What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-12-17 compared with 2023-12-18 · 170 added, 181 removed, 239 unchanged (59% of the section changed)

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The following discussion is intended to assist in the understanding of the Consolidated Balance Sheets of Barnwell Industries, Inc.

and subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us” or the “Company”) as of September 30, 2023 and 2022, and the related Consolidated Statements of Operations, Comprehensive (Loss) Income, Equity, and Cash Flows for the years ended September 30, 2023 and 2022.

and subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us” or the “Company”) as of September 30, 2024 and 2023, and the related Consolidated Statements of Operations, Comprehensive Loss, Equity, and Cash Flows for the years ended September 30, 2024 and 2023.

This discussion should be read in conjunction with the consolidated financial statements and related Notes to Consolidated Financial Statements included in this report.

Current Outlook

Impact of COVID-19

We face various risks and uncertainties related to public health crises, including the global COVID-19 pandemic, which has disrupted financial markets and significantly impacted worldwide economic activity.

The future impact of the COVID-19 pandemic as well as mandatory and voluntary actions taken to mitigate the public health impact of the pandemic may have a material adverse effect on our financial condition.

The COVID-19 pandemic and social and governmental responses to the pandemic have caused, and may continue to cause, severe economic, market and other disruptions worldwide.

Although the COVID-19 pandemic and related societal and government responses have not, to date, had a material impact on our business or financial results, the extent to which COVID-19 and related actions may, in the future, impact our operations cannot be predicted with any degree of confidence.

As a result, we cannot at this time predict the direct or indirect impact on us of the COVID-19 pandemic, but it could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

Critical Accounting Policies and Estimates

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We use the full cost method of accounting for our oil and natural gas properties under which we are required to conduct quarterly calculations of a “ceiling,” or limitation, on the carrying value of oil and natural gas properties .

The ceiling limitation is the sum of 1) the discounted present value (at 10%), using average first-day-of-the-month prices during the 12-month period ending as of the balance sheet date held constant over the life of the reserves, of Barnwell’s estimated future net cash flows from estimated production of proved oil and natural gas reserves, less estimated future expenditures to be incurred in developing and producing the proved reserves but excluding future cash outflows associated with settling

asset retirement obligations with the exception of those associated with proved undeveloped reserves from wells that are to be drilled in the future;

The ceiling limitation is the sum of 1) the discounted present value (at 10%), using average first-day-of-the-month prices during the 12-month period ending as of the balance sheet date held constant over the life of the reserves (except where prices are defined by contractual arrangements), of Barnwell’s estimated future net cash flows from estimated production of proved oil and natural gas reserves, less estimated future expenditures to be incurred in developing and producing the proved reserves but excluding future cash outflows associated with settling asset retirement obligations with the exception of those associated with proved undeveloped reserves from wells that are to be drilled in the future;

plus 2) the cost of major development projects and unproven properties not subject to depletion, if any;

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If future significant revisions are necessary that reduce previously estimated reserve quantities, such revisions could result in a write-down of oil and natural gas properties.

If reported reserve volumes were revised downward by 5% at the end of fiscal 2023, the ceiling limitation would have decreased approximately $1,329,000 before income taxes, which would not have resulted in a ceiling impairment before income taxes due to sufficient room between the ceiling and the carrying value of oil and natural gas properties at the end of fiscal 2023 of approximately $5,428,000.

If reported reserve volumes were revised downward by 5% at the end of fiscal 2024, the ceiling limitation for Canada would have decreased approximately $906,000 which would not have resulted in a ceiling impairment before income taxes due to sufficient room between the ceiling and the carrying value of Canadian oil and natural gas properties at the end of fiscal 2024 of approximately $4,658,000.

However, an additional $197,000 impairment would be recorded for U.S.

oil and gas properties at the end of fiscal 2024 as there is no room between the ceiling and the carrying value of U.S.

oil and natural gas properties at the end of fiscal 2024.

In addition to the impact of the estimates of proved reserves on the calculation of the ceiling, estimated proved reserves are also a significant component of the quarterly calculation of depletion expense.

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If reported reserve volumes were revised downward by 5% as of the beginning of fiscal 2024, depletion for fiscal 2024 would have increased by approximately $222,000.

month period ending in the reporting period on a constant basis as prescribed by SEC regulations.

While the quantities of proved reserves require substantial judgment, the associated prices of oil, natural gas and natural gas liquids reserves are the average first-day-of-the-month prices during the 12-month period ending in the reporting period on a constant basis as prescribed by SEC regulations.

Additionally, the applicable discount rate that is used to calculate the discounted present value of the reserves is mandated at 10%.

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Through contracts which are normally less than twelve months in duration, Barnwell drills water and water monitoring wells and installs and repairs water pumping systems in Hawaii.

Barnwell recognizes revenue from well drilling or the installation of pumps over time based on total costs incurred on the projects relative to the total expected costs to satisfy the performance obligation as management believes this is an accurate representation of the percentage of completion as control is continuously transferred to the customer.

recognizes revenue from well drilling or the installation of pumps over time based on total costs incurred on the projects relative to the total expected costs to satisfy the performance obligation as management believes this is an accurate representation of the percentage of completion as control is continuously transferred to the customer.

Uninstalled materials, which typically consists of well casing or pumps, are excluded in the costs-to-costs calculation for the duration of the contract as including these costs would result in a distortion of progress towards satisfaction of the performance obligation due to the resulting cumulative catch-up in margin in a single period.

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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 work to be performed, and unexpected construction execution errors, among others.

Many factors and assumptions can and do change during a contract performance obligation period which can

result in a change to contract profitability including unforeseen underground geological conditions (to the extent that contract remedies are unavailable), the availability and costs of skilled contract labor, the performance of major material suppliers, the performance of major subcontractors, unusual weather conditions and unexpected changes in material costs, changes in the scope and nature of work to be performed, and unexpected construction execution errors, among others.

Any revisions to estimated costs to complete the performance obligation from period to period as a result of changes in these factors can materially affect revenue and operating results in the period such revisions are necessary.

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1) acquiring, developing, producing and selling oil and natural gas in Canada and the U.S.

(oil and natural gas segment), 2) investing in land interests in Hawaii (land investment segment), and 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling segment).

(oil and natural gas segment), 2) leasehold land interests in Hawaii (land investment segment), and 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling segment).

Oil and Natural Gas Segment

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Oil and natural gas prices are determined by many factors that are outside of our control.

Market prices for oil and natural gas products are dependent upon factors such as, but not limited to, changes in market supply and demand, which are impacted by overall

economic activity, changes in weather, pipeline capacity constraints, inventory storage levels, and output.

Market prices for oil and natural gas products are dependent upon factors such as, but not limited to, changes in market supply and demand, which are impacted by overall economic activity, changes in weather, pipeline capacity constraints, inventory storage levels, and output.

Oil and natural gas prices are very difficult to predict and fluctuate significantly.

Natural gas prices tend to be higher in the winter than in the summer due to increased demand, although this trend has become less pronounced due to the increased use of natural gas to generate electricity for air conditioning in the summer and increased natural gas storage capacity in North America.

In November 2023, to provide partial protection against the risk of declining natural gas prices during the second half of our fiscal 2024, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on a portion of the natural gas it sells to a fixed price during the period from April 1, 2024 to October 31, 2024.

With these changes, the Company anticipates that during that period approximately 25% of its Canadian natural gas production will be sold at fixed prices while the remaining 75% of such production will continue to be sold at spot prices.

Additionally, in December 2023, the Company amended certain of its Canadian purchase and sales contract to change the sales price on a portion of the oil it sells to a fixed price during the period from January 1, 2024 to June 30, 2024.

With these changes, the Company anticipates that during that period approximately 40% of its Canadian oil production will be sold at fixed prices while the remaining 60% of such production will continue to be sold at spot prices.

Oil and natural gas exploration, development and operating costs generally follow trends in product market prices, thus in times of higher product prices the cost of exploring, developing and operating the oil and natural gas properties will tend to escalate as well.

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• The right to receive percentage of sales payments from KD I resulting from the sale of single-family residential lots by KD I, within Increment I of the Kaupulehu Lot 4A area located in the North Kona District of the island of Hawaii.

Kaupulehu Developments is entitled to receive payments from KD I based on 10% of the gross receipts from KD I’s sales at Increment I.

Increment I is an area zoned for approximately 80 single-family lots, of which two remained to be sold at September 30, 2023.

The developer had consolidated these two remaining lots into one large lot but has since split them back into the original two lots.

However, in the quarter ended March 31, 2024, the last two remaining single-family lots in Increment I were sold and there are no more lots available for sale in Increment I.

Kaupulehu Developments was entitled to receive payments from KD I based on 10% of the gross receipts from KD I’s sales at Increment I.

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

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

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Barnwell also has rights to three single-family residential lots in Phase 2A of Increment II, and four single-family residential lots in phases subsequent to Phase 2A when such lots are developed by KD II, all at no cost to Barnwell.

committed to commence construction of improvements within 90 days of the transfer of the four lots in the phases subsequent to Phase 2A as a condition of the transfer of such lots.

Barnwell is committed to commence construction of improvements within 90 days of the transfer of the four lots in the phases subsequent to Phase 2A as a condition of the transfer of such lots.

Also, in addition to Barnwell's existing obligations to pay professional fees to certain parties based on percentages of its gross receipts, Kaupulehu Developments is also obligated to pay an amount equal to 0.72% and 0.20% of the cumulative net profits of KD II to KD Development, LLC and a pool of various individuals, respectively, all of whom are partners of KKM and are unrelated to Barnwell.

The remaining acreage within Increment II is not yet under development, and there is no assurance that development of such acreage will in fact occur.

No definitive development plans have been made by KDII, the developer of Increment II, as of the date of this report.

No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report.

• An indirect 19.6% non-controlling ownership interest in KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD I and an indirect 10.8% non-controlling ownership interest in KD II through KDK.

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KDK was the developer of Kaupulehu Lot 4A Increments I and II.

The partnerships derive income from the sale of residential parcels, of which two remained to be sold at September 30, 2023, as well as from commissions on real estate sales by the real estate sales office and revenues resulting from the sale of private club memberships.

The partnerships derive income from the sale of residential parcels in Increment I, which is now completely sold, as well as from commissions on real estate resales by the real estate sales office and revenues resulting from the sale of private club memberships, a few of which remain available for sale.

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 September 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.

The Kukio Resort Land Development Partnerships have accrued estimated costs of these obligations of approximately $3,000,000.

The Kukio Resort Land Development Partnerships currently appears to have the ability to fund those obligations but there are no assurances that it can ultimately do so in the future if unforeseen events occur.

The Kukio Resort Land Development Partnerships will recognize the Increment I deferred revenue and costs of sales on a percentage completion basis as the cash outlays to complete the remaining project obligations are made.

The Kukio Resort Land Development Partnerships’ deferred profit and accrued costs to complete are not reflected in Barnwell’s Condensed Consolidated Balance Sheets as we account for our investment in the Kukio Resort Land Development Partnerships under the equity method of accounting.

No percentage of sales payments will be earned by Barnwell on any future recognition of Increment I deferred profit as such payments were already fully earned and received based on cash received by the Kukio Resort Land Development Partnerships as the Increment I lots were sold.

• Approximately 1,000 acres of vacant leasehold land zoned conservation in the Kaupulehu Lot 4C area, which currently has no development potential without both a development agreement with the lessor and zoning reclassification.

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Contract drilling results are highly dependent upon the quantity, dollar value and timing of contracts awarded by governmental and private entities and can fluctuate significantly.

In December 2023, the Company entered into an 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.

The sale is expected to close in the first half of our fiscal 2024.

Business Environment

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Barnwell realized an average price for oil of $66.49 per barrel during the year ended September 30, 2024, a decrease of 5% from $69.77 per barrel realized during the prior year and realized an average price for natural gas of $1.41 per Mcf during the year ended September 30, 2024, a decrease of 47% from $2.64 per Mcf realized during the prior year.

Oil and natural gas prices continue to be volatile over time

and thus, the Company is unable to reasonably predict future prices and the impacts future prices will have on the Company.

Oil and natural gas prices continue to be volatile over time and thus, the Company is unable to reasonably predict future prices and the impacts future prices will have on the Company.

Land Investment Segment

Future revenues from the sale of interest in leasehold land and any future cash distributions from our investment in the Kukio Resort Land Development Partnerships are dependent upon the sale of the remaining two residential lots within Increment I by KD I and potential future development or sale of the remaining portion of Increment II by KD II of Kaupulehu Lot 4A.

The amount and timing of future land investment segment proceeds from percentage of sales payments and cash distributions from the Kukio Resort Land Development Partnerships are highly uncertain and out of our control, and there is no assurance with regards to the amounts of future sales of residential lots within Increments I and II.

Future revenues from the sale of interest in leasehold land and any future cash distributions from our investment in the Kukio Resort Land Development Partnerships are dependent upon the potential future development or sale of the remaining portion of Increment II by KD II of Kaupulehu Lot 4A.

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

No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report.

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Results of Operations

Net loss attributable to Barnwell for fiscal 2023 totaled $961,000, a $6,474,000 decrease from net earnings of $5,513,000 in fiscal 2022.

Net loss attributable to Barnwell for fiscal 2024 totaled $5,565,000, a $4,604,000 increase in net loss from a net loss of $961,000 in fiscal 2023.

The following factors affected the results of operations for the current fiscal year as compared to the prior fiscal year:

• A $5,863,000 decrease in oil and natural gas segment operating results, before income taxes, due to significant decreases in natural gas, oil, and natural gas liquid prices.

Additionally, a decrease in the net production from wells in Oklahoma in the current year period as compared to the same period in the prior year also caused the decrease;

• Equity in income from affiliates decreased $2,642,000 and land investment segment operating results, before non-controlling interests’ share of such profits, decreased $941,000 due to the Kukio Resort Development Partnerships' sale of one lot in the current year period, whereas there were six lot sales in the prior year period;

• General and administrative expenses decreased $1,088,000 primarily due to decreases in share-based compensation, accrued bonus expense, professional fees, and bad debt expense, partially offset by an increase in stockholder costs in the current year period as compared to the same period in the prior year;

• A $551,000 gain recognized in the current year period from the sale of a contract drilling segment drilling rig;

• A $76,000 foreign currency gain recorded in the current year period as compared to a $484,000 foreign currency loss in the prior year period, primarily due to the effects of foreign exchange

rate changes on intercompany loans and advances as a result of the weakening of the U.S.

dollar against the Canadian dollar.

• A $4,958,000 decrease in oil and natural gas segment operating results, before income taxes, primarily attributable to a $2,885,000 non-cash ceiling test impairment in the current year and due to decreases in natural gas, oil, and natural gas prices in the current year period as compared to the same period in the prior year;

• A $599,000 decrease in contract drilling segment operating results, before income taxes, primarily resulting from decreased activity and an increase in drilling difficulties and labor costs as compared to the same period in the prior year;

• A $551,000 gain recognized in the prior year period from the sale of a contract drilling segment drilling rig, whereas there was no such gain in the current year period;

• Results improved as general and administrative expenses decreased $1,358,000 primarily due to decreases in stockholder costs and professional fees in the current year period as compared to the same period in the prior year.

Barnwell conducts operations in the U.S.

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dollar decreased 1% in fiscal 2024, as compared to fiscal 2023 and the exchange rate of the Canadian dollar to the U.S.

dollar increased 1% at September 30, 2023, as compared to September 30, 2022.

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.

dollar remained unchanged at September 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 fiscal 2023 was $2,000, a $38,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $40,000 in fiscal 2022.

Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for fiscal 2024 was nil, a $2,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $2,000 in fiscal 2023.

There were no taxes on other comprehensive loss due to foreign currency translation adjustments in fiscal 2024 and 2023 due to a full valuation allowance on the related deferred tax assets.

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* Natural gas price per unit is net of pipeline charges.

The oil and natural gas segment generated a $4,673,000 operating profit in fiscal 2023 before general and administrative expenses, a decrease in operating results of $5,863,000 as compared to $10,536,000 of operating profit in fiscal 2022.

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

The oil and natural gas segment generated a $285,000 operating loss in fiscal 2024 before general and administrative expenses, a decrease in operating results of $4,958,000 as compared to $4,673,000 of operating profit in fiscal 2023.

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

Year ended September 30,

Operating profit (before general and administrative expenses)

Canada $ 3,171,000 $ 7,869,000

Oklahoma 1,006,000 2,667,000

Texas 496,000 —

Total operating profit $ 4,673,000 $ 10,536,000

Operating (loss) profit (before general and administrative expenses)

$ (440,000) $ 3,171,000

United States (2)

155,000 1,502,000

Total operating (loss) profit $ (285,000) $ 4,673,000

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(1) The operating loss for Canada for the year ended September 30, 2024 includes a non-cash ceiling test impairment of $2,164,000.

(2) The operating profit for the United States for year ended September 30, 2024 includes a non-cash ceiling test impairment of $721,000.

Oil and natural gas revenues decreased $1,980,000 (10%) from $19,376,000 in fiscal 2023 to $17,396,000 in fiscal 2024, primarily due to significant decreases in natural gas, oil, and natural gas liquid prices, which decreased 47%, 5%, and 9%, respectively, as compared to the same period in the prior year.

The decrease was partially offset by 12% and 31% increases in oil and natural gas production, respectively, as compared to the same period in the prior year.

The increase in oil and natural gas production in the current year was due to new wells drilled in the Twining area and from new wells drilled in Texas, partially offset by a decrease in production from the Oklahoma wells.

The two gross (0.3 net) non-operated wells drilled in Texas began producing in late April 2023 and the Company’s share of net production from these wells totaled 12,000 barrels of oil, 12,000 barrels of natural gas liquids, and 121,000 Mcf of natural gas for total revenues of $1,354,000 during the year ended September 30, 2023.

Oil and natural gas operating expenses increased $995,000 (11%) from $9,439,000 in fiscal 2022 to $10,434,000 in fiscal 2023, primarily due to costs associated with new production from wells drilled in the Twining area and from new wells drilled in Texas and an increase in workover costs in the current year period as compared to the same period in the prior year.

The increase was partially offset by a decrease in production from wells in Oklahoma in the current year period as compared to the prior year period.

Oil and natural gas segment depletion increased $1,663,000 (64%) from $2,606,000 in fiscal 2022 to $4,269,000 in fiscal 2023, primarily due to depletion attributable to production in Texas, whereas there was no such depletion in the prior year period, and an increase in the depletion rate for Canadian properties and also new production from those properties, both of which were the result of the drilling of new wells and facilities expansion and upgrade costs, all in the Twining area.

The increase in oil and natural gas depletion was partially offset by a decrease in depletion for Oklahoma properties due to the decrease in production from wells in Oklahoma in the current year period as compared to the prior year period.

Oil prices continue to be volatile over time and thus, the Company is unable to reasonably predict future oil, natural gas and natural gas liquids prices and the impacts future prices will have on the Company.

The decrease was partially offset by 6% and 23% increases in natural gas and natural gas liquid production, respectively, as compared to the same period in the prior year.

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 33% of Canadian natural gas gross production per day for the year ended September 30, 2024.

In July 2024, the Company amended 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 33% of Canadian natural gas gross production per day for the year ended September 30, 2024.

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

In the quarter ended December 31, 2023, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 225 gross barrels per day of the Canadian oil for sale for the period from January 1, 2024 to June 30, 2024 to a fixed index price before differentials of $69.46 per net barrel, with remaining volumes continuing to be sold at spot prices.

This per day volume of oil under this fixed index price contract was equivalent to approximately 35% of Canadian oil gross production per day for the year ended September 30, 2024.

In July 2024, the Company amended the sales price on 100 gross barrels per day of the Canadian oil that it sells 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 16% of Canadian oil gross production per day for the year ended September 30, 2024.

These 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 decreased $585,000 (6%) from $10,434,000 in fiscal 2023 to $9,849,000 in fiscal 2024, primarily due to decreases in repairs, electricity and chemical costs in the current year period as compared to the same period in the prior year and due to optimization as a result of

certain capital expenditures made earlier in the current year.

The decrease in oil and natural gas operating expenses was partially offset by an increase in costs due to higher production and an increase in workovers and maintenance costs in the current year period as compared to the same period in the prior year.

Oil and natural gas segment depletion increased $678,000 (16%) from $4,269,000 in fiscal 2023 to $4,947,000 in fiscal 2024, primarily due to an increase in the depletion rate for Canadian properties and also increased production from those properties, both of which were the result of the wells drilled in fiscal 2023 and late fiscal 2024, and facilities expansion and upgrade costs, all in the Twining area.

The increase in oil and natural gas segment depletion 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

Kaupulehu Developments is entitled to receive a percentage of the gross receipts from the sales of lots and/or residential units in Increment I by KD I.

Kaupulehu Developments was entitled to receive a percentage of the gross receipts from the sales of lots and/or residential units in Increment I by KD I.

The following table summarizes the revenues received from KD I and the amount of fees directly related to such revenues:

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

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

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

During the year ended September 30, 2022, Barnwell received $1,295,000 in percentage of sales payments from KD I from the sale of six single-family lots within Increment I.

As of September 30, 2023, two single-family lots of the 80 lots developed within Increment I remained to be sold.

The Company does not have a controlling interest in Increments I and II, and there is no assurance with regards to the amounts of future sales from Increments I and II, or that the remaining

acreage within Increment II will be developed.

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

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

No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report.

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Contract drilling revenues and costs are associated with well drilling and water pump installation, replacement and repair in Hawaii.

Contract drilling revenues decreased $1,815,000 (33%) to $3,612,000 in fiscal 2024, as compared to $5,427,000 in fiscal 2023 and contract drilling costs decreased $1,186,000 (21%) to $4,483,000 in fiscal 2024, as compared to $5,669,000 in fiscal 2023.

The contract drilling segment generated a $1,027,000 operating loss before general and administrative expenses during fiscal 2024, a decrease in operating results of $599,000 as compared to an operating loss before general and administrative expenses of $428,000 in fiscal 2023.

Contract drilling revenues increased $887,000 (20%) to $5,427,000 in fiscal 2023, as compared to $4,540,000 in fiscal 2022, primarily due to a higher level of activity in the current year period, partially offset by a decrease in revenues recognized from previously uninstalled materials during the current year period as compared the same period in the prior year.

Contract drilling costs increased $1,078,000 (23%) to $5,669,000 in fiscal 2023, as compared to $4,591,000 in fiscal 2022, primarily due to a higher level of activity and an increase in costs for certain water well drilling contracts in the current year period due to unforeseen difficulties on two contracts.

The first job had a piece of the drill bit break off and fall into the hole causing an increase in costs due to efforts to retrieve the piece which was successfully done in November 2023.

The other job encountered an unusually hard geological formation, and the drilling has taken longer than previously anticipated which required an increase in estimated costs and resulted in the job becoming a loss job for which the Company recorded a $180,000 liability as of September 30, 2023.

The increase in total contract drilling costs was partially offset by a decrease in expenses recognized from previously uninstalled materials during the current year period as compared the same period in the prior year.

At September 30, 2023, there was a backlog of four well drilling and seven pump installation and repair contracts, of which three well drilling and four pump installation and repair contracts were in progress as of September 30, 2023.

The backlog of contract drilling revenues as of December 1, 2023 was approximately $6,800,000, of which $6,300,000 is expected to be realized in fiscal 2024 with the remainder to be recognized in the following fiscal year.

Based on these contracts in backlog, contract drilling segment operating results for fiscal 2024 is estimated to be relatively similar to fiscal 2023.

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.

The pump installation and removal test was successfully completed.

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, 2023 for any further costs related to this contract as there is no related probable or estimable contingent liability.

There has been a significant decrease in demand for water well drilling contracts in recent years that has generally led to increased competition for available contracts and lower margins on awarded contracts.

The Company is unable to predict the near-term and long-term availability of water well drilling and pump installation and repair contracts as a result of this volatility in demand.

The continuing potential impact of COVID-19 on the health of our contract drilling segment's crew is uncertain, and any work

stoppage or discontinuation of contracts currently in backlog due to COVID-19 impacts could result in a material adverse impact to the Company’s financial condition and outlook.

The decreases in contract drilling revenues and contract drilling costs for the current year period as compared to the same period in the prior year were primarily due to decreased activity and a decrease in

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, unforeseen drilling difficulties were encountered on a job where costs were spent to retrieve a portion of the drill string that twisted off and slower drilling was required to ensure plumbness of the hole.

In addition, 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.

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

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.

At September 30, 2024, there was a backlog of one well drilling and two pump installation and repair contracts and all of the contracts were in progress as of September 30, 2024.

The backlog of contract drilling revenues as of December 1, 2024 was approximately $1,100,000, all of which is expected to be realized in fiscal 2025.

Based on these contracts in backlog, contract drilling segment operating results for fiscal 2025 is estimated to be significantly less than fiscal 2024.

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.

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

Management estimates that its three remaining contracts in backlog at September 30, 2024 will be completed in March 2025 or soon thereafter, however it is uncertain as to when the contingent liability related to the required drilling of a monitoring well in satisfaction of a regulatory assessment will be settled (see Note 17 in the “Notes to Consolidated Financial Statements” in Item 8 of this report).

General and administrative expenses

General and administrative expenses decreased $1,358,000 (20%) to $5,598,000 in fiscal 2024, as compared to $6,956,000 in fiscal 2023.

The decrease was primarily due to decreases of $492,000 in share-based compensation expense, $248,000 in bonus expense, $86,000 in bad debt expense, $126,000 in professional fees related to land investment segment proceeds, and $450,000 in fees related to consulting services in the current year period as compared to the same period in the prior year.

The decrease in general and administrative expenses was partially offset by an increase of $495,000 in stockholders costs primarily attributed to the cooperation and support agreement and associated fees to certain directors, as discussed below, in the current year period as compared to the same period in the prior year.

In January 2023, the Company entered into a cooperation and support agreement (the “Cooperation Agreement”) with Alexander C.

Kinzler , the Company’s CEO and President in his capacity as a stockholder , MRMP-Managers LLC, the Ned L.

Sherwood Revocable Trust, NLS Advisory Group, Inc.

Sherwood (collectively, the “MRMP Stockholders”), with respect to a potential proxy contest pertaining to the election of directors to our Board of Directors (the “Board”).

Pursuant to the terms of the Cooperation Agreement, among other things, the Company agreed to promptly appoint Joshua S.

Horowitz and Laurance Narbut, effective February 9, 2023, to serve on the Board.

In addition, the Company agreed to nominate a five-person board comprised of Mr.

Kinzler, Kenneth Grossman, Douglas Woodrum, and Messrs.

Horowitz and Narbut as candidates for election to the Board at the 2023 Annual Meeting, which was held on April 17, 2023, and the 2024 annual meeting of stockholders (the “2024 Annual Meeting”) and Mr.

Kinzler and the MRMP Stockholders agreed to vote their respective shares of common stock of the Company in favor of the election of the Company’s slate at the 2023 Annual Meeting and the 2024 Annual Meeting.

Additionally, pursuant to the terms of the Cooperation Agreement, the Company terminated the previously adopted Tax Benefits Preservation Plan.

In exchange for this arrangement, the Company agreed to reimburse the MRMP Stockholders and Mr.

Kinzler for their reasonable, documented out-of-pocket fees and expenses (including legal expenses) in connection with the negotiation and execution of the Cooperation Agreement and the transactions contemplated hereby and the proposed nomination of directors at the 2023 Annual Meeting.

T he Company incurred approximately $351,000 in expenses under the Cooperation Agreement in the year ended September 30, 2023 with respect to such reimbursements to the MRMP Stockholders and Mr.

In May 2023, the Company’s Board of Directors approved and ratified the payment of one-time special director fees to directors Messrs.

Grossman and Woodrum for their services on behalf of the Company and the Board pertaining to the negotiations of the Cooperation Agreement and the settlement of the potential proxy contest.

Grossman received a one-time special director fee of $100,000, which was paid in $40,000 cash and a stock grant of 22,728 shares of Barnwell common stock (valued at $60,000 using the closing price of Barnwell's common stock on May 11, 2023, the date of grant).

Woodrum received a one-time special director fee of $50,000, which was paid in $20,000 cash and a stock grant of 11,363 shares of Barnwell common stock (valued at $30,000 using the closing price of Barnwell's common stock on May 11, 2023, the date of grant).

The decrease was primarily due to decreases of $962,000 in professional fees primarily related to legal and consulting services and $533,000 in stockholders costs primarily attributed to the cooperation and support agreement and associated fees to certain directors in the prior year period as compared to the same period in the current year.

Depletion, depreciation, and amortization

Depletion, depreciation, and amortization increased $1,679,000 (60%) from $2,778,000 in fiscal 2022 to $4,457,000 in fiscal 2023, due to an increase in the depletion rate for Canadian properties and also

new production from those properties and the depletion attributable to production in Texas, partially offset by a decrease in depletion for Oklahoma properties as discussed in the “Oil and natural gas” section above.

Depletion, depreciation, and amortization increased $649,000 (15%) from $4,457,000 in fiscal 2023 to $5,106,000 in fiscal 2024, primarily due to increases in the depletion rate for Canadian properties and also new production from those properties and due to depletion attributable to production in Texas as discussed in the “Oil and natural gas” section above.

Impairment of assets

There was no impairment of assets during the year ended September 30, 2023.

In fiscal 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 in the year ended September 30, 2022.

The operating lease terminates in December 2025.

Foreign currency (gain) loss

Foreign currency gain was $76,000 during the year ended September 30, 2023, as compared to a foreign currency loss of $484,000 during the year ended September 30, 2022 due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of the weakening of the U.S.

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

Changes in the 12-month rolling average first-day-of-the-month prices for oil, natural gas and natural gas liquids prices (except where prices are defined by contractual arrangements), 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.

During the year ended September 30, 2024, the Company incurred a non-cash ceiling test impairment of $2,885,000, which included impairments for our U.S.

and Canadian oil and natural gas properties of $721,000 and $2,164,000, respectively.

The impairments to our U.S.

and Canadian oil and natural gas properties were primarily due to a decline in the historical 12-month rolling average first-day-of-the-month prices.

There was no ceiling test impairment during the year ended September 30, 2023.

As discussed above, the ceiling test uses a 12-month historical rolling average first-day-of-the-month prices.

As such, declines in the 12-month historical rolling average first-day-of-the-month prices used in our ceiling test calculation in future periods could result in impairment write-downs in future periods in the absence of any offsetting factors that are not currently known or projected.

Based on the oil and gas prices for October 1, November 1 and December 1 of 2024, the oil prices and natural gas prices used in the 12-month historical rolling first-day-of-the-month average oil price for the ceiling test at December 31, 2024 will be lower than at September 30, 2024.

Whereas we believe our Canadian full cost pool is sufficiently below the ceiling limit, our U.S.

full cost pool had no ceiling excess at September 30, 2024, and thus a further impairment charge is more likely than not for our U.S full cost pool for the first quarter of fiscal 2025 ending December 31, 2024.

The Company is currently unable to estimate a range of the amount of any potential future impairment write-downs as variables that impact the ceiling limitation are dependent upon actual results of activity through the end of December 2024.

Foreign currency gain

Foreign currency gain was $10,000 and $76,000 during the years ended September 30, 2024 and 2023, respectively, due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of changes in the U.S.

dollar against the Canadian dollar.

The foreign currency gains and losses from intercompany balances are included in our consolidated statement of operations as the intercompany balances were not considered long-term in nature because management estimates that these intercompany balances will be settled in the future.

The foreign currency gains from intercompany balances are included in our consolidated statement of operations as the intercompany balances were not considered long-term in nature because management estimates that these intercompany balances will be settled in the future.

Gain on sale of assets

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Barnwell’s investment in the Kukio Resort Land Development Partnerships is accounted for using the equity method of accounting.

Barnwell recognized equity in income of affiliates of $758,000 for the year ended September 30, 2023, as compared to equity in income of affiliates of $3,400,000 for the year ended September 30, 2022.

The decrease in partnership income is primarily due to the Kukio Resort Land Development Partnerships' sale of one lot during the current year period, as compared to six lot sales in the prior year period.

During the year ended September 30, 2023, Barnwell received cash distributions of $758,000 from the Kukio Resort Land Development Partnership resulting in a net amount of $674,000, after distributing $84,000 to non-controlling interests.

During the year ended September 30, 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.

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.

Barnwell recognized equity in income of affiliates of $1,071,000 for the

year ended September 30, 2024, as compared to equity in income of affiliates of $758,000 for the year ended September 30, 2023.

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

During the year ended September 30, 2023, Barnwell received cash distributions of $758,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $674,000, after distributing $84,000 to non-controlling interests.

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.

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Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $373,000 at September 30, 2024 and $708,000 at September 30, 2023.

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

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

Year ended September 30,

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$ (5,352,000) $ (1,014,000)

Barnwell’s effective consolidated income tax benefit rate for fiscal 2023, after adjusting loss before income taxes for non-controlling interests, was 5%, as compared to an effective consolidated income tax rate of 6% for fiscal 2022.

Barnwell’s effective consolidated income tax rate for fiscal 2024, after adjusting loss before income taxes for non-controlling interests, was (4)%, as compared to an effective consolidated income tax benefit rate of 5% for fiscal 2023.

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.

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

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

corporation operating as a branch in Canada that is treated as a non-resident for Canadian tax purposes and thus has operating results that cannot be offset against or combined with the other Canadian subsidiary that files as a resident for Canadian tax purposes.

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Our operations in Texas are subject to a franchise tax assessed by the state of Texas, however no significant amounts have been incurred to date.

In addition, Canadian jurisdiction net operating loss carryforwards, the benefit of which had not previously been recognized due to the Company's continuing full valuation allowance, were partially utilized in that jurisdiction in the current year.

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 prepared amended U.S.

federal tax returns for each of these years to include Form 8858 and a statement of reasonable cause.

The amended returns were filed in September and October 2023 and the Company requested abatement of any potential penalties and interest which could subsequently be assessed.

The Company is awaiting a response from the IRS and the probability of success of the abatement request remains uncertain.

No additional expenses related to the potential penalties and interest were included in the current income tax provision for the year ended September 30, 2023.

Net earnings attributable to non-controlling interests

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Net earnings attributable to non-controlling interests totaled $234,000 in fiscal 2024, as compared to net earnings attributable to non-controlling interests of $150,000 in fiscal 2023.

The $509,000 (77%) decrease is primarily due to decreases in the amount of equity in income of affiliates and percentage of sales revenue received in the current year period as compared to the same period in the prior year.

The $84,000 (56%) increase is primarily due to increases in the amount of equity in income of affiliates and percentage of sales revenue received in the current year period as compared to the same period in the prior year.

The effect of inflation on Barnwell has generally been to increase its cost of operations, general and administrative costs and direct costs associated with oil and natural gas production and contract drilling operations.

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Impact of Recently Issued Accounting Standards on Future Filings

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss model with an expected loss model referred to as the current expected credit loss (“CECL”) model.

The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables.

This ASU is effective for annual reporting periods beginning after December 15, 2022, and interim periods within those annual periods.

The FASB has subsequently issued other related ASUs which amend ASU 2016-13 to provide clarification and additional guidance.

The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”, which expands reportable segment disclosure requirements on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses.

This ASU is effective for annual reporting periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this standard on Barnwell’s consolidated financial statements but does not expect that the adoption of this update will have a material impact on Barnwell's consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”, which requires disclosure of incremental income tax information within the tax rate reconciliation and expanded disclosures of income taxes paid both in the U.S.

and foreign jurisdiction, among other disclosure requirements.

This ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this standard on Barnwell’s consolidated financial statements .

In November 2024, the FASB issued ASU No.

2024-03 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of

Income Statement Expenses”, which requires public companies to disclose specified information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods.

This ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of this standard on Barnwell’s consolidated financial statements.

Liquidity and Capital Resources

Barnwell’s primary sources of liquidity are cash on hand, cash flow generated by operations, and land investment segment proceeds.

At September 30, 2024, Barnwell had $1,071,000 in working capital.

Cash flows provided by operating activities totaled $1,943,000 for fiscal 2023, as compared to cash flows provided by operating activities of $7,291,000 for the same period in fiscal 2022.

This $5,348,000 change in operating cash flows was due to significantly lower operating results for the oil and

natural gas segment in the current year period as compared to the prior year period.

Additionally, the change was also due to a decrease in distributions of income from the Kukio Resort Land Development Partnerships in the current year period as compared to the prior year period and fluctuations in working capital.

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.

In recent years, the Company 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.

Management estimates that cash flows from the sale of the contract drilling segment business or its operating assets may also provide some level of liquidity in the near-term.

The Company will primarily be reliant upon sufficient operating cash inflows from its oil and natural gas segment, which in turn will be largely determined by prices and production levels.

A certain level of oil and natural gas capital expenditures will be necessary to grow reserves and production or at a minimum replace declining production from aging wells.

Such a level of oil and natural gas capital expenditures may require funding from external debt or equity sources that are not currently in place.

Management estimates that, barring any significant unforeseen events, it is more likely than not that there is sufficient cash on hand, cash flows from 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.

However, the aforementioned factors will influence the Company’s liquidity beyond that twelve month period.

Cash flows provided by operating activities totaled $4,710,000 for fiscal 2024, as compared to cash flows provided by operating activities of $1,943,000 for fiscal 2023.

This $2,767,000 change in operating cash flows was due to fluctuations in working capital in the current year period as compared to the prior year period.

The adjustment in operating cash flows due to the effect of changes in current assets and liabilities was an increase of $2,780,000 in the current year period as compared to a decrease of $393,000 in the prior year period.

The change was also due to an increase in distributions of income from the Kukio Resort Land Development Partnerships and a decrease in general and administrative costs in the current year period as compared to the prior year period, partially offset by lower operating results for the oil and natural gas and contract drilling segments in the current year period as compared to the same period in the prior year.

Cash flows used in investing activities totaled $2,832,000 for fiscal 2024, as compared to cash flows used in investing activities of $11,180,000 for fiscal 2023.

This $4,068,000 change in investing cash flows was due to an increase of $2,697,000 in cash paid for oil and natural gas capital expenditures, a decrease of $904,000 in proceeds from the sale of interest in leasehold land, net of costs paid, and a decrease of $1,741,000 in proceeds related to the sale of assets in the current year period as compared to same period in the prior year, partially offset by a $1,563,000 decrease in payments to acquire oil and natural gas properties in the current year period as compared to the same period in the prior year.

Cash flows used in financing activities totaled $786,000 for fiscal 2023, as compared to cash flows provided by financing activities of $1,560,000 for fiscal 2022.

The $2,346,000 change in financing cash flows was due to a $450,000 increase in payment of dividends and a $2,356,000 decrease in proceeds from issuance of common stock, net of costs, related to the Company's at-the-market offering in the prior year period, partially offset by a $490,000 decrease in distributions to non-controlling interests in the current year period as compared to the same period in the prior year.

This $8,348,000 change in investing cash flows was primarily due to a decrease of $7,790,000 in cash paid for investments in oil and natural gas properties in the current year period as compared to the same period in the prior year and a $441,000 increase in proceeds from the sale of oil and natural gas properties in the current year period as compared to the prior year period.

Cash flows used in financing activities totaled $226,000 for fiscal 2024, as compared to cash flows used in financing activities of $786,000 for fiscal 2023.

The $560,000 change in financing cash flows was due to a decrease of $599,000 in payment of dividends, partially offset by an increase of $69,000 in distributions to non-controlling interests in the current year period as compared to the same period in the prior year.

Cash Dividends

The following table sets forth the cash dividends paid per share of common stock during fiscal 2023 and 2022.

No dividends were declared or paid during the year ended September 30, 2024.

The following table sets forth the cash dividends paid per share of common stock during the year ended September 30, 2023.

Record Date Date of Payment Dividend Paid

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December 27, 2022 January 11, 2023 $0.015

August 23, 2022 September 6, 2022 $0.015

Canada Emergency Business Account Loan

In the quarter ended December 31, 2020, the Company’s Canadian subsidiary, Barnwell of Canada, received an interest-free loan of CAD$40,000 (in Canadian dollars) under the Canada Emergency Business Account (“CEBA”) loan program for small businesses.

In the quarter ended March 31, 2021, the Company applied for an increase to our CEBA loan and received an additional CAD$20,000 for a total loan amount received of CAD$60,000 ($45,000) under the program.

The CEBA loan was interest-free with no principal payments required until December 31, 2023 and if the Company repaid 66.7% of the principal amount prior to December 31, 2023, 33.3% of the loan would be forgiven.

In September 2023, the Company repaid the loan balance of CAD$40,000 and the remaining loan balance of CAD$20,000 was forgiven per the terms of the CEBA loan agreement.

Accordingly, as a result of the loan forgiveness, the Company recognized a gain on debt extinguishment of $15,000 during the year ended September 30, 2023, which was included in the “Gas processing and other” line item in the accompanying Consolidated Statements of Operations.

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 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.

Shares of common stock sold under the ATM are offered pursuant to the Company’s Registration Statement on Form S-3 (File No.

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.

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

Oil and Natural Gas Capital Expenditures

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations, decreased $5,924,000 from $10,729,000 in fiscal 2023 to $4,805,000 in fiscal 2024.

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.

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 has paid $4,293,000 for its share of the costs to drill, complete and equip the wells during the year ended September 30, 2023.

The two gross (0.3 net) non-operated wells began producing in late April 2023 and the Company’s share of net production from these wells totaled 12,000 barrels of oil, 12,000 barrels of natural gas liquids, and 121,000 Mcf of natural gas during the year ended September 30, 2023.

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.

All three wells were completed and began producing during the latter part of the three months ended June 30, 2023.

During the year ended September 30, 2024, the Company participated in the drilling of one gross (1.0 net) operated development oil well in the Twining area.

Capital expenditures incurred for the drilling of this well during the year ended September 30, 2024 totaled approximately $3,183,000.

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

Capital expenditures incurred for the drilling of these wells and Twining facilities during the year ended September 30, 2023 totaled approximately $4,770,000.

In fiscal 2022, the Company participated in the drilling of six gross (1.7 net) non-operated wells in the Twining area.

Capital expenditures incurred by the Company for these non-operated wells totaled $4,366,000 for the year ended September 30, 2022.

Additionally, the Company drilled one gross (1.0 net)

operated well in the Twining area and capital expenditures incurred by the Company for this well was $2,852,000 for the year ended September 30, 2022.

Oil and Natural Gas Property Acquisitions and Dispositions

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 the quarter ended March 31, 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.

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

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 fiscal 2021’s oil and natural gas property sales.

Additionally, the Company participated in the drilling of two gross (0.3 net) non-operated development oil wells in Texas.

Capital expenditures incurred for the drilling of these two wells totaled approximately $4,293,00 during the year ended September 30, 2023.

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 $441,000 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.

In July 2024, Barnwell entered into and completed an agreement with an independent third party to convey interests in certain natural gas and oil properties located in the Bonanza and Balsam areas of Alberta, Canada.

In consideration for the sale of the working interests in these properties, Barnwell retained a 4% overriding royalty on these properties and the buyer assumed the asset retirement

obligations associated with these properties.

There were no cash proceeds from the sale and no gain or loss was recognized on this conveyance as this did not result in a significant alteration of the relationship between capitalized costs and proved reserves.

With the disposition of the working interest, Barnwell reduced the full cost pool and abandonment liabilities associated with the working interests conveyed by approximately $153,000.

In September 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 Wood River area of Alberta, Canada.

The sales price per the agreement was adjusted for customary purchase price adjustments to $292,000 in order to, among other things, reflect an economic effective closing date of September 30, 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.

From the sales proceeds, $38,000 was remitted directly to the Canada Revenue Agency by the buyers for potential amounts due for Barnwell’s Canadian income taxes related to the sale.

The proceeds from the sale was credited to our cash in October 2024 and will be reflected in the Statement of Cash Flows for the first quarter of fiscal 2025 ending December 31, 2024.

No gain or loss was recognized on this disposition as the sale proceeds were credited to the full cost pool and did not result in a significant alteration of the relationship between capitalized costs and proved reserves.

Asset Retirement Obligation

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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 at September 30, 2023, the Company recognized a cumulative reduction in the deposit balance of $300,000 for work performed under this program.

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

As of September 30, 2024, the Company recognized a cumulative reduction in the deposit balance of $353,000 for work performed under this program.

Contractual Obligations

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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 7. Management’s Discussion and Analysis