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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q 
              Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2024
or
              Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 1-5103 
BARNWELL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter) 
Delaware72-0496921
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1100 Alakea Street, Suite 500, Honolulu, Hawaii
96813
(Address of principal executive offices)(Zip code)
(808) 531-8400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
 Common Stock, $0.50 par valueBRNNYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     ☒ Yes   ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).           Yes   ☒ No
 
As of May 13, 2024 there were 10,028,090 shares of common stock, par value $0.50, outstanding.



BARNWELL INDUSTRIES, INC.
AND SUBSIDIARIES
 
INDEX 
 
 
 
 
 
 6
 
 
 
 




PART I - FINANCIAL INFORMATION


ITEM 1.    FINANCIAL STATEMENTS

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,
2024
September 30,
2023
ASSETS  
Current assets:
Cash and cash equivalents$3,685,000 $2,830,000 
Accounts and other receivables, net of allowance for credit losses of:
   $339,000 at March 31, 2024; $284,000 at September 30, 2023
3,385,000 3,246,000 
Assets held for sale69,000  
Other current assets2,507,000 3,009,000 
Total current assets9,646,000 9,085,000 
Asset for retirement benefits4,649,000 4,471,000 
Operating lease right-of-use assets79,000 54,000 
Property and equipment:
Proved oil and natural gas properties (full cost method)82,118,000 80,851,000 
Drilling rigs and other property and equipment3,752,000 7,223,000 
Total property and equipment85,870,000 88,074,000 
Accumulated depletion, impairment, depreciation, and amortization(67,462,000)(66,263,000)
Total property and equipment, net18,408,000 21,811,000 
Total assets$32,782,000 $35,421,000 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $1,257,000 $881,000 
Accrued capital expenditures528,000 1,099,000 
Accrued compensation396,000 726,000 
Accrued operating and other expenses1,671,000 1,747,000 
Current portion of asset retirement obligation1,828,000 1,536,000 
Other current liabilities634,000 609,000 
Total current liabilities6,314,000 6,598,000 
Operating lease liabilities25,000 47,000 
Liability for retirement benefits1,710,000 1,664,000 
Asset retirement obligation8,226,000 8,297,000 
Deferred income tax liabilities109,000 58,000 
Total liabilities16,384,000 16,664,000 
Commitments and contingencies
Equity:
Common stock, par value $0.50 per share; authorized, 40,000,000 shares:
    10,195,990 issued at March 31, 2024; 10,158,678 issued at September 30, 2023
5,098,000 5,079,000 
Additional paid-in capital7,779,000 7,687,000 
Retained earnings3,724,000 6,160,000 
Accumulated other comprehensive income, net2,069,000 2,104,000 
Treasury stock, at cost: 167,900 shares at March 31, 2024 and September 30, 2023
(2,286,000)(2,286,000)
Total stockholders’ equity
16,384,000 18,744,000 
Non-controlling interests14,000 13,000 
Total equity16,398,000 18,757,000 
Total liabilities and equity$32,782,000 $35,421,000 

See Notes to Condensed Consolidated Financial Statements
3


BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended
March 31,
Six months ended
March 31,
 2024202320242023
Revenues:  
Oil and natural gas$4,144,000 $3,686,000 $9,274,000 $8,912,000 
Contract drilling1,070,000 1,501,000 2,063,000 3,449,000 
Sale of interest in leasehold land500,000  500,000 265,000 
Gas processing and other60,000 52,000 92,000 124,000 
 5,774,000 5,239,000 11,929,000 12,750,000 
Costs and expenses:  
Oil and natural gas operating2,330,000 2,267,000 5,121,000 4,711,000 
Contract drilling operating1,387,000 1,401,000 2,556,000 3,258,000 
General and administrative1,381,000 2,050,000 2,785,000 4,299,000 
Depletion, depreciation, and amortization1,392,000 761,000 2,903,000 1,601,000 
Impairment of assets1,677,000  1,677,000  
Foreign currency loss (gain)128,000 (2,000)2,000 (80,000)
Interest expense  2,000  
Gain on sale of assets   (551,000)
 8,295,000 6,477,000 15,046,000 13,238,000 
Loss before equity in income of affiliates and income taxes(2,521,000)(1,238,000)(3,117,000)(488,000)
Equity in income of affiliates1,071,000  1,071,000 538,000 
(Loss) earnings before income taxes(1,450,000)(1,238,000)(2,046,000)50,000 
Income tax provision (benefit)100,000 (3,000)166,000 76,000 
Net loss(1,550,000)(1,235,000)(2,212,000)(26,000)
Less: Net earnings attributable to non-controlling interests222,000 2,000 224,000 122,000 
Net loss attributable to Barnwell Industries, Inc.$(1,772,000)$(1,237,000)$(2,436,000)$(148,000)
Basic and diluted net loss per common share attributable to Barnwell Industries, Inc. stockholders$(0.18)$(0.12)$(0.24)$(0.01)
Weighted-average number of common shares outstanding:  
Basic and diluted10,019,172 9,956,687 10,007,905 9,956,687 
 
See Notes to Condensed Consolidated Financial Statements

4


BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
Three months ended
March 31,
Six months ended
March 31,
 2024202320242023
Net loss$(1,550,000)$(1,235,000)$(2,212,000)$(26,000)
Other comprehensive (loss) income:  
Foreign currency translation adjustments, net of taxes of $0
(22,000) 8,000 2,000 
Retirement plans:
Amortization of accumulated other comprehensive gain into net periodic benefit cost, net of taxes of $0
(22,000)(20,000)(43,000)(40,000)
Total other comprehensive loss(44,000)(20,000)(35,000)(38,000)
Total comprehensive loss(1,594,000)(1,255,000)(2,247,000)(64,000)
Less: Comprehensive income attributable to non-controlling interests(222,000)(2,000)(224,000)(122,000)
Comprehensive loss attributable to Barnwell Industries, Inc.$(1,816,000)$(1,257,000)$(2,471,000)$(186,000)
 
See Notes to Condensed Consolidated Financial Statements

5


BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Three months ended March 31, 2024 and 2023
(Unaudited)
 
Shares
Outstanding
Common
Stock
Additional
Paid-In
Capital
Retained EarningsAccumulated
Other
Comprehensive Income
Treasury
Stock
Non-controlling
Interests
Total
Equity
Balance at December 31, 20229,956,687 $5,062,000 $7,466,000 $8,660,000 $1,276,000 $(2,286,000)$32,000 $20,210,000 
Net (loss) earnings— — — (1,237,000)— — 2,000 (1,235,000)
Distributions to non-controlling interests— — — — — — (16,000)(16,000)
Share-based compensation— — 75,000— — — — 75,000
Dividends declared, $0.015 per share
— — — (150,000)— — — (150,000)
Retirement plans:
Amortization of accumulated other comprehensive gain into net periodic benefit cost, net of taxes of $0
— — — — (20,000)— — (20,000)
Balance at March 31, 20239,956,687 $5,062,000 $7,541,000 $7,273,000 $1,256,000 $(2,286,000)$18,000 $18,864,000 
Balance at December 31, 202310,000,106 $5,084,000 $7,747,000 $5,496,000 $2,113,000 $(2,286,000)$11,000 $18,165,000 
Net (loss) earnings — — — (1,772,000)— — 222,000 (1,550,000)
Foreign currency translation adjustments, net of taxes of $0
— — — — (22,000)— — (22,000)
Distributions to non-controlling interests— — — — — — (219,000)(219,000)
Share-based compensation— — 46,000— — — — 46,000
Issuance of common stock for restricted stock unites vested27,984 14,000 (14,000)— — — —  
Retirement plans:
Amortization of accumulated other comprehensive gain into net periodic benefit cost, net of taxes of $0
— — — — (22,000)— — (22,000)
Balance at March 31, 202410,028,090 $5,098,000 $7,779,000 $3,724,000 $2,069,000 $(2,286,000)$14,000 $16,398,000 

See Notes to Condensed Consolidated Financial Statements

6


BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Six months ended March 31, 2024 and 2023
(Unaudited)
 
Shares
Outstanding
Common
Stock
Additional
Paid-In
Capital
Retained EarningsAccumulated
Other
Comprehensive Income
Treasury
Stock
Non-controlling
Interests
Total
Equity
Balance at September 30, 20229,956,687 $5,062,000 $7,351,000 $7,720,000 $1,294,000 $(2,286,000)$20,000 $19,161,000 
Net (loss) earnings— — — (148,000)— — 122,000 (26,000)
Foreign currency translation adjustments, net of taxes of $0
— — — — 2,000 — — 2,000 
Distributions to non-controlling interests— — — — — — (124,000)(124,000)
Share-based compensation— — 190,000 — — — — 190,000 
Dividends declared, $0.030 per share
— — — (299,000)— — — (299,000)
Retirement plans:
Amortization of accumulated other comprehensive gain into net periodic benefit cost, net of taxes of $0
— — — — (40,000)— — (40,000)
Balance at March 31, 20239,956,687 $5,062,000 $7,541,000 $7,273,000 $1,256,000 $(2,286,000)$18,000 $18,864,000 
Balance at September 30, 20239,990,778 $5,079,000 $7,687,000 $6,160,000 $2,104,000 $(2,286,000)$13,000 $18,757,000 
Net (loss) earnings — — — (2,436,000)— — 224,000 (2,212,000)
Foreign currency translation adjustments, net of taxes of $0
— — — — 8,000 — — 8,000 
Distributions to non-controlling interests— — — — — — (223,000)(223,000)
Share-based compensation— — 111,000— — — — 111,000
Issuance of common stock for restricted stock unites vested37,312 19,000 (19,000)— — — —  
Retirement plans:
Amortization of accumulated other comprehensive gain into net periodic benefit cost, net of taxes of $0
— — — — (43,000)— — (43,000)
Balance at March 31, 202410,028,090 $5,098,000 $7,779,000 $3,724,000 $2,069,000 $(2,286,000)$14,000 $16,398,000 

See Notes to Condensed Consolidated Financial Statements

7


BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
Six months ended
March 31,
 20242023
Cash flows from operating activities:  
Net loss$(2,212,000)$(26,000)
Adjustments to reconcile net loss to net cash  
provided by operating activities:  
Equity in income of affiliates(1,071,000)(538,000)
Depletion, depreciation, and amortization2,903,000 1,601,000 
Impairment of assets1,677,000  
Gain on sale of assets (551,000)
Sale of interest in leasehold land, net of fees paid(439,000)(233,000)
Distributions of income from equity investees1,071,000 319,000 
Retirement benefits income(173,000)(126,000)
Non-cash rent income(13,000)(12,000)
Accretion of asset retirement obligation434,000 395,000 
Deferred income tax expense (benefit)51,000 (57,000)
Asset retirement obligation payments(396,000)(529,000)
Share-based compensation expense111,000 190,000 
Retirement plan contributions and payments(2,000)(2,000)
Credit loss expense46,000 18,000 
Foreign currency loss (gain)2,000 (80,000)
Increase from changes in current assets and liabilities273,000 365,000 
Net cash provided by operating activities2,262,000 734,000 
Cash flows from investing activities: 
Distribution from equity investees in excess of earnings 219,000 
Proceeds from sale of interest in leasehold land, net of fees paid439,000 233,000 
Capital expenditures - oil and natural gas(1,624,000)(7,306,000)
Capital expenditures - all other(1,000)(35,000)
Advances to operators for capital expenditures (481,000)
Net cash used in investing activities(1,186,000)(7,370,000)
Cash flows from financing activities:  
Distributions to non-controlling interests(223,000)(124,000)
Payment of dividends (299,000)
Net cash used in financing activities(223,000)(423,000)
Effect of exchange rate changes on cash and cash equivalents2,000 34,000 
Net increase (decrease) in cash and cash equivalents855,000 (7,025,000)
Cash and cash equivalents at beginning of period2,830,000 12,804,000 
Cash and cash equivalents at end of period$3,685,000 $5,779,000 
 
See Notes to Condensed Consolidated Financial Statements
8


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), a 75%-owned land investment partnership (KD Kona 2013 LLLP), and a variable interest entity (Teton Barnwell Fund I, LLC) for which the Company is deemed to be the primary beneficiary. 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, 2023 Annual Report on Form 10-K, as amended by our Form 10-K/A Amendment No. 1 (our “2023 Annual Report”). The Condensed Consolidated Balance Sheet as of September 30, 2023 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 March 31, 2024, results of operations, comprehensive loss, and equity for the three and six months ended March 31, 2024 and 2023, and cash flows for the six months ended March 31, 2024 and 2023, have been made. The results of operations for the period ended March 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
9


valuation of deferred tax assets, asset retirement obligations, contract drilling estimated costs to complete, proved oil and natural gas reserves, and the carrying value of other assets, and such assumptions may impact the amount at which such items are recorded.

Significant Accounting Policies

Other than as set forth below, 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 2023 Annual Report.

Accounts and Other Receivables

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for credit losses is Barnwell’s best estimate of the amount of current expected credit losses in Barnwell’s existing accounts receivable and is based on the aging of the receivable balances, analysis of historical credit loss rates, and current and future economic conditions affecting collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Barnwell does not have any off-balance sheet credit exposure related to its customers.

Derivative Instruments

Barnwell utilizes physical forward commodity contracts to mitigate market price risk on its oil and natural gas output when deemed appropriate. Purchase and sale contracts with a fixed price determined at inception are recorded on the consolidated balance sheet as derivative financial instruments if such contracts are readily convertible to cash - unless the contracts are eligible for and elected as the normal purchases and normal sales exception (“NPNS”); in which case, the contracts are recorded on an accrual basis and the Company recognizes the amounts relating to such transactions during the period when the commodities are physically delivered. The Company generally applies the NPNS exception to eligible oil and natural gas contracts to purchase or sell quantities it expects to use or sell in the normal course of business. The Company has not traded in any derivative contracts other than where the NPNS exception is applied, and it does not apply hedge accounting.
 
Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss model with an expected loss model referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables. The FASB has subsequently issued other related ASUs which amend ASU 2016-13 to provide clarification and additional guidance. The Company adopted the provisions of this ASU effective October 1, 2023. The adoption of this update did not have an impact on Barnwell’s consolidated financial statements.

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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 76,336 restricted stock units were excluded from the computation of diluted shares for the three and six months ended March 31, 2024, as their inclusion would have been anti-dilutive. Options to purchase 615,000 shares of common stock were excluded from the computation of diluted shares for the three and six months ended March 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 March 31, 2024
 Net Loss
(Numerator)
Shares
(Denominator)
Per-Share
Amount
Basic
$(1,772,000)10,019,172 $(0.18)
Effect of dilutive securities -   
common stock options and restricted stock units   
Diluted
$(1,772,000)10,019,172 $(0.18)
 Six months ended March 31, 2024
 Net Loss
(Numerator)
Shares
(Denominator)
Per-Share
Amount
Basic
$(2,436,000)10,007,905 $(0.24)
Effect of dilutive securities -   
common stock options and restricted stock units   
Diluted
$(2,436,000)10,007,905 $(0.24)
 Three months ended March 31, 2023
 Net Loss
(Numerator)
Shares
(Denominator)
Per-Share
Amount
Basic
$(1,237,000)9,956,687 $(0.12)
Effect of dilutive securities -   
common stock options   
Diluted
$(1,237,000)9,956,687 $(0.12)
11


 Six months ended March 31, 2023
 Net Loss
(Numerator)
Shares
(Denominator)
Per-Share
Amount
Basic
$(148,000)9,956,687 $(0.01)
Effect of dilutive securities -   
common stock options   
Diluted
$(148,000)9,956,687 $(0.01)

3.    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 sales by the real estate sales office and revenues resulting from the sale of private club memberships. During the three months ended March 31, 2024, the last two remaining single-family lots of the 80 lots developed within Increment I were sold.

Increment II is not yet under development, and there is no assurance that development of such acreage will occur. No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report.

    Barnwell has the right to receive distributions from the Kukio Resort Land Development Partnerships via its non-controlling interest in KD Kona and KKM, based on its respective partnership sharing ratios of 75% and 34.45%, respectively. 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.
12


No cash distributions were received during the three months ended March 31, 2023. During the six months ended March 31, 2023, Barnwell received cash distributions of $538,000 from the Kukio Resort Land Development Partnerships resulting in a net amount of $478,000 after distributing $60,000 to non-controlling interests.

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

Summarized financial information for the Kukio Resort Land Development Partnerships is as follows:
Three months ended March 31,
20242023
Revenue$10,153,000 $1,284,000 
Gross profit$7,329,000 $738,000 
Net earnings (loss)$6,658,000 $(82,000)
Six months ended March 31,
20242023
Revenue$12,039,000 $4,996,000 
Gross profit$8,146,000 $3,160,000 
Net earnings$7,012,000 $1,225,000 

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 Partnerships investment balance was reduced to zero with the distributions received in excess of our investment balance recorded as equity in income of affiliates because the distributions are not refundable by agreement or by law and the Company is not liable for the obligations of or otherwise committed to provide financial support to the Kukio Resort Land Development Partnerships. The Company will record future equity method earnings only after our share of the Kukio Resort Land Development Partnerships’ cumulative earnings in excess of distributions during the suspended period exceeds our share of the Kukio Resort Land Development Partnerships’ income recognized for the excess distributions, and during this suspended period any distributions received will be recorded as equity in income of affiliates. Accordingly, the amount of equity in income of affiliates recognized in the six months ended March 31, 2024 was equivalent to the $1,071,000 of distributions received in that period.

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

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).
 
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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. During the three months ended March 31, 2024, the last two remaining single-family lots of the 80 lots developed within Increment I were sold.

    The following table summarizes the Increment I revenues from KD I and the amount of fees directly related to such revenues:
 Three months ended
March 31,
Six months ended
March 31,
 2024202320242023
Sale of interest in leasehold land:  
Revenues - sale of interest in leasehold land$500,000 $ $500,000 $265,000 
Fees - included in general and administrative expenses(61,000) (61,000)(32,000)
Sale of interest in leasehold land, net of fees paid$439,000 $ $439,000 $233,000 

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.

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. 

4.    CONSOLIDATED VARIABLE INTEREST ENTITY
 
In February 2021, Barnwell Industries, Inc. established a new wholly-owned subsidiary named BOK Drilling, LLC (“BOK”) for the purpose of indirectly investing in oil and natural gas exploration and development in Oklahoma. BOK and Gros Ventre Partners, LLC (“Gros Ventre”) entered into the Limited Liability Agreement (the “Teton Operating Agreement”) of Teton Barnwell Fund I, LLC (“Teton Barnwell”), an entity formed for the purpose of directly entering into such oil and natural gas investments. Under the terms of the Teton Operating Agreement, the profits of Teton Barnwell are split between BOK and Gros Ventre at 98% and 2%, respectively, and as the manager of Teton Barnwell, Gros Ventre is paid an annual asset management fee equal to 1% of the cumulative capital contributions made to Teton Barnwell as compensation for its management services. BOK is responsible for 100% of the capital contributions made to Teton Barnwell.

The Company has determined that Teton Barnwell is a variable interest entity (“VIE”) as the entity is structured with non-substantive voting rights and that the Company is the primary beneficiary. This is due to the fact that even though Teton Barnwell has a unanimous consent voting structure, BOK is responsible for 100% of the capital contributions required to fund Teton Barnwell’s future oil exploration and development investments pursuant to the Teton Operating Agreement and thus, BOK has the power to steer the decisions that most significantly impact Teton Barnwell’s economic performance and has the
14


obligation to absorb any potential losses that could be significant to Teton Barnwell. As BOK is the primary beneficiary of the VIE, Teton Barnwell’s operating results, assets and liabilities are consolidated by the Company.

The following table summarizes the carrying value of the assets and liabilities of Teton Barnwell that are consolidated by the Company. Intercompany balances are eliminated in consolidation and, thus, are not reflected in the table below.
March 31,
2024
September 30,
2023
ASSETS 
Cash and cash equivalents$19,000 $83,000 
Accounts and other receivables213,000 175,000 
Property and equipment:
Proved oil and natural gas properties, net (full cost method)501,000 544,000 
Total assets$733,000 $802,000 
LIABILITIES
Accounts payable $10,000 $10,000 
Accrued operating and other expenses19,000 15,000 
Total liabilities$29,000 $25,000 

5.    ASSETS HELD FOR SALE

Contract Drilling Segment Property and Equipment

During 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 property and equipment deemed necessary to complete the contract drilling segment's contracts in backlog will continue to be classified as held and used.

6.    OIL AND NATURAL GAS PROPERTIES

Investments and Acquisitions

In December 2022, Barnwell Texas, LLC (“Barnwell Texas”), a new wholly-owned subsidiary of the Company, entered into a purchase and sale agreement with an independent third party whereby Barnwell Texas acquired a 22.3% non-operated working interest in oil and natural gas leasehold acreage in the Permian Basin in Texas for cash consideration of $806,000. Additionally, in connection with the purchase of such leasehold interests, Barnwell Texas acquired a 15.4% non-operated working interest in two oil wells in the Wolfcamp Formation in Loving and Ward Counties, Texas and had paid $4,293,000 for its share of the costs to drill, complete, and equip the wells in the six months ended March 31, 2023.

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. During the three and six months ended March 31, 2024, the Company incurred a
15


non-cash ceiling test impairment for our Canadian oil and natural gas properties of $1,677,000. There was no ceiling test impairment during the three and six months ended March 31, 2023.

Changes in the 12-month rolling average first-day-of-the-month prices for oil, natural gas and natural gas liquids prices, the value of reserve additions as compared to the amount of capital expenditures to obtain them, and changes in production rates and estimated levels of reserves, future development costs and the market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties. If oil and natural gas prices decline sufficiently from the 12-month historical rolling average first-day-of-the-month prices used in the ceiling test at March 31, 2024, it is more likely than not that the Company will incur further impairment write-downs in future periods in the absence of any offsetting factors that are not currently known or projected.

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 tables detail the components of net periodic benefit (income) cost for Barnwell’s retirement plans:
 Pension PlanSERP
 Three months ended March 31,
 2024202320242023
Interest cost$102,000 $101,000 $24,000 $22,000 
Expected return on plan assets(191,000)(166,000)  
Amortization of net actuarial gain  (22,000)(20,000)
Net periodic benefit (income) cost$(89,000)$(65,000)$2,000 $2,000 
 Pension PlanSERP
 Six months ended March 31,
 2024202320242023
Interest cost$205,000 $203,000 $48,000 $44,000 
Expected return on plan assets(383,000)(333,000)  
Amortization of net actuarial gain  (43,000)(40,000)
Net periodic benefit (income) cost$(178,000)$(130,000)$5,000 $4,000 

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 expected to be made to the Pension Plan during fiscal 2024. The SERP plan is unfunded and Barnwell funds benefits when payments are made. Expected payments under the SERP for fiscal 2024 are not material. Fluctuations in actual equity market returns as well as changes
16


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.

8.    INCOME TAXES
 
The components of loss before income taxes, after adjusting the loss for non-controlling interests, are as follows:
Three months ended
March 31,
Six months ended
March 31,
 2024202320242023
United States$538,000 $(1,275,000)$(151,000)$(1,257,000)
Canada(2,210,000)35,000 (2,119,000)1,185,000 
 $(1,672,000)$(1,240,000)$(2,270,000)$(72,000)

The components of the income tax provision (benefit) are as follows:
Three months ended
March 31,
Six months ended
March 31,
 2024202320242023
Current$47,000 $42,000 $115,000 $133,000 
Deferred53,000 (45,000)51,000 (57,000)
 $100,000 $(3,000)$166,000 $76,000 

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.

17


9.    REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

    The following tables provide information about disaggregated revenue by revenue streams, reportable segments, geographical region, and timing of revenue recognition for the three and six months ended March 31, 2024 and 2023.
Three months ended March 31, 2024
Oil and natural gasContract drillingLand investmentOtherTotal
Revenue streams:
Oil$2,985,000 $ $ $ $2,985,000 
Natural gas678,000    678,000 
Natural gas liquids481,000    481,000 
Drilling and pump 1,070,000   1,070,000 
Contingent residual payments  500,000  500,000 
Other   42,000 42,000 
Total revenues before interest income$4,144,000 $1,070,000 $500,000 $42,000 $5,756,000 
Geographical regions:
United States$674,000 $1,070,000 $500,000 $25,000 $2,269,000 
Canada3,470,000   17,000 3,487,000 
Total revenues before interest income$4,144,000 $1,070,000 $500,000 $42,000 $5,756,000 
Timing of revenue recognition:
Goods transferred at a point in time$4,144,000 $ $500,000 $42,000 $4,686,000 
Services transferred over time 1,070,000   1,070,000 
Total revenues before interest income$4,144,000 $1,070,000 $500,000 $42,000 $5,756,000 

Three months ended March 31, 2023
Oil and natural gasContract drillingLand investmentOtherTotal
Revenue streams:
Oil$2,789,000 $ $ $ $2,789,000 
Natural gas616,000    616,000 
Natural gas liquids281,000    281,000 
Drilling and pump 1,501,000   1,501,000 
Other   29,000 29,000 
Total revenues before interest income$3,686,000 $1,501,000 $ $29,000 $5,216,000 
Geographical regions:
United States$309,000 $1,501,000 $ $6,000 $1,816,000 
Canada3,377,000   23,000 3,400,000 
Total revenues before interest income$3,686,000 $1,501,000 $ $29,000 $5,216,000 
Timing of revenue recognition:
Goods transferred at a point in time$3,686,000 $ $ $29,000 $3,715,000 
Services transferred over time 1,501,000   1,501,000 
Total revenues before interest income$3,686,000 $1,501,000 $ $29,000 $5,216,000 

18


Six months ended March 31, 2024
Oil and natural gasContract drillingLand investmentOtherTotal
Revenue streams:
Oil$6,877,000 $ $ $ $6,877,000 
Natural gas1,390,000    1,390,000 
Natural gas liquids1,007,000    1,007,000 
Drilling and pump 2,063,000   2,063,000 
Contingent residual payments  500,000  500,000 
Other   59,000 59,000 
Total revenues before interest income$9,274,000 $2,063,000 $500,000 $59,000 $11,896,000 
Geographical regions:
United States$1,428,000 $2,063,000 $500,000 $26,000 $4,017,000 
Canada7,846,000   33,000 7,879,000 
Total revenues before interest income$9,274,000 $2,063,000 $500,000 $59,000 $11,896,000 
Timing of revenue recognition:
Goods transferred at a point in time$9,274,000 $ $500,000 $59,000 $9,833,000 
Services transferred over time 2,063,000   2,063,000 
Total revenues before interest income$9,274,000 $2,063,000 $500,000 $59,000 $11,896,000 

Six months ended March 31, 2023
Oil and natural gasContract drillingLand investmentOtherTotal
Revenue streams:
Oil$6,273,000 $ $ $ $6,273,000 
Natural gas1,918,000    1,918,000 
Natural gas liquids721,000    721,000 
Drilling and pump 3,449,000