What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-14 · 113 added, 90 removed, 170 unchanged (54% of the section changed)

14 unchanged sentences

Management has determined that our most critical accounting policies and estimates are those related to the full-cost ceiling calculation and depletion of our oil and natural gas properties, the estimation of our contract drilling segment's revenues and expenses, and the calculation of our income taxes, all of which are discussed in our 2023 Annual Report.

There have been no significant changes to these critical accounting policies and estimates during the three and six months ended March 31, 2024.

There have been no significant changes to these critical accounting policies and estimates during the three and nine months ended June 30, 2024.

We continue to monitor our accounting policies to ensure proper application of current rules and regulations.

22 unchanged sentences

Increment I is an area zoned for approximately 80 single-family lots.

During the three months ended March 31, 2024, the last two remaining single-family lots in Increment I were sold.

In the quarter ended March 31, 2024, the last two remaining single-family lots in Increment I were sold.

• The right to receive 15% of the distributions of KD II, the cost of which is to be solely borne by KDK out of its 55% ownership interest in KD II, plus a priority payout of 10% of KDK's cumulative net profits derived from Increment II sales subsequent to Phase 2A, up to a maximum of $3,000,000.

11 unchanged sentences

The Kukio Resort Land Development Partnerships have remaining Increment I obligations to complete project amenities, infrastructure, beautification, and restoration of certain areas and therefore has yet to fully recognize its deferred profit on the Increment I project as a whole.

The Increment I deferred profit at March 31, 2024 for the Kukio Resort Land Development Partnerships as a whole was approximately $4,500,000;

The Increment I deferred profit at June 30, 2024 for the Kukio Resort Land Development Partnerships as a whole was approximately $4,500,000;

the recognition of which is dependent upon the completion of the Increment I obligations.

11 unchanged sentences

Results of Operations

The net loss attributable to Barnwell for the three months ended March 31, 2024 totaled $1,772,000, a $535,000 decrease in operating results from net loss of $1,237,000 for the three months ended March 31, 2023.

The following factors affected the results of operations for the three months ended March 31, 2024 as compared to the prior year period:

• A $1,906,000 decrease in oil and natural gas segment operating results, before income taxes, primarily attributable to a $1,677,000 non-cash ceiling test impairment in the current year period primarily due to lower 12-month rolling average first-day-of-the-month prices, whereas there was no such ceiling test impairment in the prior year period;

• A $424,000 decrease in contract drilling segment operating results, before income taxes, due to an increase in estimated costs resulting from labor cost increases and operational issues encountered on a job;

• Equity in income from affiliates increased $1,071,000 and land investment segment operating results, before non-controlling interests’ share of such profits, increased $500,000 due to the Kukio Resort Land Development Partnerships' sale of two lots in the current year period, whereas there were no lots sold in the prior year period;

• General and administrative expenses decreased $669,000 primarily due to decreases in stockholders costs and professional fees in the current year period as compared to the same period in the prior year.

The net loss attributable to Barnwell for the six months ended March 31, 2024 totaled $2,436,000, a $2,288,000 decrease in operating results from a net loss of $148,000 for the six months ended March 31, 2023.

The following factors affected the results of operations for the six months ended March 31, 2024 as compared to the prior year period:

The net loss attributable to Barnwell for the three months ended June 30, 2024 totaled $1,246,000, a $529,000 decrease in operating results from a net loss of $717,000 for the three months ended June 30, 2023.

The following factors affected the results of operations for the three months ended June 30, 2024 as compared to the prior year period:

• A $599,000 non-cash ceiling test impairment to our oil and natural gas properties in the current year period, whereas there was no such ceiling test impairment in the prior year period;

• A $104,000 decrease in contract drilling segment operating results, before income taxes, primarily resulting from decreased pump installation activity in the current year period as compared to the prior year period;

• A $104,000 increase in general and administrative expenses primarily due to an increase in compensation costs, partially offset by a decrease in professional fees in the current year period as compared to the same period in the prior year;

• A $182,000 increase in negative impacts due to a $61,000 foreign currency loss recorded in the current year period as compared to a $121,000 gain recorded in the prior year period due to the effects of foreign currency exchange rate changes on intercompany loans and advances as a result of changes in the U.S.

dollar against the Canadian dollar;

• Partially offsetting these decreases was a $772,000 decrease in oil and natural gas operating expenses in the current year period primarily due to decreases in repairs, electricity and chemical costs and also, due to optimization as a result of certain capital expenditures made earlier in the year as compared to the prior year period.

The net loss attributable to Barnwell for the nine months ended June 30, 2024 totaled $3,682,000, a $2,817,000 decrease in operating results from a net loss of $865,000 for the nine months ended June 30, 2023.

The following factors affected the results of operations for the nine months ended June 30, 2024 as compared to the prior year period:

• A $2,972,000 decrease in oil and natural gas segment operating results, before income taxes, primarily attributable to a $2,276,000 non-cash ceiling test impairment in the current year period and an increase in oil and natural gas depletion in the current year period as compared to the same period in the prior year;

• A $700,000 decrease in contract drilling segment operating results, before income taxes, due to an increase in estimated costs resulting from labor cost increases and operational issues encountered on jobs;

• A $804,000 decrease in contract drilling segment operating results, before income taxes, primarily resulting from decreased activity and a decrease in revenue and costs recognized from material deliveries and installations as compared to the same period in the prior year;

• Equity in income from affiliates increased $533,000 and land investment segment operating results, before non-controlling interests’ share of such profits, increased $235,000 due to the Kukio Resort Land Development Partnerships' sale of two lots in the current year period, whereas there was one lot sold in the prior year period;

7 unchanged sentences

The average exchange rate of the Canadian dollar to the U.S.

dollar remained unchanged in the three and six months ended March 31, 2024, respectively, as compared to the same periods in the prior year.

dollar decreased 2% and 1% in the three and nine months ended June 30, 2024, respectively, as compared to the same periods in the prior year.

The exchange rate of the Canadian dollar to the U.S.

dollar also remained unchanged at March 31, 2024, as compared to September 30, 2023.

dollar decreased 1% at June 30, 2024, as compared to September 30, 2023.

Accordingly, the assets, liabilities, stockholders’ equity and revenues and expenses of Barnwell’s subsidiaries operating in Canada have been adjusted to reflect the change in the exchange rates.

Other comprehensive income and losses are not included in net earnings and net loss.

Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for the three months ended March 31, 2024 was $22,000, a $22,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of nil for the same period in the prior year.

Other comprehensive income due to foreign currency translation adjustments, net of taxes, for the six months ended March 31, 2024 was $8,000, a $6,000 change from other comprehensive income due to foreign currency translation adjustments, net of taxes, of $2,000 for the same period in the prior year.

There were no taxes on other comprehensive income (loss) due to foreign currency translation adjustments in the three and six months ended March 31, 2024 and 2023 due to a full valuation allowance on the related deferred tax asset.

Other comprehensive income due to foreign currency translation adjustments, net of taxes, for the three months ended June 30, 2024 was $12,000, a $3,000 change from other comprehensive income due to foreign currency translation adjustments, net of taxes, of $15,000 for the same period in the prior year.

Other comprehensive income due to foreign currency translation adjustments, net of taxes, for the nine months ended June 30, 2024 was $20,000, a $3,000 change from other comprehensive income due to foreign currency translation adjustments, net of taxes, of $17,000 for the same period in the prior year.

There were no taxes on other comprehensive income due to foreign currency translation adjustments in the three and nine months ended June 30, 2024 and 2023 due to a full valuation allowance on the related deferred tax asset.

Oil and Natural Gas

3 unchanged sentences

Three months ended Increase

March 31, (Decrease)

June 30, (Decrease)

2024 2023 $ %

3 unchanged sentences

Average Price Per Unit

Six months ended Increase

March 31, (Decrease)

Nine months ended Increase

June 30, (Decrease)

2024 2023 $ %

4 unchanged sentences

Three months ended Increase

March 31, (Decrease)

June 30, (Decrease)

2024 2023 Units %

3 unchanged sentences

Net Production

Six months ended Increase

March 31, (Decrease)

Nine months ended Increase

June 30, (Decrease)

2024 2023 Units %

6 unchanged sentences

** Bbl = stock tank barrel equivalent to 42 U.S.

The oil and natural gas segment generated a $1,205,000 operating loss before general and administrative expenses in the three months ended March 31, 2024, a decrease in operating results of $1,906,000 as compared to the $701,000 operating profit before general and administrative expenses generated during the same period of the prior year.

The oil and natural gas segment generated a $324,000 operating loss before general and administrative expenses in the six months ended March 31, 2024, a decrease in operating results of $3,011,000 as compared to the $2,687,000 operating profit before general and administrative expenses generated during the same period of the prior year.

The operating losses for the three and six months ended March 31, 2024 were due to a non-cash ceiling test impairment of $1,677,000.

There was no ceiling test impairment during the three and six months ended March 31, 2023.

The decrease in operating results for both the three and six month periods of the current year were also due to an increase in depletion expense, as further discussed below.

The following table sets forth Barnwell’s oil and natural gas segment operating (loss) profit before general and administrative expenses by geographic location:

The oil and natural gas segment generated a $326,000 operating profit after depletion and impairment of $1,293,000 and $599,000, respectively, and before general and administrative expenses in the three months ended June 30, 2024, an increase in operating results of $39,000 as compared to the $287,000 operating profit before general and administrative expenses generated during the same period of the prior year.

There was no ceiling test impairment during the three months ended June 30, 2023.

The oil and natural gas segment generated a $2,000 operating profit after depletion and impairment of $4,093,000 and $2,276,000, respectively, and before general and administrative expenses in the nine months ended June 30, 2024, a decrease in operating results of $2,972,000 as compared to the $2,974,000 operating profit before general and administrative expenses generated during the same period of the prior year.

There was no ceiling test impairment during the nine months ended June 30, 2023.

The following table sets forth Barnwell’s oil and natural gas segment operating profit before general and administrative expenses by geographic location:

Three months ended

March 31, Six months ended

June 30, Nine months ended

2024 2023 2024 2023

3 unchanged sentences

United States (2)

Total operating (loss) profit $ (1,205,000) $ 701,000 $ (324,000) $ 2,687,000

34,000 358,000 685,000 957,000

(1) The operating losses for Canada for the three and six months ended March 31, 2024 include a non-cash ceiling test impairment of $1,677,000.

Oil and natural gas revenues increased $458,000 (12%) and $362,000 (4%) for the three and six months ended March 31, 2024, respectively, as compared to the same periods in the prior year.

The increases were primarily due to increases in natural gas, oil, and natural gas liquid production from wells drilled in 2023 in the Twining area and from wells in Texas, partially offset by decreases in the prices of all the commodities in the current year periods as compared to the same periods in the prior year.

In the quarter ended December 31, 2023, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 1,055 gross Mcf per day of the Canadian natural gas that it will sell during the period from April 1, 2024 to October 31, 2024 to a fixed index price of $2.55 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices.

This per day volume of natural gas under fixed index price contract is equivalent to approximately 34% of what Canadian natural gas gross production per day was for the three months ended March 31, 2024.

Additionally, the Company also amended the sales price on 225 gross barrels per day of the Canadian oil for sale for the period from January 1, 2024 to June 30, 2024 to a fixed index price of $69.46 per net barrel, with remaining volumes continuing to be sold at spot prices.

This per day volume of oil under this fixed index price contract is equivalent to approximately 37% of what Canadian oil gross production per day was for the three months ended March 31, 2024.

Total operating profit $ 326,000 $ 287,000 $ 2,000 $ 2,974,000

________________________

(1) The operating profit (loss) for Canada for the three and nine months ended June 30, 2024 includes non-cash ceiling test impairments of $487,000 and $2,164,000, respectively.

(2) The operating profit for the United States for the three and nine months ended June 30, 2024 include a non-cash ceiling test impairment of $112,000.

Oil and natural gas revenues decreased $51,000 (1%) for the three months ended June 30, 2024 as compared to the same period in the prior year.

Oil and natural gas revenues increased $311,000 (2%) for the nine months ended June 30, 2024, as compared to the same period in the prior year, primarily due to increases in natural gas, oil, and natural gas liquid production and was partially offset by decreases in the prices of all of those commodities in the current year period as compared to the same period in the prior year.

In the quarter ended December 31, 2023, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 1,055 gross Mcf per day of the Canadian natural gas that it sells during the period from April 1, 2024 to October 31, 2024 to a fixed index price before differentials of $2.55 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices.

This per day volume of natural gas under fixed index price contract is equivalent to approximately 32% of what Canadian natural gas gross production per day was for the nine months ended June 30, 2024.

Additionally, the Company also amended the sales price on 225 gross barrels per day of the Canadian oil for sale for the period from January 1, 2024 to June 30, 2024 to a fixed index price before differentials of $69.46 per net barrel, with remaining volumes continuing to be sold at spot prices.

This per day volume of oil under this fixed index price contract is equivalent to approximately 34% of what Canadian oil gross production per day was for the nine months ended June 30, 2024.

These natural gas and oil contracts were eligible for and elected as normal purchase and normal sales exception contracts and were thus excluded from derivative accounting.

Oil and natural gas operating expenses increased $63,000 (3%) and $410,000 (9%) for the three and six months ended March 31, 2024, respectively, as compared to the same periods in the prior year, primarily due to costs associated with new production from wells in the Twining area and from wells in Texas.

Oil and natural gas segment depletion increased $624,000 (87%) and $1,286,000 (85%) for the three and six months ended March 31, 2024, respectively, as compared to the same periods in the prior year.

In July 2024, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 100 gross barrels per day of the Canadian oil it will sell during the period from August 1, 2024 to December 31, 2024 to a fixed index price before differentials of $79.00 per net barrel, with remaining volumes continuing to be sold at spot prices.

This per day volume of oil under this fixed index price contract is equivalent to approximately 15% of what Canadian oil gross production per day was for the nine months ended June 30, 2024.

Additionally, in July 2024, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 1,055 gross Mcf per day of the Canadian natural gas it will sell during the period from November 1, 2024 to March 31, 2025 to a fixed index price before differentials of $2.64 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices.

This per day volume of natural gas under this fixed index price contract is

equivalent to approximately 32% of what Canadian natural gas gross production per day was for the nine months ended June 30, 2024.

Oil and natural gas operating expenses decreased $772,000 (26%) and $362,000 (5%) for the three and nine months ended June 30, 2024, respectively, as compared to the same periods in the prior year, primarily due to decreases in repairs, electricity and chemical costs in the current year periods.

The decreases in oil and natural gas operating expenses for the three and nine months ended June 30, 2024 were also due to optimization as a result of certain capital expenditures made earlier in the year.

Oil and natural gas segment depletion increased $83,000 (7%) and $1,369,000 (50%) for the three and nine months ended June 30, 2024, respectively, as compared to the same periods in the prior year.

The increases were primarily due to increases in the depletion rate for Canadian properties and also increased production from those properties, both of which were the result of the wells drilled in 2023 and facilities expansion and upgrade costs, all in the Twining area.

The increases were also due to depletion attributable to production in Texas, whereas there was no such depletion in the prior year periods.

The increase for the nine months ended June 30, 2024 was also due to increased depletion from production in Texas, whereas there was only a minor amount of such depletion in the prior year period.

Sale of Interest in Leasehold Land

2 unchanged sentences

Three months ended

March 31, Six months ended

June 30, Nine months ended

2024 2023 2024 2023

3 unchanged sentences

Sale of interest in leasehold land, net of fees paid $ — $ — $ 439,000 $ 233,000

During the three and six months ended March 31, 2024, Barnwell received $500,000 in percentage of sales payments from KD I from the sale of the last two single-family lots within Increment I.

No lots were sold during the three months ended March 31, 2023.

During the six months ended March 31, 2023, Barnwell received $265,000 in percentage of sales payments from KD I from the sale of one single-family lot within Increment I.

No lots were sold during the three months ended June 30, 2024 and 2023.

During the nine months ended June 30, 2024, Barnwell received $500,000 in percentage of sales payments from KD I from the sale of the last two single-family lots within Increment I.

During the nine months ended June 30, 2023, Barnwell received $265,000 in percentage of sales payments from KD I from the sale of one single-family lot within Increment I.

There is an Increment II owned by KD II in which the Company has a 10.8% indirect non-controlling ownership interest.

2 unchanged sentences

Contract Drilling

Contract drilling revenues and contract drilling costs decreased $431,000 (29%) and $14,000 (1%), respectively, for the three months ended March 31, 2024, as compared to the same period in the prior year.

The contract drilling segment generated a $367,000 operating loss before general and administrative expenses in the three months ended March 31, 2024, a decrease in operating results of $424,000 as compared to the $57,000 operating profit generated during the same period of the prior year.

Contract drilling revenues and contract drilling costs decreased $1,386,000 (40%) and $702,000 (22%), respectively, for the six months ended March 31, 2024, as compared to the same period in the prior year.

The contract drilling segment generated a $595,000 operating loss before general and administrative expenses in the six months ended March 31, 2024, a decrease in operating results of $700,000 as compared to the $105,000 operating profit generated during the same period of the prior year.

The decreases in contract drilling revenues and contract drilling costs for the three and six months ended March 31, 2024 as compared to the same periods in the prior year were due to less progress made on jobs due to drilling difficulties and increases in estimated costs to complete as a result of these drilling difficulties, and a decrease in revenues and costs recognized from materials deliveries and installations as compared to the same periods in the prior year.

Also, during the quarter ended March 31, 2024, the Company commenced compensation adjustments for contract drilling segment personnel to decrease

potential attrition of workers and enable the Company to complete its drilling obligations.

These factors resulted in contract drilling expenses decreasing less than the decreases in contract drilling revenues.

Contract drilling revenues decreased $113,000 (10%) and contract drilling costs increased $10,000 (1%) for the three months ended June 30, 2024 as compared to the same period in the prior year.

The contract drilling segment generated a $99,000 operating loss before general and administrative expenses in the three months ended June 30, 2024, a decrease in operating results of $104,000 as compared to the $5,000 operating profit generated during the same period of the prior year.

Contract drilling revenues and contract drilling costs decreased $1,499,000 (33%) and $692,000 (16%), respectively, for the nine months ended June 30, 2024, as compared to the same period in the prior year.

The contract drilling segment generated a $694,000 operating loss before general and administrative expenses in the nine months ended June 30, 2024, a decrease in operating results of $804,000 as compared to the $110,000 operating profit generated during the same period of the prior year.

The decreases in contract drilling revenues and contract drilling costs for the nine months ended June 30, 2024 as compared to the same period in the prior year were primarily due to decreased activity and a decrease in revenues and costs recognized from materials deliveries and installations as compared to the same period in the prior year.

Also, during the current year period, the Company commenced compensation adjustments for contract drilling segment personnel to decrease potential attrition of workers and enable the Company to complete its drilling obligations.

These factors resulted in contract drilling expenses decreasing less than the decrease in contract drilling revenues.

On December 13, 2023, the Company entered into a stock purchase agreement with a construction company for the sale of Water Resources for gross proceeds of $2,000,000, subject to customary post-closing price adjustments and the purchaser’s completion of due diligence.

On December 27, 2023, the stock purchase agreement was terminated by the buyer prior to closing.

The Company continues to investigate strategies regarding Water Resources' future including, but not limited to, other potential opportunities for a sale of its stock or assets to any other interested parties.

If no sale of its stock or assets along with contract backlog can be secured, Water Resources will be wound down after all contracts in backlog are completed and any remaining drilling rigs and equipment will be liquidated.

Management estimates that contracts in backlog will be completed in December 2024 or soon thereafter.

In January 2024, a significant well drilling contract, which previously had an estimated contract drilling revenue backlog of $2,400,000 and which had not yet started, was cancelled by mutual agreement of Water Resources and the counterparty.

The Company continues to investigate strategies regarding Water Resources' future including, but not limited to, other potential opportunities for a sale of its stock or assets.

Management estimates that its three remaining contracts in backlog at June 30, 2024 will be completed in December 2024 or soon thereafter.

General and Administrative Expenses

General and administrative expenses decreased $669,000 (33%) for the three months ended March 31, 2024 as compared to the same period in the prior year.

The decrease was due to decreases of $153,000 in professional fees and $535,000 in stockholders costs primarily attributed to the cooperation and support agreement and associated fees to certain directors in the prior year period as compared to the same period in the current year.

General and administrative expenses decreased $1,514,000 (35%) for the six months ended March 31, 2024 as compared to the same period in the prior year.

The decrease was due to decreases of $80,000 in share-based compensation, $847,000 in professional fees primarily related to legal and consulting services, and $545,000 in stockholders costs primarily attributed to the cooperation and support agreement and associated fees to certain directors in the prior year period as compared to the same period in the current year.

General and administrative expenses increased $104,000 (8%) for the three months ended June 30, 2024 as compared to the same period in the prior year.

General and administrative expenses decreased $1,410,000 (25%) for the nine months ended June 30, 2024 as compared to the same period in the prior year.

The decrease for the nine months ended June 30, 2024 as compared to the prior year period was primarily due to decreases of $924,000 in professional fees primarily related to legal and consulting services and $513,000 in stockholders costs primarily attributed to the cooperation and support agreement and associated fees to certain directors in the prior year period as compared to the same period in the current year.

Depletion, Depreciation, and Amortization

Depletion, depreciation, and amortization increased $631,000 (83%) and $1,302,000 (81%) for the three and six months ended March 31, 2024, respectively, as compared to the same periods in the prior year, primarily due to increases in the depletion rate for Canadian properties and also new production from those properties and due to depletion attributable to production in Texas as discussed in the “Oil and natural gas” section above.

Depletion, depreciation, and amortization increased $65,000 (5%) and $1,367,000 (48%) for the three and nine months ended June 30, 2024, respectively, as compared to the same periods in the prior year, primarily due to increases in the depletion rate for Canadian properties and also new production from those properties and due to depletion attributable to production in Texas as discussed in the “Oil and natural gas” section above.

Impairment of Assets

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

During the three and six months ended March 31, 2024, the Company incurred a non-cash ceiling test impairment for our Canadian oil and natural gas propertries of $1,677,000.

There was no ceiling test impairment during the three and six months ended March 31, 2023.

During the three months ended June 30, 2024, the Company incurred a non-cash ceiling test impairment of $599,000, which included impairments for our U.S.

and Canadian oil and natural gas properties of $112,000 and $487,000, respectively.

The impairment to our U.S.

oil and natural gas properties was due to a decline in the historical 12-month rolling average first-day-of-the-month prices, primarily attributed to decreases in natural gas prices for our Texas property which is sold at the Waha hub.

The impairment to our Canadian oil and natural gas properties was primarily due to capital expenditures for which there is insufficient operating history to assign a determinable increase in future cash flows from reserves at period-end.

There was no ceiling test impairment during the three months ended June 30, 2023.

During the nine months ended June 30, 2024, the Company incurred a non-cash ceiling test impairment of $2,276,000, which included impairments for our U.S.

and Canadian oil and natural gas properties of $112,000 and $2,164,000, respectively.

The impairment to our Canadian oil and natural gas properties during the nine months ended June 30, 2024 was primarily due to a decline in the historical 12-month rolling average first-day-of-the-month prices and due to capital expenditures for which there is insufficient operating history to assign a determinable increase in future cash flows from reserves at period-end.

There was no ceiling test impairment during the nine months ended June 30, 2023.

Changes in the 12-month 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 market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties.

If oil and natural gas prices decline sufficiently from the 12-month historical rolling average first-day-of-the-month prices used in the ceiling test at March 31, 2024, it is more likely than not that the Company will incur further impairment write-downs in future periods in the absence of any offsetting factors that are not currently known or projected.

If oil and natural gas prices decline sufficiently from the 12-month historical rolling average first-day-of-the-month prices used in the ceiling test at June 30, 2024, it is more likely than not that the Company will incur further impairment write-downs in future periods in the absence of any offsetting factors that are not currently known or projected.

Foreign Currency Loss (Gain)

Foreign currency loss was $128,000 and $2,000 during the three and six months ended March 31, 2024, respectively, as compared to foreign currency gain of $2,000 and $80,000 during the three and six months ended March 31, 2023, respectively, due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of changes in the U.S.

Foreign currency loss was $61,000 and $63,000 during the three and nine months ended June 30, 2024, respectively, as compared to foreign currency gain of $121,000 and $201,000 during the three and nine months ended June 30, 2023, respectively, due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of changes in the U.S.

dollar against the Canadian dollar.

2 unchanged sentences

In October 2022, the Company completed the sale of a contract drilling segment drilling rig to an independent third party for proceeds of $551,000, net of related costs.

The drilling rig was fully depreciated and had a net book value of zero and as a result of the sale, the Company recognized a $551,000 gain during the six months ended March 31, 2023.

The drilling rig was fully depreciated and had a net book value of zero and as a result of the sale, the Company recognized a $551,000 gain during the nine months ended June 30, 2023.

Equity in Income of Affiliates

Equity in income of affiliates was $1,071,000 during the three and six months ended March 31, 2024, as compared to equity in income of affiliates of nil and $538,000 during the three and six months ended March 31, 2023, respectively.

Equity in income of affiliates was nil and $1,071,000 during the three and nine months ended June 30, 2024, respectively, as compared to equity in income of affiliates of nil and $538,000 during the three and nine months ended June 30, 2023, respectively.

The increase in partnership income is primarily due to the Kukio Resort Land Development Partnerships' sale of the last two lots in Increment I during the current year period, as compared to one lot sale in the prior year period.

During the six months ended March 31, 2024, Barnwell received cash distributions of $1,071,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $953,000, after distributing $118,000 to non-controlling interests.

During the six months ended March 31, 2023, Barnwell received cash distributions of $538,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $478,000 after distributing $60,000 to non-controlling interests.

During the nine months ended June 30, 2024, Barnwell received cash distributions of $1,071,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $953,000, after distributing $118,000 to non-controlling interests.

During the nine months ended June 30, 2023, Barnwell received cash distributions of $538,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $478,000 after distributing $60,000 to non-controlling interests.

In the quarter ended June 30, 2021, the Company received cumulative distributions from the Kukio Resort Land Development Partnerships in excess of our investment balance and in accordance with applicable accounting guidance, the Company suspended its equity method earnings recognition and the Kukio Resort Land Development Partnerships investment balance was reduced to zero with the distributions received in excess of our investment balance recorded as equity in income of affiliates because the distributions are not refundable by agreement or by law and the Company is not liable for the obligations of or otherwise committed to provide financial support to the Kukio Resort Land Development Partnerships.

The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnerships’ cumulative earnings in excess of distributions during the

suspended period exceeds our share of the Kukio Resort Land Development Partnerships’ 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 six months ended March 31, 2024 was equivalent to the $1,071,000 of distributions received in that period.

Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $225,000 at March 31, 2024 and $708,000 at September 30, 2023.

Barnwell’s effective consolidated income tax rate, after adjusting loss before income taxes for non-controlling interests, was (6)% and (7)% for the three and six months ended March 31, 2024, respectively, as compared to nil and (106)% for the three and six months ended March 31, 2023, respectively.

The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnerships’ cumulative earnings in excess of distributions during the suspended period exceeds our share of the Kukio Resort Land Development Partnerships’ 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 nine months ended June 30, 2024 was equivalent to the $1,071,000 of distributions received in that period.

Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $300,000 at June 30, 2024 and $708,000 at September 30, 2023.

Barnwell’s effective consolidated income tax rate, after adjusting loss before income taxes for non-controlling interests, was (2)% and (5)% for the three and nine months ended June 30, 2024, respectively, as compared to 19% and 9% for the three and nine months ended June 30, 2023, respectively.

Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that the Company is taxed separately in Canada based on Canadian source operations and in the U.S.

based on consolidated operations, and essentially all deferred tax assets, net of relevant offsetting deferred tax liabilities, are not estimated to have a future benefit as tax credits or deductions.

based on consolidated operations, and essentially all deferred tax assets, net of relevant offsetting deferred

tax liabilities, are not estimated to have a future benefit as tax credits or deductions.

The Company operates two subsidiaries in Canada, one of which is a U.S.

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Earnings and losses attributable to non-controlling interests represent the non-controlling interests’ share of revenues and expenses related to the various partnerships and joint ventures in which Barnwell has controlling interests and consolidates.

Net earnings attributable to non-controlling interests totaled $222,000 and $224,000 for the three and six months ended March 31, 2024, respectively, as compared to net earnings attributable to non-controlling interests of $2,000 and $122,000 for the same periods in the prior year.

The changes of $220,000 (11,000%) and $102,000 ( 84%) for the three and six months, respectively, are primarily due to increases in the amount of equity in income of affiliates and percentage of sales revenues received in the current year periods as compared to the same periods in the prior year.

Net earnings attributable to non-controlling interests totaled $12,000 and $236,000 for the three and nine months ended June 30, 2024, respectively, as compared to net earnings attributable to non-controlling interests of $2,000 and $124,000 for the same periods in the prior year.

The changes of $10,000 (500%) and $112,000 ( 90%) for the three and nine months, respectively, are primarily due to increases in the amount of equity in income of affiliates and percentage of sales revenues received in the current year periods as compared to the same periods in the prior year.

Liquidity and Capital Resources

At March 31, 2024, Barnwell had $3,332,000 in working capital.

Barnwell’s primary sources of liquidity are cash on hand and cash flow generated by our oil and natural gas operations as minimal, if any, cash flow is expected from our land investment segment.

The Company has generated a significant amount of cash inflows from its land investment segment, however, the last lots at Increment I were sold during the quarter ended March 31, 2024 and there are no more lots available for sale in Increment I.

At June 30, 2024, Barnwell had $3,292,000 in working capital.

Barnwell’s primary sources of liquidity are cash on hand and cash flow generated by our oil and natural gas operations, as cash flow from our land investment segment, if any, is expected to be minimal.

The Company has generated a significant amount of cash inflows from its land investment segment, however, the last lots at Increment I were sold in the quarter ended March 31, 2024 and there are no more lots available for sale in Increment I.

In addition, no definitive development plans have been made by the developer of Increment II as of the date of this report and thus future cash inflows from the land investment segment are uncertain.

4 unchanged sentences

While management estimates that it is more likely than not that there is sufficient cash on hand, contract drilling segment asset sales and cash flows from oil and natural gas segment operations to continue as a going concern for the twelve months from the filing of this report, the aforementioned factors will influence the Company’s liquidity beyond that twelve month period.

Cash flows provided by operations totaled $2,262,000 for the six months ended March 31, 2024, as compared to cash flows provided by operations of $734,000 for the same period in the prior year.

Cash flows provided by operations totaled $3,538,000 for the nine months ended June 30, 2024, as compared to cash flows provided by operations of $157,000 for the same period in the prior year.

This $3,381,000 change in operating cash flows was due to an increase in distributions of income from the Kukio Resort Land Development Partnerships and a decrease in general and administrative costs in the current year period as compared to the prior year period, partially offset by lower operating results for the contract drilling segment in the current year period as compared to the same period in the prior year.

Cash flows used in investing activities totaled $1,186,000 during the six months ended March 31, 2024, as compared to cash flows used in investing activities of $7,370,000 during the same period of the prior year.

This $6,184,000 change in investing cash flows was primarily due to a decrease of $6,163,000 in cash paid for investments in oil and natural gas properties in the current year period as compared to the same period in the prior year.

Cash flows used in financing activities totaled $223,000 for the six months ended March 31, 2024, as compared to cash flows used in financing activities of $423,000 for the six months ended March 31, 2023.

The change was also due to fluctuations in working capital in the current year period as compared to the prior year period.

Cash flows used in investing activities totaled $1,731,000 during the nine months ended June 30, 2024, as compared to cash flows used in investing activities of $9,875,000 during the same period of the prior year.

This $8,144,000 change in investing cash flows was primarily due to a $451,000 increase in proceeds from the sale of oil and natural gas properties in the current year period as compared to the prior year period and a decrease of $7,588,000 in cash paid for investments in oil and natural gas properties in the current year period as compared to the same period in the prior year.

Cash flows used in financing activities totaled $226,000 for the nine months ended June 30, 2024, as compared to cash flows used in financing activities of $577,000 for the nine months ended June 30, 2023.

The $351,000 change in financing cash flows was due to a decrease of $499,000 in payment of dividends, partially offset by an increase of $98,000 in distributions to non-controlling interests in the current year period as compared to the same period in the prior year.

Cash Dividends

No dividends were declared or paid during the six months ended March 31, 2024.

No dividends were declared or paid during the nine months ended June 30, 2024.

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

In February 2023, the Company's Board of Directors declared a cash dividend of $0.015 per share that was paid on March 13, 2023 to stockholders of record on February 23, 2023.

In May 2023, the Company's Board of Directors declared a cash dividend of $0.015 per share that was paid on June 12, 2023 to stockholders of record on May 25, 2023.

Oil and Natural Gas Capital Expenditures

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and excluding acquisitions and additions and revisions to estimated asset retirement obligations, totaled $560,000 and $1,055,000 for the three and six months ended March 31, 2024, respectively, as compared to $1,752,000 and $7,680,000 for the same periods in the prior year.

The oil and natural gas capital expenditures for the six months ended March 31, 2024 were primarily for completion, improvement and equipping costs in the Twining area of Alberta, Canada.

In December 2022, Barnwell Texas, LLC (“Barnwell Texas”), a new wholly-owned subsidiary of the Company, entered into a purchase and sale agreement with an independent third party whereby Barnwell Texas acquired a 22.3% non-operated working interest in oil and natural gas leasehold acreage in the Permian Basin in Texas for cash consideration of $806,000.

Additionally, in connection with the purchase of such leasehold interests, Barnwell Texas acquired a 15.4% non-operated working interest in two oil wells in the Wolfcamp Formation in Loving and Ward Counties, Texas and had paid $4,293,000 for its share of the costs to drill, complete, and equip the wells in the six months ended March 31, 2024.

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and excluding acquisitions and additions and revisions to estimated asset retirement obligations, totaled $751,000 and $1,806,000 for the three and nine months ended June 30, 2024, respectively, as compared to $2,336,000 and $10,016,000 for the same periods in the prior year.

The oil and natural gas capital expenditures for the nine months ended June 30, 2024 were primarily for completion, improvement and equipping costs in the Twining area of Alberta, Canada.

In December 2022, Barnwell Texas, LLC (“Barnwell Texas”), a wholly-owned subsidiary of the Company, entered into a purchase and sale agreement with an independent third party whereby Barnwell

Texas acquired a 22.3% non-operated working interest in oil and natural gas leasehold acreage in the Permian Basin in Texas for cash consideration of $806,000.

Additionally, in connection with the purchase of such leasehold interests, Barnwell Texas acquired a 15.4% non-operated working interest in two oil wells in the Wolfcamp Formation in Loving and Ward Counties, Texas and paid $4,293,000 for its share of the costs to drill, complete, and equip the wells in the nine months ended June 30, 2023.

In the quarter ended March 31, 2023, the Company participated in the drilling of three gross (0.9 net) non-operated wells in the Twining area of Alberta, Canada.

Capital expenditures incurred for the drilling of these wells and Twining facilities in the six months ended March 31, 2023 totaled approximately $2,236,000.

Capital expenditures incurred for the drilling of these wells and Twining facilities in the nine months ended June 30, 2023 totaled approximately $4,649,000.

Barnwell estimates that investments in oil and natural gas properties for fiscal 2024 will range from $4,000,000 to $6,000,000.

This estimated amount may increase or decrease as dictated by cash flows and management's assessment of the oil and natural gas environment and prospects.

In July 2024, the Company commenced the drilling of one gross (1.0 net) 100%-owned operated development oil well in the Twining area.

Oil and Natural Gas Property Dispositions

In the quarter ended June 30, 2024, Barnwell entered into and completed a purchase and sale agreement with an independent third party and sold its interests in certain natural gas and oil properties located in the Kaybob area of Alberta, Canada.

The sales price per the agreement was adjusted for customary purchase price adjustments to $448,000 in order to, among other things, reflect an economic effective date of May 1, 2024.

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.

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-Q

Item 2. Management’s Discussion and Analysis