What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-12-29 compared with 2021-12-21 · 388 added, 319 removed, 1137 unchanged (38% of the section changed)

26 unchanged sentences

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Estimation of Proved Reserves Impacting the Recognition and Valuation of Depletion Expense and Impairment and Oil and Gas Properties

Critical Audit Matter Description

Estimation of proved reserves impacting the recognition and valuation of depletion expense and impairment of oil and gas properties

Critical Accounting Matter Description

As described in Note 1 to the financial statements, the Company accounts for its oil and gas properties using the full cost method of accounting which requires management to make estimates of proved reserve volumes and future revenues and expenses to calculate depletion expense and measure its oil and gas properties for potential impairment.

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• We evaluated the level of knowledge, skill, and ability of the Company’s reservoir engineering specialists and their relationship to the Company, made inquiries of those reservoir engineers regarding the process followed and judgments made to estimate the Company’s proved reserve volumes, and read the reserve report prepared by the Company’s specialists.

• To the extent key, sensitive inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from Company’s accounting records, such as commodity pricing, historical pricing differentials, operating costs, estimated capital costs and working and net revenue interests, we tested management’s process for determining the assumptions, including examining the underlying support, on a sample basis.

Specifically, our audit procedures involved testing management’s assumptions as follows:

• To the extent key, sensitive inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from Company’s accounting records, such as commodity pricing, historical pricing differentials, operating costs, and working and net revenue interests, we tested management’s process for determining the assumptions, including examining the underlying support, on a sample basis.

Specifically, our audit procedures involved testing management’s assumptions, to the extent key, as follows:

◦ Compared the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the current year and examined contractual support for the pricing differentials;

◦ Evaluated the models used to estimate the operating costs at year-end compared to historical operating costs;

◦ Compared the models used to determine the future capital expenditures and compared estimated future capital expenditures used in the reserve report to amounts expended for recently drilled and completed wells with similar locations;

◦ Evaluated the working and net revenue interests used in the reserve report by inspecting a sample of ownership interests, historical pricing differentials, and operating costs to underlying support from the Company’s accounting records;

◦ Evaluated the forecasted operating costs at year-end compared to historical operating costs;

◦ Evaluated the working and net revenue interests used in the reserve report by inspecting a sample of ownership interests,

◦ Evaluated the Company’s evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining support for the Company’s or the operator’s ability and intent to develop the proved undeveloped properties;

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Revenue recognition based on the percentage of completion method

Critical Audit Matter Description

Critical Accounting Matter Description

As described further in Note 1 to the financial statements, revenues derived from contract drilling contracts are recognized over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer, using the percentage-of-completion method of accounting, based primarily on contract cost incurred to date compared to total estimated contract cost.

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• Compared contract profitability estimates in the current year to historical estimates and actual performance.

Calculation of Gain Associated with Sale of Oil and Gas Properties

Critical Audit Matter Description

As described further in Note 7 to the consolidated financial statements, the Company recorded a gain to the statement of operations from sale of certain oil and gas properties.

Determination of the accounting for

this transaction is challenging as it requires the Company to prepare significant assumptions and estimates regarding the associated fair value of the oil and gas reserves sold as compared to costs capitalized.

The fair value estimate allows the Company to determine if the sale of the oil and gas assets are significant to the total full cost pool to record a gain on sale under the full cost method of accounting.

Auditing the Company’s estimates and assumptions used to calculate the fair value of the oil and gas reserves used to determine the relationship between capitalized costs and proved reserves of the Spirit River properties sold as compared to the properties retained by the Company, as it required the evaluation of the significant inputs and assumptions used in the reserve reports prepared by a third party reserve engineer (the Company’s specialist).

Further, such fair values determined by the Company’s specialist also determined the gain calculation under the full cost method of accounting used by the Company.

How the Critical Audit Matter was Addressed in the Audit

We obtained an understanding of the design and implementation of management’s controls and our audit procedures related to the fair value of oil and gas reserves sold in relationship with the capitalized costs utilized in the calculation of the gain associated with the sale of oil and gas properties included the following:

• Utilized the support of auditor’s specialists to recalculate independently of reserve engineer the fair value of oil and gas reserves sold vs.

retained based on reserve information provided by the Company’s through their third party reserve engineer;

• We evaluated management’s application of gain accounting under full cost method related to the sale of the oil and gas properties to determine proper treatment was applied.

• Compared the calculation inputs for the gain recorded to the purchase and sale agreement.

/s/ WEAVER AND TIDWELL, L.L.P.

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Asset for retirement benefits 3,385,000 2,229,000

Investments — 901,000

Operating lease right-of-use assets 132,000 296,000

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Additional paid-in capital 7,351,000 4,590,000

Retained earnings (accumulated deficit) 2,356,000 ( 3,897,000 )

Accumulated other comprehensive income (loss), net 32,000 ( 1,435,000 )

Retained earnings 7,720,000 2,356,000

Accumulated other comprehensive income, net 1,294,000 32,000

Treasury stock, at cost:

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( 2,286,000 ) ( 2,286,000 )

Total stockholders’ equity (deficit) 9,499,000 ( 2,045,000 )

Total stockholders’ equity 19,141,000 9,499,000

Non-controlling interests 20,000 8,000

Total equity (deficit) 9,507,000 ( 1,953,000 )

Total equity 19,161,000 9,507,000

Total liabilities and equity $ 37,215,000 $ 24,435,000

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Impairment of assets 89,000 668,000

Foreign currency loss 484,000 —

Interest expense 1,000 13,000

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25,426,000 16,371,000

Earnings (loss) before equity in income of affiliates and income taxes 1,742,000 ( 5,026,000 )

Earnings before equity in income of affiliates and income taxes 3,119,000 1,742,000

Equity in income of affiliates 3,400,000 5,793,000

Earnings (loss) before income taxes 7,535,000 ( 4,674,000 )

Earnings before income taxes 6,519,000 7,535,000

Income tax provision 347,000 332,000

Net earnings (loss) 7,203,000 ( 4,677,000 )

Net earnings 6,172,000 7,203,000

Net earnings attributable to non-controlling interests 659,000 950,000

Net earnings (loss) attributable to Barnwell Industries, Inc.

Net earnings attributable to Barnwell Industries, Inc.

stockholders $ 5,513,000 $ 6,253,000

Basic net earnings (loss) per common share

Basic net earnings per common share

attributable to Barnwell Industries, Inc.

stockholders $ 0.57 $ 0.73

Diluted net earnings (loss) per common share

Diluted net earnings per common share

attributable to Barnwell Industries, Inc.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended September 30,

Net earnings (loss) $ 7,203,000 $ ( 4,677,000 )

Other comprehensive income (loss):

Net earnings $ 6,172,000 $ 7,203,000

Other comprehensive (loss) income:

Foreign currency translation adjustments, net of taxes of $ 0

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Amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $ 0

101,000 120,000

Net actuarial gain (loss) arising during the period, net of taxes of $ 0

Net actuarial gain arising during the period, net of taxes of $ 0

1,302,000 1,108,000

Curtailment gain, net of taxes of $ 0

Gain on termination of post-retirement medical plan, net of taxes of $ 0

Total other comprehensive income 1,262,000 1,467,000

Total comprehensive income (loss) 8,670,000 ( 3,195,000 )

Total comprehensive income 7,434,000 8,670,000

Comprehensive income attributable to non-controlling interests ( 659,000 ) ( 950,000 )

Comprehensive income (loss) attributable to Barnwell Industries, Inc.

Comprehensive income attributable to Barnwell Industries, Inc.

$ 6,775,000 $ 7,720,000

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF EQUITY

Years ended September 30, 2022 and 2021

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Balance at September 30, 2020 8,277,160 $ 4,223,000 $ 1,350,000 $ ( 3,897,000 ) $ ( 1,435,000 ) $ ( 2,286,000 ) $ 92,000 $ ( 1,953,000 )

Net (loss) earnings — — — ( 4,756,000 ) — — 79,000 ( 4,677,000 )

Net earnings — — — 6,253,000 — — 950,000 7,203,000

Foreign currency translation adjustments, net of taxes of $ 0

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Distributions to non-controlling interests — — — — — — ( 1,034,000 ) ( 1,034,000 )

Share-based compensation — — 643,000 — — — — 643,000

Issuance of common stock, net of costs 1,167,987 583,000 2,596,000 — — — — 3,179,000

Issuance of common stock for services 478 1,000 1,000 — — — — 2,000

Retirement plans:

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— — — — 101,000 — — 101,000

Net actuarial loss arising during the period, net of taxes of $ 0

Net actuarial gain arising during the period, net of taxes of $ 0

— — — — 1,108,000 — — 1,108,000

Curtailment gain, net of taxes of $ 0

Gain on termination of post-retirement medical plan, net of taxes of $ 0

— — — — 541,000 — — 541,000

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Issuance of common stock for services 1,595 — 3,000 — — — — 3,000

Retirement plans:

Amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $ 0

Dividends declared, $ 0.015 per share

— — — ( 149,000 ) — — — ( 149,000 )

Retirement plans:

Net actuarial gain arising during the period, net of taxes of $ 0

— — — — 1,302,000 — — 1,302,000

Gain on termination of post-retirement medical plan, net of taxes $ 0

— — — — 541,000 — — 541,000

Balance at September 30, 2022 9,956,687 $ 5,062,000 $ 7,351,000 $ 7,720,000 $ 1,294,000 $ ( 2,286,000 ) $ 20,000 $ 19,161,000

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Cash flows from operating activities:

Net earnings (loss) $ 7,203,000 $ ( 4,677,000 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Net earnings $ 6,172,000 $ 7,203,000

Adjustments to reconcile net earnings to net cash provided by operating activities:

Equity in income of affiliates ( 3,400,000 ) ( 5,793,000 )

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Accretion of asset retirement obligation 767,000 580,000

Deferred income tax expense 165,000 26,000

Deferred income tax (benefit) expense ( 171,000 ) 165,000

Asset retirement obligation payments ( 942,000 ) ( 421,000 )

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Common stock issued for services 3,000 1,000

Non-cash rent (income) expense ( 4,000 ) 48,000

Non-cash rent income ( 1,000 ) ( 4,000 )

Retirement plan contributions and payments ( 3,000 ) ( 14,000 )

Bad debt expense 124,000 32,000

Foreign currency loss 484,000 —

Gain on debt extinguishment — ( 149,000 )

Gain on termination of post-retirement medical plan — ( 2,341,000 )

(Decrease) increase from changes in current assets and liabilities ( 2,151,000 ) 448,000

Decrease from changes in current assets and liabilities ( 1,027,000 ) ( 2,151,000 )

Net cash provided by operating activities 7,291,000 831,000

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Proceeds from sale of interest in leasehold land, net of fees paid 1,137,000 1,526,000

Proceeds from the sale of oil and natural gas assets 581,000 608,000

Proceeds from the sale of other assets, net of closing costs 1,864,000 1,100,000

Proceeds from sale of oil and natural gas assets 503,000 581,000

Proceeds from sale of contract drilling and other assets, net of closing costs 687,000 1,864,000

Deposit for sale of contract drilling asset 551,000 —

Payments to acquire oil and natural gas properties ( 1,563,000 ) ( 348,000 )

1 unchanged sentence

Capital expenditures - all other ( 50,000 ) ( 63,000 )

Net cash provided by (used in) investing activities 3,686,000 ( 833,000 )

Net cash (used in) provided by investing activities ( 7,112,000 ) 3,686,000

Cash flows from financing activities:

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Proceeds from issuance of stock, net of costs 2,356,000 3,179,000

Payment of dividends ( 149,000 ) —

Net cash provided by financing activities 1,560,000 2,192,000

Effect of exchange rate changes on cash and cash equivalents ( 214,000 ) ( 14,000 )

Net increase (decrease) in cash and cash equivalents 6,695,000 ( 29,000 )

Net increase in cash and cash equivalents 1,525,000 6,695,000

Cash and cash equivalents at beginning of year 11,279,000 4,584,000

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Significant assumptions are required in the valuation of deferred tax assets, asset retirement obligations, share-based payment arrangements, obligations for retirement plans, contract drilling estimated costs to complete, proved oil and natural gas reserves, and the carrying value of other assets, and such assumptions may impact the amount at which such items are recorded.

Reclassifications

Certain reclassifications of prior period amounts have been made in the Notes to Consolidated Financial Statements to conform to the current period presentations.

Revenue Recognition

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The Company estimates variable consideration using either the most likely amount or expected value method, whichever is a more appropriate reflection of the amount to which it expects to be entitled based on the characteristics and circumstances of the contract.

Variable consideration is included in the estimated transaction price to the extent it is probable that a significant reversal of cumulative recognized revenue will not occur.

Variable consideration is included

in the estimated transaction price to the extent it is probable that a significant reversal of cumulative recognized revenue will not occur.

Contract price and cost estimates are reviewed periodically as work progresses and adjustments proportionate to the costs incurred to date to total estimated costs at completion are reflected in contract revenues in the reporting period when such estimates are revised.

The nature of accounting for these contracts is such that refinements of the estimated costs to complete may occur and are characteristic of the estimation process due to changing conditions and new developments.

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 the work to be performed, and unexpected

construction execution errors, among others.

These factors may result in revisions to costs and income and are recognized in the period in which the revisions become known.

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The allowance for doubtful accounts is Barnwell’s best estimate of the amount of probable credit losses in Barnwell’s existing accounts receivable and is based on historical write-off experience and the application of the specific identification method.

Account balances are charged off against the allowance after all means of

collection have been exhausted and the potential for recovery is considered remote.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Barnwell does not have any off-balance sheet credit exposure related to its customers.

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Under the full cost method of accounting, we review the carrying value of our oil and natural gas properties, on a country-by-country basis, each quarter in what is commonly referred to as the ceiling test.

estimated production of proved oil and natural gas reserves as determined by independent petroleum reserve engineers, 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;

Under the ceiling test, capitalized costs, net of accumulated depletion and oil and natural gas related deferred income taxes, may not exceed an amount equal to 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 as determined by independent petroleum reserve engineers, 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;

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In accordance with the guidance for business combinations, Barnwell determines whether an acquisition is a business combination, which requires that the assets acquired and liabilities assumed constitute a business.

Each business combination is then accounted for by applying the acquisition method of accounting.

Each business combination is then accounted for by applying the acquisition method

of accounting.

If the assets acquired are not a business, the Company accounts for the transaction as an asset acquisition.

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Recoverability is measured by comparing the carrying amount of the asset to the future net cash flows expected to result from use of the asset (undiscounted and without interest charges).

If it is determined that the asset may not be recoverable, impairment loss is measured as the

amount by which the carrying amount of the asset exceeds the fair value of the asset.

If it is determined that the asset may not be recoverable, impairment loss is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Long-lived assets to be disposed of are reported at the lower of the asset carrying value or fair value, less cost to sell.

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Treasury instruments with terms comparable to the estimated option terms.

Expected dividends are based on current and historical dividend payments.

Expected dividends are based on historical dividend payments.

The Company's policy is to recognize forfeitures as they occur.

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At the end of each year, Barnwell determines the discount rate to be used to calculate the present value of plan liabilities and the net periodic benefit cost.

The discount rate is an estimate of the current interest rate at which the retirement plan liabilities could be effectively settled at the end of the year.

The discount rate is an estimate of the current

interest rate at which the retirement plan liabilities could be effectively settled at the end of the year.

In estimating this rate, Barnwell performs a cash-flow matching discount rate analysis developed using high-quality corporate bonds yield.

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Any differential arising between insurance recoveries and insurance receivables is expensed or capitalized, consistent with the original treatment.

Foreign Currency Translation

Foreign Currency Translations and Transactions

Assets and liabilities of foreign subsidiaries are translated at the year-end exchange rate.

Operating results of foreign subsidiaries are translated at average exchange rates during the period.

Translation adjustments have no effect on net income and are included in “Accumulated other comprehensive income (loss), net” in stockholders’ equity.

Translation adjustments have no effect on net income and are included in “Accumulated other comprehensive income, net” in stockholders’ equity.

Foreign currency gains or losses on intercompany loans and advances that are not considered long-term investments in nature because management intends to settle these intercompany balances in the future are included in our statements of operations.

Fair Value Measurements

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Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement:

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement,” which provides changes to certain fair value disclosure requirements.

The Company adopted the provisions of this ASU effective October 1, 2020.

The adoption of this update did not have an impact on Barnwell's consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-14, “Compensation - Retirement Benefits-Defined Benefit Plans - General:

Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans,” which provides changes to certain pension and postretirement plan disclosures.

The Company adopted the provisions of this ASU effective October 1, 2020.

The adoption of this update did not have an impact on Barnwell's consolidated financial statements.

In October 2018, the FASB issued ASU No.

2018-17, “Consolidation:

Targeted Improvements to Related Party Guidance for Variable Interest Entities,” which modifies the guidance related to indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interest.

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,” which enhances and simplifies various aspects of the income tax accounting guidance in ASC 740.

The Company adopted the provisions of this ASU effective October 1, 2021.

The adoption of this update did not have an impact on Barnwell's consolidated financial statements.

GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business for the twelve-month period following the date of issuance of these consolidated financial statements.

Our ability to sustain our business in the future will depend on the sufficiency of our cash on hand, oil and natural gas operating cash flows, which are highly sensitive to volatile oil and natural gas prices, contract drilling operating cash flows, which are subject to large changes in demand, and future land investment segment proceeds and distributions from the Kukio Resort Land Development Partnerships, the timing of which are both highly uncertain and not within Barnwell’s control.

A sufficient level of such cash and cash inflows are necessary to fund discretionary oil and natural gas capital expenditures, which must be economically successful to provide sufficient returns, as well as fund our non-discretionary outflows such as oil and natural gas asset retirement obligations and ongoing operating and general and administrative expenses.

In addition, as discussed in the "Asset Retirement Obligation" section of "Liquidity and Capital Resources," a significant amount of funds will be required to be put on deposit with Canadian regulatory authorities to fund abandonments at the Company's oil and natural gas properties in the Manyberries area.

Other sources and potential sources of funding are discussed below.

In fiscal 2020, the Company listed its corporate office on the 29th floor of a commercial office building in downtown Honolulu, Hawaii for sale and on September 30, 2021, the Company’s Honolulu corporate office was sold for approximately $ 1,864,000 , net of related costs.

On March 16, 2021, the Company initiated an at-the-market offering program (“ATM”) pursuant to which the Company may offer and sell, from time to time, shares of its common stock under price and volume guidelines set by the Company's Board of Directors and the terms and conditions described in the Registration Statement.

The sale of shares under the ATM began in May 2021 and as of September 30, 2021, the Company sold 1,167,987 shares of common stock resulting in net proceeds of $ 3,784,000 after commissions and fees of $ 123,000 .

In April 2021, the Company re-initiated the marketing of its non-core oil and natural gas properties in the Spirit River, Wood River, Medicine River, Kaybob, Bonanza, Balsam and Thornbury areas for sale.

On July 8, 2021, 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 Spirit River area of Alberta, Canada.

The sales price per the agreement was adjusted for customary purchase price adjustments to $ 1,047,000 in order to, among other things, reflect an economic effective closing date of sale of July 8, 2021.

From Barnwell's net proceeds, $ 526,000 was withheld for remittance by the buyers to the Canada Revenue Agency for potential amounts due for Barnwell’s Canadian income taxes related to the sale.

Negotiations regarding the potential sales of other non-core oil and natural gas properties is ongoing, however there is no assurance that the sale of any of the other non-core properties will occur.

We have experienced a trend of losses and negative operating cash flows in three of the last four years.

During fiscal 2020 and 2021, continuing uncertainties regarding the impacts of the COVID-19 pandemic on our business and the sufficiency of our cash balances and future cash inflows as described above raised substantial doubt about our ability to meet our estimated cash outflows or continue as a going concern.

However, due to the $ 3,784,000 of net proceeds raised by the ATM through September 30, 2021, the proceeds received from the sale of the Company's corporate office and its interests in certain natural gas and oil properties in the Spirit River area, as well as the $ 7,156,000 of net cash inflows in the year ended September 30, 2021 from land segment percentage of sales proceeds and distributions from the Kukio Resort Land Development Partnerships, substantial doubt about our ability to meet our estimated cash outflows or continue as a going concern for one year from the date of the filing of this report has been overcome.

EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding for the period.

Diluted earnings (loss) per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities, which consist of outstanding stock options.

Potentially dilutive shares are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive.

Options to purchase 615,000 shares were excluded from the computation of diluted shares for the year ended September 30, 2021, as their inclusion would have been antidilutive.

There were no options outstanding at September 30, 2020.

Reconciliations between net earnings (loss) attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net earnings (loss) per share computations are detailed in the following tables:

EARNINGS PER COMMON SHARE

Basic earnings per share is computed using the weighted-average number of common shares outstanding for the period.

Diluted earnings per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities, which consist of outstanding stock options.

Potentially dilutive shares are excluded from the computation of diluted earnings per share if their effect is anti-dilutive.

Options to purchase 615,000 shares were excluded from the computation of diluted shares for the years ended September 30, 2022 and 2021, as their inclusion would have been anti-dilutive.

Reconciliations between net earnings attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net earnings per share computations are detailed in the following tables:

Year ended September 30, 2022

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Year ended September 30, 2021

Net Loss Shares Per-Share

Net Earnings Shares Per-Share

(Numerator) (Denominator) Amount

Basic net loss per share $ ( 4,756,000 ) 8,277,160 $ ( 0.57 )

Basic net earnings per share $ 6,253,000 8,592,154 $ 0.73

Effect of dilutive securities - common stock options — —

Diluted net loss per share $ ( 4,756,000 ) 8,277,160 $ ( 0.57 )

Diluted net earnings per share $ 6,253,000 8,592,154 $ 0.73

Investment in Kukio Resort Land Development Partnerships

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Barnwell's ownership interests in the Kukio Resort Land Development Partnerships is accounted for using the equity method of accounting.

The partnerships derive income from the sale of residential parcels as well as from commissions on real estate sales by the real estate sales office.

The partnerships derive income from the sale of residential parcels, of which two lots, one being a large lot that is now a consolidation of two previous separate lots and one being an original size lot, remain to be sold at Increment I as of September 30, 2022, 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.

Two ocean front parcels approximately two to three acres in size fronting the ocean were developed within Increment II by KD II, of which one was sold in fiscal 2017 and one was sold in fiscal 2016.

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Additionally, Barnwell was entitled to a preferred return from KKM on any allocated equity in income of the Kukio Resort Land Development Partnerships in excess of its partnership sharing ratio for cumulative distributions to all of its partners in excess of $ 45,000,000 from those partnerships.

Cumulative distributions from the Kukio Resort Land Development Partnerships have reached the $ 45,000,000 threshold and in the quarter ended December 31, 2020, the Kukio Resort Land Development Partnerships made distributions in excess of the threshold out of the proceeds from the sale of two lots in Increment I.

Accordingly, Barnwell received a total of $ 459,000 in preferred return payments, which is reflected as an additional equity pickup in the "Equity in income of affiliates" line item on the accompanying Consolidated Statement of Operations for the year ended September 30, 2021.

The preferred return payments received in the quarter ended December 30, 2020, brought the cumulative preferred return total to $ 656,000 , which is the total amount Barnwell was entitled to, and thus there is no more preferred return outstanding as of September 30, 2021.

Cumulative distributions from the Kukio Resort Land Development Partnerships reached the $ 45,000,000 threshold, and accordingly, Barnwell received a total of $ 459,000 in preferred return payments in the year ended September 30, 2021.

The payments were reflected as an additional equity pickup in the "Equity in income of affiliates" line item on the accompanying Consolidated Statement of Operations for the year ended September 30, 2021.

Those preferred return payments brought the cumulative preferred return total to $ 656,000 , which was the total amount to which Barnwell was entitled.

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, 2021, Barnwell received net cash distributions in the amount of $ 6,011,000 from the Kukio Resort Land Development Partnerships after distributing $ 683,000 to non-controlling interests.

Of the $ 6,011,000 net cash distribution received from the Kukio Resort Land Development Partnerships, $ 459,000 represented a payment of the preferred return from KKM, as discussed above.

During the year ended September 30, 2020, Barnwell received net cash distributions in the amount of $ 360,000 from the Kukio Resort Land Development Partnerships after distributing $ 20,000

to non-controlling interests.

Of the $ 360,000 net cash distribution received from the Kukio Resort Land Development Partnerships, $ 197,000 represented a payment of the preferred return from KKM.

Barnwell's share of the operating results of its equity affiliates was income of $ 5,793,000 , which includes the $ 459,000 payment of the preferred return from KKM discussed above, for the year ended September 30, 2021, as compared to income of $ 352,000 , which includes a preferred return payment of $ 197,000 from KKM, for the year ended September 30, 2020.

The equity in the underlying net assets of the Kukio Resort Land Development Partnerships exceeds the carrying value of the investment in affiliates by approximately $ 138,000 as of September 30, 2021, which is attributable to differences in the value of capitalized development costs and a note receivable.

The basis difference will be recognized as the partnerships sell lots and recognize the associated costs and sell memberships for the Kuki`o Golf and Beach Club for which the receivable relates.

The basis difference adjustments of $ 146,000 and $ 13,000 , for the years ended September 30, 2021 and 2020, respectively, increased equity in income of affiliates.

Equity in income of affiliates was $ 3,400,000 for the year ended September 30, 2022, as compared to equity in income of affiliates of $ 5,793,000 for the year ended September 30, 2021, which includes the $ 459,000 payment of the preferred return from KKM discussed above.

Summarized financial information for the Kukio Resort Land Development Partnerships is as follows:

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Net earnings $ 13,763,000 $ 20,612,000

During the year ended September 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 reduced its Kukio Resort Land Development Partnership investment balance to zero as of September 30, 2021.

In addition, the Company recorded the distributions received in excess of our investment balance of $ 654,000 as equity in income of affiliates during the year ended September 30, 2021.

The Company records the distributions in excess of our investment in the Kukio Resort Land Development Partnerships as income 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 during the suspended period exceeds our share of the Kukio Resort Land Development Partnership’s income recognized for the excess distributions.

At September 30, 2020, the Company’s investment in the Kukio Resort Land Development Partnerships was $ 901,000 .

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 recorded as equity in income of affiliates.

Accordingly, the amount of equity in income of affiliates recognized in the year ended September 30, 2022 was equivalent to the $ 3,400,000 of distributions received in that period.

Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $ 958,000 at September 30, 2022 and $ 654,000 at September 30, 2021.

Sale of Interest in Leasehold Land

Kaupulehu Developments has the right to receive payments from KD I and KD II resulting from the sale of lots and/or residential units within Increment I and Increment II by KD I and KD II (see Note 19).

With respect to Increment I, Kaupulehu Developments is entitled to receive payments from KD I based on the following percentages of the gross receipts from KD I’s sales of single-family residential lots in Increment I:

10 % of such aggregate gross proceeds greater than $ 100,000,000 up to $ 300,000,000 ;

14 % of such aggregate gross proceeds in excess of $ 300,000,000 .

In fiscal 2021, eight single-family lots in Increment I were sold bringing the total amount of gross proceeds from single-family lot sales through September 30, 2021 to $ 237,038,000 .

As of September 30, 2021, nine single-family lots, of the 80 lots developed within Increment I, remained to be sold.

With respect to Increment I, 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.

Six single-family lots were sold during the year ended September 30, 2022 and two single-family lots, of the 80 lots developed within Increment I, remained to be sold as of September 30, 2022.

Under the terms of the Increment II agreement with KD II, Kaupulehu Developments is entitled to 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 as to the priority payout.

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Sale of interest in leasehold land, net of fees paid $ 1,137,000 $ 1,526,000

In November 2022, one lot within Increment I was sold and Kaupulehu Developments received a percentage of sales payment of $ 265,000 from the sale, leaving one lot remaining to be sold in Increment I.

Financial results from the receipt of this payment will be reflected in Barnwell's first quarter of fiscal 2023 ending December 31, 2022.

There is no assurance with regards to the amounts of future payments from Increment I or Increment II to be received, or that the remaining acreage within Increment II will be developed.

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The lease terminates in December 2025.

In the year ended September 30, 2020, the Company recorded a $ 50,000 impairment in the carrying value of its investment in leasehold land interest in Lot 4C as a result of the uncertainty regarding the timing of future development and potential use of water rights within Lot 4C prior to the expiration of the lease term.

CONSOLIDATED VARIABLE INTEREST ENTITY

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established a new wholly-owned subsidiary named BOK Drilling, LLC (“BOK”) for the purpose of indirectly investing in oil and natural gas exploration and development in Oklahoma.

BOK and Gros Ventre Partners, LLC (“Gros Ventre”), an entity affiliated with the Company, entered into the Limited Liability Agreement (the “Agreement”) of Teton Barnwell Fund I, LLC (“Teton Barnwell”), an entity formed for the purpose of directly entering into such oil and natural gas investments.

Under the terms of the Agreement, the profits of Teton Barnwell are split between BOK and Gros Ventre at 98 % and 2 %, respectively, and as the manager of Teton Barnwell, Gros Ventre is paid an annual asset management fee equal to 1 % of the cumulative capital contributions made to Teton Barnwell as compensation for its management services.

BOK is responsible for 100 % of the capital contributions made to Teton Barnwell and as of September 30, 2021, the Company made a total of $ 750,000 in capital contributions to Teton Barnwell to fund its oil and natural gas investments in Oklahoma.

BOK and Gros Ventre Partners, LLC (“Gros Ventre”), an entity previously affiliated with the Company (see Note 19 for additional details), entered into the Limited Liability Agreement (the “Teton Operating Agreement”) of Teton Barnwell Fund I, LLC (“Teton Barnwell”), an entity formed for the purpose of directly entering into such oil and natural gas investments.

Under the terms of the Teton Operating Agreement, the profits of Teton Barnwell are split between BOK and Gros Ventre at 98 % and 2 %, respectively, and as the manager of Teton Barnwell, Gros Ventre is paid an annual asset management fee equal to 1 % of the cumulative capital contributions made to Teton Barnwell as compensation for its management services.

BOK is responsible for 100 % of the capital contributions made to Teton Barnwell and as of September 30, 2022, the Company has made a total of $ 1,250,000 in cumulative capital contributions to Teton Barnwell to fund its initial oil and natural gas investment in Oklahoma and has received a total of $ 2,058,000 in distributions, net of non-controlling interests, from Teton Barnwell out of Teton Barnwell's operating cash flows.

In October 2022, an additional $ 711,000 distribution, net of non-controlling interests, was received from Teton Barnwell.

These contributions and distributions between Teton Barnwell and the Company do not affect our reported consolidated cash flows as Teton Barnwell is a consolidated entity, as discussed further below.

The Company has determined that Teton Barnwell is a VIE as the entity is structured with non-substantive voting rights and that the Company is the primary beneficiary.

This is due to the fact that even though Teton Barnwell has a unanimous consent voting structure, BOK is responsible for 100 % of the capital contributions required to fund Teton Barnwell’s future oil exploration and development investments pursuant to the Agreement and thus, BOK has the power to steer the decisions that most significantly impact Teton Barnwell’s economic performance and has the obligation to absorb any potential losses that could be significant to Teton Barnwell.

This is due to the fact that even though Teton Barnwell has a unanimous consent voting structure, BOK is responsible for 100 % of the capital contributions required to fund Teton Barnwell’s future oil exploration and development investments pursuant to the Teton Operating Agreement and thus, BOK has the power to steer the decisions that most significantly impact Teton Barnwell’s economic performance and has the obligation to absorb any potential losses that could be significant to Teton Barnwell.

As BOK is the primary beneficiary of the VIE, Teton Barnwell’s operating results, assets and liabilities are consolidated by the Company.

O'Farrell, a member of the Board of Directors of the Company effective July 12, 2021, is the sole member of Four Pines Operating LLC which owns a 25 % interest in Gros Ventre.

O'Farrell's influence as a member of the Board of Directors of the Company further supports the consolidation of Teton Barnwell's operating results, assets and liabilities as discussed above.

The following table summarizes the carrying value of the assets and liabilities of Teton Barnwell that are consolidated by the Company.

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September 30,

2022 September 30,

Cash and cash equivalents $ 623,000 $ 136,000

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Total liabilities $ 41,000 $ 604,000

ASSETS HELD FOR SALE

Honolulu Corporate Office

The Company’s Honolulu corporate office was designated as an asset held for sale and the carrying value in the aggregate amount of $ 699,000 was included in “Asset held for sale” on the Company's Consolidated Balance Sheet at September 30, 2020.

On September 30, 2021, the Company’s Honolulu corporate office was sold for approximately $ 1,864,000 , net of related costs, resulting in a gain of $ 1,164,000 , which was recognized in the year ended September 30, 2021.

Contract Segment Drilling Rig and Equipment

ASSET HELD FOR SALE

Contract Segment Drilling Rigs and Equipment

In September 2021, the Company designated a contract drilling segment drilling rig and related ancillary equipment, with an aggregate net carrying value of $ 725,000 , as assets held for sale and recorded an impairment of $ 38,000 to reduce the value of these assets to its fair value, less estimated selling costs.

The fair value of these assets in the aggregate amount of $ 687,000 is recorded as “Assets held for sale” on the Company's Consolidated Balance Sheet at September 30, 2021.

The fair value of these assets in the aggregate amount of $ 687,000 was recorded as “Assets held for sale” on the Company's Consolidated Balance Sheet at September 30, 2021.

In October 2021, the Company sold the drilling rig and related ancillary equipment for proceeds of $ 687,000 , net of related costs, which was equivalent to its net carrying value.

In September 2022, the Company entered into a purchase and sale agreement with an independent third party for the sale of a contract drilling segment drilling rig and received a payment of $ 551,000 , net of related costs.

At September 30, 2022, the legal title for the drilling rig had not yet transferred to the buyer and therefore, the Company did not record a sale during the year ended September 30, 2022.

The proceeds received from the buyer was recognized as a deposit and recorded in “Other Current Liabilities” on the Company's Consolidated Balance Sheet at September 30, 2022.

No amount was recorded as assets held for sale at September 30, 2022 as the drilling rig was fully depreciated and therefore had a net book value of zero.

In October 2022, the legal title for the drilling rig was transferred to the buyer and as a result, the Company will recognize a $ 551,000 gain on the sale of the drilling rig in the first quarter of fiscal 2023 ending December 31, 2022.

OIL AND NATURAL GAS PROPERTIES

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 .

In January 2022, Barnwell acquired additional working interests in oil and natural gas properties located in the Twining area of Alberta, Canada for consideration of $ 1,246,000 .

The purchase price per the agreement was adjusted for customary purchase price adjustments to reflect the economic activity from the effective date to the closing date.

The final determination of the customary adjustments to the purchase price has not yet been made, however, it is not expected to result in a material adjustment.

Barnwell also assumed $ 1,500,000 in asset retirement obligations associated with the acquisition.

In April 2021, Barnwell acquired additional working interests in oil and natural gas properties located in the Twining area of Alberta, Canada for cash consideration of $ 348,000 .

The purchase price per the agreement was adjusted for customary purchase price adjustments to reflect the economic activity from the effective date to the closing date.

There were no significant oil and natural gas property dispositions during the year ended September 30, 2022.

The $ 503,000 of proceeds from sale of oil and natural gas properties included in the Consolidated Statement of Cash Flows for the year ended September 30, 2022 primarily represents the refund of income taxes previously withheld from what otherwise would have been proceeds on prior year's oil and natural gas property sales.

In April 2021, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in properties located in the Hillsdown area of Alberta, Canada.

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$ 72,000 of the sales proceeds was withheld by the buyers for potential amounts due for Barnwell’s Canadian income taxes related to the sale.

The final determination of the customary adjustments to the purchase price has not yet been made, however it is not expected to result in a material adjustment.

The proceeds were credited to the full cost pool, with no gain or loss recognized, as the sale did not result in a significant alteration of the relationship between capitalized costs and proved reserves.

In July 2021, Barnwell 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 Spirit River area of Alberta, Canada.

From Barnwell's net proceeds, $ 526,000 was withheld for remittance by the buyers to the Canada Revenue Agency for potential amounts due for Barnwell’s Canadian income taxes related to the sale.

Income taxes were withheld by the buyers from Barnwell's net proceeds for potential amounts due to the Canada Revenue Agency related to the sale, and the amount was subsequently refunded to Barnwell in fiscal 2022.

The difference in the relationship between capitalized costs and proved reserves of the Spirit River properties sold, as compared to the properties retained by Barnwell, was significant as there was a 93 % difference in capitalized costs divided by proved reserves if the gain was recorded versus the gain being credited against the full-cost pool.

Accordingly, Barnwell recorded a gain on the sale of Spirit River of $ 818,000 in the year ended September 30, 2021 in accordance with the guidance in Rule 4-10(c)(6)(i) of Regulation S-X of the rules and regulations of the SEC, which requires an allocation of capitalized costs to the reserves sold and reserves retained on the basis of the relative fair values of the properties as there was a substantial economic difference between the properties sold and those retained.

the reserves sold and reserves retained on the basis of the relative fair values of the properties as there was a substantial economic difference between the properties sold and those retained.

Also included in the gain calculation were asset retirement obligations of $ 77,000 assumed by the purchaser.

In the quarter ended December 31, 2019, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in properties located in the Progress area of Alberta, Canada.

The sales price per the agreement was adjusted for customary purchase price adjustments to $ 594,000 in order to, among other things, reflect an economic effective date of October 1, 2019.

In April 2021, Barnwell acquired additional working interests in oil and natural gas properties located in the Twining area of Alberta, Canada for cash consideration of $ 348,000 .

The purchase price per the agreement was adjusted for customary purchase price adjustments to reflect the economic activity from the effective date to the closing date.

The final determination of the customary adjustments to the purchase price has not yet been made, however it is not expected to result in a material adjustment.

There were no significant amounts paid for oil and natural gas property acquisitions during the year ended September 30, 2020.

Impairment of Oil and Natural Gas Properties

Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations.

There was a ceiling test impairment of $ 630,000 during the year ended September 30, 2021.

There was a $ 4,326,000 ceiling test impairment during the year ended September 30, 2020.

There was no ceiling test impairment during the year ended September 30, 2022 and a $ 630,000 ceiling test impairment during the year ended September 30, 2021.

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.

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See Note 6 for discussion of acquisitions and divestitures of oil and natural gas properties in fiscal 2022 and 2021.

In September 2021, the Company’s Honolulu corporate office was sold for approximately $ 1,864,000 , net of related costs, resulting in a gain of $ 1,164,000 , which was recognized in the year ended September 30, 2021.

Asset Retirement Obligation

Barnwell recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made.

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Asset retirement obligations were reduced by $ 483,000 and $ 375,000 , in fiscal 2022 and 2021, respectively, for those obligations that were assumed by purchasers of Barnwell's oil and natural gas properties.

Asset retirement obligations also increased by $ 279,000 in fiscal 2021 as compared to a reduction of $ 279,000 in fiscal 2020 primarily due to upward revisions from acceleration in the estimated timing of future abandonments as a result of changes in the estimated economic life of certain wells and changes in management's discretionary timing of abandonment projects due to an increase in estimated funds available as well as an increase in the estimated cost of abandonments at the Manyberries area, as further discussed below.

Asset retirement obligations increased by $ 532,000 and $ 227,000 in fiscal 2021 and 2020, respectively, due primarily to our acquisitions (see Note 7 for additional details).

Asset retirement obligations increased by $ 1,021,000 and $ 279,000 in fiscal 2022 and 2021, respectively, primarily due to upward revisions from acceleration in the estimated timing of future abandonments as a result of changes in the estimated economic life of certain wells and changes in management's discretionary timing of abandonment projects due to an increase in estimated funds available as well as changes to the estimated cost of abandonments at the Manyberries area, as further discussed below.

Asset retirement obligations also increased by $ 1,682,000 and $ 532,000 in fiscal 2022 and 2021, respectively, due primarily to our acquisitions (see Note 6 for additional details).

The asset retirement obligation reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with Barnwell's oil and natural gas properties.

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Under the new agreement with the OWA, the Company is required to pay the abandonment and reclamation costs in advance through a cash deposit.

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 will need to pay the remaining balance of $ 637,000 by August 2022.

The deposit balance at September 30, 2021, less draw-downs by the OWA for OWA-performed abandonments, was $ 809,000 and is reflected in "Other current assets" in the Consolidated Balance Sheet as of September 30, 2021.

There is no right of offset between the deposit with the OWA and the Company's ARO liability balance.

The Company revised its Manyberries ARO liability based on the OWA’s revised abandonment and reclamation estimates, which resulted in an increase of approximately $ 213,000 in the current year.

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 will need to pay the remaining balance of $ 637,000 by August 2023.

The Company revised its Manyberries ARO liability based on the OWA’s revised abandonment and reclamation estimates, which resulted in an increase of approximately $ 213,000 in the year ended September 30, 2021.

The increase in the ARO liability was a result of higher reclamation and remediation costs than anticipated, partially offset by lower abandonment estimates.

Based on a review of the details of the cash deposit calculation provided by the OWA, which includes amounts added for possible contingencies, the Company believes the required cash deposit amount by the OWA is higher than the actual costs of the asset retirement obligation for the Manyberries wells and that any excess of the deposit over actual asset retirement costs for the first phase of the work would be credited toward the second phase of the work.

A remaining excess deposit, if any, would ultimately be refunded to the Company upon completion of all of the work.

As of September 30, 2022, the Company recognized a cumulative reduction in the deposit balance of $ 113,000 for work performed under this program.

RETIREMENT PLANS

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In addition, Barnwell sponsors a Supplemental Executive Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and previously sponsored a post-retirement medical insurance benefits plan (“Post-retirement Medical”) covering officers of Barnwell Industries, Inc., the parent company, who have attained at least 20 years of service of which at least 10 years were at the position of Vice President or higher, their spouses and qualifying dependents.

In December 2019, the Company’s Board of Directors approved a resolution to freeze all future benefit accruals for all participants under the Company’s Pension Plan and SERP effective December 31, 2019.

Consequently, current participants in the Pension Plan and SERP no longer accrue new benefits under the plans and new employees of the Company are no longer eligible to enter the Pension Plan and SERP as participants after December 31, 2019.

The freezing of the Pension Plan and SERP triggered a curtailment which required a remeasurement of the projected benefit obligations of the Pension Plan and SERP and resulted in a $ 1,726,000 reduction in unrecognized pension benefit costs that were previously included in accumulated other comprehensive loss, with a corresponding curtailment gain in other comprehensive income which was recorded during the year ended September 30, 2020.

In June 2021, the Company terminated its Post-retirement Medical plan effective June 4, 2021.

Pursuant to the Post-retirement Medical plan document, the Company, as the sponsor of the Post-retirement Medical plan, had the right to terminate the plan within sixty days ’ notice to each participant and the plan may be terminated by the resolution of the Board of the Directors of the Company.

Pursuant to the Post-retirement Medical plan document, the Company, as the sponsor of the Post-retirement Medical plan, had the right to terminate the plan by the resolution of the Board of the Directors of the Company and sixty days ’ notice to each participant in the plan.

Further, under the terms of the plan document, the participants in the Post-retirement Medical plan were not entitled to any unpaid vested benefits thereunder upon termination of the plan.

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Benefit obligation at beginning of year $ 10,365,000 $ 10,280,000 $ 2,136,000 $ 2,031,000 $ — $ 2,839,000

Service cost — 50,000 — 3,000 — —

Interest cost 290,000 258,000 60,000 51,000 — 48,000

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Benefits paid ( 306,000 ) ( 158,000 ) ( 3,000 ) ( 9,000 ) — ( 5,000 )

Curtailments — ( 1,396,000 ) — ( 330,000 ) — —

Termination of post-retirement medical plan — — — — — ( 2,882,000 )

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Net amount $ 3,385,000 $ 2,229,000 $ ( 1,715,000 ) $ ( 2,136,000 ) $ — $ —

Amounts recognized in accumulated other comprehensive income (loss) before income taxes:

Net actuarial loss $ 471,000 $ 1,681,000 $ 135,000 $ 72,000 $ — $ 721,000

Prior service cost (credit) — — — — — —

Accumulated other comprehensive loss $ 471,000 $ 1,681,000 $ 135,000 $ 72,000 $ — $ 721,000

Amounts recognized in accumulated other comprehensive income before income taxes:

Net actuarial (gain) loss $ ( 353,000 ) $ 471,000 $ ( 343,000 ) $ 135,000 $ — $ —

Accumulated other comprehensive (income) loss $ ( 353,000 ) $ 471,000 $ ( 343,000 ) $ 135,000 $ — $ —

The accumulated benefit obligation for the Pension Plan was $ 7,931,000 and $ 10,365,000 at September 30, 2022 and 2021, respectively.

The accumulated benefit obligation for the SERP was $ 1,715,000 and $ 2,136,000 at September 30, 2022 and 2021, respectively.

The accumulated benefit obligations are the same as the projected benefit obligations due to the Pension Plan and SERP being frozen as of December 31, 2019.

Currently, no contributions will be made to the Pension Plan during fiscal 2023.

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Expected payments under the SERP for fiscal 2023 is not material.

Fluctuations in actual market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

Fluctuations in actual market returns as well as changes in general interest rates

will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

The Pension Plan actuarial gains in fiscal 2022 were primarily due to an increase in the discount rate, partially offset by an actuarial loss resulting from actual investment returns that were less than the assumed rate of return.

The SERP actuarial gains in fiscal 2022 were primarily due to an increase in the discount rate.

The Pension Plan actuarial gains in fiscal 2021 were primarily due to an increase in the discount rate and actual investment returns that were greater than the assumed rate of return.

The SERP actuarial losses in fiscal 2021 were primarily due to an updated mortality projection scale and adjustments due to experience, partially offset by an increase in the discount rate.

The Pension Plan actuarial losses in fiscal 2020 were primarily due to a decrease in the discount rate.

The SERP actuarial gains in fiscal 2020 were primarily due to the freezing of the plan benefit accruals which decreased the net periodic cost and improved the funded position.

The Post-retirement Medical plan actuarial losses in fiscal 2020 were primarily due to a decrease in the discount rate.

The following table presents the weighted-average assumptions used to determine benefit obligations and net benefit (income) costs:

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Assumptions used to determine fiscal year-end benefit obligations:

Discount rate 2.84 % 2.54 % 2.84 % 2.54 % N/A 2.54 %

Discount rate 5.25 % 2.84 % 5.25 % 2.84 % N/A N/A

Rate of compensation increase N/A N/A N/A N/A N/A N/A

Assumptions used to determine net benefit costs (years ended):

Discount rate 2.54 % 3.06 % / 3.15 % (1)

2.54 % 3.06 % / 3.15 % (1)

2.54 % / 3.00 % (2)

Discount rate 2.84 % 2.54 % 2.84 % 2.54 % N/A 2.54 % / 3.00 % (1)

Expected return on plan assets 5.00 % 5.00 % N/A N/A N/A N/A

Rate of compensation increase N/A 4.00 % N/A 4.00 % N/A N/A

Rate of compensation increase N/A N/A N/A N/A N/A N/A

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(1) 3.06% as of September 30, 2019 and 3.15% as of December 31, 2019 remeasurement.

(1) 2.54% as of September 30, 2020 and 3.00% as of May 31, 2021 termination.

We select a discount rate by reference to yields available on the FTSE High Grade Credit Index at our consolidated balance sheet date.

The expected return on plan assets is primarily based on historical rates of return.

We select a discount rate by reference to yields available on the ICE Bank of America Merrill Lynch AA-AAA 15+ Index at our consolidated balance sheet date.

The expected return on plan assets is based on an actuarial model which takes into consideration our investment mix and market conditions.

The components of net periodic benefit (income) cost are as follows:

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Net periodic benefit (income) cost for the year:

Service cost $ — $ 50,000 $ — $ 3,000 $ — $ —

Interest cost $ 290,000 $ 258,000 $ 60,000 $ 51,000 $ — $ 48,000

Expected return on plan assets ( 622,000 ) ( 546,000 ) — — — —

Amortization of prior service cost (credit) — 1,000 — ( 1,000 ) — —

Amortization of net actuarial loss — 39,000 — — — 62,000

Curtailment cost (income) — 53,000 — ( 53,000 ) — —

Net periodic benefit (income) cost $ ( 332,000 ) $ ( 249,000 ) $ 60,000 $ 51,000 $ — $ 110,000

The accumulated benefit obligation differs from the projected benefit obligation in that it assumes future compensation levels will remain unchanged.

The accumulated benefit obligation for the Pension Plan was $ 10,365,000 and $ 10,280,000 at September 30, 2021 and 2020, respectively.

The accumulated benefit obligation for the SERP was $ 2,136,000 and $ 2,031,000 at September 30, 2021 and 2020, respectively.

The benefits expected to be paid under the retirement plans as of September 30, 2022 are as follows:

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and international equities, fixed income securities and cash equivalents.

Barnwell’s investments in fixed income securities include corporate bonds, preferred securities, and fixed income exchange-traded funds.

Barnwell’s investments in fixed income securities include corporate bonds, U.S.

treasury and government securities, preferred securities, and fixed income exchange-traded funds.

The Company’s investments in equity securities primarily include domestic and international large-cap companies, as well as, domestic and international equity securities exchange-traded funds.

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Fixed income securities are valued based upon the closing price reported in the active market in which the security is traded.

All of our plan assets are categorized as Level 1 assets, and as such, the actual market value is used to determine the fair value of assets.

All of our plan

assets are categorized as Level 1 assets, and as such, the actual market value is used to determine the fair value of assets.

The following tables set forth by level, within the fair value hierarchy, pension plan assets at their fair value:

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Corporate bonds 1,000 1,000 — —

treasury and government securities 561,000 561,000 — —

Fixed income exchange-traded funds 3,223,000 3,223,000 — —

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Financial Assets:

Cash $ 25,000 $ 25,000 $ — $ —

Corporate bonds 1,000 1,000 — —

Fixed income exchange-traded funds 3,809,000 3,809,000 — —

Preferred securities 48,000 48,000 — —

Equity securities exchange-traded funds 459,000 459,000 — —

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Total $ 12,594,000 $ 12,594,000 $ — $ —

The components of earnings (loss) before income taxes, after adjusting the earnings (loss) for non-controlling interests, are as follows:

The components of earnings before income taxes, after adjusting the earnings for non-controlling interests, are as follows:

Year ended September 30,

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$ 5,860,000 $ 6,585,000

The components of the income tax provision related to the above earnings (loss) are as follows:

The components of the income tax provision related to the above earnings are as follows:

Year ended September 30,

Current provision (benefit):

Current provision:

United States – Federal

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After operating loss carryforwards 456,000 167,000

Before operating loss carryforwards 510,000 —

Benefit of operating loss carryforwards ( 510,000 ) —

After operating loss carryforwards — —

Total current 518,000 167,000

Deferred provision:

Deferred (benefit) provision:

United States – State ( 171,000 ) 165,000

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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 therefore, receives no benefit from consolidated or unitary losses.

On June 28, 2019, the Canadian province of Alberta enacted legislation that decreased the provincial general corporate tax rate from 12% to 11% effective July 1, 2019, with further 1% rate reductions on January 1 of every year until the provincial general corporate tax rate is 8% on January 1, 2022, bringing Barnwell of Canada’s and Octavian Oil’s total Canadian statutory tax rates from 30.65% and 27.00%, respectively, to 29.70% and 26.00%, respectively, effective July 1, 2019 and to 26.85% and 23.00%, respectively, effective January 1, 2022.

On June 29, 2020, the Government of Alberta introduced Alberta’s Recovery Plan which will, among other things, reduce Alberta’s general corporate income tax rate to 8% (from 10%) effective July 1, 2020.

This reduction was enacted in the quarter ended December

Canadian deferred tax assets and liabilities have been measured using the enacted tax rates in effect for the year in which the differences are expected to reverse.

Alberta rate changes have no significant impact to earnings/loss as a result of a full valuation allowance being applied to Canadian deferred tax assets.

On December 27, 2020, then President Donald Trump signed into law the Consolidated Appropriations Act (the “Act”), an omnibus spending bill to fund the federal government that also includes an array of COVID-related tax relief for individuals and businesses.

Income from our investment in the Oklahoma oil venture is 100% allocable to Oklahoma, and therefore, receives no benefit from consolidated or unitary losses and, therefore, is subject to Oklahoma state taxes.

In addition, net operating loss carryforwards, all of which had a full valuation allowance at the end of the previous fiscal year, are being partially utilized in the current year to offset taxable income in the U.S.

federal and Canadian jurisdictions.

The net operating loss carryforwards beyond the current year’s

utilization continue to have a full valuation allowance as realization of their benefit is not more likely than not.

Included in the current income tax provision for the year ended September 30, 2022 is a $ 62,000 expense for income tax penalties and interest thereon for the non-filing of IRS Form 8858 in each of our U.S.

federal income tax returns for fiscal years 2019, 2020 and 2021.

The Company is in the process of amending its U.S.

federal tax returns to include Form 8858 and plans to request abatement of the potential penalties and interest.

There was no such expense included in the current income tax provision for the year ended September 30, 2021.

On December 27, 2020, the President signed into law the Consolidated Appropriations Act (the “Act”), an omnibus spending bill to fund the federal government that also includes an array of COVID-related tax relief for individuals and businesses.

The tax-related measures contained in the Act revise and expand provisions enacted earlier in the year by the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act.

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Additionally, the Act provides for a 100% deduction for certain business meals incurred in calendar years 2021 and 2022.

The Company determined that income tax effects related to the passage of the Consolidated Appropriations Act were not material to the financial statements for the year ended September 30, 2021.

A reconciliation between the reported income tax expense and the amount computed by multiplying the earnings (loss) attributable to Barnwell before income taxes by the U.S.

The Company determined that income tax effects related to the passage of the Consolidated Appropriations Act were not material to the financial statements for the years ended September 30, 2021 and 2022.

A reconciliation between the reported income tax expense and the amount computed by multiplying the earnings attributable to Barnwell before income taxes by the U.S.

federal tax rate of 21 % is as follows:

Year ended September 30,

Tax provision (benefit) computed by applying statutory rate $ 1,383,000 $ ( 998,000 )

Impact of TCJA limitation on post-TCJA net operating loss carryforwards — ( 260,000 )

(Decrease) increase in the valuation allowance ( 1,482,000 ) 1,978,000

Tax provision computed by applying statutory rate $ 1,231,000 $ 1,383,000

Decrease in the valuation allowance ( 1,450,000 ) ( 1,427,000 )

Additional effect of the foreign tax provision on the total tax provision 130,000 31,000

Uncertain tax positions 62,000 —

state tax provision, net of federal benefit 285,000 332,000

13 unchanged sentences

Property and equipment accumulated book depreciation and depletion in excess of tax under Canadian tax law

1,091,000 1,421,000

Property and equipment accumulated book depreciation and depletion in excess of tax under U.S.

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Liabilities accrued for books but not for tax under Canadian tax law 2,120,000 1,813,000

Foreign currency loss under U.S.

tax law 102,000 —

Foreign currency loss under Canadian tax law 124,000 —

Other 278,000 442,000

3 unchanged sentences

Deferred income tax liabilities:

Property and equipment accumulated tax depreciation and depletion in excess of book under Canadian tax law ( 280,000 ) —

Book basis of investment in land development partnerships in excess of tax basis under U.S.

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state tax law ( 23,000 ) ( 7,000 )

tax law impact of foreign branch deferred tax asset under Canadian tax law ( 1,465,000 ) ( 1,782,000 )

Other ( 285,000 ) ( 272,000 )

Total deferred income tax liabilities ( 2,885,000 ) ( 3,711,000 )

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The total valuation allowance decreased $ 2,008,000 for the year ended September 30, 2022.

The decrease was primarily due to a $ 1,225,000 decrease in the U.S.

federal tax law valuation allowance related to U.S.

federal net operating loss carryforwards, a $ 1,224,000 decrease in the U.S.

federal tax law valuation allowance related to foreign tax credit carryovers, and a $ 257,000 decrease in the valuation allowance for deferred tax assets under Canadian law related to property and equipment accumulated book depletion in excess of tax and Canadian jurisdiction net operating loss carryforwards that may not be realizable.

The decrease was due to current fiscal year operational activity that resulted in changes in deferred tax asset

and liability balances, and there were no changes in judgment about the realizability of related deferred tax assets in future years.

Of the total net decrease in the valuation allowance for fiscal 2022, $ 1,614,000 was recognized as an income tax benefit and $ 394,000 was credited to accumulated other comprehensive loss.

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federal consolidated deferred tax assets that are estimated to be partially realized through corresponding reversals of U.S.

federal consolidated deferred tax liabilities related to the Kukio Resort Land Development Partnerships' excess of book income over taxable income and the Oklahoma oil venture's book basis of property and equipment in excess of tax basis.

federal consolidated deferred tax liabilities related to the Kukio Resort Land Development Partnerships' excess of book income over taxable income, the book basis of property and equipment in excess of tax basis under U.S federal and Canadian tax law, foreign branch deferred taxes and certain other minor deferred tax liabilities.

At September 30, 2022, Barnwell had U.S.

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state unitary net operating loss carryovers generated through September 30, 2017 expire in fiscal years 2033-2037, the Canadian net operating loss carryovers expire in fiscal years 2037-2042, and the foreign tax credit carryovers expire in fiscal years 2023-2025.

federal net operating loss carryovers generated in the years ended September 30, 2021, 2020 and 2019 and the U.S.

state net operating loss carryovers generated in the years ended September 30, 2021, 2020, 2019 and 2018 have no expiry, however utilization of the U.S.

state net operating loss carryovers generated in fiscal 2018 and future years are limited to 80% of taxable income.

federal net operating loss carryovers generated in fiscal years 2019-2021 and the U.S.

state net operating loss carryovers generated in fiscal years 2018-2022 have no expiry, however utilization of the U.S.

state and U.S.

federal net operating loss carryovers generated in these and future years are limited to 80% of taxable income.

FASB ASC Topic 740, Income Taxes, prescribes a threshold for recognizing the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority.

The Company has no uncertain tax positions as of September 30, 2021 or 2020.

Barnwell files U.S.

federal income tax returns, income tax returns in various U.S.

states, and Canadian federal and provincial tax returns.

A number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved.

We believe that our unrecognized tax benefits are reflected on a more likely than not basis.

We evaluate uncertain tax positions based on ongoing facts and circumstances.

Any change in judgment related to the expected resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs.

Interest and penalties, if any, related to unrecognized tax benefits are recorded as a component of income tax expense.

Settlement of any particular position could require the use of cash.

Favorable resolution for an amount less than the amount estimated by Barnwell would be recognized as a decrease in the effective income tax rate in the period of resolution, and unfavorable resolution in excess of the amount estimated by Barnwell would be recognized as an increase in the effective income tax rate in the period of resolution.

Below are the changes in unrecognized tax benefits.

Year ended September 30,

Balance at beginning of year $ — $ —

Effect of tax positions taken in prior years 60,000 —

Accrued interest related to tax positions taken 2,000 —

Balance at end of year $ 62,000 $ —

Uncertain tax positions at September 30, 2022 are related to the potential assessment of penalties and interest for the failure to file certain foreign information forms with each of our U.S.

federal income tax returns for fiscal years 2019, 2020 and 2021.

The Company is in the process of amending its U.S.

federal tax returns to include missing forms and plans to request abatement of the potential penalties and interest.

Included below is a summary of the tax years, by jurisdiction, that remain subject to examination by taxing authorities at September 30, 2022:

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Nearly all of the Company's contract drilling segment contracts have original expected durations of one year or less.

At September 30, 2021, the Company had four contract drilling jobs with original expected durations of greater than one year.

At September 30, 2022, the Company had five contract drilling jobs with original expected durations of greater than one year.

For these contracts, approximately 71 % of the remaining performance obligation of $ 4,890,000 is expected to be recognized in the next twelve months and the remaining, thereafter.

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Additionally, no impairment charges in connection with the Company’s preconstruction costs were recorded during the years ended September 30, 2022 and 2021.

Water Well Re-drill

In the quarter ended December 31, 2019, the Company experienced the failure of a hole opener which broke apart leaving pieces in the bottom of a water well being drilled in Hawaii.

Efforts to remove the items from the well were unsuccessful through the quarter ended March 31, 2020 and subsequently the Company determined that the well should be abandoned and a new well drilled at no incremental cost to the customer as per the terms of the contract.

Accordingly, all the costs to drill and abandon the first well, which are all wasted costs, were excluded from the measurement of progress toward contract completion and all such costs were fully accrued in the quarter ended March 31, 2020, as this contract was determined to be a loss job.

In September 2020, while making progress towards the drilling of a replacement well in different location, the drill string twisted off and became lodged in the well borehole, which required a stoppage of drilling and the need to dislodge and retrieve the broken drill string.

Accordingly, the estimated total rework costs to remediate the situation was accrued at September 30, 2020.

In January 2021, the broken drill string was retrieved from the well borehole and drilling of the replacement well recommenced.

Uninstalled Materials

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General and administrative expenses ( 8,044,000 ) ( 7,088,000 )

Foreign currency loss ( 484,000 ) —

Interest expense ( 1,000 ) ( 13,000 )

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Gain on termination of post-retirement medical plan — 2,341,000

Earnings (loss) before income taxes $ 7,535,000 $ ( 4,674,000 )

Earnings before income taxes $ 6,519,000 $ 7,535,000

Capital Expenditures:

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3,260,000 4,071,000

Land investment (2)

Cash and cash equivalents 12,804,000 11,279,000

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Total (excluding interest income) $ 28,527,000 $ 18,105,000

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of accumulated other comprehensive income (loss), net of taxes, are as follows:

ACCUMULATED OTHER COMPREHENSIVE INCOME

Components of accumulated other comprehensive income, net of taxes, are as follows:

Year ended September 30,

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Beginning accumulated retirement plans benefit cost ( 230,000 ) ( 1,980,000 )

Amortization of net actuarial loss and prior service cost 101,000 120,000

Net actuarial gains arising during the period 1,108,000 1,508,000

Amortization of net actuarial loss — 101,000

Net actuarial gain arising during the period 1,302,000 1,108,000

Gain on termination of post-retirement medical plan — 541,000

1 unchanged sentence

Net current period other comprehensive income 1,302,000 1,750,000

Ending accumulated retirement plans benefit cost ( 230,000 ) ( 1,980,000 )

Accumulated other comprehensive income (loss), net of taxes $ 32,000 $ ( 1,435,000 )

The amortization of net actuarial loss and prior service cost for the retirement plans are included in the computation of net periodic benefit (income) cost which is a component of “General and administrative” expenses on the accompanying Consolidated Statements of Operations (see Note 9 for additional details).

Ending accumulated retirement plans benefit income (cost) 1,072,000 ( 230,000 )

Accumulated other comprehensive income, net of taxes $ 1,294,000 $ 32,000

The amortization of net actuarial loss for the retirement plans are included in the computation of net periodic benefit (income) cost which is a component of “General and administrative” expenses on the accompanying Consolidated Statements of Operations (see Note 8 for additional details).

FAIR VALUE MEASUREMENTS

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Barnwell estimates the fair value of asset retirement obligations based on the projected discounted future cash outflows required to settle abandonment and restoration liabilities.

Such an estimate requires

assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments.

Such an estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows

required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments.

Abandonment and restoration cost estimates are determined in conjunction with Barnwell’s reserve engineers based on historical information regarding costs incurred to abandon and restore similar well sites, information regarding current market conditions and costs, and knowledge of subject well sites and properties.

2 unchanged sentences

Asset retirement obligations are not measured at fair value subsequent to initial recognition.

Paycheck Protection Program Loan

On April 28, 2020, the Company, as obligor, entered into a promissory note evidencing an unsecured loan in the approximate amount of $ 147,000 under the PPP pursuant to the CARES Act that was signed into law in March 2020.

The note was to mature two years after the date of the loan disbursement with interest at a fixed annual rate of 1.00 %, and with the principal and interest payments deferred until ten months after the last day of the covered period.

In April 2021, the Company was notified by the lender of our PPP loan that the entire PPP loan amount and related accrued interest was forgiven by the Small Business Administration.

As a result of the loan forgiveness, the Company recognized a gain on debt extinguishment of $ 149,000 during the year ended September 30, 2021.

Canada Emergency Business Account Loan

1 unchanged sentence

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 ($ 44,000 ) under the program.

The CEBA loan is interest-free with no principal payments required until December 31, 2022, after which the remaining loan balance is converted to a three year term loan at 5 % annual interest paid monthly.

In January 2022, the Canadian government announced the extension of the CEBA loan repayment deadline and interest-free period 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 66.7 % 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 .

Paycheck Protection Program Loan

In April 2020, the Company, as obligor, entered into a promissory note evidencing an unsecured loan in the approximate amount of $ 147,000 under the PPP pursuant to the CARES Act that was signed into law in March 2020.

In April 2021, the Company was notified by the lender of our PPP loan that the entire PPP loan amount and related accrued interest was forgiven by the Small Business Administration.

As a result of the loan forgiveness, the Company recognized a gain on debt extinguishment of $ 149,000 during the year ended September 30, 2021.

The Company’s right-of-use (“ROU”) assets and lease liabilities at September 30, 2022, primarily relate to non-cancelable operating leases for our Hawaii corporate and Canadian office spaces and our leasehold land interest for Lot 4C held by Kaupulehu Developments.

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A ROU asset and corresponding lease liability is not recorded for leases with an initial term of 12 months or less (short-term leases) as the Company recognizes lease expense for these leases as incurred over the lease term.

In September 2022, the Company determined that the right-of-use asset related to the operating lease for the Lot 4C leasehold land zoned conservation held by Kaupulehu Developments was fully impaired as of September 30, 2022.

As a result, the Company recognized an $ 89,000 right-of-use asset impairment expense during the year ended September 30, 2022.

Leases recorded on the balance sheet consist of the following:

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Current portion of operating lease liabilities (1)

$ 105,000 $ 117,000

Operating lease liabilities 117,000 180,000

Total lease liabilities $ 222,000 $ 297,000

The components of lease expenses are as follows:

______________

(1) Amount included in “Other Current Liabilities” in the Consolidated Balance Sheets .

The components of lease expense are as follows:

Year ended September 30,

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September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 133,000 $ 189,000

Cash paid related to operating lease liabilities $ 108,000 $ 133,000

Operating leases:

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Present value of lease liabilities $ 222,000

The lease payments for the Lot 4C leasehold land were subject to renegotiation as of January 1, 2006.

The lease payments for the Lot 4C leasehold land zoned conservation were subject to renegotiation as of January 1, 2006.

Per the lease agreement, the lease payments will remain unchanged pending an appraisal, whereupon the lease rent could be adjusted to fair market value.

2 unchanged sentences

The future lease payment disclosures above assume the minimum lease payments for leasehold land in effect at December 31, 2005 remain unchanged through December 2025, the end of the lease term.

Gain on sale of leased asset

In March 2020, the Company sold its leasehold interest in a three-quarter of an acre contract drilling segment maintenance and storage yard in Honolulu, Hawaii to an unrelated third party for a $ 1,100,000 cash payment.

As a result of the sale transaction, the Company recognized a gain of $ 1,336,000 , inclusive of a $ 236,000 gain from the reversal of the storage yard's lease liability in excess of the right-of-use asset, in the year ended September 30, 2020.

STOCKHOLDERS' EQUITY (DEFICIT)

STOCKHOLDERS' EQUITY

In May 2022, Barnwell’s stockholders approved the amendment to increase the Company’s number of authorized shares of common stock from 20,000,000 to 40,000,000 shares and approved amendments to the Company’s 2018 Equity Incentive Plan which included the amendment to increase the total number of shares of stock authorized for awards from 800,000 to 1,600,000 shares among other amendments.

Share-based Compensation

5 unchanged sentences

Equity-classified Awards

On February 9, 2021, the Board of Directors of the Company granted options to purchase 665,000 shares of common stock, 310,000 shares to independent directors and 355,000 shares to employees.

605,000 shares of the stock options granted have an exercise price equal to the closing market price of Barnwell’s stock on the date of grant of $ 3.33 , vest annually over three years , and expire in ten years from the date of grant.

In February 2021, the Board of Directors of the Company granted options to purchase 665,000 shares of common stock, 310,000 shares to independent directors and 355,000 shares to employees.

605,000 shares of the stock options granted have an exercise price equal to the closing market price of

Barnwell’s stock on the date of grant of $ 3.33 , vest annually over three years , and expire in ten years from the date of grant.

60,000 shares of the stock options granted have an exercise price of $ 3.66 (110% of the closing market price on the date of grant for options granted to affiliates), vest annually over three years , and expire in five years from the date of grant.

The following assumptions were used in estimating the fair value for equity-classified share options granted in the year ended September 30, 2021:

> 10% Owner-Employee Others

Number of shares 60,000 605,000

Expected volatility 127.4 % 105.8 %

Expected dividends None None

Expected term (in years) 3.5 6.0

Risk-free interest rate 0.19 % 0.82 %

Expected forfeitures None None

Fair value per share $ 2.51 $ 2.70

The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the “General and administrative” expenses in the Consolidated Statements of Operations.

A summary of the activity in Barnwell’s equity-classified share options from October 1, 2021 through September 30, 2022 is presented below:

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Outstanding at October 1, 2021 615,000 $ 3.36

Granted 665,000 3.36

Exercised — —

2 unchanged sentences

Exercisable at September 30, 2022 205,000 $ 3.36 7.9 $ —

The following assumptions were used in estimating the fair value of the equity-classified share options granted on February 9, 2021:

> 10% Owner-Employee Others

Number of shares 60,000 605,000

Expected volatility 127.4 % 105.8 %

Expected dividends None None

Expected term (in years) 3.5 6.0

Risk-free interest rate 0.19 % 0.82 %

Expected forfeitures None None

Fair value per share $ 2.51 $ 2.70

Compensation cost for equity-classified awards is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period.

During the year ended September 30, 2021, the Company recognized total share-based compensation expense of $ 643,000 .

There was no share-based compensation expense recognized during the year ended September 30, 2020.

Additionally, there was no impact on income taxes for the years ended September 30, 2021 and 2020 due to a full valuation allowance on the related deferred tax asset.

During the years ended September 30, 2022 and 2021, the Company recognized share-based compensation expense of $ 657,000 and $ 643,000 , respectively.

There was no impact on income taxes for the years ended September 30, 2022 and 2021 due to a full valuation allowance on the related deferred tax asset.

As of September 30, 2022, the total remaining unrecognized compensation cost related to nonvested share options was $ 348,000 , which is expected to be recognized over the weighted-average remaining requisite service period of 1.4 years.

Cash Dividend

In August 2022, the Company's Board of Directors declared a cash dividend of $ 0.015 per share that was paid on September 6, 2022 to stockholders of record on August 23, 2022.

No dividends were declared or paid during fiscal 2021.

At The Market Offering

On March 16, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P,”), with respect to the ATM pursuant to which the Company may offer and sell, from time to time, shares of its common stock, par value $ 0.50 per share, having an aggregate sales price of up to $ 25 million (subject to certain limitations at any time our public float remains under $ 75 million), through or to A.G.P as the Company’s sales agent or as principal.

On March 16, 2021, the Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P,”), with respect to an at-the-market offering program (“ATM”) pursuant to which the Company may offer and sell, from time to time, shares of its common stock, par value $ 0.50 per share, having an aggregate sales price of up to $ 25 million (subject to certain limitations set forth in the Sales Agreement and applicable securities laws, rules and regulations), through or to A.G.P as the Company’s sales agent or as principal.

Sales of our common stock under the ATM, if any, will be made by any methods deemed to be “at the market offerings” as defined in Rule 415(a)(4) under the Securities Act, including sales made directly on the NYSE American, on any other existing trading market for our Common Stock, or to or through a market maker.

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333-254365), filed with the Securities and Exchange Commission on March 16, 2021, and declared effective on March 26, 2021 (the "Registration Statement”), and the prospectus dated March 26, 2021, included in the Registration Statement.

During the year ended September 30, 2022, the Company sold 509,467 shares of common stock resulting in net proceeds of $ 2,356,000 after commissions and fees of $ 75,000 and ATM-related professional services of $ 22,000 .

During the year ended September 30, 2021, the Company sold 1,167,987 shares of common stock resulting in net proceeds of $ 3,179,000 after commissions and fees of $ 123,000 and ATM-related professional services of $ 605,000 .

As of September 30, 2022, the Company has received $ 5,535,000 in cumulative net proceeds from the shares sold under the ATM program.

In August 2022, the Company’s Board of Directors suspended the sales of our common stock under the ATM until further notice.

COMMITMENTS AND CONTINGENCIES

Incentive compensation plan

In fiscal 2020, Barnwell established an incentive compensation plan to compensate all Canadian oil and natural gas segment personnel and an incentive compensation plan to compensate Canadian executive officers.

The value of the plans are directly related to our oil and natural gas segment's free cash flows and the divestiture of oil and natural gas assets.

Barnwell established an incentive compensation plan to compensate all Canadian oil and natural gas segment personnel and an incentive compensation plan to compensate Canadian executive officers.

The value of the plans are directly related to our oil and natural gas segment's free cash flows from Canadian properties and the divestiture of Canadian oil and natural gas assets.

As of September 30, 2022, Barnwell has accrued approximately $ 381,000 in bonus compensation under these plans and the amount is reported in “Accrued compensation” on the Consolidated Balance Sheet at September 30, 2022.

Subscription Receipts Agreement

In May 2022, Barnwell Investments LLC, a new wholly-owned subsidiary of Barnwell Industries Inc., entered into an agreement to participate in a private placement offering (the “Offering”) of subscriptions receipts (the “Subscription Agreement”) with 1287398 B.C.

(the “Issuer”) and agreed to purchase 1,724,138 subscription receipts at a price of $ 1.16 per subscription receipt for a total of

$ 2,000,000 from the Issuer.

is a Canadian reporting issuer.

The Offering is subject to regulatory approvals, including the conditional listing approval by the TSX Venture Exchange.

The Subscription Agreement was held in escrow by the Issuer until certain escrow release conditions were met which included the Issuer raising an additional $ 3,000,000 in gross proceeds from other parties under the private placement offering for total minimum gross proceeds of $ 5,000,000 .

As of September 30, 2022, the escrow release condition had not been satisfied and no cash was paid by the Company to the Issuer.

In November 2022, the Subscription Agreement was terminated by the Company and therefore the Company no longer has a commitment with the Issuer.

Environmental Matters

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Barnwell’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.

In the year ended September 30, 2019, two of the water wells drilled by the contract drilling segment for one customer were determined to not meet the contract specifications for plumbness.

Subsequently, in the quarter ended March 31, 2020, the Company executed a separate five-year warranty

agreement with the customer for one of the wells that did not meet plumbness.

Under the terms of the agreement, if the lack of plumbness is determined to be the cause of a pump failure within the warranty period, the Company would be obligated to replace the pump at no cost to the customer.

If the Company is unable to replace the pump using industry-standard methods, or if there are two or more pump failures attributable to lack of plumbness within the five-year warranty period, the Company would be obligated to drill a new well at no cost to the customer.

Negotiations with the customer are currently ongoing for the other well that the customer claims did not meet plumbness despite the fact that the independent consulting engineer for the job concluded that the most recent plumbness test, completed after the well was cased with casing cemented into place as per the contract, showed that the well meets the plumbness specifications of the contract.

Management believes the degrees of deviation for both wells are not impactful to the performance of the submersible pumps that will be installed in those wells.

Accordingly, no accruals have been recorded as of September 30, 2021 as there is no probable or estimable contingent liability.

In July 2020, the Staff of the Commission circulated a draft of a proposed recommendation to the Commission under which the Company, the water utility, the water utility's independent hydrologist firm and the owner of the land on which the two aforementioned water wells were drilled would be assessed penalty fines because each of the wells were calculated to have been drilled beyond the depth permitted by the permit.

The wells were drilled to a depth to penetrate certain layers of impermeable rock necessary to access the aquifer at the instructions and on the advice of the hydrologist hired by the owner of the well.

The Company’s share of the proposed penalties and fines was originally calculated to approximately $ 1,200,000 .

Subsequently, the Staff of the Commission acknowledged that one well had not been drilled to a depth beyond its permitted depth and the fines on that well were eliminated.

Additionally, the fines applicable to the depth of the second well were dropped in lieu of the parties entering into an agreement to perform a water quality study and repurpose a current well into a monitoring well.

Accordingly, the Company recorded a contingent liability of approximately $ 300,000 at September 30, 2020 and no subsequent revision to the accrual has been recorded as of September 30, 2021.

In the quarter 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 an arrangement where Barnwell will provide for centralizers, armored cabling and a pump installation and removal test to confirm that plumbness is satisfactory.

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, armored cabling and the pump installation and removal test have been accrued, no accrual has been recorded as of September 30, 2022 for any further costs related to this contract as there is no related probable or estimable contingent liability.

Other Matters

3 unchanged sentences

These fees are included in general and administrative expenses.

Barnwell is obligated to pay its external real estate legal counsel 1.2 %, net of non-controlling interests' share, of all Increment II payments received by Kaupulehu Developments for services provided by its external real estate legal counsel in the negotiation and closing of the Increment II transaction.

by its external real estate legal counsel in the negotiation and closing of the Increment II transaction.

These fees are included in general and administrative expenses.

11 unchanged sentences

Other current liabilities 1,190,000 ( 796,000 )

(Decrease) increase from changes in current assets and liabilities $ ( 2,151,000 ) $ 448,000

Decrease from changes in current assets and liabilities $ ( 1,027,000 ) $ ( 2,151,000 )

Supplemental disclosure of cash flow information:

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Supplemental disclosure of non-cash investing activities:

Canadian income tax withholding on proceeds from the sale of oil and natural gas properties $ 598,000 $ —

Canadian income tax withheld on proceeds from the sale of oil and natural gas properties $ — $ 598,000

Capital expenditure accruals related to oil and natural gas acquisition and development increased $ 882,000 and $ 346,000 during the years ended September 30, 2022 and 2021, respectively.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $ 811,000 during the year ended September 30, 2021 and decreased $ 52,000 during the year ended September 30, 2020.

Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $ 2,703,000 and $ 811,000 during the years ended September 30, 2022 and 2021, respectively.

RELATED PARTY TRANSACTIONS

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The percentage of sales payments are part of transactions which took place in 2004 and 2006 where Kaupulehu Developments sold its leasehold interests in Increment I and Increment II to KD I's and KD II's predecessors in interest, respectively, which was prior to Barnwell’s affiliation with KD I and KD II which commenced on November 27, 2013, the acquisition date of our ownership interest in the Kukio Resort Land Development Partnerships.

Changes to the arrangement above, effective March 7, 2019, are discussed in Note 4.

During the year ended September 30, 2021, Barnwell received $ 1,738,000 in percentage of sales payments from KD I from the sale of eight lots within Phase II of Increment I.

During the year ended September 30, 2020, Barnwell received $ 325,000 in percentage of sales payments from KD I from the sale of two lots within Phase II of Increment I.

O'Farrell, a member of the Board of Directors of the Company effective July 12, 2021, is the sole member of Four Pines Operating LLC which owns a 25 % interest in Gros Ventre.

In February 2021, Gros Ventre and BOK, a wholly-owned subsidiary of Barnwell, entered into the Agreement of Teton Barnwell, an entity formed for the purpose of directly investing in oil and natural gas exploration and development in Oklahoma.

Under the terms of the Agreement, Gros Ventre makes no capital contributions and receives 2 % of the profits of Teton Barnwell.

to the arrangement above, effective March 7, 2019, are discussed in Note 3.

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 lots within Increment I.

During the year ended September 30, 2021, Barnwell received $ 1,738,000 in percentage of sales payments from KD I from the sale of eight lots within Increment I.

O'Farrell, formerly a member of the Board of Directors of the Company through March 7, 2022, is the sole member of Four Pines Operating LLC which owns a 25 % interest in Gros Ventre.

In February 2021, Gros Ventre and BOK, a wholly-owned subsidiary of Barnwell, entered into the Teton Operating Agreement of Teton Barnwell, an entity formed for the purpose of directly investing in oil and natural gas exploration and development in Oklahoma.

Under the terms of the Teton Operating Agreement, Gros Ventre makes no capital contributions and receives 2 % of the profits of Teton Barnwell.

Additionally, as the manager of Teton Barnwell, Gros Ventre is paid an annual asset management fee equal to 1 % of the cumulative capital contributions made to Teton Barnwell as compensation for its management services.

SUBSEQUENT EVENTS

Gain on Sale of Drilling Rig

At September 30, 2022, the legal title for the drilling rig had not yet transferred to the buyer and therefore, the Company did not record a sale during the year ended September 30, 2022.

The proceeds received from the buyer was recognized as a deposit and recorded in “Other Current Liabilities” on the Company's Consolidated Balance Sheet at September 30, 2022.

No amount was recorded as assets held for sale at September 30, 2022 as the drilling rig was fully depreciated and therefore had a net book value of zero.

The Tax Benefits Preservation Plan

On October 17, 2022, the Board of Directors of the Company adopted a Tax Benefits Preservation Plan (the “Tax Plan”) designed to protect the availability of the Company’s existing net operating loss carryforwards and certain other tax attributes (collectively, the “Tax Benefits”).

The Company has generated substantial Tax Benefits, which could potentially be used in certain circumstances to reduce its future income tax obligations.

Utilization of these NOLs and other Tax Benefits depends on many factors, including the Company’s future taxable income.

Additionally, the Company’s ability to use its Tax Benefits would be substantially limited if it were to experience an “ownership change,” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”).

In general, a corporation would experience an ownership change if the percentage of the corporation’s stock owned by one or more “5% stockholders,” as defined under Section 382, were to increase by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period (or, if a shorter period, since the Company’s last ownership change).

The purpose of the Tax Plan is to reduce the likelihood that the Company will experience an ownership change under Section 382, which would limit the Company’s future use of its Tax Benefits and, in turn, significantly impair the value of such Tax Benefits.

Absent the adoption of the Tax Plan, the Company would be at a greater risk of experiencing an ownership change under Section 382 in the future as a result of certain changes in its investor base and subsequent shifts in its stock ownership that cannot be predicted or controlled.

If the Company were to undergo an ownership change, limitations would be placed on the Company’s ability to utilize the Tax Benefits in future years in which it has taxable income, and the Company would pay more taxes than if it were able to utilize the Tax Benefits fully.

This could result in a negative impact on the Company’s financial position, results of operations, and cash flows.

The Tax Plan is designed to preserve the Tax Benefits by reducing the risk of an ownership change under Section 382.

The Tax Plan adopted by the Board of Directors is similar to plans adopted by other publicly held companies with substantial Tax Benefits and has a limited duration of three years.

The Tax Plan is not designed to prevent any action that the Board of Directors determines to be in the best interest of the Company and its stockholders.

To implement the Tax Plan, the Board of Directors declared a dividend of one right (a “Right”) for each outstanding share of the Company's common stock.

The Rights will be issued to stockholders of record at the close of business on October 27, 2022 pursuant to the Tax Plan.

The Rights will be exercisable if a person or group of persons acquires 4.95% or more of the Company’s common stock.

The Rights will also be exercisable if a person or group of persons that already owns 4.95% or more of the Company’s common stock acquires an additional share other than as a result of a dividend or a stock split.

Existing stockholders that beneficially own in excess of 4.95% of the Company’s common stock will be “grandfathered in” at their current ownership level.

If the Rights become exercisable, all holders of Rights, other than the person or group of persons triggering the Rights, will be entitled to purchase shares of the Company’s common stock at a 50% discount.

Rights held by the person or group of persons triggering the Rights will become void and will not be exercisable.

The Tax Plan also includes an exchange option.

At any time after any person or group of persons acquires 4.95% or more of the Company’s common stock, but less than 50% or more of the outstanding shares of the Company’s common stock, the Board of Directors, at its option, may exchange the Rights (other than Rights owned by such person or group of persons which will have become void), in whole or in part, at an exchange ratio of three shares of the Company’s common stock per outstanding Right (subject to adjustment).

The Rights will trade with the Company’s common stock and will expire at the close of business on October 17, 2025.

The Rights will expire under other circumstances as described in the Tax Plan, including on the date set by the Board of Directors following a determination that the Tax Plan is no longer necessary or desirable for the preservation of the Tax Benefits or no significant Tax Benefits are available to be carried forward or are otherwise available.

The Board of Directors may terminate the Tax Plan prior to the time the Rights are triggered or may redeem the Rights prior to the Distribution Date, as defined in the Tax Plan.

Kukio Resort Land Development Partnerships and Sale of Interest in Leasehold Land

Subsequent to September 30, 2021, Kaupulehu Developments received percentage of sales payments totaling $ 600,000 from the sale of three lots within Phase II of Increment I.

Financial results from the receipt of these payments will be reflected in Barnwell's quarter ending December 31, 2021.

Additionally, subsequent to September 30, 2021, Barnwell received net cash distributions in the amount of $ 1,075,000 from the Kukio Resort Land Development Partnerships.

Financial results of this distribution will be reflected in Barnwell's quarter ending December 31, 2021.

Contract Segment Drilling Rig and Equipment

Subsequent to September 30, 2021, the Company sold a contract segment drilling rig and related ancillary equipment for proceeds of $ 687,000 , net of related costs, which is equivalent to its net carrying value at September 30, 2021.

Financial results from this sale will be reflected in Barnwell's quarter ending December 31, 2021.

In November 2022, Kaupulehu Developments received a percentage of sales payment of $ 265,000 from the sale of one lot within Increment I.

Financial results from the receipt of this payment will be reflected in Barnwell's first quarter of fiscal 2023 ending December 31, 2022.

Additionally, in November 2022, Barnwell received a net cash distribution in the amount of $ 478,000 from the Kukio Resort Land Development Partnerships.

Financial results from this distribution will be reflected in Barnwell's first quarter of fiscal 2023 ending December 31, 2022.

Oil and Natural Gas Investment

In December 2022, the Company, through a new wholly-owned subsidiary named Barnwell Texas, LLC, entered into agreements with an independent third party whereby the Company will now own a 22.3 % non-operated working interest in oil and natural gas leasehold acreage and a 15.4 % non-operated working interest in the planned drilling of two oil wells in the Permian Basin in Texas.

The Company paid $ 5,099,000 to the independent third party under these agreements.

In addition, the Company is obligated to pay a broker’s fee of 5 % of the capital invested under this arrangement to Four Pines Exploration LLC - Exploration - Series 1 (“Four Pines”).

Four Pines is controlled by Mr.

Colin O’Farrell who is an affiliate of Teton Barnwell (see Note 19 for additional details).

This transaction will be reflected in Barnwell's first quarter of fiscal 2023 ending December 31, 2022.

Cash Dividend

In December 2022, the Company's Board of Directors declared a cash dividend of $ 0.015 per share payable on January 11, 2023 to stockholders of record on December 27, 2022.

SUMMARY OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

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SUPPLEMENTARY OIL AND NATURAL GAS INFORMATION (UNAUDITED)

The following tables summarize information relative to Barnwell’s oil and natural gas operations, which are conducted in Canada and in the U.S state of Oklahoma.

The following tables summarize information relative to Barnwell’s oil and natural gas operations, which are conducted in Canada and in the U.S.

state of Oklahoma.

Proved reserves are the estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

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(A) Oil and Natural Gas Reserves

The following table summarizes changes in the estimates of Barnwell’s net interests in total proved reserves of oil and natural gas liquids and natural gas, which are all in Canada.

Proved oil, natural gas liquids and natural gas reserves located in the U.S.

state of Oklahoma are not significant and are therefore not included in the table below.

The following tables summarizes changes in the estimates of Barnwell’s net interests in total proved reserves of oil and natural gas liquids and natural gas, which are located in Canada and the U.S.

state of Oklahoma.

Proved oil, natural gas liquids and natural gas reserves located in the U.S state of Oklahoma were not significant in fiscal 2021 and was therefore not included in the tables below.

All of the information regarding Canadian reserves in this Form 10-K is derived from the report of our independent petroleum reserve engineers, InSite, and is included as an Exhibit to this Form 10-K.

All of the information regarding U.S.

reserves in this Form 10-K is derived from the report of our independent petroleum reserve engineers, Ryder Scott, and is included as an Exhibit to this Form 10-K.

The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and natural gas properties.

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Proved developed oil and natural gas reserves are proved reserves that can be expected to be recovered through existing wells and equipment in place and under operating methods being utilized at the time the estimates were made.

Canada United States Total

Proved reserves:

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Revisions of previous estimates 154,000 — 154,000

Extensions, discoveries and other additions 285,000 132,000 417,000

Acquisitions of reserves 99,000 — 99,000

Less production ( 188,000 ) ( 42,000 ) ( 230,000 )

Proved Reserves, September 30, 2022 990,000 90,000 1,080,000

Proved Developed Reserves, September 30, 2022 956,000 90,000 1,046,000

Proved Undeveloped Reserves, September 30, 2022 34,000 — 34,000

Canada United States Total

Proved reserves:

Balance at September 30, 2020 2,310,000 — 2,310,000

Revisions of previous estimates 1,345,000 — 1,345,000

Acquisitions of reserves 289,000 — 289,000

Less sales of reserves ( 341,000 ) — ( 341,000 )

Less production ( 690,000 ) — ( 690,000 )

Balance at September 30, 2021 2,913,000 — 2,913,000

Revisions of previous estimates 968,000 — 968,000

Extensions, discoveries and other additions 1,200,000 658,000 1,858,000

Acquisitions of reserves 223,000 — 223,000

Less sales of reserves ( 13,000 ) — ( 13,000 )

Less production ( 772,000 ) ( 192,000 ) ( 964,000 )

Proved Reserves, September 30, 2022 4,519,000 466,000 4,985,000

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Proved Undeveloped Reserves, September 30, 2022 128,000 — 128,000

Total Equivalent Reserves

Canada United States Total

Proved reserves:

Balance at September 30, 2020 933,000 — 933,000

Revisions of previous estimates 523,000 — 523,000

Acquisitions of reserves 130,000 — 130,000

Less sales of reserves ( 156,000 ) — ( 156,000 )

Less production ( 288,000 ) — ( 288,000 )

Balance at September 30, 2021 1,142,000 — 1,142,000

Revisions of previous estimates 321,000 — 321,000

Extensions, discoveries and other additions 492,000 245,000 737,000

Acquisitions of reserves 137,000 — 137,000

Less sales of reserves ( 2,000 ) — ( 2,000 )

Less production ( 321,000 ) ( 75,000 ) ( 396,000 )

Proved Reserves, September 30, 2022 1,769,000 170,000 1,939,000

Proved Developed Reserves, September 30, 2022 1,713,000 170,000 1,883,000

Proved Undeveloped Reserves, September 30, 2022 56,000 — 56,000

(B) Capitalized Costs Relating to Oil and Natural Gas Producing Activities

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Total $ 13,876,000 $ ( 121,000 ) $ 13,755,000

Year ended September 30, 2020

September 30, 2021

Canada United States Total

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Unproved — — —

Exploration costs 255,000 — 255,000

Development costs 563,000 1,108,000 1,671,000

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Depletion ( 2,217,000 ) ( 389,000 ) ( 2,606,000 )

Reduction of carrying value of oil and natural gas properties ( 630,000 ) — ( 630,000 )

Pre-tax results of operations (1)

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Estimated income tax expense (2)

— 107,000 107,000

Results of operations (1)

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Moreover, the projections should not be construed as realistic estimates of future cash flows, nor should the standardized measure be viewed as representing current value.

Additionally, proved oil, natural gas and natural gas liquids reserves located in the United States are not significant and are therefore not included in the tables below.

Additionally, proved oil, natural gas liquids and natural gas reserves located in the U.S.

were not significant in fiscal 2021 and was therefore not included in the tables below.

The estimated future cash flows at September 30, 2022 and 2021 were based on average sales prices in effect on the first day of the month for the preceding twelve month period in accordance with SEC Release No.

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The future income tax expenses were computed by applying statutory income tax rates in existence at September 30, 2022 and 2021 to the future pre-tax net cash flows relating to proved reserves, net of the tax basis of the properties involved.

Material revisions to reserve estimates may occur in the future, development and production of the oil and natural gas reserves may not occur in the periods assumed and actual prices realized and actual

costs incurred are expected to vary significantly from those used.

Management does not rely upon this information in making investment and operating decisions;

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Standardized Measure of Discounted Future Net Cash Flows

September 30,

Year ended September 30, 2022

Canada United States Total

Future cash inflows $ 93,658,000 $ 6,676,000 $ 100,334,000

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Standardized measure of discounted future net cash flows $ 24,090,000 $ 3,788,000 $ 27,878,000

Year ended September 30, 2021

Canada United States Total

Future cash inflows $ 36,130,000 $ — $ 36,130,000

Future production costs ( 25,323,000 ) — ( 25,323,000 )

Future development costs ( 240,000 ) — ( 240,000 )

Future income tax expenses ( 995,000 ) — ( 995,000 )

Future net cash flows excluding abandonment, decommissioning and reclamation 9,572,000 — 9,572,000

Future abandonment, decommissioning and reclamation ( 14,525,000 ) — ( 14,525,000 )

Future net cash flows ( 4,953,000 ) — ( 4,953,000 )

10% annual discount for timing of cash flows 7,598,000 — 7,598,000

Standardized measure of discounted future net cash flows $ 2,645,000 $ — $ 2,645,000

Changes in the Standardized Measure of Discounted Future Net Cash Flows

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Net changes in prices and production costs, net of royalties and wellhead taxes 27,828,000 5,702,000

Extensions and discoveries 8,889,000 —

Net change due to purchases and sales of minerals in place 2,451,000 ( 882,000 )

Previously estimated development costs incurred — 1,305,000

Changes in future development costs — 7,773,000

Revisions of previous quantity estimates 4,270,000 4,217,000

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data