BARNWELL INDUSTRIES INC 10-Q

ITEM 1. FINANCIAL STATEMENTS BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) December 31, 2024 September 30, 2024 ASSETS Current assets: Cash and cash equivalents $ 1,957,000 $ 4,505,000 Accounts and other receivables, net of allowance for credit losses of: $ 350,000 at December 31, 2024; $ 375,000 at September 30, 2024 2,403,000 2,770,000 Assets held for sale 69,000 69,000 Other current assets 1,547,000 1,539,000 Total current assets 5,976,000 8,883,000 Asset for retirement benefits 5,002,000 4,899,000 Operating lease right-of-use assets 153,000 39,000 Property and equipment: Proved oil and natural gas properties (full cost method) 79,081,000 83,557,000 Drilling rigs and other property and equipment 3,660,000 3,679,000 Total property and equipment 82,741,000 87,236,000 Accumulated depletion, impairment, depreciation, and amortization ( 67,862,000 ) ( 70,388,000 ) Total property and equipment, net 14,879,000 16,848,000 Total assets $ 26,010,000 $ 30,669,000 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 1,319,000 $ 1,822,000 Accrued capital expenditures 105,000 2,407,000 Accrued compensation 609,000 650,000 Accrued operating and other expenses 1,575,000 1,834,000 Current portion of asset retirement obligation 938,000 798,000 Other current liabilities 788,000 301,000 Total current liabilities 5,334,000 7,812,000 Operating lease liabilities 122,000 7,000 Liability for retirement benefits 1,921,000 1,898,000 Asset retirement obligation 7,237,000 7,790,000 Deferred income tax liabilities 91,000 100,000 Total liabilities 14,705,000 17,607,000 Commitments and contingencies Equity: Common stock, par value $ 0.50 per share; authorized, 40,000,000 shares: 10,221,434 issued at December 31, 2024; 10,195,990 issued at September 30, 2024 5,111,000 5,098,000 Additional paid-in capital 7,746,000 7,690,000 (Accumulated deficit) retained earnings ( 1,322,000 ) 595,000 Accumulated other comprehensive income, net 2,036,000 1,943,000 Treasury stock, at cost: 167,900 shares at December 31, 2024 and September 30, 2024 ( 2,286,000 ) ( 2,286,000 ) Total stockholders' equity 11,285,000 13,040,000 Non-controlling interests 20,000 22,000 Total equity 11,305,000 13,062,000 Total liabilities and equity $ 26,010,000 $ 30,669,000 See Notes to Condensed Consolidated Financial Statements 3 BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended December 31, 2024 2023 Revenues: Oil and natural gas $ 3,897,000 $ 5,130,000 Contract drilling 543,000 993,000 Gas processing and other 37,000 32,000 4,477,000 6,155,000 Costs and expenses: Oil and natural gas operating 2,496,000 2,791,000 Contract drilling operating 720,000 1,169,000 General and administrative 1,281,000 1,404,000 Depletion, depreciation, and amortization 928,000 1,511,000 Impairment of assets 613,000 — Foreign currency loss (gain) 351,000 ( 126,000 ) Interest expense — 2,000 6,389,000 6,751,000 Loss before equity in income of affiliates and income taxes ( 1,912,000 ) ( 596,000 ) Equity in income of affiliates — — Loss before income taxes ( 1,912,000 ) ( 596,000 ) Income tax provision 7,000 66,000 Net loss ( 1,919,000 ) ( 662,000 ) Less: Net (loss) earnings attributable to non-controlling interests ( 2,000 ) 2,000 Net loss attributable to Barnwell Industries, Inc. $ ( 1,917,000 ) $ ( 664,000 ) Basic and diluted net loss per common share attributable to Barnwell Industries, Inc. stockholders $ ( 0.19 ) $ ( 0.07 ) Weighted-average number of common shares outstanding: Basic and diluted 10,047,173 9,996,760 See Notes to Condensed Consolidated Financial Statements 4 BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) Three months ended December 31, 2024 2023 Net loss $ ( 1,919,000 ) $ ( 662,000 ) Other comprehensive income (loss): Foreign currency translation adjustments, net of taxes of $ 0 93,000 30,000 Retirement plans: Amortization of accumulated other comprehensive gain into net periodic benefit cost, net of taxes of $ 0 — ( 21,000 ) Total other comprehensive income 93,000 9,000 Total comprehensive loss ( 1,826,000 ) ( 653,000 ) Less: Comprehensive loss (income) attributable to non-controlling interests 2,000 ( 2,000 ) Comprehensive loss attributable to Barnwell Industries, Inc. $ ( 1,824,000 ) $ ( 655,000 ) See Notes to Condensed Consolidated Financial Statements 5 BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY Three months ended December 31, 2024 and 2023 (Unaudited) Shares Outstanding Common Stock Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Treasury Stock Non-controlling Interests Total Equity Balance at September 30, 2023 9,990,778 $ 5,079,000 $ 7,687,000 $ 6,160,000 $ 2,104,000 $ ( 2,286,000 ) $ 13,000 $ 18,757,000 Net (loss) earnings — — — ( 664,000 ) — — 2,000 ( 662,000 ) Foreign currency translation adjustments, net of taxes of $ 0 — — — — 30,000 — — 30,000 Distributions to non-controlling interests — — — — — — ( 4,000 ) ( 4,000 ) Share-based compensation — — 65,000 — — — — 65,000 Issuance of common stock for restricted stock units vested 9,328 5,000 ( 5,000 ) — — — — — Retirement plans: Amortization of accumulated other comprehensive gain into net periodic benefit cost, net of taxes of $ 0 — — — — ( 21,000 ) — — ( 21,000 ) Balance at December 31, 2023 10,000,106 $ 5,084,000 $ 7,747,000 $ 5,496,000 $ 2,113,000 $ ( 2,286,000 ) $ 11,000 $ 18,165,000 Balance at September 30, 2024 10,028,090 $ 5,098,000 $ 7,690,000 $ 595,000 $ 1,943,000 $ ( 2,286,000 ) $ 22,000 $ 13,062,000 Net loss — — — ( 1,917,000 ) — — ( 2,000 ) ( 1,919,000 ) Foreign currency translation adjustments, net of taxes of $ 0 — — — — 93,000 — — 93,000 Share-based compensation — — 69,000 — — — — 69,000 Issuance of common stock for restricted stock units vested 25,444 13,000 ( 13,000 ) — — — — — Balance at December 31, 2024 10,053,534 $ 5,111,000 $ 7,746,000 $ ( 1,322,000 ) $ 2,036,000 $ ( 2,286,000 ) $ 20,000 $ 11,305,000 See Notes to Condensed Consolidated Financial Statements 6 BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 1,919,000 ) $ ( 662,000 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depletion, depreciation, and amortization 928,000 1,511,000 Impairment of assets 613,000 — Retirement benefits income ( 79,000 ) ( 86,000 ) Accretion of asset retirement obligation 196,000 200,000 Non-cash rent income — ( 7,000 ) Deferred income tax benefit ( 9,000 ) ( 2,000 ) Asset retirement obligation payments ( 101,000 ) ( 160,000 ) Share-based compensation expense 69,000 65,000 Retirement plan contributions and payments ( 1,000 ) ( 1,000 ) Credit loss (reversal) expense ( 14,000 ) 37,000 Foreign currency loss (gain) 351,000 ( 126,000 ) (Decrease) increase from changes in current assets and liabilities ( 793,000 ) 606,000 Net cash (used in) provided by operating activities ( 759,000 ) 1,375,000 Cash flows from investing activities: Proceeds from sale of oil and natural gas assets 282,000 — Deposit for sale of contract drilling assets 585,000 — Capital expenditures - oil and natural gas ( 2,529,000 ) ( 1,018,000 ) Capital expenditures - all other — ( 1,000 ) Net cash used in investing activities ( 1,662,000 ) ( 1,019,000 ) Cash flows from financing activities: Distributions to non-controlling interests — ( 4,000 ) Net cash used in financing activities — ( 4,000 ) Effect of exchange rate changes on cash and cash equivalents ( 127,000 ) 41,000 Net (decrease) increase in cash and cash equivalents ( 2,548,000 ) 393,000 Cash and cash equivalents at beginning of period 4,505,000 2,830,000 Cash and cash equivalents at end of period $ 1,957,000 $ 3,223,000 See Notes to Condensed Consolidated Financial Statements 7 BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc. and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6 %-owned land investment general partnership (Kaupulehu Developments) and a 75 %-owned land investment partnership (KD Kona 2013 LLLP). All significant intercompany accounts and transactions have been eliminated. Undivided interests in oil and natural gas exploration and production joint ventures are consolidated on a proportionate basis. Barnwell’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method. Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars. Unaudited Interim Financial Information The accompanying unaudited condensed consolidated financial statements and notes have been prepared by Barnwell in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Barnwell’s September 30, 2024 Annual Report on Form 10-K, as amended by our Form 10-K/A Amendment No. 1 (our “2024 Annual Report”). The Condensed Consolidated Balance Sheet as of September 30, 2024 has been derived from audited consolidated financial statements. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at December 31, 2024, results of operations, comprehensive loss, equity and cash flows for the three months ended December 31, 2024 and 2023, have been made. The results of operations for the period ended December 31, 2024 are not necessarily indicative of the operating results for the full year. Use of Estimates in the Preparation of Condensed Consolidated Financial Statements The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management of Barnwell to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates. Significant assumptions are required in the valuation of deferred tax assets, asset retirement obligations, contract drilling estimated costs to complete, 8 proved oil and natural gas reserves, and such assumptions may impact the amount at which such items are recorded. Significant Accounting Policies There have been no changes to Barnwell's significant accounting policies as described in the Notes to Consolidated Financial Statements included in Item 8 of the Company's 2024 Annual Report. 2. LOSS PER COMMON SHARE Basic loss per share is computed using the weighted-average number of common shares outstanding for the period. Diluted loss per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities, which consist of outstanding stock options and nonvested restricted stock units. Potentially dilutive shares are excluded from the computation of diluted loss per share if their effect is anti-dilutive. Options to purchase 465,000 shares of common stock and 216,712 restricted stock units were excluded from the computation of diluted shares for the three months ended December 31, 2024, as their inclusion would have been anti-dilutive. Options to purchase 465,000 shares of common stock and 76,336 restricted stock units were excluded from the computation of diluted shares for the three months ended December 31, 2023, as their inclusion would have been anti-dilutive. Reconciliations between net loss attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net loss per share computations are detailed in the following tables: Three months ended December 31, 2024 Net Loss (Numerator) Shares (Denominator) Per-Share Amount Basic $ ( 1,917,000 ) 10,047,173 $ ( 0.19 ) Effect of dilutive securities - common stock options and restricted stock units — — Diluted $ ( 1,917,000 ) 10,047,173 $ ( 0.19 ) Three months ended December 31, 2023 Net Loss (Numerator) Shares (Denominator) Per-Share Amount Basic $ ( 664,000 ) 9,996,760 $ ( 0.07 ) Effect of dilutive securities - common stock options and restricted stock units — — Diluted $ ( 664,000 ) 9,996,760 $ ( 0.07 ) 9 3. ALLOWANCE FOR CREDIT LOSSES The following table summarizes the activity in the balance of allowance for credit losses related to accounts and other receivables: Three months ended December 31, 2024 2023 Allowance for credit losses at beginning of period $ 375,000 $ 284,000 (Reversal of) provision for expected credit losses ( 14,000 ) 37,000 Write-offs charged against the allowance ( 2,000 ) ( 4,000 ) Recoveries of amounts previously written off — 15,000 Foreign currency translation adjustment ( 9,000 ) 2,000 Allowance for credit losses at end of period $ 350,000 $ 334,000 4. INVESTMENTS Investment in Kukio Resort Land Development Partnerships On November 27, 2013, Barnwell, through a wholly-owned subsidiary, entered into two limited liability limited partnerships, KD Kona 2013 LLLP (“KD Kona”) and KKM Makai, LLLP (“KKM”), and indirectly acquired a 19.6 % non-controlling ownership interest in each of KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD Kaupulehu, LLLP (“KDK”) for $ 5,140,000 . These entities, collectively referred to hereinafter as the “Kukio Resort Land Development Partnerships,” own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations. KDK holds interests in KD Acquisition, LLLP (“KD I”) and KD Acquisition II, LP, formerly KD Acquisition II, LLLP (“KD II”). KD I is the developer of Kaupulehu Lot 4A Increment I (“Increment I”), and KD II is the developer of Kaupulehu Lot 4A Increment II (“Increment II”). Barnwell's ownership interests in the Kukio Resort Land Development Partnerships is accounted for using the equity method of accounting. In March 2019, KD II admitted a new development partner, Replay Kaupulehu Development, LLC (“Replay”), a party unrelated to Barnwell, in an effort to move forward with development of the remainder of Increment II at Kaupulehu. KDK and Replay hold ownership interests of 55 % and 45 %, respectively, of KD II and Barnwell has a 10.8 % indirect non-controlling ownership interest in KD II through KDK, which is accounted for using the equity method of accounting. Barnwell continues to have an indirect 19.6 % non-controlling ownership interest in KD Kukio Resorts, LLLP, KD Maniniowali, LLLP, and KD I. 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 a few remaining private club memberships. The last two single-family lots of the 80 lots developed within Increment I were sold in the quarter ended March 31, 2024. 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 KD II, the developer of Increment II, as of the date of this report. 10 Barnwell has the right to receive distributions from the Kukio Resort Land Development Partnerships via its non-controlling interests in KD Kona and KKM, based on its respective partnership sharing ratios of 75 % and 34.45 %, respectively. No cash distributions were received during the three months ended December 31, 2024 and 2023. Summarized financial information for the Kukio Resort Land Development Partnerships is as follows: Three months ended December 31, 2024 2023 Revenue $ 1,299,000 $ 1,886,000 Gross profit $ 479,000 $ 817,000 Net (loss) earnings $ ( 48,000 ) $ 354,000 In the quarter ended June 30, 2021, the Company received cumulative distributions from the Kukio Resort Land Development Partnerships in excess of our investment balance and in accordance with applicable accounting guidance, the Company suspended its equity method earnings recognition and the Kukio Resort Land Development Partnership investment balance was reduced to zero with the distributions received in excess of our investment balance recorded as equity in income of affiliates because the distributions are not refundable by agreement or by law and the Company is not liable for the obligations of or otherwise committed to provide financial support to the Kukio Resort Land Development Partnerships. The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnership’s cumulative earnings in excess of distributions during the suspended period exceeds our share of the Kukio Resort Land Development Partnership’s income recognized for the excess distributions, and during this suspended period any distributions received will be recorded as equity in income of affiliates. Accordingly, no equity in income of affiliates was recognized during the three months ended December 31, 2024. Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $ 382,000 at December 31, 2024 and $ 373,000 at September 30, 2024. Sale of Interest in Leasehold Land Kaupulehu Developments holds rights to receive payments from KD I and KD II resulting from the sale of lots and/or residential units within Increment I, which is now fully sold, and within Increment II, which is not yet developed (see Note 16). With respect to Increment I, Kaupulehu Developments was entitled to receive payments from KD I based on 10 % of the gross receipts from KD I’s sales of single-family residential lots in Increment I. The last two single-family lots of the 80 lots developed within Increment I were sold in the quarter ended March 31, 2024. 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. 11 Investment in Leasehold Land Interest - Lot 4C Kaupulehu Developments holds an interest in an area of approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A, which currently has no development potential without both a development agreement with the lessor and zoning reclassification. The lease terminates in December 2025. 5. ASSETS HELD FOR SALE In the quarter ended March 31, 2024, the Company commenced the marketing of a portion of the contract drilling segment's property and equipment, the majority of which was already fully depreciated. There was no impairment related to the classification change from held and used to held for sale as the fair value, less estimated selling costs, of the disposal group exceeded its carrying value. The carrying value of these assets was recorded as “Assets held for sale” in the accompanying Condensed Consolidated Balance Sheets. The property and equipment deemed necessary to complete the contract drilling segment's contracts in backlog continue to be classified as held and used as of December 31, 2024. At December 31, 2024, a sale of the remainder of the contract drilling segment's property and equipment or the contract drilling segment as a whole was not estimated to be probable due to the lack of any definitive sale opportunities at that date. In December 2024, the Company entered into an agreement with an independent third party for the sale of a contract drilling segment drilling rig and related ancillary equipment and received a payment of $ 585,000 from the buyer. At December 31, 2024, the delivery of the drilling rig and the transfer of the legal title to the buyer had not yet occurred, and therefore, the Company did not record a sale during the three months ended December 31, 2024. The payment received from the buyer was recognized as a deposit and recorded in “Other current liabilities” on the Company's Condensed Consolidated Balance Sheet at December 31, 2024. This drilling rig and related ancillary equipment was included in assets held for sale at December 31, 2024, and had a net book value of zero as the assets were already fully depreciated. In February 2025, the drilling rig and ancillary equipment was delivered and the legal title was transferred to the buyer, and as a result, the Company will recognize a gain, net of costs, on the sale of the drilling rig and ancillary equipment in the quarter ending March 31, 2025. 6. OIL AND NATURAL GAS PROPERTIES Oil and Natural Gas Property Dispositions There were no significant oil and natural gas property dispositions during the three months ended December 31, 2024 and 2023. The $ 282,000 of proceeds from sale of oil and natural gas properties included in the Condensed Consolidated Statement of Cash Flows for the three months ended December 31, 2024 represents proceeds that were credited to our cash in October 2024 from a sale of properties that closed in late September 2024. Impairment of Oil and Natural Gas Properties Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations. 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), 12 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 three months ended December 31, 2024, the Company incurred a non-cash ceiling test impairment for our U.S. oil and natural gas properties of $ 613,000 . There was no ceiling test impairment during the three months ended December 31, 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. 7. RETIREMENT PLANS Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S. employees and a noncontributory Supplemental Executive Retirement Plan (“SERP”), which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan. Effective December 31, 2019, the accrual of benefits for all participants in the Pension Plan and SERP was frozen and the plans were closed to new participants from that point forward. The following table details the components of net periodic benefit (income) cost for Barnwell’s retirement plans: Pension Plan SERP Three months ended December 31, 2024 2023 2024 2023 Interest cost $ 98,000 $ 103,000 $ 23,000 $ 24,000 Expected return on plan assets ( 200,000 ) ( 192,000 ) — — Amortization of net actuarial gain — — — ( 21,000 ) Net periodic benefit (income) cost $ ( 102,000 ) $ ( 89,000 ) $ 23,000 $ 3,000 The net periodic benefit (income) cost is included in “General and administrative” expenses in the Company's Condensed Consolidated Statements of Operations. Currently, no contributions are planned to be made to the Pension Plan during fiscal 2025. The SERP plan is unfunded and Barnwell funds benefits when payments are made. Expected payments under the SERP for fiscal 2025 are expected to be $ 76,000 . Fluctuations in actual equity market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods. 13 8. INCOME TAXES The components of loss before income taxes, after adjusting the loss for non-controlling interests, are as follows: Three months ended December 31, 2024 2023 United States $ ( 1,466,000 ) $ ( 689,000 ) Canada ( 444,000 ) 91,000 $ ( 1,910,000 ) $ ( 598,000 ) The components of the income tax provision are as follows: Three months ended December 31, 2024 2023 Current $ 16,000 $ 68,000 Deferred ( 9,000 ) ( 2,000 ) $ 7,000 $ 66,000 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. 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. Income from our non-controlling interest in the Kukio Resort Land Development Partnerships is treated as non-unitary for state of Hawaii unitary filing purposes, thus unitary Hawaii losses provide limited sheltering of such non-unitary income. Income from our investment in the Oklahoma oil venture is 100% allocable to Oklahoma. As such, Barnwell receives no benefit from consolidated or unitary losses and, therefore, is subject to Oklahoma state taxes. 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. 14 9. REVENUE FROM CONTRACTS WITH CUSTOMERS Disaggregation of Revenue The following tables provides information about disaggregated revenue by revenue streams, reportable segments, geographical region, and timing of revenue recognition for the three months ended December 31, 2024 and 2023. Three months ended December 31, 2024 Oil and natural gas Contract drilling Land investment Other Total Revenue streams: Oil $ 3,143,000 $ — $ — $ — $ 3,143,000 Natural gas 349,000 — — — 349,000 Natural gas liquids 405,000 — — — 405,000 Drilling and pump — 543,000 — — 543,000 Other — — — 11,000 11,000 Total revenues before interest income $ 3,897,000 $ 543,000 $ — $ 11,000 $ 4,451,000 Geographical regions: United States $ 355,000 $ 543,000 $ — $ — $ 898,000 Canada 3,542,000 — — 11,000 3,553,000 Total revenues before interest income $ 3,897,000 $ 543,000 $ — $ 11,000 $ 4,451,000 Timing of revenue recognition: Goods transferred at a point in time $ 3,897,000 $ — $ — $ 11,000 $ 3,908,000 Services transferred over time — 543,000 — — 543,000 Total revenues before interest income $ 3,897,000 $ 543,000 $ — $ 11,000 $ 4,451,000 Three months ended December 31, 2023 Oil and natural gas Contract drilling Land investment Other Total Revenue streams: Oil $ 3,892,000 $ — $ — $ — $ 3,892,000 Natural gas 712,000 — — — 712,000 Natural gas liquids 526,000 — — — 526,000 Drilling and pump — 993,000 — — 993,000 Other — — — 17,000 17,000 Total revenues before interest income $ 5,130,000 $ 993,000 $ — $ 17,000 $ 6,140,000 Geographical regions: United States $ 754,000 $ 993,000 $ — $ 1,000 $ 1,748,000 Canada 4,376,000 — — 16,000 4,392,000 Total revenues before interest income $ 5,130,000 $ 993,000 $ — $ 17,000 $ 6,140,000 Timing of revenue recognition: Goods transferred at a point in time $ 5,130,000 $ — $ — $ 17,000 $ 5,147,000 Services transferred over time — 993,000 — — 993,000 Total revenues before interest income $ 5,130,000 $ 993,000 $ — $ 17,000 $ 6,140,000 15 Contract Balances The following table provides information about accounts receivables, contract assets and contract liabilities from contracts with customers: December 31, 2024 September 30, 2024 September 30, 2023 Accounts receivables from contracts with customers $ 1,930,000 $ 2,031,000 $ 2,931,000 Contract assets 333,000 267,000 958,000 Contract liabilities — — 377,000 Accounts receivables from contracts with customers are included in "Accounts and other receivables, net of allowance for credit losses," in the accompanying Condensed Consolidated Balance Sheets and contract assets, which includes costs and estimated earnings in excess of billings and retainage, are included in “Other current assets” in the accompanying Condensed Consolidated Balance Sheets. Contract liabilities, which includes billings in excess of costs and estimated earnings are included in “Other current liabilities” in the accompanying Condensed Consolidated Balance Sheets. Retainage, included in contract assets, represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5 % to 10 % of the total invoice, up to contractually-specified maximums. The Company classifies as a current asset those retainages that are expected to be collected in the next twelve months. Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. The Company’s rights are generally unconditional at the time its performance obligations are satisfied. When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. Such deferred revenue typically results from billings in excess of costs and estimated earnings on uncompleted contracts. During the three months ended December 31, 2024 and 2023, the amount of revenue recognized that was previously included in contract liabilities as of the beginning of the respective period was nil and $ 229,000 , respectively. Contracts are sometimes modified for a change in scope or other requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the Company’s contract modifications are for goods and services that are not distinct from the existing performance obligations. The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis. Performance Obligations The Company’s remaining performance obligations for drilling and pump installation contracts (hereafter referred to as “backlog”) represent the unrecognized revenue value of the Company’s contract commitments. The Company’s backlog may vary significantly each reporting period based on the timing 16 of major new contract commitments. In addition, our customers have the right, under some infrequent circumstances, to terminate contracts or defer the timing of the Company’s services and their payments to us. Nearly all of the Company's contract drilling segment contracts have original expected durations of one year or less. At December 31, 2024, the Company had three contract drilling jobs with original expected durations of greater than one year, for which 100 % of the remaining performance obligation of $ 208,000 is expected to be recognized as revenue in the next twelve months. Contract Fulfillment Costs Preconstruction costs, which include costs such as set-up and mobilization, are capitalized and allocated across all performance obligations and deferred and amortized over the contract term on a progress towards completion basis. As of December 31, 2024 and September 30, 2024, the Company had $ 92,000 and $ 173,000 , respectively, in unamortized preconstruction costs related to contracts that were not completed. During the three months ended December 31, 2024 and 2023, the amortization of preconstruction costs related to contracts were not material and were included in the accompanying Condensed Consolidated Statements of Operations. Additionally, no impairment charges in connection with the Company’s preconstruction costs were recorded during the three months ended December 31, 2024 and 2023. 17 10. SEGMENT INFORMATION Barnwell operates the following segments: 1) acquiring, developing, producing and selling oil and natural gas in Canada and the U.S. (oil and natural gas); 2) leasehold land interests in Hawaii (land investment); and 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling). The following table presents certain financial information related to Barnwell’s reporting segments. All revenues reported are from external customers with no intersegment sales or transfers. Three months ended December 31, 2024 2023 Revenues: Oil and natural gas $ 3,897,000 $ 5,130,000 Contract drilling 543,000 993,000 Other 11,000 17,000 Total before interest income 4,451,000 6,140,000 Interest income 26,000 15,000 Total revenues $ 4,477,000 $ 6,155,000 Depletion, depreciation, and amortization: Oil and natural gas $ 904,000 $ 1,458,000 Contract drilling 24,000 52,000 Other — 1,000 Total depletion, depreciation, and amortization $ 928,000 $ 1,511,000 Impairment: Oil and natural gas $ 613,000 $ — Total impairment $ 613,000 $ — Operating (loss) profit (before general and administrative expenses): Oil and natural gas $ ( 116,000 ) $ 881,000 Contract drilling ( 201,000 ) ( 228,000 ) Other 11,000 16,000 Total operating (loss) profit ( 306,000 ) 669,000 General and administrative expenses ( 1,281,000 ) ( 1,404,000 ) Foreign currency (loss) gain ( 351,000 ) 126,000 Interest expense — ( 2,000 ) Interest income 26,000 15,000 Loss before income taxes $ ( 1,912,000 ) $ ( 596,000 ) 18 11. ACCUMULATED OTHER COMPREHENSIVE INCOME The changes in each component of accumulated other comprehensive income were as follows: Three months ended December 31, 2024 2023 Foreign currency translation: Beginning accumulated foreign currency translation $ 220,000 $ 220,000 Change in cumulative translation adjustment before reclassifications 93,000 30,000 Income taxes — — Net current period other comprehensive income 93,000 30,000 Ending accumulated foreign currency translation 313,000 250,000 Retirement plans: Beginning accumulated retirement plans benefit income 1,723,000 1,884,000 Amortization of net actuarial gain — ( 21,000 ) Income taxes — — Net current period other comprehensive loss — ( 21,000 ) Ending accumulated retirement plans benefit income 1,723,000 1,863,000 Accumulated other comprehensive income, net of taxes $ 2,036,000 $ 2,113,000 The amortization of net actuarial gain for the retirement plans are included in the computation of net periodic benefit (income) cost which is a component of “General and administrative” expenses on the accompanying Condensed Consolidated Statements of Operations (see Note 7 for additional details). 12. FAIR VALUE MEASUREMENTS The carrying values of cash and cash equivalents, accounts and other receivables, accounts payable and accrued current liabilities approximate their fair values due to the short-term nature of the instruments. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The estimated fair values of oil and natural gas properties and the asset retirement obligation incurred in the drilling of oil and natural gas wells or assumed in the acquisitions of additional oil and natural gas working interests are based on an estimated discounted cash flow model and market assumptions. The assumptions used in the calculation of estimated discounted cash flows were primarily Level 3 assumptions; assumptions included future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development, operating and asset retirement costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates. Barnwell estimates the fair value of asset retirement obligations based on the projected discounted future cash outflows required to settle abandonment and restoration liabilities. Such an estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments. Abandonment and restoration cost estimates are determined in conjunction with Barnwell’s reserve engineers based on historical information regarding costs incurred to abandon and restore similar 19 well sites, information regarding current market conditions and costs, and knowledge of subject well sites and properties. Asset retirement obligation fair value measurements in the current period were Level 3 fair value measurements. 13. STOCKHOLDERS' EQUITY Restricted Stock Units On October 24, 2024, the Board of Directors of the Company granted a total of 105,820 restricted stock units to the independent directors of the Board as partial payment of director fees for their service as members of the Board. The restricted stock units vest ratably over a three-year period, subject to the director’s continued service through the applicable vesting date. The following table summarizes Barnwell’s restricted stock unit activity from October 1, 2024 through December 31, 2024: Restricted Stock Units Shares Weighted-Average Grant Date Fair Value Nonvested at October 1, 2024 110,892 $ 2.63 Granted 105,820 1.89 Vested — — Forfeited — — Nonvested at December 31, 2024 216,712 $ 2.27 Compensation cost for restricted stock unit awards is measured at fair value and is recognized as an expense over the requisite service period. During the three months ended December 31, 2024 and 2023, the Company recognized share-based compensation expense related to restricted stock units of $ 69,000 and $ 30,000 , respectively. As of December 31, 2024, the total remaining unrecognized compensation cost related to nonvested restricted stock units was $ 331,000 , which is expected to be recognized over the weighted-average remaining requisite service period of 1.7 years. 14. CONTINGENCIES Legal and Regulatory Matters Barnwell is routinely involved in disputes with third parties that occasionally require litigation. In addition, Barnwell is required to maintain compliance with all current governmental controls and regulations in the ordinary course of business. Barnwell’s management is not aware of any claims or litigation involving Barnwell that are likely to have a material adverse effect on its results of operations, financial position or liquidity. In fiscal 2020, the Staff of the State of Hawaii’s Commission on Water Resource Management (“Commission”) circulated a draft of a proposed recommendation to the Commission under which the Company, the water utility, the water utility's independent hydrologist firm and the owner of the land on which two water wells were drilled would be assessed penalty fines because each of the wells were calculated to have been drilled beyond the depth permitted by the permit. The wells were drilled to a depth to penetrate certain layers of impermeable rock necessary to access the aquifer at the instructions and on the advice of the hydrologist hired by the owner of the well. Subsequently, the Staff of the Commission 20 acknowledged that one well had not been drilled to a depth beyond its permitted depth and the fines on that well were eliminated. Additionally, the fines applicable to the depth of the second well were dropped in lieu of the parties entering into an agreement to perform a water quality study and repurpose a current well into a monitoring well. The liability related to this contingency was $ 200,000 at December 31, 2024 and September 30, 2024 and is included in “Accrued operating and other expenses” in the accompanying Condensed Consolidated Balance Sheets. It is unknown when this contingent liability related to the required drilling of the monitoring well in satisfaction of a regulatory assessment will be settled. 15. INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended December 31, 2024 2023 Supplemental disclosure of cash flow information: Cash paid during the year for: Income taxes paid $ 136,000 $ 44,000 Capital expenditure accruals related to oil and natural gas exploration and development decreased $ 2,215,000 and $ 523,000 during the three months ended December 31, 2024 and 2023, respectively. Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $ 32,000 and $ 115,000 during the three months ended December 31, 2024 and 2023, respectively. 16. RELATED PARTY TRANSACTIONS Kaupulehu Developments is entitled to receive payments from the sales of lots and/or residential units by KD I and KD II. KD I and KD II are part of the Kukio Resort Land Development Partnerships in which Barnwell holds indirect 19.6 % and 10.8 % non-controlling ownership interests, respectively, accounted for under the equity method of investment. The percentage of sales payments are part of transactions which took place in 2004 and 2006 where Kaupulehu Developments sold its leasehold interests in Increment I and Increment II to KD I's and KD II's predecessors in interest, respectively, which was prior to Barnwell’s affiliation with KD I and KD II which commenced on November 27, 2013, the acquisition date of our ownership interest in the Kukio Resort Land Development Partnerships. Changes to the arrangement above, effective March 7, 2019, are discussed in Note 4. 17. SUBSEQUENT EVENTS Restricted Stock Units In January 2025, the Company's Board of Directors (the “Board”) granted a total of 66,000 restricted stock units to the Company's President and Chief Executive Officer. The restricted stock units vest ratably over a three-year period, subject to the employee’s continued service through the applicable vesting dates. Limited-Duration Shareholder Rights Plan On January 26, 2025, the Board adopted a shareholder rights plan and declared a dividend of one 21 right (a “Right”) in respect of each of the Company’s issued and outstanding shares of common stock, par value $ 0.50 per share (“Common Stock”). The dividend is payable to the shareholders of record at the close of business on February 7, 2025. Each Right initially entitles the registered holder, subject to the terms of the Rights Agreement (as defined below), to purchase from the Company one share of Common Stock, at a price equal to $ 9.00 , subject to certain adjustments (as adjusted from time to time, the “Exercise Price”). The terms of the Rights are set forth in the Rights Agreement, dated as of January 26, 2025 (as it may be amended from time to time, the “Rights Agreement”), by and between the Company and Broadridge Corporate Issuer Solutions, LLC, as rights agent (or any successor rights agent, the “Rights Agent”). In general terms, the Rights Agreement imposes significant dilution upon any person or group (other than the Company or certain related persons) that is or becomes the beneficial owner of 20 % (the “Triggering Percentage”) or more of the Company’s outstanding Common Stock without the prior approval of the Board. A person or group that becomes the beneficial owner of the Triggering Percentage or more is called an “Acquiring Person.” Any Rights held by an Acquiring Person will be null and void and may not be exercised. Shareholders that beneficially own the Triggering Percentage or more of the Company’s outstanding Common Stock on the date the plan is adopted, are not considered Acquiring Persons; however, such Shareholders generally may not acquire, or obtain the right to acquire, beneficial ownership of 0.25 % or more additional shares of the Company’s outstanding Common Stock. The term “beneficial ownership” is defined in the Rights Agreement and includes, among other things, certain securities that may be exercised or converted into shares of Common Stock and certain derivative arrangements. The Rights will expire prior to the earliest of (i) the close of business on January 26, 2026 (subject to the shareholders of the Company approving an extension of the Rights Agreement through a date on or prior to January 26, 2028); (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement; (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement; and (iv) upon the occurrence of certain transactions. This description of the Rights Agreement herein does not purport to be complete and is qualified in its entirety by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 27, 2025. 22