What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2025-02-14 · 165 added, 84 removed, 115 unchanged (68% of the section changed)

13 unchanged sentences

Critical Accounting Policies and Estimates

Management has determined that our most critical accounting policies and estimates are those related to the full-cost ceiling calculation and depletion of our oil and natural gas properties, the estimation of our contract drilling segment's revenues and expenses, and the calculation of our income taxes, all of which are discussed in our 2024 Annual Report.

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

Management has determined that our most critical accounting policies and estimates are those related to the full-cost ceiling calculation and depletion of our oil and natural gas properties and the calculation of our income taxes, all of which are discussed in our 2024 Annual Report.

There have been no significant changes to these critical accounting policies and estimates during the three and six months ended March 31, 2025.

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

Current Outlook

Going Concern

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

Our ability to sustain our business in the future will depend on sufficient oil and natural gas operating cash flows, which are highly sensitive to potentially volatile oil and natural gas prices, timely repayment of the note receivable from the buyers of our contract drilling segment, and the amount and timing of costs incurred related to the shareholder consent solicitation and ongoing proxy contest.

sufficient level of such cash inflows are necessary to fund discretionary oil and natural gas capital expenditures, which must be economically successful to provide sufficient returns 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, but those sources may not be feasible or sufficient.

In addition, we will need sufficient cash flows to fund our non-discretionary outflows such as oil and natural gas asset retirement obligations and ongoing operating and general and administrative expenses.

Due to the recent shareholder consent solicitation and the ongoing proxy contest costs incurred and estimated to be incurred and the impacts of recently imposed tariffs which have caused a reduction in oil prices and have had an impact on the U.S.

economy as a whole, we now face a greater uncertainty about our oil and natural gas operating cash inflows as described above, which in turn limits our ability to make the required discretionary cash outflows for the capital expenditures necessary to convert our proved undeveloped reserves to proved developed reserves.

Furthermore, because of the greater uncertainty about our cash inflows described above, there is substantial doubt about our ability to fund our non-discretionary cash outflows and thus substantial doubt about our ability to continue as a going concern for one year from the date of the filing of this report.

The Company is investigating potential sources of funding, including debt financing, non-core oil and natural gas property sales and the partial or complete sale of its remaining interests in the Kukio Resort Land Development Partnerships, however, no probable timing or amounts of such funding have yet been secured.

Because of this uncertainty as well as uncertainties regarding the potential duration and depth of the impacts of recently legislated tariffs on the economy as a whole, which in turn affects oil prices and our business as described above, substantial doubt about our ability to continue as a going concern for one year from the date of the filing of this report exists.

These financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Impact of Recently Issued Accounting Standards on Future Filings

12 unchanged sentences

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.

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 within annual 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.

Barnwell is engaged in the following lines of business:

As disclosed in Note 3 “Discontinued Operations,” on March 14, 2025, the Company entered into and completed the sale of its wholly-owned subsidiary, Water Resources.

Water Resources drilled water wells and installed and repaired water pumping systems in Hawaii and represented our contract drilling segment.

As a result of the sale, the Company has classified the related assets and liabilities and the results of its contract drilling business as discontinued operations in the condensed consolidated financial statements for all periods presented.

Accordingly, Barnwell’s continuing operations is engaged in the following lines of business:

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

(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) and 2) leasehold land interests in Hawaii (land investment segment).

Oil and Natural Gas Segment

6 unchanged sentences

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.

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

of $3,000,000.

Such interests are limited to distributions or net profits interests and Barnwell does not have any partnership interest in KD II or KDK through its interest in Kaupulehu Developments.

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

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

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.

6 unchanged sentences

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

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

The Increment I deferred profit at March 31, 2025 for the Kukio Resort Land Development Partnerships as a whole was approximately $4,100,000;

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

6 unchanged sentences

The lease terminates in December 2025.

Contract Drilling Segment

Barnwell’s wholly-owned subsidiary, Water Resources International, Inc.

(“Water Resources”), drills water and water monitoring wells and installs and repairs water pumping systems in Hawaii.

Results of Operations

The net loss attributable to Barnwell for the three months ended December 31, 2024 totaled $1,917,000, a $1,253,000 decrease in operating results from net loss of $664,000 for the three months ended December 31, 2023.

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

• A $997,000 decrease in oil and natural gas segment operating results, before income taxes, primarily attributable to a $613,000 non-cash ceiling test impairment in the current year period and due to decreases in natural gas, oil, and natural gas liquids prices and production in the current year period as compared to the same period in the prior year;

• A $477,000 increase in negative impacts due to a $351,000 foreign currency loss recorded in the current period as compared to a $126,000 gain recorded in the prior year period due to the effects of foreign currency exchange rate changes on intercompany loans and advances as a result of changes in the U.S.

dollar against the Canadian dollar;

• Partially offsetting these decreases was a $123,000 decrease in general and administrative expenses primarily due to a decrease in professional fees in the current year period as compared to the same period in the prior year and a $14,000 credit loss recovery recorded in the current year period as compared to a $37,000 credit loss expense in the prior year period.

Summary of Results From Continuing Operations

The net loss from continuing operations attributable to Barnwell for the three months ended March 31, 2025 totaled $1,538,000, a $232,000 increase from a net loss from continuing operations attributable to Barnwell of $1,306,000 for the three months ended March 31, 2024.

The following factors affected the results of operations for the three months ended March 31, 2025 as compared to the prior year period:

• General and administrative expenses increased $906,000 due to $978,000 in new fees related to a shareholder consent solicitation and proxy contest in the current year period as compared to the same period in the prior year;

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

• A $1,625,000 decrease in the ceiling test impairment which was $1,677,000 in the prior year period compared to a ceiling test impairment of $52,000 in the current year period, and a $589,000 decrease in oil and natural gas depletion in the current year period as compared to the same period in the prior year, partially offset by a decrease in operating results primarily from decreased production.

The net loss from continuing operations attributable to Barnwell for the six months ended March 31, 2025 totaled $3,136,000, a $1,480,000 increase from a net loss from continuing operations attributable to Barnwell of $1,656,000 for the six months ended March 31, 2024.

The following factors affected the results of operations for the six months ended March 31, 2025 as compared to the prior year period:

• General and administrative expenses increased $749,000 due to $941,000 in new fees related to a shareholder consent solicitation and proxy contest, partially offset by a reduction in compensation costs in the current year period as compared to the same period in the prior year;

• A $1,012,000 decrease in the ceiling test impairment which was $1,677,000 in the prior year period compared to a ceiling test impairment of $665,000 in the current year period, and a $1,143,000 decrease in oil and natural gas depletion in the current year period as compared to the same period in the prior year, partially offset by a decrease in operating results primarily from decreased production.

Barnwell conducts operations in the U.S.

4 unchanged sentences

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

dollar decreased 3% in the three months ended December 31, 2024 as compared to the same period in the prior year, and the exchange rate of the Canadian dollar to the U.S.

dollar decreased 6% at December 31, 2024 as compared to September 30, 2024.

dollar decreased 6% and 4% in the three and six months ended March 31, 2025, respectively, as compared to the same periods in the prior year.

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

dollar decreased 6% at March 31, 2025, as compared to September 30, 2024.

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 income due to foreign currency translation adjustments, net of taxes, for the three months ended December 31, 2024 was $93,000, a $63,000 change from other comprehensive income due to foreign currency translation adjustments, net of taxes, of $30,000 for the same period in the prior year.

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

Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for the three months ended March 31, 2025 was $3,000, a $19,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $22,000 for the same period in the prior year.

Other comprehensive income due to foreign currency translation adjustments, net of taxes, for the six months ended March 31, 2025 was $90,000, a $82,000 change from other comprehensive income due to foreign currency translation adjustments, net of taxes, of $8,000 for the same period in the prior year.

There were no taxes on other comprehensive income (loss) due to foreign currency translation adjustments in the three and six months ended March 31, 2025 and 2024 due to a full valuation allowance on the related deferred tax asset.

Oil and Natural Gas

3 unchanged sentences

Three months ended Increase

December 31, (Decrease)

March 31, (Decrease)

2025 2024 $ %

2 unchanged sentences

Natural gas liquids (Bbls)** $ 32.43 $ 30.06 $ 2.37 8 %

Average Price Per Unit

Six months ended Increase

March 31, (Decrease)

2025 2024 $ %

Natural Gas (Mcf)* $ 1.43 $ 1.87 $ (0.44) (24 %)

Oil (Bbls)** $ 63.39 $ 64.09 $ (0.70) (1 %)

Natural gas liquids (Bbls)** $ 29.61 $ 29.60 $ 0.01 — %

Net Production

Three months ended Increase

December 31, (Decrease)

March 31, (Decrease)

2025 2024 Units %

2 unchanged sentences

Natural gas liquids (Bbls)** 14,000 16,000 (2,000) (13 %)

Net Production

Six months ended Increase

March 31, (Decrease)

2025 2024 Units %

Natural Gas (Mcf)* 551,000 713,000 (162,000) (23 %)

Oil (Bbls)** 91,000 108,000 (17,000) (16 %)

Natural gas liquids (Bbls)** 29,000 34,000 (5,000) (15 %)

_______________________________________

2 unchanged sentences

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

The oil and natural gas segment generated an $116,000 operating loss before general and administrative expenses in the three months ended December 31, 2024, a decrease in operating results of $997,000 as compared to a $881,000 operating profit before general and administrative expenses generated during the same period of the prior year.

The oil and natural gas segment generated a $752,000 operating profit before general and administrative expenses in the three months ended March 31, 2025, an increase in operating results of $1,957,000 as compared to the $1,205,000 operating loss before general and administrative expenses generated during the same period of the prior year primarily due to a decrease of $1,625,000 in the ceiling test impairment and a $589,000 decrease in oil and natural gas depletion in the current year period, partially offset by a decrease in operating results primarily from decreased production.

The oil and natural gas segment generated a $636,000 operating profit before general and administrative expenses in the six months ended March 31, 2025, an increase in operating results of $960,000 as compared to the $324,000 operating loss before general and administrative expenses generated during the same period of the prior year primarily due to a decrease of $1,012,000 in the ceiling test impairment and a $1,143,000 decrease in oil and natural gas depletion in the current year period, partially offset by a decrease in operating results primarily from decreased production.

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

Three months ended

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

Canada $ 402,000 $ 536,000

March 31, Six months ended

2025 2024 2025 2024

Operating profit (loss)

(before general and administrative expenses)

$ 653,000 $ (1,511,000) $ 1,055,000 $ (975,000)

United States (2)

99,000 306,000 (419,000) 651,000

Total operating (loss) profit $ (116,000) $ 881,000

Total operating profit (loss) $ 752,000 $ (1,205,000) $ 636,000 $ (324,000)

________________________

(1) The operating loss for the United States for the three months ended December 31, 2024 includes a non-cash ceiling test impairment of $613,000.

Oil and natural gas segment revenues decreased $1,233,000 (24%) for the three months ended December 31, 2024, as compared to the same period in the prior year, primarily due to decreases in oil, natural gas and natural gas liquids production, which decreased 17%, 21% and 17%, respectively, as compared to the same period in the prior year.

The decrease was also attributable to decreases in natural gas, oil, and natural gas liquids prices, which decreased 40%, 2%, and 8%, respectively, as compared to the same period in the prior year.

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

(2) The operating profit (loss) for the United States for the three and six months ended March 31, 2025 includes a non-cash ceiling test impairment of $52,000 and $665,000, respectively.

Oil and natural gas revenues decreased $601,000 (15%) and $1,834,000 (20%) for the three and six months ended March 31, 2025, respectively, as compared to the same periods in the prior year, primarily due to decreases in natural gas, oil, and natural gas liquids production in the current year periods as compared to the same periods in the prior year.

The decreases in production are primarily the result of natural declines as the wells age.

The production decreases were also partially due to properties sold and certain wells that were temporarily shut-in for workovers.

The Company's latest Canadian well drilled, which is 100%-owned and operated, started producing in mid-September 2024 and contributed approximately 107 net barrels of equivalent per day for a total of approximately 10,000 net barrels of equivalent during the three months ended December 31, 2024.

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 sold 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.

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 that will affect the period from January 1, 2025 to March 31, 2025, is equivalent to approximately 38% of Canadian natural gas gross production per day for the quarter ended December 31, 2024.

This per day volume of natural gas under this fixed index price contract was equivalent to approximately 39% of Canadian natural gas gross production per day for the six months ended March 31, 2025.

In February 2025, 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 April 1, 2025 to October 31, 2025 to a fixed index price before differentials of $1.95 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 that will affect the period from April 1, 2025 to June 30, 2025, is equivalent to approximately 39% of Canadian natural gas gross production per day for the six months ended March 31, 2025.

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 July 2024, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 100 gross barrels per day of the Canadian oil that it sold 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 was equivalent to approximately 17% of Canadian oil gross production per day for the quarter ended December 31, 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 segment operating expenses decreased $295,000 (11%) for the three months ended December 31, 2024, as compared to the same period in the prior year, due to lower production, partially offset by an increase in workovers and repair costs in the current year, as compared to the same period in the prior year.

Oil and natural gas segment depletion decreased $554,000 (38%) for the three months ended December 31, 2024, as compared to the prior year period.

The decrease was due to both a decrease in the depletion rate and a decrease in production.

The depletion rate decreased as a result of a decrease in the depletable base from significant ceiling test impairments between the prior year period and the current year period.

Contract drilling

The contract drilling segment generated a $201,000 operating loss before general and administrative expenses in the three months ended December 31, 2024, an increase in operating results of $27,000 as compared to a $228,000 operating loss during the same period of the prior year.

Contract drilling revenues and contract drilling costs decreased $450,000 (45%) and $449,000 (38%), respectively, for the three months ended December 31, 2024, as compared to the same period in the prior year.

These decreases were primarily due to less activity in the current year period as compared to the same period in the prior year.

The contract drilling segment worked on only one water well drilling job in the current year period, as compared to three water well drilling jobs and one pump installation job in the prior year period.

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, which are all fully depreciated, 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.

In February 2025, the drilling rig 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 in the quarter ending March 31, 2025.

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 December 31, 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 14 in the “Notes to Consolidated Financial Statements” of this report).

Oil and natural gas operating expenses decreased $344,000 (15%) and $639,000 (12%) for the three and six months ended March 31, 2025, respectively, as compared to the same periods in the prior year, primarily due decreases in production in the current year periods as compared to the same periods in the prior year.

Additionally, the decrease in oil and natural gas operating expenses for the six months ended March 31, 2025, was partially offset by an increase in workovers in the current year period, as compared to the same period in the prior year.

Oil and natural gas segment depletion decreased $589,000 (44%) and $1,143,000 (41%) for the three and six months ended March 31, 2025, respectively, as compared to the same periods in the prior year.

The decreases were due to decreases in the depletion rate and due to decreases in production in the current year periods as compared to the same periods in the prior year.

The depletion rate decreased as a result of a decrease in the depletable base from significant ceiling test impairments between the prior year periods and the current year periods.

Sale of Interest in Leasehold Land

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:

Three months ended

March 31, Six months ended

2025 2024 2025 2024

Sale of interest in leasehold land:

Revenues - sale of interest in leasehold land $ — $ 500,000 $ — $ 500,000

Fees - included in general and administrative expenses — (61,000) — (61,000)

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

No lots were sold during the three and six months ended March 31, 2025.

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

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.

General and Administrative Expenses

General and administrative expenses decreased $123,000 (9%) for the three months ended December 31, 2024, as compared to the same period in the prior year.

The decrease was due to a decrease in professional fees in the current year period as compared to the same period in the prior year and a $14,000 credit loss recovery recorded in the current year period as compared to a $37,000 credit loss expense in the prior year period.

General and administrative expenses increased $906,000 (72%) for the three months ended March 31, 2025 as compared to the same period in the prior year.

The increase was due to $978,000 in new fees for legal services, proxy solicitation, proxy advisory, and public relations costs related to a shareholder consent solicitation and proxy contest in the current year period as compared to the same period in the prior year.

The increase was partially offset by decreases in compensation and other costs in the current year period as compared to the same period in the prior year.

General and administrative expenses increased $749,000 (29%) for the six months ended March 31, 2025 as compared to the same period in the prior year.

The increase was due to $941,000 in new fees for legal services, proxy solicitation, proxy advisory, and public relations costs related to a shareholder consent solicitation and proxy contest in the current year period as compared to the same period in the prior year.

The increase was partially offset by decreases in compensation and other costs in the current year period as compared to the same period in the prior year.

The aforementioned shareholder proxy contest is continuing as of the date of this report and thus related costs will continue to be incurred until the matter is resolved.

Accordingly, general and administrative expenses will continue to be affected by this matter beyond March 31, 2025.

The Company is unable to estimate the amount of such future costs as the matter is ongoing and such costs will depend upon the future actions to be taken, which are yet to be determined.

Depletion, Depreciation, and Amortization

Depletion, depreciation, and amortization decreased $583,000 (39%) for the three months ended December 31, 2024, as compared to the same period in the prior year, primarily due to both a decrease in the depletion rate and a decrease in production, as discussed in the “Oil and natural gas” section above.

Depletion, depreciation, and amortization decreased $588,000 (44%) and $1,143,000 (41%) for the three and six months ended March 31, 2025, respectively, as compared to the same periods in the prior year, primarily due to decreases in the depletion rate and decreases in production, as discussed in the “Oil and natural gas” section above.

Impairment of Assets

1 unchanged sentence

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 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.

During the three and six months ended March 31, 2025, the Company incurred a non-cash ceiling test impairment for our U.S.

oil and natural gas properties of $52,000 and $665,000, respectively.

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

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.

Foreign currency loss (gain)

During the three months ended December 31, 2024 and 2023, there was a $351,000 foreign currency loss and a $126,000 foreign currency gain, respectively, due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of changes in the exchange rate between the U.S.

Based on the oil and gas prices for April 1 and May 1 of 2025, 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 June 30, 2025 will be lower than at March 31, 2025.

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

full cost pool had no ceiling excess at March 31, 2025, and thus a further impairment charge is more likely than not for our U.S full cost pool in the quarter ending June 30, 2025.

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 June 2025.

Foreign Currency (Gain) Loss

During the three and six months ended March 31, 2025, there was a $10,000 foreign currency gain and a $341,000 foreign currency loss, respectively, as compared to foreign currency losses of $128,000 and $2,000 during the three and six months ended March 31, 2024, respectively, due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of changes in the exchange rate between the U.S.

dollar against the Canadian dollar.

The foreign currency losses or gains from intercompany balances are included in our 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.

Barnwell’s effective consolidated income tax rate for the three months ended December 31, 2024, after adjusting loss before income taxes for non-controlling interests, was nil, as compared to an effective income tax rate of (11)% for the three months ended December 31, 2023.

The foreign currency losses or gains from intercompany balances are included in our condensed 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.

Equity in Income of Affiliates

Equity in income of affiliates was nil for the three and six months ended March 31, 2025, as compared to equity in income of affiliates of $1,071,000 for the three and six months ended March 31, 2024.

The decrease in partnership income is primarily due to the Kukio Resort Land Development Partnerships' sale of the last two lots in Increment I in the prior year period, whereas there were no lots sold in the current year period.

No cash distributions were received during the three and six months ended March 31, 2025.

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

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

The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnerships’ cumulative earnings in excess of distributions during the suspended period exceeds our share of the Kukio Resort Land Development Partnerships’ income recognized for the excess distributions, and during this suspended period any distributions received will be recorded as equity in income of affiliates.

Accordingly, no equity in income of affiliates was recognized in the six months ended March 31, 2025.

Cumulative distributions received from the Kukio Resort Land Development Partnerships in excess of our investment balance was $31,000 at March 31, 2025 and $373,000 at September 30, 2024.

Barnwell’s effective consolidated income tax rate from continuing operations, after adjusting loss from continuing operations before income taxes for non-controlling interests, was (12)% and (6)% for the three and six months ended March 31, 2025, respectively, as compared to (8)% and (11)% for the three and six months ended March 31, 2024, respectively.

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

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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.

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.

Net Earnings Attributable to Non-controlling Interests

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

Net loss attributable to non-controlling interests totaled nil and $2,000 for the three and six months ended March 31, 2025, respectively, as compared to net earnings attributable to non-controlling interests of $222,000 and $224,000 for the same periods in the prior year.

The changes of $222,000 (100%) and $226,000 ( 101%) for the three and six months, respectively, are primarily due to decreases in the amount of equity in income of affiliates and percentage of sales revenues received in the current year periods as compared to the same periods in the prior year.

Net Earnings (Loss) From Discontinued Operations

Net earnings from discontinued operations was $331,000 and $12,000 during the three and six months ended March 31, 2025, respectively, as compared to net loss from discontinued operations of $466,000 and $780,000 during the three and six months ended March 31, 2024, respectively.

On March 14, 2025, the Company completed the sale of Water Resources, which represented the Company’s contract drilling segment.

The financial results of the Company’s contract drilling business has been presented as discontinued operations in the condensed consolidated financial statements for all periods presented.

See Note 3 “Discontinued Operations” for further discussion and additional disclosures related to discontinued operations.

Liquidity and Capital Resources

At December 31, 2024, Barnwell had $642,000 in working capital.

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

In recent years, the Company generated a significant amount of cash inflows from its land investment segment, however, 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, but those sources may not be feasible or sufficient.

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 used in operating activities totaled $759,000 for the three months ended December 31, 2024, as compared to cash flows provided by operating activities of $1,375,000 for the three months ended December 31, 2023.

This $2,134,000 change in operating cash flows was primarily due to changes in working capital and lower operating results for the oil and natural gas segment in the current year period as compared to the same period in the prior year.

The adjustment in operating cash flows due to the effect of changes in current assets and liabilities was a decrease of $793,000 in the current year period as compared to an increase of $606,000 in the prior year period.

Cash flows used in investing activities totaled $1,662,000 during the three months ended December 31, 2024, as compared to cash flows used in investing activities of $1,019,000 during the same period of the prior year.

This $643,000 change in investing cash flows was due to $1,511,000 more in cash

paid for investments in oil and natural gas properties in the current year as compared to the same period in the prior year, partially offset by a $585,000 deposit received for a pending sale of a contract drilling segment drilling rig and $282,000 of proceeds from the sale of oil and natural gas properties in Canada in the current year period;

The Company has presented cash flows from discontinued operations in the accompanying Condensed Consolidated Statement of Cash Flows separately after the presentation of cash flows from operating, investing, and financing activities of continuing operations.

See Note 3 “Discontinued Operations” for further discussion and additional disclosures related to discontinued operations.

The focus of this section, “Liquidity and Capital Resources,” is on the cash flows from continuing operations, which affects future liquidity and capital resources as the Company no longer has any significant continuing involvement with the discontinued operations after the sale.

At March 31, 2025, Barnwell had a working capital deficit of $57,000.

Cash Flows From Continuing Operations

Cash flows used in continuing operations totaled $854,000 for the six months ended March 31, 2025, as compared to cash flows provided by continuing operations of $3,000,000 for the same period in the prior year.

This $3,854,000 decrease in operating cash flows was primarily due to lower operating results for the oil and natural gas segment in the current year period as compared to the same period in the

prior year, and a distribution of income from the Kukio Resort Land Development Partnerships in the prior year period as compared to none in the current year period.

The change was also due to the effect of changes in current assets and liabilities, which was a decrease in operating cash flows of $423,000 in the current year period as compared to an increase of $333,000 in the prior year period.

Cash flows used in investing activities from continuing operations totaled $2,272,000 during the six months ended March 31, 2025, as compared to cash flows used in investing activities from continuing operations of $1,185,000 during the same period of the prior year.

This $1,087,000 change in investing cash flows was due to $1,017,000 more in cash paid for investments in oil and natural gas properties and $163,000 in cash divested from the sale of discontinued operations, net of proceeds, in the current year as compared to the same period in the prior year, partially offset by a $250,000 dividend received from discontinued operations and $282,000 of proceeds from the sale of oil and natural gas properties in Canada in the current year period;

there were no such amounts in the same period of the prior year.

In addition, there was $439,000 of proceeds received by the land investment segment in the prior year period, as compared to none in the current year period.

Cash flows used in financing activities from continuing operations totaled $15,000 for the six months ended March 31, 2025, as compared to cash flows used in financing activities from continuing operations of $223,000 for the six months ended March 31, 2024.

The $208,000 change in financing cash flows was due to a decrease of $223,000 in distributions to non-controlling interests, partially offset by $15,000 in repayments for insurance premium financing in the current year period as compared to none the same period in the prior year.

Going Concern

A sufficient level of such cash inflows are necessary to fund discretionary oil and natural gas capital expenditures, which must be economically successful to provide sufficient returns 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, but those sources may not be feasible or sufficient.

Furthermore, because of the greater uncertainty about our cash inflows described above, there is substantial doubt about our ability to fund our non-discretionary

cash outflows and thus substantial doubt about our ability to continue as a going concern for one year from the date of the filing of this report.

These financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Oil and Natural Gas Capital Expenditures

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and excluding additions and revisions to estimated asset retirement obligations, totaled $314,000 for the three months ended December 31, 2024, as compared to $495,000 for the same period in the prior year.

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and excluding acquisitions and additions and revisions to estimated asset retirement obligations, totaled $68,000 and $382,000 for the three and six months ended March 31, 2025, respectively, as compared to $560,000 and $1,055,000 for the same periods in the prior year.

Barnwell estimates that investments in oil and natural gas properties for fiscal 2025 will range from $500,000 to $1,000,000.

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Oil and Natural Gas Property Dispositions

There were no significant oil and natural gas property dispositions during the three months ended December 31, 2024.

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.

There were no significant oil and natural gas property dispositions during the six months ended March 31, 2025.

The $282,000 of proceeds from sale of oil and natural gas properties included in the Condensed Consolidated Statement of Cash Flows for the six months ended March 31, 2025 represents proceeds that were credited to our cash in October 2024 from a sale of properties that closed in late September 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis