair contracts as a result of this volatility in demand. The continuing potential impact of COVID-19 on the health of our contract drilling segment's crew is uncertain, and any work stoppage or discontinuation of contracts currently in backlog due to COVID-19 impacts could result in a material adverse impact to the Company’s financial condition and outlook. General and administrative expenses General and administrative expenses increased $645,000 (54%) for the three months ended December 31, 2021, as compared to the same period in the prior year. The increase was primarily due to increases in share-based compensation expense, compensation costs and professional fees related to legal and consulting services in the current year period as compared to the same period in the prior year. 31 Depletion, depreciation, and amortization Depletion, depreciation, and amortization increased $207,000 (75%) for the three months ended December 31, 2021, as compared to the same period in the prior year, primarily due to $157,000 in depletion due to production in Oklahoma, whereas there was no such depletion in the three months ended December 31, 2020 and an increase in the depletion rate due primarily to the drilling of three new wells at the Twining area, as discussed in the “Oil and natural gas” section above. Impairment of assets Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations. There was no ceiling test impairment during the three months ended December 31, 2021. There was a $630,000 ceiling test impairment during the three months ended December 31, 2020. Changes in the mandated 12-month historical rolling average first-day-of-the-month prices for oil, natural gas and natural gas liquids prices, the value of reserve additions as compared to the amount of capital expenditures to obtain them, and changes in production rates and estimated levels of reserves, future development costs and the estimated market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties. Equity in income of affiliates Barnwell recognized equity in income of affiliates of $1,207,000 during the three months ended December 31, 2021, as compared to $1,054,000 during the three months ended December 31, 2020. The increase was primarily due to the Kukio Resort Land Development Partnerships' sale of three lots during the current year period as compared to two lot sales in the prior year period and more club memberships sold, partially offset by $459,000 in preferred return payments received from KKM in the prior year period as compared to none in the current year period. During the three months ended December 31, 2021, Barnwell received cash distributions of $1,207,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $1,075,000, after distributing $132,000 to non-controlling interests. During the three months ended December 31, 2020, Barnwell received net cash distributions in the amount of $1,712,000 from the Kukio Resort Land Development Partnerships after distributing $155,000 to non-controlling interests. Of the $1,712,000 net cash distributions received, $459,000 represented a payment of the preferred return from KKM, as discussed in Note 3 of the Notes to Condensed Consolidated Financial Statements. 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 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. The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnership’s cumulative earnings in excess of distributions during the suspended period exceeds our share of the Kukio Resort Land Development Partnership’s income recognized for the excess distributions, and during this suspended period any distributions received will be 32 recorded as equity in income of affiliates. Accordingly, the amount of equity in income of affiliates recognized in the three months ended December 31, 2021 was equivalent to the $1,207,000 of distributions received in that period. Income taxes Barnwell’s effective consolidated income tax rate for the three months ended December 31, 2021, after adjusting earnings before income taxes for non-controlling interests, was 9%, as compared to an effective income tax rate of 10% for the three months ended December 31, 2020. Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that the Company is taxed separately in Canada based on Canadian source operations and in the U.S. based on consolidated operations, and essentially all deferred tax assets, net of relevant offsetting deferred tax liabilities, are not estimated to have a future benefit as tax credits or deductions. Income from our non-controlling interest in the Kukio Resort Land Development Partnerships is treated as non-unitary for state of Hawaii unitary filing purposes, thus unitary Hawaii losses provide limited sheltering of such non-unitary income. Income from our investment in the Oklahoma oil venture is 100% allocable to Oklahoma and Barnwell receives no benefit from consolidated or unitary losses and, therefore, is subject to Oklahoma state taxes. Net earnings attributable to non-controlling interests Earnings and losses attributable to non-controlling interests represent the non-controlling interests’ share of revenues and expenses related to the various partnerships and joint ventures in which Barnwell has controlling interests and consolidates. Net earnings attributable to non-controlling interests for the three months ended December 31, 2021 totaled $267,000, as compared to net earnings attributable to non-controlling interests of $159,000 for the same period in the prior year. The increase of $108,000 is primarily due to increases in the amount of Kukio Resort Land Development Partnerships' income and percentage of sales proceeds received in the current year period as compared to the same period in the prior year. Liquidity and Capital Resources Barnwell’s primary sources of liquidity are cash on hand, cash flow generated by operations, land investment segment proceeds, and starting in fiscal 2021, funds generated by the ATM program. At December 31, 2021, Barnwell had $10,676,000 in working capital. Cash Flows Cash flows provided by operating activities totaled $909,000 for the three months ended December 31, 2021, as compared to cash flows provided by operating activities of $80,000 for the same period in the prior year. This $829,000 change in operating cash flows was primarily due to higher operating results, before non-cash impairment expenses, for the oil and natural gas segment, which was partially offset by lower operating results for the contract drilling segment in the current year period as compared to the prior year period, and fluctuations in working capital. Cash flows provided by investing activities totaled $194,000 during the three months ended December 31, 2021, as compared to cash flows provided by investing activities of $875,000 during the 33 same period of the prior year. This $681,000 decrease in investing cash flows was primarily due to an increase of $338,000 in oil and natural gas capital expenditures, an increase of $317,000 in payments to acquire oil and natural gas properties, and a decrease of $813,000 in distributions from equity investees in excess of earnings received in the prior year period as compared to none in the current year period, partially offset by a $687,000 increase in proceeds from the sale of contract drilling assets in the current period as compared to none in the prior year period. Cash flows used in financing activities totaled $251,000 during the three months ended December 31, 2021, as compared to cash flows used in financing activities of $217,000 for the same period in the prior year. Canada Emergency Business Account Loan In the quarter ended December 31, 2020, the Company’s Canadian subsidiary, Barnwell of Canada, received a loan of CAD$40,000 (in Canadian dollars) under the Canada Emergency Business Account (“CEBA”) loan program for small businesses. In the quarter ended March 31, 2021, the Company applied for an increase to our CEBA loan and received an additional CAD$20,000 for a total loan amount received of CAD$60,000 ($47,000) under the program. In January 2022, the CEBA program announced an extension to the repayment deadline from December 31, 2022, to December 31, 2023. Accordingly, the CEBA loan is interest-free with no principal payments required until December 31, 2023, after which the remaining loan balance is converted to a two year term loan at 5% annual interest paid monthly. If the Company repays 66.6% of the principal amount prior to December 31, 2023, there will be loan forgiveness of 33.3% up to a maximum of CAD$20,000. Oil and Natural Gas Capital Expenditures Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and excluding additions and revisions to estimated asset retirement obligations, totaled $2,870,000 for the three months ended December 31, 2021, as compared to $139,000 for the same period in the prior year. The Company participated in the drilling of one operated and two non-operated for a total of three gross (1.6 net) wells in the Twining area of Alberta, Canada. The drilling phases of the wells were largely complete as of December 31, 2021, with completion of those wells to occur and expected production commencing in the latter part of the three months ending March 31, 2022. Capital expenditures incurred for the drilling phase of these wells in the three months ended December 31, 2021 totaled approximately $2,350,000. All seven of the non-operated wells in Oklahoma that the Company participated in drilling in the year ended September 30, 2021 were producing in the three months ended December 31, 2021. Barnwell estimates that investments in oil and natural gas properties for fiscal 2022 will range from $7,000,000 to $9,500,000. This estimated amount may increase or decrease as dictated by cash flows and management's assessment of the oil and natural gas environment and prospects. Oil and Natural Gas Properties Acquisitions In the three months 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. 34 There were no oil and natural gas working interest acquisitions during the three months ended December 31, 2020.