Cautionary Statement Relevant to Forward-Looking Information
For the Purpose Of "Safe Harbor" Provisions Of The
Private Securities Litigation Reform Act of 1995
This Form 10-Q, and the documents incorporated herein by reference, contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is one
which is based on current expectations of future events or conditions and does
not relate to historical or current facts. These statements include various
estimates, forecasts, projections of Barnwell's future performance, statements
of Barnwell's plans and objectives, and other similar statements. All such
statements we make are forward-looking statements made under the safe harbor of
the PSLRA, except to the extent such statements relate to the operations of a
partnership or limited liability company. Forward-looking statements include
phrases such as "expects," "anticipates," "intends," "plans," "believes,"
"predicts," "estimates," "assumes," "projects," "may," "will," "will be,"
"should," or similar expressions. Although Barnwell believes that its current
expectations are based on reasonable assumptions, it cannot assure that the
expectations contained in such forward-looking statements will be achieved.
Forward-looking statements involve risks, uncertainties and assumptions which
could cause actual results to differ materially from those contained in such
statements. The risks, uncertainties and other factors that might cause actual
results to differ materially from Barnwell's expectations are set forth in the
"Forward-Looking Statements" and "Risk Factors" sections of Barnwell's 2022
Annual Report. Investors should not place undue reliance on these
forward-looking statements, as they speak only as of the date of filing of this
Form 10-Q, and Barnwell expressly disclaims any obligation or undertaking to
publicly release any updates or revisions to any forward-looking statements
contained herein.
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 2022 Annual Report. There have been no significant
changes to these critical accounting policies and estimates during the three
months ended December 31, 2022. We continue to monitor our accounting policies
to ensure proper application of current rules and regulations.
Impact of COVID-19
In March 2020, the World Health Organization declared the COVID-19 outbreak a
global pandemic and the U.S. and Canadian governments declared the virus a
national emergency shortly thereafter. The ongoing global health crisis
(including resurgences) resulting from the pandemic have, and continue to,
disrupt the normal operations of many businesses, including the temporary
closure or scale-back of business operations and/or the imposition of either
quarantine or remote work or meeting requirements for employees, either by
government order or on a voluntary basis. While the outbreak recently appeared
to be trending downward, particularly as vaccination rates increased, new
variants of COVID-19 continue emerging, including the Omicron variants,
spreading throughout the U.S. and globally and causing significant disruptions.
The global economy, our markets and our business have been, and may continue to
be, materially and adversely affected by COVID-19.
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The COVID-19 outbreak materially and adversely affected our business operations
and financial condition as a result of the deteriorating market outlook, the
global economic recession and weakened liquidity. Although demand for oil and
oil prices has increased significantly from the lows of March through May of
2020, uncertainty regarding future oil prices continues to exist. While the
Company's contract drilling segment remained operational throughout fiscal 2020
through fiscal 2022 and continues to work, the continuing potential impact of
COVID-19 on the health of our contract drilling segment's crews is uncertain,
and any work stoppage or discontinuation of contracts currently in backlog could
result in a material adverse impact to the Company's financial condition and
outlook. Though availability of vaccines and reopening of state and local
economies has improved the outlook for recovery from COVID-19's impacts, the
impact of new, more contagious or lethal variants that may emerge, and the
effectiveness of COVID-19 vaccines against variants and the related responses by
governments, including reinstated government-imposed lockdowns or other
measures, cannot be predicted at this time. Both the health and economic aspects
of the COVID-19 pandemic remain highly fluid and the future course of each is
uncertain. We cannot foresee whether the outbreak of COVID-19 will be
effectively contained on a sustained basis, nor can we predict the severity and
duration of its impact. If the impact of COVID-19 is not effectively and timely
controlled on a sustained basis going forward, our business operations and
financial condition may be materially and adversely affected by factors that we
cannot foresee. Any of these factors and other factors beyond our control could
have an adverse effect on the overall business environment, cause uncertainties
in the regions where we conduct business, cause our business to suffer in ways
that we cannot predict and materially and adversely impact our business,
financial condition and results of operations.
Impact of Recently Issued Accounting Standards on Future Filings
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. This ASU is effective for
annual reporting periods beginning after December 15, 2022, and interim periods
within those annual periods. The FASB has subsequently issued other related ASUs
which amend ASU 2016-13 to provide clarification and additional guidance. The
Company is currently evaluating the impact of these standards.
Overview
Barnwell 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) investing in land interests in Hawaii (land
investment segment), and 3) drilling wells and installing and repairing water
pumping systems in Hawaii (contract drilling segment).
Oil and Natural Gas Segment
Barnwell is involved in the acquisition and development of oil and natural gas
properties in Canada where we initiate and participate in acquisition and
developmental operations for oil and natural gas on properties in which we have
an interest, and evaluate proposals by third parties with regard to
participation in exploratory and developmental operations elsewhere.
Additionally, through its wholly-owned subsidiaries, Barnwell is involved in
several non-operated oil and natural gas investments in Oklahoma and Texas.
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Land Investment Segment
Through Barnwell's 77.6% interest in Kaupulehu Developments, 75% interest in KD
Kona, and 34.45% non-controlling interest in KKM Makai, the Company's land
investment interests include the following:
•The right to receive percentage of sales payments from KD I resulting from the
sale of single-family residential lots by KD I, within Increment I of the
Kaupulehu Lot 4A area located in the North Kona District of the island of
Hawaii. Kaupulehu Developments is entitled to receive payments from KD I based
on 10% of the gross receipts from KD I's sales at Increment I. Increment I is an
area zoned for approximately 79 single-family lots, of which one remained to be
sold at December 31, 2022.
•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. Also, in addition to Barnwell's
existing obligations to pay professional fees to certain parties based on
percentages of its gross receipts, Kaupulehu Developments is also obligated to
pay an amount equal to 0.72% and 0.20% of the cumulative net profits of KD II to
KD Development, LLC and a pool of various individuals, respectively, all of whom
are partners of KKM and are unrelated to Barnwell. The remaining acreage within
Increment II is not yet under development, and there is no assurance that
development of such acreage will occur. No definitive development plans have
been made by KDII, the developer of Increment II, as of the date of this report.
•An indirect 19.6% non-controlling ownership interest in KD Kukio Resorts, LLLP,
KD Maniniowali, LLLP and KD I and an indirect 10.8% non-controlling ownership
interest in KD II through KDK. These entities 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 was
the developer of Kaupulehu Lot 4A Increments I and II. The partnerships derive
income from the sale of residential parcels as well as from commission on real
estate sales by the real estate sales office and revenues resulting from the
sale of private club memberships.
•Approximately 1,000 acres of vacant leasehold land zoned conservation in the
Kaupulehu Lot 4C area, which currently has no development potential without both
a development agreement with the lessor and zoning reclassification. The lease
terminates in December 2025.
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Contract Drilling Segment
Barnwell drills water and water monitoring wells and installs and repairs water
pumping systems in Hawaii. Contract drilling results are highly dependent upon
the quantity, dollar value and timing of contracts awarded by governmental and
private entities and can fluctuate significantly.
Results of Operations
Summary
The net earnings attributable to Barnwell for the three months ended
December 31, 2022 totaled $1,089,000, a $16,000 increase in operating results
from net earnings of $1,073,000 for the three months ended December 31, 2021.
The following factors affected the results of operations for the three months
ended December 31, 2022 as compared to the same period in the prior year:
•A $551,000 gain recognized in the current year period from the sale of a
contract drilling segment drilling rig;
•A $418,000 improvement in oil and natural gas segment operating results, before
income taxes, due to an increase in oil prices and an increase in the net
production of oil and natural gas in the current period as compared to the same
period in the prior year. The increase in production was primarily due to the
additional working interests acquired and wells drilled in the Twining area in
fiscal 2022 and was partially offset by a decrease in production from wells in
Oklahoma;
•A $199,000 improvement in contract drilling segment operating results, before
income taxes, due to work performed on higher value water well drilling
contracts in the current year period as compared to the prior year period;
•Equity in income from affiliates decreased $669,000 and land investment segment
operating results, before non-controlling interests' share of such profits,
decreased $335,000 due to the Kukio Resort Development Partnerships' sale of one
lot in the current year period, whereas there were three lot sales in the prior
year period; and
•General and administrative expenses increased $419,000 primarily due to an
increase in professional fees in the current year period as compared to the same
period in the prior year, partially offset by a $138,000 decrease in share-based
compensation expense in the current year period as compared to the prior year
period.
General
Barnwell conducts operations in the U.S. and Canada. Consequently, Barnwell is
subject to foreign currency translation and transaction gains and losses due to
fluctuations of the exchange rates between the Canadian dollar and the U.S.
dollar. Barnwell cannot accurately predict future fluctuations of the exchange
rates and the impact of such fluctuations may be material from period to period.
To date, we have not entered into foreign currency hedging transactions. Foreign
currency gains or losses on intercompany loans and advances that are not
considered long-term investments in nature because management intends to settle
these intercompany balances in the future are included in our statements of
operations.
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The average exchange rate of the Canadian dollar to the U.S. dollar decreased 7%
in the three months ended December 31, 2022 as compared to the same period in
the prior year, and the exchange rate of the Canadian dollar to the U.S. dollar
increased 1% at December 31, 2022 as compared to September 30, 2022.
Accordingly, the assets, liabilities, stockholders' equity and revenues and
expenses of Barnwell's subsidiaries operating in Canada have been adjusted to
reflect the change in the exchange rates. 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, 2022 was $2,000, a $27,000 change from other comprehensive
loss due to foreign currency translation adjustments, net of taxes, of $25,000
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 months ended December 31, 2022 and 2021 due to a full valuation
allowance on the related deferred tax assets.
Oil and natural gas
The following tables set forth Barnwell's average prices per unit of production
and net production volumes. Production amounts reported are net of royalties.
Average Price Per Unit
Three months ended Increase
December 31, (Decrease)
2022 2021 $ %
Natural Gas (Mcf)* $ 4.25 $ 4.08 $ 0.17 4 %
Oil (Bbls)** $ 72.32 $ 68.50 $ 3.82 6 %
Natural gas liquids (Bbls)** $ 44.01 $ 31.04 $ 12.97 42 %
Net Production
Three months ended Increase
December 31, (Decrease)
2022 2021 Units %
Natural Gas (Mcf)* 300,000 205,000 95,000 46 %
Oil (Bbls)** 48,000 39,000 9,000 23 %
Natural gas liquids (Bbls)** 10,000 13,000 (3,000) (23 %)
_______________________________________
* Mcf = 1,000 cubic feet. Natural gas price per unit is net of pipeline
charges.
** Bbl = stock tank barrel equivalent to 42 U.S. gallons
The oil and natural gas segment generated $1,986,000 of operating profit before
general and administrative expenses in the three months ended December 31, 2022,
an increase in operating results of $418,000 as compared to a $1,568,000
operating profit during the same period of the prior year.
Oil and natural gas segment revenues and operating expenses increased $1,306,000
(33%) and $528,000 (28%) for the three months ended December 31, 2022,
respectively, as compared to the same period in the prior year, primarily due to
6% and 42% increases in oil and natural gas liquid prices, respectively, and 46%
and 23% increases in natural gas and oil net production, respectively. The
increase in production was primarily due to the additional working interests
acquired and wells drilled in the Twining area in fiscal 2022 and was partially
offset by a decrease in production from wells in Oklahoma in the current year
period as compared to the prior year period.
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Our Oklahoma operations generated $517,000 (10%) of our oil and natural gas
segment revenues for the three months ended December 31, 2022 as compared to
$964,000 (25%) of our oil and natural gas segment revenues for the three months
ended December 31, 2021.
Oil and natural gas segment depletion increased $360,000 (83%) for the three
months ended December 31, 2022, as compared to the prior year period, primarily
due to increases in the depletion rate for Canadian properties and also new
production from those properties, both of which were the result of the drilling
of new wells, acquisition of additional working interests, and facilities
expansion and upgrade costs, all in the Twining area. The increase in oil and
natural gas depletion was partially offset by a decrease in depletion for
Oklahoma properties due to the decrease in production from wells in Oklahoma in
the current year period as compared to the prior year period.
Oil prices continue to be volatile over time and thus the Company is unable to
reasonably predict future oil, natural gas and natural gas liquids prices and
the impacts future prices will have on the Company.
Sale of interest in leasehold land
Kaupulehu Developments is entitled to receive a percentage of the gross receipts
from the sales of lots and/or residential units in Increment I by KD I.
The following table summarizes the revenues received from KD I and the amount of
fees directly related to such revenues:
Three months ended
December 31,
2022 2021
Sale of interest in leasehold land:
Revenues - sale of interest in leasehold land $ 265,000 $ 600,000
Fees - included in general and administrative expenses (32,000) (73,000)
Sale of interest in leasehold land, net of fees paid $ 233,000 $ 527,000During the three months ended December 31, 2022, Barnwell received $265,000 in
percentage of sales payments from KD I from the sale of one single-family lot
within Increment I. During the three months ended December 31, 2021, Barnwell
received $600,000 in percentage of sales payments from KD I from the sale of
three single-family lots within Increment I.
As of December 31, 2022, only one single-family lot of the 79 lots developed
within Increment I remained to be sold and it is not expected to be sold in the
Company's fiscal 2023. The Company does not have a controlling interest in
Increments I and II, and there is no assurance with regards to the amounts of
future sales from Increments I and II, or that the remaining acreage within
Increment II will be developed. No definitive development plans have been made
by KD II, the developer of Increment II, as of the date of this report.
Contract drilling
Contract drilling revenues and contract drilling costs increased $1,072,000
(122%) and $877,000 (89%), respectively, for the three months ended December 31,
2022, as compared to the same period in the prior year. The contract drilling
segment generated a $48,000 operating profit before general and
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administrative expenses in the three months ended December 31, 2022, an increase
in operating results of $199,000 as compared to a $151,000 operating loss during
the same period of the prior year. The increase in contract drilling revenues
and contract drilling costs for the three months ended December 31, 2022 as
compared to the same period in the prior year is due to work performed on higher
value water well drilling contracts in the current year period as compared to
the prior year period and due to a higher amount of revenues and expenses
recognized from previously uninstalled materials during the current year period.
In the quarter ended December 31, 2021, it was determined that a contract
drilling segment well completed in the period did not meet the contract
specifications for plumbness under a gyroscopic plumbness test which the
contract required. While the well did pass the cage plumbness test, the contract
uses the gyroscopic test as the measure of plumbness. Barnwell and the customer
currently have an arrangement where Barnwell will provide for centralizers,
armored cabling and a pump installation and removal test to confirm that
plumbness is satisfactory. Barnwell's management believes the plumbness
deviation is not impactful to the performance of the submersible pumps that will
be installed in the well. Accordingly, while costs for the centralizers, armored
cabling and the pump installation and removal test have been accrued, no accrual
has been recorded as of December 31, 2022 for any further costs related to this
contract as there is no related probable or estimable contingent liability.
There has been a significant decrease in demand for water well drilling
contracts in recent years that has generally led to increased competition for
available contracts and lower margins on awarded contracts. The Company is
unable to predict the near-term and long-term availability of water well
drilling and pump installation and repair contracts as a result of this
volatility in demand. The continuing potential impact of COVID-19 on the health
of our contract drilling segment's crew is uncertain, and any work stoppage or
discontinuation of contracts currently in backlog due to COVID-19 impacts could
result in a material adverse impact to the Company's financial condition and
outlook.
General and administrative expenses
General and administrative expenses increased $419,000 (23%) for the three
months ended December 31, 2022, as compared to the same period in the prior
year. The increase was primarily due to an increase in professional fees in the
current year period as compared to the same period in the prior year, partially
offset by a $138,000 decrease in share-based compensation expense in the current
year period as compared to the prior year period.
Depletion, depreciation, and amortization
Depletion, depreciation, and amortization increased $357,000 (74%) for the three
months ended December 31, 2022, as compared to the same period in the prior
year, primarily due to increases in the depletion rate for Canadian properties
and also new production from those properties, partially offset by a decrease in
depletion for Oklahoma properties as discussed in the "Oil and natural gas"
section above.
Foreign currency gain
Foreign currency gain was $78,000 during the three months ended December 31,
2022, as compared to none during the three months ended December 31, 2021, due
to the effects of foreign exchange rate changes on intercompany loans and
advances as a result of the weakening of the U.S. dollar against the Canadian
dollar. The foreign currency gain from intercompany balances was included in our
condensed consolidated net earnings as the intercompany balances were not
considered long-term in
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nature because management estimates that these intercompany balances will be
settled in the future.
Gain on sale of assets
In October 2022, the Company completed the sale of a contract drilling segment
drilling rig to an independent third part for proceeds of $551,000, net of
related costs. The drilling rig was fully depreciated and had a net book value
of zero and as a result of the sale, the Company recognized a $551,000 gain
during the three months ended December 31, 2022.
Equity in income of affiliates
Barnwell recognized equity in income of affiliates of $538,000 during the three
months ended December 31, 2022, as compared to $1,207,000 during the three
months ended December 31, 2021. The decrease was primarily due to the Kukio
Resort Land Development Partnerships' sale of one lot during the current year
period as compared to three lot sales in the prior year period. The Kukio Resort
Land Development Partnerships' have only one lot to sell in Increment I and we
are not anticipating any more lot sales in fiscal 2023.
During the three months ended December 31, 2022, Barnwell received cash
distributions of $538,000 from the Kukio Resort Land Development Partnerships
resulting in a net amount of $478,000, after distributing $60,000 to
non-controlling interests. During the three months ended December 31, 2021,
Barnwell received cash distributions $1,207,000 from from the Kukio Resort Land
Development Partnerships resulting in a net amount of $1,075,000, after
distributing $132,000 to non-controlling interests.
In the quarter ended June 30, 2021, the Company received cumulative
distributions from the Kukio Resort Land Development Partnerships in excess of
our investment balance and in accordance with applicable accounting guidance,
the Company suspended its equity method earnings recognition and the Kukio
Resort Land Development 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, the amount of equity in income of affiliates recognized in the
three months ended December 31, 2022 was equivalent to the $538,000 of
distributions received in that period.
Cumulative distributions received from the Kukio Resort Land Development
Partnerships in excess of our investment balance was $1,198,000 at December 31,
2022 and $958,000 at September 30, 2022.
Income taxes
Barnwell's effective consolidated income tax rate for the three months ended
December 31, 2022, after adjusting earnings before income taxes for
non-controlling interests, was 7%, as compared to an effective income tax rate
of 9% for the three months ended December 31, 2021.
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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. 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, and therefore, receives no benefit from consolidated
or unitary losses and, therefore, is subject to Oklahoma state taxes.
In addition, net operating loss carryforwards, all of which had a full valuation
allowance at the end of the previous fiscal year, are being partially utilized
in the current year to offset taxable income in the U.S. federal and Canadian
jurisdictions. The net operating loss carryforwards beyond the current year's
utilization continue to have a full valuation allowance as realization of their
benefit is not more likely than not.
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 earnings attributable to non-controlling interests for the three months
ended December 31, 2022 totaled $120,000, as compared to net earnings
attributable to non-controlling interests of $267,000 for the same period in the
prior year. The decrease of $147,000 is primarily due to decreases in the amount
of equity in income of affiliates and percentage of sales revenue received in
the current year period as compared to the same period in the prior year.
Liquidity and Capital Resources
Barnwell's primary sources of liquidity are cash on hand, cash flow generated by
operations and land investment segment proceeds. At December 31, 2022, Barnwell
had $6,747,000 in working capital.
Cash Flows
Cash flows provided by operating activities totaled $897,000 for the three
months ended December 31, 2022, as compared to cash flows provided by operating
activities of $909,000 for the same period in the prior year. This $12,000
change in operating cash flows was primarily due to a decrease in distributions
from the Kukio Resort Land Development Partnerships, which was partially offset
by higher operating results for the oil and natural gas segment in the current
year period as compared to the prior year period, and fluctuations in working
capital.
Cash flows used in investing activities totaled $6,891,000 during the three
months ended December 31, 2022, as compared to cash flows provided by investing
activities of $194,000 during the same period of the prior year. This $7,085,000
change in investing cash flows was primarily due to an increase of $3,168,000 in
cash paid for oil and natural gas capital expenditures, an increase of
$3,464,000 in advances to operators for capital expenditures, and a decrease of
$687,000 in proceeds from the sale of assets in the current year period as
compared to same period in the prior year.
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Cash flows used in financing activities totaled $108,000 during the three months
ended December 31, 2022, as compared to cash flows used in financing activities
of $251,000 for the same period in the prior year. The $143,000 change in
financing cash flows was due to a decrease in distributions to non-controlling
interests in the current year period as compared to the same period in the prior
year.
Cash Dividend
In December 2022, the Company's Board of Directors declared a cash dividend of
$0.015 per share that was paid on January 11, 2023 to stockholders of record on
December 27, 2022. No dividends were declared or paid during the three months
ended December 31, 2021.
Canada Emergency Business Account Loan
In the quarter ended December 31, 2020, the Company's Canadian subsidiary,
Barnwell of Canada, received a loan of CAD$40,000 (in Canadian dollars) under
the Canada Emergency Business Account ("CEBA") loan program for small
businesses. In the quarter ended March 31, 2021, the Company applied for an
increase to our CEBA loan and received an additional CAD$20,000 for a total loan
amount received of CAD$60,000 ($44,000) under the program. In January 2022, the
Canadian government announced the extension of the CEBA loan repayment deadline
and interest-free period from December 31, 2022 to December 31, 2023.
Accordingly, the CEBA loan is interest-free with no principal payments required
until December 31, 2023, after which the remaining loan balance is converted to
a two year term loan at 5% annual interest paid monthly. If the Company repays
66.7% of the principal amount prior to December 31, 2023, there will be loan
forgiveness of 33.3% up to a maximum of CAD$20,000. The current loan balance of
$44,000 is included in "Other current liabilities" in the Company's Condensed
Consolidated Balance sheet at December 31, 2022.
At The Market Offering
On March 16, 2021, the Company entered into a Sales Agreement (the "Sales
Agreement") with A.G.P./Alliance Global Partners ("A.G.P,"), with respect to an
at-the-market offering program ("ATM") pursuant to which the Company may offer
and sell, from time to time, shares of its common stock, par value $0.50 per
share, having an aggregate sales price of up to $25 million (subject to certain
limitations set forth in the Sales Agreement and applicable securities laws,
rules and regulations), through or to A.G.P as the Company's sales agent or as
principal. Sales of our common stock under the ATM, if any, will be made by any
methods deemed to be "at the market offerings" as defined in Rule 415(a)(4)
under the Securities Act, including sales made directly on the NYSE American, on
any other existing trading market for our Common Stock, or to or through a
market maker. Shares of common stock sold under the ATM are offered pursuant to
the Company's Registration Statement on Form S-3 (File No. 333-254365), filed
with the Securities and Exchange Commission on March 16, 2021, and declared
effective on March 26, 2021 (the "Registration Statement"), and the prospectus
dated March 26, 2021, included in the Registration Statement.
In August 2022, the Company's Board of Directors suspended the sales of our
common stock under the ATM until further notice.
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Oil and Natural Gas Capital Expenditures
Barnwell's oil and natural gas capital expenditures, including accrued capital
expenditures, advances to operators, and excluding additions and revisions to
estimated asset retirement obligations, totaled $5,928,000 for the three months
ended December 31, 2022 of which $5,354,000 was for a new Texas investment and
$574,000 was primarily for the completion and equipping of Canadian wells and
facilities at Twining, as compared to $2,870,000, essentially all in Canada, for
the same period in the prior year.
In December 2022, Barnwell Texas, LLC ("Barnwell Texas"), a new wholly-owned
subsidiary of the Company, entered into a purchase and sale agreement with an
independent third party whereby Barnwell Texas acquired a 22.3% non-operated
working interest in oil and natural gas leasehold acreage in the Permian Basin
in Texas for cash consideration of $806,000. In connection with the purchase of
such leasehold interests, Barnwell Texas acquired a 15.4% non-operated working
interest in the planned drilling of two oil wells in the Wolfcamp Formation in
Loving and Ward Counties, Texas and made a pre-payment of $4,293,000 to pay its
share of the estimated costs to drill, complete and equip the wells. As of
December 31, 2022, the total costs incurred for these two oil wells was $829,000
and thus, the remaining prepaid balance of $3,464,000 was recorded as "Advances
to operators for capital expenditures" on the Company's Condensed Consolidated
Balance sheet.
In fiscal 2022, the Company participated in the drilling of one operated and two
non-operated for a total of three gross (1.6 net) wells in the Twining area of
Alberta, Canada and the capital expenditures incurred for the drilling these
wells in the three months ended December 31, 2021 totaled approximately
$2,350,000.
Barnwell estimates that investments in oil and natural gas properties for fiscal
2023 will range from $9,000,000 to $10,00,000. This estimated amount may
increase or decrease as dictated by cash flows and management's assessment of
the oil and natural gas environment and prospects.
Oil and Natural Gas Properties Acquisitions
There were no oil and gas working interest acquisitions during the three months
ended December 31, 2022. In the quarter ended December 31, 2021, Barnwell
acquired working interests in oil and natural gas properties located in the
Twining area of Alberta, Canada, for cash consideration of $317,000.
© Edgar Online, source Glimpses
BARNWELL INDUSTRIES, INC. 
