Barnwell Industries Inc. (BRN) 2008年年度報告「AMEX」.pdf

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1、 Barnwell Industries,Inc.2008 Annual ReportUNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,D.C.20549 FORM 10-K (Mark One)X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30,2008 or TRANSITION REPORT PURSUANT TO SECT

2、ION 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)Delaware 72-0496921 (State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)1100 Alakea Street,Su

3、ite 2900,Honolulu,Hawaii 96813-2833 (Address of principal executive offices)(Zip code)Registrants telephone number,including area code:(808)531-8400 Securities registered pursuant to Section 12(b)of the Act:Title of each class Name of each exchange on which registered Common Stock,par value$0.50 per

4、 share NYSE Alternext U.S.Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to S

5、ection 13 or Section 15(d)of the Act.Yes No 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

6、reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(229.405 of this chapter)is not contained herein,and will not be contained,to the best of registrants knowledge,in d

7、efinitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See the definiti

8、ons of“large accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company)Smaller reporting company Indicate by check mark whether the registrant is a

9、 shell company(as defined in Rule 12b-2 of the Act).Yes No The aggregate market value of the voting common stock held by non-affiliates of the registrant,computed by reference to the closing price of a share of common stock on March 31,2008(the last business day of the registrants most recently comp

10、leted second fiscal quarter)was$49,978,000.As of December 4,2008 there were 8,240,160 shares of common stock outstanding.Documents Incorporated by Reference 1.Proxy statement to be forwarded to stockholders on or about January 15,2009 is incorporated by reference in Part III hereof.2TABLE OF CONTENT

11、S PagePART I Discussion of Forward-Looking Statements 3 Item 1.Business 4 Item 1A.Risk Factors 20 Item 1B.Unresolved Staff Comments 37 Item 2.Properties 37 Item 3.Legal Proceedings 37 Item 4.Submission of Matters to a Vote of Security Holders 37 PART II Item 5.Market For Registrants Common Equity,Re

12、lated Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6.Selected Financial Data 39 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations 40 Item 7A.Quantitative and Qualitative Disclosures About Market Risk 61 Item 8.Financial Statements an

13、d Supplementary Data 62 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 108 Item 9A(T).Controls and Procedures 108 Item 9B.Other Information 109 PART III Item 10.Directors,Executive Officers and Corporate Governance 109 Item 11.Executive Compensation 109 I

14、tem 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 109 Item 13.Certain Relationships and Related Transactions,and Director Independence 110 Item 14.Principal Accounting Fees and Services 110 PART IV Item 15.Exhibits,Financial Statement Schedules 110

15、 3PART I 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-K,and the documents incorporated herein by reference,contain“forward-looking statements”within the meaning of the Priva

16、te Securities Litigation Reform Act of 1995,Section 27A of the Securities Act of 1933,as amended,and Section 21E of the Securities Exchange Act of 1934,as amended.A forward-looking statement is one which is based on current expectations of future events or conditions and does not relate to historica

17、l or current facts.These statements include various estimates,forecasts,projections of Barnwell Industries,Inc.s(referred to herein together with its subsidiaries as“Barnwell,”“we,”“our,”“us”or the“Company”)future performance,statements of Barnwells plans and objectives and other similar statements.

18、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 ca

19、nnot 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.Investors should not place undue relian

20、ce on these forward-looking statements,as they speak only as of the date of filing of this Form 10-K,and Barnwell expressly disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein.Among the important factors that could c

21、ause actual results to differ materially from those in the forward-looking statements are domestic and international general economic conditions,such as recessionary trends and inflation;domestic and international political,legislative,economic,regulatory and legal actions,including changes in the p

22、olicies of the Organization of Petroleum Exporting Countries or other developments involving or affecting oil-producing countries;military conflict,embargoes,internal instability or actions or reactions of the governments of the United States and/or Canada in anticipation of or in response to such d

23、evelopments;interest costs,restrictions on production,restrictions on imports and exports in both the United States and Canada,the maintenance of specified reserves,tax increases and retroactive tax claims,royalty increases,expropriation of property,cancellation of contract rights,environmental prot

24、ection controls,environmental compliance requirements and laws pertaining to workers health and safety;the condition of Hawaiis real estate market,including the level of real estate activity and prices,the demand for new housing and second homes on the island of Hawaii,the rate of increase in the co

25、st of building materials and labor,the introduction of building code modifications,changes to zoning laws,the condition of Hawaiis tourism industry and the level of confidence in Hawaiis economy;levels of land development activity in Hawaii;levels of demand for water well drilling and pump installat

26、ion in Hawaii;the potential liability resulting from pending or future litigation;the Companys acquisition or disposition of assets;the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies;and the factors set forth under the heading“Ri

27、sk Factors”in this Form 10-K,in other portions of this Form 10-K,in the Notes to Consolidated Financial Statements,and in other documents filed by Barnwell with the Securities and Exchange Commission(“SEC”).In addition,unpredictable or unknown factors not discussed in this report could also cause ac

28、tual results to materially and adversely differ from those discussed in the forward-looking statements.Unless otherwise indicated,all references to“dollars”in this Form 10-K are to United States dollars.4ITEM 1.BUSINESS Overview Barnwell was incorporated in Delaware in 1956 and fiscal 2008 represent

29、ed Barnwells 52nd year of operations.Barnwell operates in the following four principal business segments:Oil and Natural Gas Segment.Barnwell engages in oil and natural gas exploration,development,production and sales in Canada.Land Investment Segment.Barnwell invests in leasehold land and other rea

30、l estate interests in Hawaii.Residential Real Estate Segment.Established in January 2007,Barnwell acquires house lots for investment and development of homes for sale in Hawaii.Contract Drilling Segment.Barnwell provides well drilling services and water pumping system installation and repairs in Haw

31、aii.Oil and Natural Gas Segment Overview Through our wholly-owned subsidiary,Barnwell of Canada,Limited(“Barnwell of Canada”),we are involved in the acquisition,exploration and development of oil and natural gas properties.Barnwell of Canada initiates and participates in exploratory and developmenta

32、l operations for oil and natural gas on property in which it has an interest,and evaluates proposals by third parties with regard to participation in such exploratory and developmental operations elsewhere.Operations Barnwells investments in oil and natural gas properties consist of investments in C

33、anada,principally in the Province of Alberta,with minor holdings in the Provinces of Saskatchewan and British Columbia.These property interests are principally held under governmental leases or licenses.Under the typical Canadian provincial governmental lease,Barnwell must perform exploratory operat

34、ions and comply with certain other conditions.Lease terms vary with each province,but,in general,the terms grant Barnwell the right to remove oil,natural gas and related substances subject to payment of specified royalties on production.All exploratory and developmental operations are overseen by Ba

35、rnwells Calgary,Alberta staff and Barnwells Chief Operating Officer located in Honolulu,along with senior management and independent consultants as necessary.In fiscal 2008,Barnwell participated in exploratory and developmental operations primarily in the Canadian Province of Alberta,although Barnwe

36、ll does not limit its consideration of exploratory and developmental operations to this area.The Province of Alberta charges oil and natural gas producers a royalty for production in Alberta.The Province of Alberta determines its royalty share of natural gas and of oil by using reference prices that

37、 average all natural gas sales and oil sales,respectively,in Alberta.Royalty rates are calculated on a sliding scale basis,increasing as prices increase up to a maximum royalty rate of 535%.Additionally,Barnwell pays gross overriding royalties and leasehold royalties on a portion of its natural gas

38、and oil sales to parties other than the Province of Alberta.On October 25,2007,the Alberta Government announced a New Royalty Framework(“NRF”)that will take effect on January 1,2009.The NRF increases royalty rates on conventional oil and natural gas production whereby royalty rates will be both pric

39、e-sensitive and production-sensitive and may increase up to a maximum of 50%.The price-sensitive maximum is reached for oil when oil is selling at or above$120.00 Canadian dollars per barrel and for natural gas when natural gas is selling at or above$17.50 Canadian dollars per MCF.Approximately 99%o

40、f Barnwells gross revenues are derived from properties located within Alberta.Approximately 85%of all fiscal 2008 royalties related to crown charges,and 15%of Barnwells fiscal 2008 royalties related to freehold and override charges which are not directly affected by the NRF.In November 2008,the Albe

41、rta Government announced a one-time option of selecting new transitional rates or NRF rates when drilling a new natural gas or conventional oil well 1,000 to 3,500 meters in depth.All wells drilled between 2009 and 2013 that adopt the transitional rates will be required to shift to the NRF on Januar

42、y 1,2014.All current wells will move to the NRF on January 1,2009 as previously scheduled.In fiscal 2008 and 2007,the weighted-average royalty rate paid on all of Barnwells natural gas was approximately 23%and 24%,respectively.The weighted-average rate of all royalties paid to governments and others

43、 on natural gas from the Dunvegan Unit,Barnwells principal oil and natural gas property,was approximately 25%and 27%in fiscal 2008 and 2007,respectively.The slight decrease in royalty rate on all properties was primarily due to the lower royalties paid at Dunvegan.At Dunvegan,the decrease in royalty

44、 rate was due to higher operating cost royalty credits received from the Alberta Department of Energy for operating expenditures incurred by Barnwell,a decrease in average gross production per well,and the categorization of these wells as lower productivity,decreasing the royalty rate overall for th

45、e property.In fiscal 2008 and 2007,the weighted-average royalty rate paid on oil was approximately 21%and 20%,respectively.The slight increase in the weighted-average royalty rate on oil was primarily due to higher average oil prices partially offset by a higher percentage of Barnwells fiscal 2008 p

46、roduction of oil coming from newer wells where royalties are assessed at a lower rate than on older wells.Natural gas prices are typically higher in the winter than at other times due to increased heating demand.Oil prices are also subject to seasonal fluctuations,but to a lesser degree.Oil and natu

47、ral gas unit sales are based on the quantity produced from the properties by the operator.During periods of low demand for natural gas,the operator of the Dunvegan property may re-inject natural gas into underground storage facilities in the Dunvegan property for delivery at a future date.Well Drill

48、ing Activities During fiscal 2008,Barnwell participated in the drilling of 26 gross development wells and 6 gross exploratory wells,29 of which management believes should be capable of production and 3 are dry holes.6The following table sets forth more detailed information with respect to the number

49、 of exploratory(“Exp.”)and development(“Dev.”)wells drilled for the fiscal years ended September 30,2008,2007,and 2006 in which Barnwell participated:Productive Productive Total Productive Oil Wells Gas Wells Wells Dry Holes Total Wells Exp.Dev.Exp.Dev.Exp.Dev.Exp.Dev.Exp.Dev.2008 Gross*3.0 3.0 1.0

50、22.0 4.0 25.0 2.0 1.0 6.0 26.0 Net*1.2 0.8 0.6 4.3 1.8 5.1 0.8 0.1 2.6 5.2 2007 Gross*-9.0 2.0 18.0 2.0 27.0-3.0 2.0 30.0 Net*-2.4 0.9 2.3 0.9 4.7-1.1 0.9 5.8 2006 Gross*1.0 4.0 2.0 33.0 3.0 37.0 4.0 3.0 7.0 40.0 Net*0.4 1.1 0.7 9.0 1.1 10.1 1.3 1.0 2.4 11.1 *The term“Gross”refers to the total numbe

51、r of wells in which Barnwell owns an interest,and“Net”refers to Barnwells aggregate interest therein.For example,a 50%interest in a well represents one gross well,but 0.5 net well.The gross figures include interests owned of record by Barnwell and,in addition,the portions owned by others.Barnwell in

52、vested$17,662,000 in oil and natural gas properties during fiscal 2008,of which$518,000(3%)was for acquisition of oil and natural gas leases and lease rentals,$1,451,000(8%)was for geological and geophysical costs,$8,852,000(50%)was for intangible drilling costs,and$6,841,000(39%)was for production

53、equipment.The major areas of investments in fiscal 2008 were in the Dunvegan,Progress,Bonanza/Balsam,Boundary Lake,Kitty,and Pouce Coupe areas of Alberta and Boundary Lake area of British Columbia.The Dunvegan Unit,in which Barnwell holds an 8.9%working interest,is Barnwells principal oil and natura

54、l gas property and is located in Alberta,Canada.At September 30,2008,the Dunvegan Unit had 205 producing natural gas wells.In fiscal 2008,Barnwell participated in the drilling of 10 gross(0.9 net)development gas wells in the Dunvegan area,of which all but one gross(0.1 net)well were successful.Barnw

55、ell also participated in the drilling of four gross(0.5 net)development gas wells in the Dunvegan area(Non-Unit),of which all were successful.Total capital expenditures at Dunvegan were$3,070,000 in fiscal 2008 as compared to$3,524,000 and$1,781,000 in fiscal 2007 and 2006,respectively.Barnwell expe

56、cts that fiscal 2009 capital expenditures at Dunvegan will increase slightly from fiscal 2008s level with the anticipated drilling of 5 gross(0.4 net)development gas wells from the Dunvegan Unit and 7 gross(0.6 net)Non-Unit development gas wells.Capital expenditures totaled$3,498,000 in the Progress

57、 area in fiscal 2008 as compared to$1,042,000 in fiscal 2007.Three gross(1.7 net)wells were drilled in fiscal 2008 of which one gross(0.5 net)well was successful and on production,one gross(0.3 net)well was waiting to be tied in and one gross(0.9 net)well is still being evaluated at September 30,200

58、8.Barnwell did not acquire any undeveloped land in the Progress area in fiscal 2008 and completed development of certain wells drilled in a prior year.At September 30,2008 Barnwells average working interest in its productive wells in the Progress area was 42%.7Capital expenditures totaled$2,086,000

59、in the Bonanza/Balsam area in fiscal 2008 as compared to$590,000 in fiscal 2007.Two gross(1.2 net)wells were drilled in fiscal 2008 of which one gross(0.6 net)well is being evaluated and one gross(0.6 net)well was unsuccessful at September 30,2008.Barnwell did not acquire any undeveloped land in the

60、 Bonanza/Balsam area in fiscal 2008.At September 30,2008 Barnwells average working interest in its productive wells in the Bonanza/Balsam area was 31%.Capital expenditures totaled$2,557,000 in the Boundary Lake area of Alberta in fiscal 2008 as compared to$1,335,000 in fiscal 2007.One gross(0.2 net)

61、well was drilled in fiscal 2008 which was successful and waiting to be tied in at September 30,2008.Barnwells fiscal 2008 capital expenditures in facilities within the Boundary Lake area of Alberta amounted to$1,126,000.Barnwell did not acquire any undeveloped land in the Boundary Lake area of Alber

62、ta in fiscal 2008.At September 30,2008,Barnwells average working interest in its productive wells in the Boundary Lake area of Alberta was 27%.Capital expenditures totaled$1,557,000 in the Boundary Lake area of British Columbia in fiscal 2008 as compared to$761,000 in fiscal 2007.Two gross(0.5 net)w

63、ells were drilled in fiscal 2008 which were successful and waiting to be tied in at September 30,2008.Barnwells fiscal 2008 capital expenditures in facilities within the Boundary Lake area of British Columbia amounted to$484,000.Barnwell did not acquire any undeveloped land in the Boundary Lake area

64、 of British Columbia in fiscal 2008 and completed development of certain wells drilled in a prior year.At September 30,2008,Barnwells average working interest in its productive wells in the Boundary Lake area of British Columbia was 24%.Capital expenditures totaled$654,000 in the Kitty area in fisca

65、l 2008.One gross(0.2 net)well was successfully drilled in fiscal 2008 and on production at September 30,2008.In the Kitty area,Barnwell acquired oil and natural gas rights in 640 gross(160 net)acres of undeveloped land in fiscal 2008.At September 30,2008 Barnwells average working interest in its pro

66、ductive wells in the Kitty area was 25%.Capital expenditures totaled$323,000 in the Pouce Coupe area in fiscal 2008.Two gross(0.2 net)wells were drilled in fiscal 2008 of which one gross(0.1 net)well was on production and one gross(0.1 net)well was waiting to be tied in at September 30,2008.Barnwell

67、 did not acquire any undeveloped land in the Pouce Coupe area in fiscal 2008.At September 30,2008 Barnwells average working interest in its productive wells in the Pouce Coupe area was 7%.Barnwell participated in 12 gross(4.9 net)wells,16 gross(5.2 net)wells,and 28 gross(11.7 net)wells in fiscal 200

68、8,2007 and 2006,respectively,that were on prospects developed by Barnwell.8The following table summarizes the number of wells Barnwell was in the process of drilling as of September 30,2008:Wells Being Drilled at September 30,2008 Oil Wells Gas Wells Exp.Dev.Exp.Dev.Gross*0.0 0.0 0.0 1.0 Net*0.0 0.0

69、 0.0 0.2 *The term“Gross”refers to the total number of wells in which Barnwell owns an interest,and“Net”refers to Barnwells aggregate interest therein.For example,a 50%interest in a well represents one gross well,but 0.5 net well.The gross figures include interests owned of record by Barnwell and,in

70、 addition,the portions owned by others.Oil and Natural Gas Production The following table summarizes(a)Barnwells net unit production for the last three fiscal years,based on sales of crude oil,natural gas,condensate and other natural gas liquids,from all wells in which Barnwell has or had an interes

71、t,and(b)the average sales prices and average production and depletion costs for such production during the same periods.Production amounts reported are net of royalties and the Alberta Royalty Tax Credit,where applicable.As discussed in further detail below,the Alberta Royalty Tax Credit was discont

72、inued effective January 1,2007.Barnwells net production in fiscal 2008,2007 and 2006 was derived primarily from the Province of Alberta.Year ended September 30,2008 2007 2006 Annual net production:Natural gas liquids(BBLS)*107,000 114,000 115,000 Oil(BBLS)*160,000 146,000 145,000 Natural gas(MCF)*3,

73、349,000 3,615,000 3,629,000 Annual average sale price per unit of production:BBL of natural gas liquids*$61.02$37.36$40.18 BBL of oil*$100.15$56.96$56.85 MCF of natural gas*$7.77$5.88$6.67 Annual average production cost per MCFE produced*$1.97$1.83$1.45 Annual average depletion cost per MCFE produce

74、d*$2.89$2.49$2.17 *When used in this report,the term“BBL(S)”means stock tank barrel(s)of oil equivalent to 42 U.S.gallons and the term“MCF”means 1,000 cubic feet of natural gas at 14.65 pounds per square inch absolute and 60 degrees F.*Calculated on revenues before royalty expense and Alberta Royalt

75、y Tax Credit divided by gross production.*Calculated on revenues net of pipeline charges before royalty expense and Alberta Royalty Tax Credit divided by gross production.*Natural gas liquids,oil and natural gas units were combined by converting barrels of natural gas liquids and oil to an MCF equiv

76、alent(“MCFE”)on the basis of 1 BBL=5.8 MCF.Excludes natural gas pipeline charges.*Natural gas liquids,oil and natural gas units were combined by converting barrels of natural gas liquids and oil to an MCF equivalent(“MCFE”)on the basis of 1 BBL=5.8 MCF.In fiscal 2008,approximately 54%,33%and 13%of B

77、arnwells oil and natural gas revenues were from the sale of natural gas,oil and natural gas liquids,respectively.9In fiscal 2008,Barnwells net natural gas production after royalties averaged 9,150 MCF per day,a decrease from 9,900 MCF per day in fiscal 2007.Gross natural gas production decreased 7%i

78、n fiscal 2008,as compared to fiscal 2007,6%at Dunvegan and 8%at all other properties.Dunvegan contributed approximately 52%of Barnwells net natural gas production in fiscal 2008 and 2007.In fiscal 2008,natural gas production from the Dunvegan Unit was responsible for approximately 50%of Barnwells na

79、tural gas revenues,as compared to 51%in fiscal 2007.Barnwells major oil producing properties are the Red Earth,Chauvin and Bonanza/Balsam areas in Canada.In fiscal 2008,net oil production after royalties averaged 440 barrels per day as compared to an average of 400 barrels per day in fiscal 2007;gro

80、ss oil production increased 11%as compared to the prior year.The addition of new wells in the Bonanza/Balsam and Manyberries areas were partially offset by decreased production from the Red Earth and Chauvin areas caused by natural declines from existing wells.In fiscal 2008,net natural gas liquids

81、production after royalties averaged 290 barrels per day,a decrease from 310 barrels per day in fiscal 2007.Gross natural gas liquids production declined 4%in fiscal 2008,as compared to fiscal 2007.These decreases were principally due to lower Dunvegan production which decreased 9%or 25 barrels per d

82、ay which were partially offset by new natural gas liquids production at Progress.Dunvegan contributed approximately 83%of Barnwells net natural gas liquids production in fiscal 2008.The average production cost per MCFE was$1.97 for fiscal 2008,an 8%increase from$1.83 for fiscal 2007.The increase was

83、 due to a 10%increase in the average exchange rate of the Canadian dollar to the U.S.dollar in fiscal 2008,as compared to fiscal 2007.Actual field costs decreased by 6%due to lower repairs and maintenance work performed on older properties.The average depletion cost per MCFE was$2.89 for fiscal 2008

84、,a 16%increase from$2.49 for fiscal 2007.The increase was due to a 5%increase in the depletion rate and a 10%increase in the average exchange rate of the Canadian dollar to the U.S.dollar in fiscal 2008,as compared to fiscal 2007.The 5%increase in the depletion rate was the result of increases over

85、the past several years in Barnwells costs of finding and developing proven reserves,which have partially increased due to the rising costs of oil and natural gas exploration and development,along with product prices and the drilling of unsuccessful wells.Petroleum and natural gas prices are very dif

86、ficult to predict and fluctuate significantly.Natural gas prices tend to be higher in the winter than in the summer due to increased demand,although this trend has become less pronounced due to the increased use of natural gas to generate electricity for air conditioning in the summer and increased

87、natural gas storage capacity in North America.Beginning in the quarter ended September 30,2008 through the date of this filing,oil and natural gas prices have experienced a significant decline.If prices continue to decline,we may be required to write off the excess of unamortized capitalized costs o

88、ver the related cost ceiling and reduce oil and natural gas capital expenditures,possibly to a significant degree.10Productive Wells The following table sets forth the gross and net number of productive wells Barnwell has an interest in as of September 30,2008.Productive Wells*Gross*Net*Location Oil

89、 Gas Oil Gas Canada Alberta 165 583 29.1 66.7 Saskatchewan 7 30 0.3 4.9 British Columbia 4 0 1.0 0.0Total 176 613 30.4 71.6 *Eighteen natural gas wells have dual or multiple completions.*Please see note(*)on the following table.Developed Acreage and Undeveloped Acreage The following table sets forth

90、 certain information with respect to oil and natural gas properties of Barnwell as of September 30,2008.Developed and Developed Undeveloped Undeveloped Acreage*Acreage*Acreage*Location Gross*Net*Gross*Net*Gross*Net*Canada Alberta 248,728 39,601 237,097 110,146 485,825 149,747 British Columbia 1,827

91、542 4,704 1,167 6,531 1,709 Saskatchewan 3,140 426 -3,140 426Total 253,695 40,569 241,801 111,313 495,496 151,882 *“Developed Acreage”includes the acres covered by leases upon which there are one or more producing wells.“Undeveloped Acreage”includes acres covered by leases upon which there are no pr

92、oducing wells and which are maintained in effect by the payment of delay rentals or the commencement of drilling thereon.*The term“Gross”refers to the total number of acres or wells in which Barnwell owns an interest,and“Net”refers to Barnwells aggregate interest therein.For example,a 50%interest in

93、 a 320 acre lease represents 320 gross acres and 160 net acres.The gross acreage and well figures include interests owned of record by Barnwell and,in addition,the portions owned by others.Barnwells leasehold interests in its undeveloped acreage expire over the next fiscal years,if not developed,as

94、follows:5%expire during fiscal 2009;33%expire during fiscal 2010;20%expire during fiscal 2011;16%expire during fiscal 2012;and 8%expire during fiscal 2013.Eighteen percent of Barnwells undeveloped acreage is related to heavy oil and therefore not subject to expiration.There can be no assurance that

95、Barnwell will be successful in renewing its leasehold interests in the event of expiration.Barnwells undeveloped acreage includes concentrations in Alberta,at Doris(10,944 net acres),Bonanza/Balsam(8,752 net acres),Bremner(7,424 net acres),Rycroft(7,160 net acres),Thornbury(5,949 net acres),Paddle R

96、iver(4,896 net acres),Boundary Lake(4,775 net acres)and Mulligan(4,368 net acres).11Reserves The amounts set forth in the following table,prepared by Paddock Lindstrom&Associates Ltd.,Barnwells independent reservoir engineering consultants,summarize the estimated net quantities of proved producing r

97、eserves and proved reserves of crude oil(including condensate and natural gas liquids)and natural gas as of September 30,2008,2007 and 2006 on all properties in which Barnwell has an interest.These reserves are before deductions for indebtedness secured by the properties and are based on constant do

98、llars.No estimates of total proved net oil or natural gas reserves have been filed with or included in reports to any federal authority or agency,other than the United States Securities and Exchange Commission,since October 1,2004.Proved Producing Reserves September 30,2008 2007 2006 Oil(including n

99、atural gas liquids)barrels(BBLS):Dunvegan 329,000 387,000 404,000 All other properties 763,000 708,000 665,000Total 1,092,000 1,095,000 1,069,000 Natural gas thousand cubic feet(MCF):Dunvegan 10,493,000 11,577,000 11,503,000 All other properties 8,321,000 7,281,000 7,055,000Total 18,814,000 18,858,0

100、00 18,558,000 Total Proved Reserves(Includes Proved Producing Reserves)September 30,2008 2007 2006 Oil(including natural gas liquids)barrels(BBLS):Dunvegan 337,000 387,000 426,000 All other properties 998,000 1,000,000 877,000Total 1,335,000 1,387,000 1,303,000 Natural gas thousand cubic feet(MCF):D

101、unvegan 10,697,000 11,577,000 12,074,000 All other properties 12,600,000 12,441,000 12,752,000Total 23,297,000 24,018,000 24,826,000 As of September 30,2008,essentially all of Barnwells proved producing and total proved reserves were located in the Province of Alberta,with minor volumes located in t

102、he Provinces of Saskatchewan and British Columbia.During fiscal 2008,Barnwells total net proved reserves,including proved producing reserves,of oil,condensate and natural gas liquids decreased by 52,000 barrels,and total net proved reserves of natural gas decreased by 721,000 MCF.The following table

103、,based on information prepared by independent petroleum engineers,Paddock Lindstrom&Associates Ltd.,summarizes changes in the estimates of Barnwells net interests 12in total proved reserves of crude oil and natural gas liquids(“NGL”)and natural gas(“MCF”means 1,000 cubic feet of natural gas)which ar

104、e all in Canada:OIL&NGL GAS (Barrels)(MCF)Balance at September 30,2005 1,306,000 25,234,000 Revisions of previous estimates due to discontinuation of Alberta Royalty Tax Credit(24,000)(378,000)Revisions of previous estimates due to other 91,000(865,000)Extensions,discoveries and other additions 190,

105、000 4,464,000 Less production (260,000)(3,629,000)Balance at September 30,2006 1,303,000 24,826,000 Revisions of previous estimates 176,000 1,279,000 Extensions,discoveries and other additions 168,000 1,528,000 Less production (260,000)(3,615,000)Balance at September 30,2007 1,387,000 24,018,000 Rev

106、isions of previous estimates 89,000 1,114,000 Extensions,discoveries and other additions 126,000 1,514,000 Less production (267,000)(3,349,000)Balance at September 30,2008 1,335,000 23,297,000 The upward revisions in reserves in fiscal 2008 were due to improved performance on certain wells drilled i

107、n prior years.Barnwells working interest in the Dunvegan area accounted for approximately 46%and 48%of its total proved natural gas reserves at September 30,2008 and 2007,respectively,and approximately 25%and 28%of total proved oil and natural gas liquids reserves at September 30,2008 and 2007,respe

108、ctively.The following table sets forth Barnwells oil and natural gas reserves at September 30,2008,by property name,based on information prepared by Paddock Lindstrom&Associates Ltd.Gross reserves are before the deduction of royalties;net reserves are after the deduction of royalties.This table is b

109、ased on constant dollars where reserve estimates are based on sales prices,costs and statutory tax rates in existence at September 30,2008,the date of the projection.Oil,which includes natural gas liquids,is shown in thousands of barrels(“MBBLS”)and natural gas is shown in millions of cubic feet(“MM

110、CF”).13OIL AND NATURAL GAS RESERVES AT SEPTEMBER 30,2008 Total Proved Producing Total Proved Oil&NGL Gas Oil&NGL Gas Gross Net Gross Net Gross Net Gross Net Property Name(MBBLS)(MMCF)(MBBLS)(MMCF)Dunvegan 492 329 12,390 10,493503 337 12,64210,697Red Earth 278 207 12 9278 207 129Bonanza/Balsam 154 99

111、 747 652154 99 747652Pouce Coupe South 7 5 1,324 1,11262 42 1,4231,195Medicine River 34 25 485 38134 25 485381Doris 0 0 375 3170 0 988861Faith South 0 0 0 00 0 1,011809Wood River 75 50 152 13475 50 390318Progress 129 99 2,778 2,357195 148 3,4062,833Pouce Coupe 4 2 358 3064 2 436371Boundary Lake,AB 5

112、5 37 477 364111 71 1,201918Boundary Lake,BC 0 0 0 081 71 451377Other properties 312 239 3,061 2,689 370 283 4,421 3,876TOTAL 1,540 1,092 22,159 18,8141,867 1,335 27,61323,297Standardized Measure of Estimated Discounted Future Net Cash Flows The following table sets forth Barnwells“Estimated Future N

113、et Revenues”from total proved oil,natural gas and natural gas liquids reserves and the present value of Barnwells“Estimated Future Net Revenues”(discounted at 10%).Estimated future net revenues for total proved reserves are net of estimated future expenditures of developing and producing the proved

114、reserves,and assume the continuation of existing economic conditions.Net revenues have been calculated using year-end sales prices and current costs,after deducting all royalties,operating costs,future estimated capital expenditures,and income taxes.Proved Producing Total Proved Reserves Reserves Ye

115、ar ending September 30,2009$20,571,000$23,315,000 2010 16,316,000 20,440,000 2011 12,978,000 15,856,000 Thereafter 49,102,000 64,345,000$98,967,000$123,956,000 Present value(discounted at 10%)at September 30,2008$70,456,000*$88,246,000*These amounts do not purport to represent,nor should they be int

116、erpreted as,the fair value of Barnwells natural gas and oil reserves.An estimate of fair value would also consider,among other items,the value of Barnwells undeveloped land position,the recovery of reserves not presently classified as proved,anticipated future changes in oil and natural gas prices(t

117、hese amounts were based on a natural gas price of$5.94 per 1,000 cubic feet and an oil price of$92.76 per barrel as of September 30,2008)and costs,and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.14Marketing of Oil and Natural Gas Barnw

118、ell sells substantially all of its oil and natural gas liquids production under short-term contracts between itself and marketers of oil.The price of oil and natural gas liquids is freely negotiated between the buyers and sellers and is largely determined by the world price for oil,which is principa

119、lly denominated in U.S.dollars.Natural gas sold by Barnwell is generally sold under both long-term and short-term contracts with prices indexed to market prices.The price of natural gas and natural gas liquids is freely negotiated between buyers and sellers and is principally determined for Barnwell

120、 by the North American price for natural gas,which is principally denominated in U.S.dollars.In fiscal 2008,2007 and 2006,Barnwell took virtually all of its oil and natural gas“in kind”where Barnwell markets the products instead of having the operator of a producing property market the products on B

121、arnwells behalf.Barnwells oil and natural gas segment derived 66%of its oil and natural gas revenues in fiscal 2008 from four individually significant customers,ProGas Limited(22%),Glencoe Resources Ltd.(15%),Mercuria Energy Canada Inc.(14%),and Shell Trading Canada(14%).A substantial portion of Bar

122、nwells natural gas production from Dunvegan and other properties is sold to aggregators and marketers under various short-term and long-term contracts,with the price of natural gas determined by negotiations between the aggregators and the final purchasers.In fiscal 2008,over 90%of Barnwells oil and

123、 natural gas revenues were from products sold at spot prices.Governmental Regulation The jurisdictions in which the oil and natural gas properties of Barnwell are located have regulatory provisions relating to permits for the drilling of wells,the spacing of wells,the prevention of oil and natural g

124、as waste,allowable rates of production and other matters.The amount of oil and natural gas produced is subject to control by regulatory agencies in each province that periodically assign allowable rates of production.The Province of Alberta and Government of Canada also monitor and regulate the volu

125、me of natural gas that may be removed from the province and the conditions of removal.There is no current government regulation of the price that may be charged on the sale of Canadian oil or natural gas production.Canadian natural gas production destined for export is priced by market forces subjec

126、t to export contracts meeting certain criteria prescribed by Canadas National Energy Board and the Government of Canada.Different royalty rates are imposed by the provincial governments,the Government of Canada and private interests with respect to the production and sale of crude oil,natural gas an

127、d natural gas liquids.In addition,provincial governments receive additional revenue through the imposition of taxes on crude oil and natural gas owned by private interests within the province.Essentially,provincial royalties are calculated as a percentage of revenue and vary depending on production

128、volumes,selling prices and the date of discovery.As discussed above,on October 25,2007,the Alberta Government announced a New Royalty Framework(“NRF”)that will take effect on January 1,2009.The NRF increases royalty rates on conventional oil and natural gas production whereby royalty rates will be b

129、oth price-sensitive and production-sensitive and may increase up to a maximum of 50%.The price-sensitive maximum is 15reached for oil when oil is selling at or above$120.00 Canadian dollars per barrel and for natural gas when natural gas is selling at or above$17.50 Canadian dollars per MCF.Approxim

130、ately 99%of Barnwells gross revenues are derived from properties located within Alberta.Approximately 85%of all fiscal 2008 royalties related to crown charges,and 15%of Barnwells fiscal 2008 royalties related to freehold and override charges which are not directly affected by the NRF.In November 200

131、8,the Alberta Government announced a one-time option of selecting new transitional rates or NRF rates when drilling a new natural gas or conventional oil well 1,000 to 3,500 meters in depth.All wells drilled between 2009 and 2013 that adopt the transitional rates will be required to shift to the NRF

132、 on January 1,2014.All current wells will move to the NRF on January 1,2009 as previously scheduled.In May 2006,a bill reducing the Province of Albertas corporate tax rate from 11.5%to 10.0%effective April 1,2006 received Royal Assent and was passed into law.In June 2006,Royal Assent was received on

133、 a bill passed by the Parliament of Canada which reduced the federal corporate income tax rate to 19%from 21%by 2010 starting January 1,2008.The federal corporate surtax was also eliminated effective January 1,2008.Accordingly,as a result of these reductions in Canadian tax rates,Barnwells Canadian

134、net deferred income tax liabilities were reduced by approximately$1,094,000 during fiscal 2006 and$100,000 in fiscal 2007.During the first quarter of fiscal 2008,the Canadian government enacted reductions in the corporate tax rate from 20.5%,20.0%,19.0%,18.5%and 18.5%in calendar years 2008,2009,2010

135、,2011 and 2012,respectively,to 19.5%,19.0%,18.0%,16.5%and 15%,respectively.This reduction in Canadian federal tax rates resulted in a$909,000 reduction of the net deferred tax liability in fiscal 2008.In Alberta,a producer of oil or natural gas was entitled to a credit against the royalties payable

136、to Alberta called the Alberta Royalty Tax Credit(“ARTC”).The ARTC was discontinued by the Alberta government effective January 1,2007.Accordingly,no ARTC payments were received during fiscal 2008.Barnwell received ARTC payments of$111,000 and$438,000 in fiscal years 2007 and 2006,respectively.The AR

137、TC payments received through December 31,2006 were recorded as a credit against oil and natural gas royalties and reported in oil and natural gas revenues.Competition The majority of Barnwells natural gas sales take place in Alberta,Canada.Natural gas prices in Alberta are generally competitive with

138、 other major North American areas due to sufficient pipeline capacity into the United States.Barnwells oil and natural gas liquids are sold in Alberta with prices determined by the world price for oil.Barnwell competes in the sale of oil and natural gas on the basis of price,and on the ability to de

139、liver products.The oil and natural gas industry is intensely competitive in all phases,including the exploration for new production and reserves and the acquisition of equipment and labor necessary to conduct drilling activities.The competition comes from numerous major oil companies as well as nume

140、rous other independent operators.There is also competition between the oil and natural gas industry and other industries in supplying the energy and fuel requirements of industrial,commercial and individual consumers.Barnwell is a minor participant in the industry and competes in its oil and natural

141、 gas activities with many other companies having far greater financial,technical and other resources.16Land Investment Segment Overview Barnwell owns a 77.6%controlling interest in Kaupulehu Developments,a Hawaii general partnership that owns interests in leasehold land and development rights for pr

142、operty located approximately six miles north of the Kona International Airport in the North Kona District of the island of Hawaii.Operations Between 1986 and 1989,Kaupulehu Developments obtained the state and county zoning changes necessary to permit development of the Four Seasons Resort Hualalai a

143、t Historic Kaupulehu and Hualalai Golf Club,which opened in 1996,a second golf course,and single-family and multi-family residential units.These projects were developed by an unrelated entity on leasehold land acquired from Kaupulehu Developments.Kaupulehu Developments holds the development rights f

144、or residentially-zoned leasehold land within and adjacent to Hualalai Golf Club.These development rights are under option to Hualalai Investors JV,LLC and Hualalai Investors II,LLC,two entities unrelated to Barnwell(hereinafter referred to as“Hualalai Investors”).Barnwell acquired a 1.5%passive mino

145、rity interest,through an 80%-owned joint venture,in Hualalai Investors in fiscal 2007.If Hualalai Investors exercises all remaining options,Kaupulehu Developments expects to receive a total of$6,198,000 as of September 30,2008.Between 1993 and 2001,Kaupulehu Developments obtained the state and count

146、y zoning changes necessary to permit development of single-family and multi-family residential units,a golf course and a limited commercial area on approximately 870 leasehold acres,zoned for resort/residential development,located adjacent to and north of the Four Seasons Resort Hualalai at Historic

147、 Kaupulehu.In February 2004,Kaupulehu Developments sold its leasehold interest in the approximately 870 acres in two increments(“Increment I”and“Increment II”)to WB KD Acquisition,LLC(“WB”).There is no affiliation between Kaupulehu Developments and WB.WB is affiliated with RP-Hualalai Investors,LLC,

148、a managing member of Hualalai Investors,and Westbrook Partners,developers of Kukio Resort located adjacent to Hualalai Resort.Increment I is an area planned for approximately 80 single-family lots and a beach club on the portion of the property bordering the Pacific Ocean.The purchasers of the 80 si

149、ngle-family lots will have the right to apply for membership in the Kukio Resort Golf and Beach Club,which is located adjacent to and south of the Four Seasons Resort Hualalai at Historic Kaupulehu.Increment II is the remaining portion of the approximately 870-acre property and is zoned for single-f

150、amily and multi-family residential units and a golf course and clubhouse.With respect to Increment I,Kaupulehu Developments received an$11,550,000 closing payment and is entitled to receive payments from WB based on the following percentages of the gross receipts from WBs sales of single-family resi

151、dential lots in Increment I:9%of the gross proceeds from single-family lot sales up to aggregate gross proceeds of$100,000,000;10%of such aggregate gross proceeds greater than$100,000,000 but less than$300,000,000;and 14%of such aggregate gross proceeds in excess of$300,000,000.In fiscal 2008 four s

152、ingle family lots were sold,in fiscal 172007 seven single family lots were sold and in fiscal 2006 five single family lots were sold for a total of 16 single-family lots.In June 2006,Kaupulehu Developments sold its leasehold interest in Increment II to WB and WB KD Acquisition II,LLC(“WBKD”).There i

153、s no affiliation between Kaupulehu Developments and WB or WBKD.WB and WBKD are both affiliates of RP-Hualalai Investors,LLC and Westbrook Partners.Pursuant to the sale,Kaupulehu Developments received a$10,000,000 closing payment and is entitled to receive future payments from WBKD based on a percent

154、age of the sales prices of the residential lots,ranging from 3.25%to 14%,to be determined in the future depending upon a number of variables,including whether the lots are sold prior to improvement.In addition,under the terms of the sale of Increment II,WBKD has the exclusive right to negotiate with

155、 Kaupulehu Developments with respect to Kaupulehu Developments interest in approximately 1,000 acres of vacant leasehold land zoned conservation in the Kaupulehu area located adjacent to Increment II.This right expires in June 2009 or,if WBKD completes any and all environmental assessments and surve

156、ys reasonably required to support a petition to the Hawaii State Land Use Commission for reclassification and rezoning of the aforementioned land,in June 2012.Kaupulehu Mauka Investors,LLC,a limited liability company wholly-owned by Barnwell,holds 14 lot acquisition rights as to lots within approxim

157、ately 5,000 acres of agricultural-zoned leasehold land in the upland area of Kaupulehu(“Mauka Lands”)situated between the Queen Kaahumanu Highway and the Mamalahoa Highway at Kaupulehu,North Kona,island and state of Hawaii.The 14 lot acquisition rights give Barnwell the right to acquire 14 residenti

158、al lots,each of which is currently estimated to be two to five acres in size,which may be developed on the Mauka Lands.These lands are currently classified as agricultural by the state of Hawaii and,accordingly,the developer of these lands(Hualalai Investors)will need to pursue both state and county

159、 of Hawaii approvals for reclassification and rezoning to permit a residential subdivision and negotiate development terms.Competition Barnwells land investment segment is subject to intense competition in all phases of its operations including the acquisition of new properties,the securing of appro

160、vals necessary for land rezoning,and the search for potential buyers of property interests presently owned.The competition comes from numerous independent land development companies and other industries involved in land investment activities.The principal factors affecting competition are the locati

161、on of the project and pricing.Kaupulehu Developments is a minor participant in the land development industry and competes in its land investment activities with many other entities having far greater financial and other resources.Residential Real Estate Segment Overview Established in fiscal 2007,Ka

162、upulehu 2007,LLLP(“Kaupulehu 2007”),a Hawaii limited liability limited partnership 80%-owned by Barnwell,acquires house lots for investment and constructs turnkey single-family homes for future sale.18Operations In fiscal 2007,Kaupulehu 2007 made nonrefundable initial deposits of$200,000 each to sec

163、ure the right to purchase seven parcels in the Lot 4A Increment I area of Kaupulehu,North Kona,Hawaii from WB,an unrelated entity.Each lot under contract had a purchase price of$2,378,000 and the deposit for each lot was to be applied to the purchase price of each lot.In fiscal 2007,Kaupulehu 2007 p

164、urchased three of the aforementioned parcels and in January 2008,Kaupulehu 2007 acquired a fourth residential parcel.Kaupulehu 2007 is in the process of developing residences for future sale on two of the parcels and intends to hold the third and fourth parcels for investment purposes.In June 2008,K

165、aupulehu 2007 sold its investments in two of its three remaining rights to purchase lots in the Lot 4A Increment I area to an unrelated party.The unrelated party used the lot purchase rights acquired from Kaupulehu 2007 to purchase two parcels in the Lot 4A Increment I area from WB.As Kaupulehu 2007

166、 no longer had an obligation to purchase the aforementioned two parcels,Kaupulehu 2007 received a$400,000 refund of its original deposits for the two lots at$200,000 per lot.At September 30,2008,one deposit of$200,000 remained.The closing date for Kaupulehu 2007s obligation to purchase the remaining

167、 parcel is being negotiated.Competition Barnwells residential real estate segment is subject to intense competition in all phases of its operations including the acquisition of land,the building of residential homes,including the need for raw materials and skilled labor,and the search for potential

168、purchasers of completed homes.The competition comes from numerous independent real estate developers.The principal factors affecting competition are the location of the project,reputation,design,quality and pricing.Kaupulehu 2007 is a newcomer and a minor participant in the real estate development i

169、ndustry and competes with many other entities having far greater financial and other resources.Contract Drilling Segment Overview Barnwells wholly-owned subsidiary,Water Resources International,Inc.(“Water Resources”),drills water,water monitoring and geothermal wells of varying depths in Hawaii,ins

170、talls and repairs water pumping systems,and is the state of Hawaiis distributor for Floway pumps and equipment.Operations Water Resources owns and operates three Spencer-Harris portable rotary drill rigs capable of drilling up to approximately 6,000 feet,an IDECO H-35 rotary drill/workover rig,a GEF

171、CO 40-T portable rotary drill rig and pump installation and service equipment.Additionally,Water Resources leases a three-quarter of an acre maintenance facility in Honolulu,Hawaii and a one acre maintenance and storage facility with 2,800 square feet of interior space in Kawaihae,Hawaii,and maintai

172、ns an inventory of drilling materials and pump supplies.19The demand for Water Resources services is primarily dependent upon land development activities in Hawaii.Water Resources markets its services to land developers and government agencies,and identifies potential contracts through public notice

173、s,its officers involvement in community activities and referrals.Contracts are usually fixed price per lineal foot drilled or day rate contracts and are negotiated with private entities or obtained through competitive bidding with private entities or local,state and federal agencies.Contract revenue

174、s are not dependent upon the discovery of water,geothermal production zones or other similar targets,and contracts are not subject to renegotiation of profits or termination at the election of the governmental entities involved.Contracts provide for arbitration in the event of disputes.Water Resourc

175、es derived 24%,47%and 37%of its contract drilling revenues in fiscal 2008,2007 and 2006,respectively,pursuant to federal,state of Hawaii and county contracts.At September 30,2008,Barnwell had accounts receivable from the state of Hawaii and county entities totaling approximately$509,000.Barnwell has

176、 lien rights on wells drilled and pumps installed for federal,state of Hawaii,county and private entities.Water Resources currently operates in Hawaii and is not subject to seasonal fluctuations.In fiscal 2008,Water Resources started four well drilling contracts and 10 pump installation contracts an

177、d completed four well drilling contracts and eight pump installation contracts.The four completed well drilling contracts were started in the prior year.Fifty-eight percent(58%)of well drilling and pump installation jobs,representing 24%of total contract drilling revenues in fiscal 2008,have been pu

178、rsuant to government contracts.At September 30,2008,Water Resources had a backlog of six well drilling contracts and five pump installation and repair contracts,of which four well drilling and three pump installation and repair were in progress as of September 30,2008.The dollar amount of Water Reso

179、urces backlog of firm well drilling and pump installation and repair contracts at November 30,2008 and 2007 was as follows:2008 2007 Well drilling$3,180,000$7,860,000 Pump installation and repair 630,000 1,480,000$3,810,000$9,340,000 All of the contracts in backlog at November 30,2008 are expected t

180、o be completed within fiscal year 2009.Competition Water Resources utilizes rotary drill rigs and competes with other drilling contractors in Hawaii which use drill rigs similar to Water Resources drilling rigs or drilling rigs that drill as quickly as Water Resources equipment but require less labo

181、r.These competitors are also capable of installing and repairing vertical turbine and submersible water pumping systems in Hawaii.These contractors compete actively with Water Resources for government and private contracts.Pricing is Water Resources major method of competition;reliability of service

182、 is also a significant factor.20Competitive pressures are expected to remain high,thus there is no assurance that the quantity of available or awarded jobs which occurred in fiscal 2008 will continue.Financial Information About Industry Segments and Geographic Areas Note 12 in the“Notes to Consolida

183、ted Financial Statements”in Item 8 contains information on our segments and geographic areas.Employees As of December 4,2008,Barnwell employed 53 employees,49 of which are on a full-time basis.20 are employed in contract drilling activities,20 are employed in oil and natural gas activities,and 13 ar

184、e members of the corporate and administrative staff.None of our employees are union members.Environmental Costs Barnwell is subject to extensive environmental laws and regulations.Federal,state,and Canadian governmental agencies issue rules and regulations and enforce laws to protect the environment

185、 which are often difficult and costly to comply with and which carry substantial penalties for failure to comply,particularly in regard to the discharge of materials into the environment.These laws,which are constantly changing,regulate the discharge of materials into the environment and maintenance

186、 of surface conditions and may require Barnwell to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites.Barnwell did not incur material environmental costs in fiscal 2008.Available Information We are required to file annual,quar

187、terly and current reports and other information with the Securities and Exchange Commission(“SEC”).These filings are not deemed to be incorporated by reference in this report.You may read and copy any documents filed by us at the Public Reference Room of the SEC,100 F Street,N.E.,Washington,D.C.2054

188、9.You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.Our filings with the SEC are also available to the public through the SECs website at www.sec.gov.Furthermore,we maintain an Internet site at .We make available on our Internet website fre

189、e of charge our annual reports on Form 10-K,quarterly reports on Form 10-Q and current reports on Form 8-K as soon as practicable after we electronically file such reports with the SEC.ITEM 1A.RISK FACTORS The business of Barnwell and its subsidiaries face numerous risks,including those set forth be

190、low or those described elsewhere in this Form 10-K or in Barnwells other filings with the SEC.The risks described below are not the only risks that Barnwell faces,nor are they necessarily listed in order of significance.If any of the following risk factors should occur,our profitability,financial co

191、ndition or liquidity could be materially impacted.21Risks Related to Oil and Natural Gas Segment The oil and natural gas industry is highly competitive.We compete for capital,acquisitions of reserves,undeveloped lands,skilled personnel,access to drilling rigs,service rigs and other equipment,access

192、to processing facilities,pipeline and refining capacity and in many other respects with a substantial number of other organizations,many of which may have greater technical and financial resources than we do.Some of these organizations explore for,develop and produce oil and natural gas,carry on ref

193、ining operations and market oil and other products on a worldwide basis.As a result of these complementary activities,some of our competitors may have competitive resources that are greater and more diverse than ours.Furthermore,many of our competitors may have a competitive advantage when respondin

194、g to factors that affect demand for oil and natural gas production,such as changing prices and production levels,the cost and availability of alternative fuels and the application of government regulations.If our competitors are able to capitalize on these competitive resources,it could adversely af

195、fect our revenues.Oil and natural gas prices are volatile.Our results of operations and financial condition are highly dependent on the prices of and demand for our oil and natural gas production.Oil and natural gas prices are volatile and have fluctuated widely during recent years in response to ma

196、ny factors that are beyond our control.These factors include,but are not limited to,minor changes in supply and demand,market uncertainty,weather,worldwide political instability,foreign supply of oil and natural gas,the level of consumer product demand,government regulations and taxes,the price and

197、availability of alternative fuels and the overall economic environment.Any decline in crude oil or natural gas prices may have a material adverse effect on our operations,financial condition,operating cash flows,borrowing ability,reserves,amount of capital that we are able to allocate for the develo

198、pment of oil and natural gas reserves and future growth.Energy prices are also subject to other political and regulatory actions outside our control,which may include changes in the policies of the Organization of Petroleum Exporting Countries or other developments involving or affecting oil-produci

199、ng countries,or actions or reactions of the government of the United States in anticipation of or in response to such developments.If oil and natural gas prices decrease,we may be required to take write-downs of the carrying value of our oil and natural gas properties.We follow the full cost method

200、of accounting for costs related to our oil and natural gas properties.Under this method,the net book value of properties less related deferred income taxes,may not exceed a calculated“ceiling.”The ceiling is the estimated after tax future net revenues from proved oil and natural gas properties,disco

201、unted at 10%per year.In calculating discounted future net revenues,oil and natural gas prices in effect at the time of the calculation are held constant,except for changes which are fixed and determinable by existing contracts.The full cost ceiling is evaluated at the end of each quarter using the p

202、rices for oil and natural gas at that date.The excess,if any,of the net book value above the ceiling is required to be written off as an expense.A significant decline in oil and natural gas prices from current levels,or other factors,without other mitigating circumstances,could result in reductions

203、in the carrying value of such assets and an equivalent charge to earnings.22An increase in operating costs or a decline in our production level could have a material adverse effect on our results of operations and financial condition.Higher operating costs for our underlying properties will directly

204、 decrease the amount of cash flow received by us and,therefore,may reduce the price of our common stock.Electricity,supplies,and labor costs are a few of the operating costs that are susceptible to material fluctuation.The level of production from our existing properties may decline at rates greater

205、 than anticipated due to unforeseen circumstances,many of which are beyond our control.A significant decline in our production could result in materially lower revenues and cash flow.Our operating results are affected by our ability to market the oil and natural gas that we produce.Our business depe

206、nds in part upon the availability,proximity and capacity of natural gas gathering systems,pipelines and processing facilities.Canadian federal and provincial,as well as United States federal and state,regulation of oil and natural gas production,processing and transportation,tax and energy policies,

207、general economic conditions,and changes in supply and demand could adversely affect our ability to produce and market oil and natural gas.If market factors change and inhibit the marketing of our production,overall production or realized prices may decline.We are not the operator and have limited in

208、fluence over the operations of the majority of our oil and natural gas properties.We hold minority interests in the majority of our oil and natural gas properties.As a result,we cannot control the pace of exploration or development or major decisions affecting the drilling of wells or the plan for d

209、evelopment and production at non-operated properties,although contract provisions give Barnwell certain consent rights in some matters.The operators influence over these matters can affect the pace at which we incur capital expenditures.Additionally,as certain underlying joint venture data is not ac

210、cessible to us,we depend on the operators at non-operated properties to provide us with reliable accounting information.Our operations are subject to domestic and foreign government regulation and other risks,particularly in the United States and Canada.Barnwells oil and natural gas operations are a

211、ffected by political developments and laws and regulations,particularly in the United States and Canada,such as restrictions on production,restrictions on imports and exports,the maintenance of specified reserves,tax increases and retroactive tax claims,expropriation of property,cancellation of cont

212、ract rights,environmental protection controls,environmental compliance requirements and laws pertaining to workers health and safety.Further,the right to explore for and develop oil and natural gas on lands in Alberta,Saskatchewan and British Columbia is controlled by the governments of each of thos

213、e provinces.Changes in royalties and other terms of provincial leases,permits and reservations may have a substantial effect on Barnwells operations.We derive a significant portion of our revenues from our operations in Canada.In fiscal 2008,we derived approximately 75%of our operating revenues from

214、 operations in Canada.Additionally,our ability to compete in the Canadian oil and natural gas industry may be adversely affected by governmental regulations or other policies that favor the awarding of contracts to 23contractors in which Canadian nationals have substantial ownership interests.Furthe

215、rmore,we may face governmentally imposed restrictions or fees from time to time on the transfer of funds to the U.S.Government regulations control and often limit access to potential markets and impose extensive requirements concerning employee safety,environmental protection,pollution control and r

216、emediation of environmental contamination.Environmental regulations,in particular,prohibit access to some markets and make others less economical,increase equipment and personnel costs and often impose liability without regard to negligence or fault.In addition,governmental regulations may discourag

217、e our customers activities,reducing demand for our products and services.Compliance with foreign tax and other laws may adversely affect our operations.Tax and other laws and regulations are not always interpreted consistently among local,regional and national authorities.Income tax laws,other legis

218、lation or government incentive programs relating to the oil and natural gas industry may in the future be changed or interpreted in a manner that adversely affects us and our stockholders.It is also possible that in the future we will be subject to disputes concerning taxation and other matters in C

219、anada,including the manner in which we calculate our income for tax purposes,and these disputes could have a material adverse effect on our financial performance.We are dependent upon future discoveries or acquisitions of oil and natural gas to maintain our reserves.We actively explore for oil and n

220、atural gas reserves.However,future exploration and drilling results are uncertain and may involve substantial costs.Despite this uncertainty or potential cost,discoveries or acquisitions of additional reserves are needed to avoid a material decline in reserves and production.As a result,future oil a

221、nd natural gas reserves may be dependent on our success in exploiting existing properties and acquiring additional reserves.If our access to capital becomes limited or unavailable,our ability to make the necessary capital investments to maintain or expand our oil and natural gas reserves will be imp

222、aired.Additionally,we cannot guarantee that we will be successful in developing additional reserves or acquiring additional reserves on terms that meet our investment objectives.Without these reserve additions,our reserves will deplete and as a consequence,either production from,or the average reser

223、ve life of,our properties will decline.Actual reserves will vary from reserve estimates.The value of our common stock depends upon,among other things,the level of reserves of oil and natural gas.Estimating reserves is inherently uncertain,and the figures herein are only estimates.Ultimately,actual r

224、eserves attributable to our properties will vary from estimates,and those variations may be material.The estimation of reserves involves a number of factors and assumptions,including,among others:historical production from our wells compared with production rates from similar producing wells in the

225、area;future commodity prices,production and development costs,royalties and capital expenditures;initial production rates;production decline rates;ultimate recovery of reserves;success of future development activities;24 marketability of production;effects of government regulation;and other governme

226、nt levies that may be imposed over the producing life of reserves.Reserve estimates are based on the relevant factors,assumptions and prices as of the date on which the evaluations are prepared.Many of these factors are subject to change and are beyond our control.If these factors,assumptions and pr

227、ices prove to be inaccurate,actual results may vary materially from reserve estimates.Delays in business operations could adversely affect our distributions.In addition to the usual delays in payment by purchasers of oil and natural gas to the operators of our properties,and the delays of those oper

228、ators in remitting payment to us,payments between any of these parties may also be delayed by:restrictions imposed by lenders;accounting delays;delays in the sale or delivery of products;delays in the connection of wells to a gathering system;blowouts or other accidents;adjustments for prior periods

229、;recovery by the operator of expenses incurred in the operation of the properties;and the establishment by the operator of reserves for these expenses.Any of these delays could expose us to additional third party credit risks.The industry in which we operate exposes us to potential liabilities that

230、may not be covered by insurance.Our operations are subject to all of the risks associated with the operation and development of oil and natural gas properties,including the drilling of oil and natural gas wells,and the production and transportation of oil and natural gas.These risks include encounte

231、ring unexpected formations or pressures,premature declines of reservoirs,blow-outs,equipment failures and other accidents,cratering,sour gas releases,uncontrollable flows of oil,natural gas or well fluids,adverse weather conditions,pollution,other environmental risks,fires and spills.A number of the

232、se risks could result in personal injury,loss of life,or environmental and other damage to our property or the property of others.While we maintain reserves for anticipated liabilities and carry various levels of insurance,we could be affected by civil,criminal,regulatory or administrative actions,c

233、laims or proceedings.We cannot fully protect against all of the risks listed above,nor are all of these risks insurable.There is no assurance that any applicable insurance or indemnification agreements will adequately protect us against liability for the risks listed above.We could face substantial

234、losses if an event occurs for which we are not fully insured or are not indemnified against or a customer or insurer fails to meet its indemnification or insurance obligations.In addition,there can be no assurance that insurance will continue to be available to cover any or all of these risks,or,eve

235、n if available,that insurance premiums or other costs will not rise significantly in the future,so as to make the cost of such insurance prohibitive.25We may incur material costs to comply with or as a result of health,safety,and environmental laws and regulations.The oil and natural gas industry is

236、 subject to extensive environmental regulation pursuant to local,provincial and federal legislation.A violation of that legislation may result in the imposition of fines or the issuance of“clean up”orders.Legislation regulating the oil and natural gas industry may be changed to impose higher standar

237、ds and potentially more costly obligations.For example,the 1997 Kyoto Protocol to the United Nations Framework Convention on Climate Change,known as the Kyoto Protocol,was ratified by the Canadian government in December 2002 and will require,among other things,significant reductions in greenhouse ga

238、ses.The impact of the Kyoto Protocol on us is uncertain and may result in significant additional costs for our future operations.Although we record a provision in our financial statements relating to our estimated future environmental and reclamation obligations,we cannot guarantee that we will be a

239、ble to satisfy our actual future environmental and reclamation obligations.We are not fully insured against certain environmental risks,either because such insurance is not available or because of high premium costs.In particular,insurance against risks from environmental pollution occurring over ti

240、me,as opposed to sudden and catastrophic damages,is not available on economically reasonable terms.Accordingly,any site reclamation or abandonment costs actually incurred in the ordinary course of business in a specific period could negatively impact our cash flow.Should we be unable to fully fund t

241、he cost of remedying an environmental problem,we might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy.We may have difficulty financing our planned capital expenditures,which could have an adverse affect on our business.We make an

242、d will continue to make substantial capital expenditures in our exploration and development projects.Without adequate capital resources,our drilling and other activities may be limited and our business,financial condition and results of operations may suffer.We may not be able to secure necessary fi

243、nancing on reasonable terms or at all and financing may not continue to be available to us under our existing financing arrangements.If capital resources are unavailable,we may curtail our drilling,development and other activities or be forced to sell some of our assets under untimely or unfavorable

244、 terms.Any such curtailment or sale could have a material adverse effect on our business,financial condition and results of operations.Unforeseen title defects may result in a loss of entitlement to production and reserves.Although we conduct title reviews in accordance with industry practice prior

245、to any purchase of resource assets or property,such reviews do not guarantee that an unforeseen defect in the chain of title will not arise and defeat our title to the purchased assets.If such a defect were to occur,our entitlement to the production from such purchased assets could be jeopardized.26

246、Risks Related to Land Investment Segment The real estate investment industry is experiencing a severe and extended downturn that may continue for an indefinite period.This downturn in economic conditions could adversely affect our business.The real estate investment industry is cyclical in nature an

247、d is particularly vulnerable to shifts in local,regional,and national economic conditions outside of our control such as interest rates,housing demand,population growth,employment levels and job growth and property taxes.Further,a weakening of the economic drivers in Hawaii,which include tourism,mil

248、itary spending,construction starts and employment,and a decrease in market demand adversely impacted the level of real estate activity in Hawaii.The industry has experienced a significant decrease in demand for new homes in recent months and this trend may continue for an extended period of time.Eco

249、nomic conditions in the United States have also weakened recently,which puts continued pressure on consumer confidence for residential real estate.These challenging market conditions are expected to continue for the foreseeable future and,in the near term,these conditions may further deteriorate.We

250、expect that continued weakness in the industry could adversely affect our business,results of operations and financial condition.Considerable economic and political uncertainties currently exist that could have adverse effects on consumer buying habits,construction costs,availability of labor and ma

251、terials and other factors affecting us and the real estate industry in general.Significant expenditures associated with investment in real estate,such as real estate taxes,insurance,maintenance costs and debt payments,cannot generally be reduced even though changes in Hawaiis or the nations economy

252、may cause a decrease in revenues from our properties.Our real estate business is primarily concentrated in the state of Hawaii.As a result,our financial results are dependent on the economic growth and health of Hawaii,particularly the island of Hawaii.Barnwells land investment segment is affected b

253、y the condition of Hawaiis real estate market.The Hawaii real estate market is affected by Hawaiis economy and Hawaiis tourism industry,as well as the United States economy in general.Any future cash flows from Barnwells land development activities are subject to,among other factors,the level of rea

254、l estate activity and prices,the demand for new housing and second homes on the island of Hawaii,the rate of increase in the cost of building materials and labor,the introduction of building code modifications,changes to zoning laws,and the level of confidence in Hawaiis economy.The future economic

255、growth in certain portions of the island of Hawaii may be adversely affected if its infrastructure,such as roads,airports,medical facilities and schools,are not improved to meet increased demand.There can be no assurance that these improvements will occur.The occurrence of natural disasters in Hawai

256、i could adversely affect our business.The occurrence of natural disasters in Hawaii such as,but not limited to,earthquakes,landslides,hurricanes,tornadoes,volcanic activity,droughts and floods,could have a material adverse effect on our ability to develop and sell properties or realize income from o

257、ur projects.The occurrence of natural disasters could also cause increases in property and flood insurance rates and deductibles,which could reduce demand for our properties.27Increases in interest rates,tightening of lending standards and decreases,limitations or restrictions in the availability of

258、 mortgage financing and other economic factors outside our control,such as consumer confidence and declines in employment levels could lead to slowed home sales,which could adversely affect our total earned revenues and earnings.The United States residential mortgage market is experiencing significa

259、nt disruption.Mortgage interest rates have recently experienced significant volatility and contributed to the challenging market conditions faced by us and the industry.In addition,as a result of increased default rates and other factors,the willingness of many lenders to make home mortgage loans ha

260、s decreased and lenders have tightened their lending standards.The volatility in interest rates,the decrease in the willingness of lenders to make home mortgage loans,and the tightening of lending standards have made it more difficult for some potential buyers to finance the purchase of our homes.Po

261、tential buyers may not be able to obtain acceptable financing to purchase residential lots within the Kaupulehu area,leading to further declines in the market for homes.Any limitations or restrictions on the availability of mortgage financing or increases in mortgage interest rates could reduce resi

262、dential lot sales,thereby reducing our total revenues and net earnings.Even if potential buyers do not need financing,changes in interest rates and mortgage availability could make it harder for them to sell their existing homes to potential buyers who need financing.Any limitations or restrictions

263、on the availability of mortgage financing,further interest rate increases or limits on the deductibility of home mortgages could adversely affect our sales,which would reduce our revenues.Our business is subject to extensive regulation which makes it difficult and expensive for us to conduct our ope

264、rations.We are subject to a wide variety of federal,state and local laws and regulations relating to land use and development and to environmental compliance and permitting obligations,including those related to the use,storage,discharge,emission,and disposal of hazardous materials.Any failure to co

265、mply with these laws could result in capital or operating expenditures or the imposition of severe penalties or restrictions on operations that could adversely affect present and future operations,or jeopardize our ability to sell the leasehold interest currently held.Future percentage of sales paym

266、ents could be impaired if the developer of the property is unable to negotiate fee simple interests.In 2006 we sold our leasehold interest in the second of two increments of resort/residential zoned property to an unrelated developer.As a part of the sale,we are entitled to receive future payments b

267、ased on a percentage of the sales prices of residential lots sold in this second increment.Receipt of these percentage of sales payments will be contingent upon the ability of the developer of the leasehold interest in the resort/residential zoned property to successfully negotiate fee simple prices

268、 within this second increment.If the developer is unsuccessful in such negotiations,our ability to receive percentage of sales payments on the sales of those lots would be impaired and could impair our ability to receive percentage of sales payments on the sales of lots in the first increment.Future

269、 percentage of sales payments would be impacted if the developer of the second of two increments does not complete the necessary infrastructure and amenities.Demand for lots is dependent upon the developer completing the necessary infrastructure and amenities and thus we are reliant upon the develop

270、er to construct such improvements within the area.28If the developer does not do so,our ability to receive future percentage of sales payments from the sales of lots in the second of two increments would be negatively impacted.If we are unable to obtain required land use entitlements at reasonable c

271、osts,or at all,our operating results could be adversely affected.We hold the leasehold interest to approximately 1,000 acres of vacant land that is currently zoned conservation.Our success in selling this interest may be contingent upon obtaining the necessary reclassification from the State of Hawa

272、ii Land Use Commission and county of Hawaii.Obtaining the necessary reclassification and ministerial approvals is often difficult,costly and may take several years,or more,to complete.Delays or failures to obtain the necessary reclassification approvals may adversely affect our financial results.Env

273、ironmental and other regulations may have an adverse effect on our business.Our properties are subject to federal,state and local environmental regulations and restrictions that may impose significant limitations.In most cases,approval to develop requires multiple permits which involve a long,uncert

274、ain and costly regulatory process.General economic conditions in the lodging industry could adversely affect our overall financial results.We own a 1.5%passive minority interest in Hualalai Resort,which includes the Four Seasons Resort Hualalai at Historic Kaupulehu,two golf courses and a clubhouse,

275、and the Kona Village Resort,an 80-acre oceanfront hotel property.Soft economic conditions and reduced travel to North Kona,Hawaii could adversely affect our results from these properties and,therefore,our overall financial results.The aforementioned properties are also subject to risks that generall

276、y relate to investments in commercial real estate,including governmental regulations;real estate,insurance,zoning,tax and eminent domain laws;the ongoing need for capital improvements to maintain or upgrade properties;fluctuations in real estate values;and the relative illiquidity of real estate com

277、pared to other investments.The value of our lot acquisition rights could be impaired if the developer of the property is unable to obtain required land use entitlements or successfully negotiate development terms and agreements.We hold acquisition rights to 14 lots in agricultural-zoned leasehold la

278、nds in the upland area of Kaupulehu(“Mauka Lands”)situated between the Queen Kaahumanu Highway and the Mamalahoa Highway at Kaupulehu,North Kona,island and state of Hawaii.The lot acquisition rights give us the right to purchase residential lots which may be developed on the Mauka Lands.The ability

279、to purchase residential lots and the value of such lots in the future is contingent upon the developer of the property obtaining the necessary land use reclassification,zoning and development approvals from regulatory entities.Obtaining the necessary reclassification and ministerial approvals is oft

280、en difficult,costly and may take several years,or more,to complete.Delays or failures to obtain the necessary reclassification and rezoning approvals may adversely affect our financial results.Our ability to purchase lots and the value of such lots is also contingent upon the ability of the develope

281、r of the property to successfully negotiate development terms and agreements within the Mauka Lands.If the developer is unsuccessful in such negotiations,our ability to purchase residential lots in the Mauka Lands would be impaired.29Risks Related to Residential Real Estate Segment The homebuilding

282、industry is experiencing a severe and extended downturn that may continue for an indefinite period and may continue to adversely affect our business,results of operations and stockholders equity.The residential homebuilding industry historically has been cyclical and is sensitive to changes in econo

283、mic conditions such as employment levels,consumer confidence,consumer income,availability of financing and interest rate levels.Adverse changes in any of these conditions generally,or in the market in which we operate,could decrease demand and pricing for new homes or result in customer cancellation

284、s of pending contracts,which could adversely affect the number of home deliveries we make or reduce the prices we can charge for homes,either of which could result in a reduction in our revenues or deterioration of our margins.The homebuilding industry has experienced a significant and sustained dow

285、nturn characterized by decreased demand for new homes,an oversupply of both new and resale home inventories,including foreclosed homes;aggressive price competition among homebuilders,including increased incentives for home sales;and a more restrictive mortgage lending environment.Economic conditions

286、 in the United States have also weakened recently,which puts continued pressure on consumer confidence for residential real estate.These challenging market conditions are expected to continue for the foreseeable future and,in the near term,these conditions may further deteriorate.We expect that cont

287、inued weakness in the homebuilding industry could further adversely affect our business,results of operations and financial condition.We are reliant upon sales of residential homes under development and lots held for investment as a source of liquidity.If we are unable to sell the homes or lots with

288、in a reasonable timeframe,our revenues,operating results,cash inflows and financial condition could be materially impacted.Barnwell currently owns four parcels in the Lot 4A Increment I area of Kaupulehu,North Kona,Hawaii.We are in the process of developing residences for future sale on two of the p

289、arcels and intend to hold the remaining two parcels for investment purposes.The two turnkey homes currently being built are slated for completion within the next six months.The acquisition of the parcels and home construction costs on the two turnkey homes are being financed through a bank revolving

290、 credit facility.The entire unpaid principal balance and all accrued interest is due in full on December 17,2010,unless we sell a home and lot before then,in which case we will be required to make a principal payment upon the sale of a home and lot in an amount equal to 100%of the net sales proceeds

291、 of the home and lot.The timing and amount of residential home sales and/or lot sales are unpredictable and may be sporadic.The inability to sell the homes or lots within a reasonable timeframe may lead to unnecessary interest costs.Additionally,if we are unable to sell the homes or lots within a re

292、asonable timeframe,we may need to request a loan extension,obtain refinancing or reduce oil and natural gas capital expenditures to make the required cash outflows.This would negatively impact our liquidity.Furthermore,if estimated cash inflows from home or lot sales do not occur on a timely basis o

293、r are less than current expectations,our revenues,operating results,cash inflows and financial condition could be materially impacted.30Significant competition in the real estate industry could have an adverse effect on our business.The homebuilding industry is highly competitive.We face competition

294、 from other developers on the island of Hawaii,and from other luxury residential properties in Hawaii and the mainland United States.In many cases,our competitors have greater financial and other resources,more established market positions,better opportunities for land acquisitions and have lower co

295、sts of capital,labor and material than we do.If we are unable to compete with these larger competitors,our financial results could be adversely affected.We have limited experience in the homebuilding industry.Homebuilding is a new business segment for us and we are relying to a material extent on ou

296、r business partners to help us execute our business plan.We may need additional financing to fund our real estate development activities.If we are unable to obtain sufficient financing or such financing is obtained on adverse terms,we may not be able to operate our business as planned,which could ad

297、versely affect our results of operations and future growth.The real estate development industry is capital intensive and homebuilding requires significant up-front expenditures to acquire land and begin development.Accordingly,we will incur substantial indebtedness to finance our homebuilding activi

298、ties.Although we believe that internally generated funds and borrowing capacity under our credit facility will be sufficient to fund our development and construction activities,the amounts available from such sources may not be adequate to meet our needs especially in the tight credit market.Additio

299、nally,we will need to establish new funding sources to finance our land acquisition capital expenditures.If such sources are not sufficient,we would seek additional capital in the form of debt or equity financing from a variety of potential sources,including additional bank financing,joint venture p

300、artner financing,and/or securities offerings.The amount and types of indebtedness which we may incur are limited by the terms of the agreements governing our existing debt.In addition,the availability of borrowed funds to be utilized for land acquisition,development and construction may be greatly r

301、educed,and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans.The failure to obtain sufficient capital to fund our planned capital and other expenditures could have a material ad

302、verse effect on our business.Our operating results from homebuilding are expected to be variable.Due to the cyclical nature of the real estate development industry,we expect to experience variability in our future operating results on a quarterly and an annual basis.Factors expected to contribute to

303、 this variability include,among other things:the timing of land acquisitions and permitting;the timing of home closings,land sales and level of home sales;our ability to continue to acquire additional land or options thereon on acceptable terms;the condition of the real estate market and the general

304、 economy;and delays in construction due to natural disasters,adverse weather,reduced contractor availability and strikes.31For example,the timing of land acquisitions and permitting impacts our ability to pursue the development of new housing projects in accordance with our business plan.If the timi

305、ng of land acquisitions or zoning or regulatory approvals is delayed,we will be delayed in our ability to develop housing projects,which would likely decrease our backlog.Furthermore,these delays could result in a decrease in our revenues and earnings for the periods in which the delays occur and po

306、ssibly subsequent periods until the planned housing projects can be completed.A delay in a significant number of home closings or land sales due to natural disasters,adverse weather or contractor availability would have a similar impact on revenues and earnings for the period in which the delays occ

307、ur.Further,revenues may increase in subsequent periods over what would normally be expected as a result of increased home closings as the delays described above are resolved.Changes in the government regulations applicable to homebuilders could restrict our business activities,increase our operating

308、 expenses and cause our revenues to decline.Regulatory requirements applicable to homebuilders could cause us to incur significant liabilities and operating expenses and could restrict our business activities.We are subject to local,state and federal statutes and rules regulating,among other things,

309、certain developmental matters,building and site design,and matters concerning the protection of worker health and safety,and the environment.Our operating expenses may be increased by governmental regulations,such as building permit allocation ordinances,impact and other fees and taxes,which may be

310、imposed to defray the cost of providing certain governmental services and improvements.Other governmental regulations,such as building moratoriums and“no growth or“slow growth initiatives,which may be adopted in communities which have developed rapidly,may cause delays in our home projects or otherw

311、ise restrict our business activities resulting in reductions in our revenues.Any delay or refusal to grant us necessary licenses,permits or approvals from government agencies could cause substantial increases to development costs or cause us to abandon the project and to sell the affected land at a

312、potential loss,which in turn could harm our operating results.Our residential real estate segment is dependent on the continued availability and satisfactory performance of our building contractors,which,if unavailable,could have a material adverse effect on our business.We conduct our construction

313、operations through unaffiliated building contractors.As a consequence,we depend on the continued availability of and satisfactory performance by the contractors for the construction of our homes.There may not be sufficient availability of and satisfactory performance by the contractors.If the contra

314、ctors quality of work is not sufficient to assist us in home construction,our ability to construct homes on the schedule we have planned would be affected.This could result in an increase in our costs to construct homes in a timely manner,which could result in an increase in our overall costs and th

315、us a decline in our margins and in our net income.Further,non-timely completion of work could affect our ability to sell homes based upon our projected timeline thus possibly affecting our ability to obtain additional financing to continue our homebuilding efforts.Shortages of labor or materials and

316、/or increases in the price of materials could delay construction or increase the cost of home construction thereby reducing our sales and earnings.The homebuilding business has from time to time experienced building material and labor shortages,as well as volatility in the prices of certain material

317、s,including lumber,framing,drywall and cement,which are significant components of home construction costs.These labor and material 32shortages can be more severe during periods of strong demand for housing or during periods where the area in which we operate experiences natural disasters that have a

318、 significant impact on existing residential and commercial structures.Shortages and price increases could cause delays in and increase our costs of home construction,which in turn could harm our operating results.The market value of our real estate interests could drop significantly,which may requir

319、e write-downs of the carrying value of our real estate held for development and investment to its estimated fair value.Any write-downs would negatively impact our results of operations and financial condition.The risk of owning developed and undeveloped land can be substantial for homebuilders.Homeb

320、uilding requires that we acquire land for replacement and expansion of land inventory within our existing and new markets.The risks inherent in purchasing and developing land increase as consumer demand for housing decreases.Thus,we may have bought and developed land which we cannot profitably sell

321、or on which we cannot profitably build and sell homes.The market value of land,buildable lots and housing inventories can fluctuate significantly as a result of changing economic market conditions.It is possible that the measures we employ to manage inventory risks will not be successful and as a re

322、sult our operations may suffer.In addition,inventory carrying costs can be significant and can result in losses in a poorly performing market.Prevailing market conditions may significantly influence the market value of our residential lots held for development and/or our residential parcels held for

323、 investment.In the event of significant changes in economic or market conditions,we may have to sell homes or land inventory at significantly lower margins or at a loss.Furthermore,if the market conditions continue to deteriorate,we may be required to write-down the carrying value of our real estate

324、 held for development and investment to its estimated fair value.Such write-downs would have a negative impact on our results of operations and financial condition.Severe weather and other natural conditions or disasters may disrupt or delay construction and may impair the value of our real estate p

325、roperty.Severe weather and other natural conditions or disasters,such as,but not limited to,earthquakes,landslides,hurricanes,tornadoes,volcanic activity,droughts,floods,and heavy or prolonged rain,can negatively affect our operations by requiring us to delay or halt construction or to perform poten

326、tially costly repairs to our projects under construction and to unsold homes.Further,these conditions can delay home closings,adversely affect the cost or availability of materials or labor,or impair the value of the property on a temporary or permanent basis.To the extent our insurance is not adequ

327、ate to cover business interruption losses or repair costs resulting from these events,our total earned revenues and earnings may be adversely affected.The homebuilding industry is highly competitive and,with more limited resources than some of our competitors,we may not be able to compete effectivel

328、y.The homebuilding industry is highly competitive.Homebuilders compete for,among other things,desirable land,financing,raw materials,skilled labor and purchasers.We compete for residential sales on the basis of a number of interrelated factors,including location,reputation,amenities,design,quality a

329、nd price,with numerous homebuilders,including some homebuilders with greater financial resources and/or lower costs than us.Increased competition could also reduce the number of homes we deliver,reducing our revenues,or cause us to accept reduced margins to maintain sales volumes.A reduction in our

330、revenue or margins due to competitive factors could affect our ability to service our debt,including the credit facilities.33Risks Related to Contract Drilling Segment Demand for water well drilling and/or pump installation is volatile.A decrease in demand for our services could adversely affect our

331、 revenues and results of operations.Demand for services is highly dependent upon land development activities in the state of Hawaii.As also noted above,the real estate development industry is cyclical in nature and is particularly vulnerable to shifts in local,regional,and national economic conditio

332、ns outside of our control such as interest rates,housing demand,population growth,employment levels and job growth and property taxes.If we experience a decrease in water well drilling and/or pump installation contracts,we may experience decreased revenues and operating results.A significant portion

333、 of our contract drilling business is dependent on municipalities and a decline in municipal spending could adversely impact our business.A significant portion of our contract drilling division revenues are derived from water and infrastructure contracts with governmental entities or agencies.Reduced tax revenues in certain regions may limit spending and new development by local municipalities whi