Barnwell Industries Inc. (BRN) 2019年年度報告「AMEX」.pdf

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1、 Barnwell Industries,Inc.2019 Annual Report FINANCIAL AND OPERATING HIGHLIGHTS Year ended September 30,2019 201820172016 2015FINANCIAL:Revenues$12,075,000$9,368,000$13,030,000$13,627,000$17,533,000 Net(loss)earnings$(12,414,000)$(1,770,000)$1,171,000$(3,615,000)$1,263,000 Net(loss)earnings per share

2、 diluted$(1.50)$(0.21)$0.14$(0.44)$0.15 OPERATING:Production-Oil and natural gas liquids barrels 141,000 67,00086,00084,000 143,000 Natural gas MCF*628,000 328,000378,000476,000 1,688,000 Average price-Oil and natural gas liquids,per barrel$39.80$50.89$40.11$31.81$33.59 Natural gas,per MCF*$1.15$1.1

3、2$1.98$1.27$2.23 At September 30,2019 201820172016 2015FINANCIAL:Total assets$18,302,000$31,378,000$33,020,000$31,568,000$41,553,000 RESERVES:Oil and liquids barrels:Proved Developed Reserves 529,000 693,000413,000450,000 469,000 Proved Undeveloped Reserves 890,000 897,000 -,-,-,Total 1,419,000 1,59

4、0,000413,000450,000 469,000 Natural gas MCF*:Proved Developed Reserves 1,900,000 2,399,0003,005,0001,441,000 3,124,000 Proved Undeveloped Reserves 2,620,000 2,656,000 -,-,-,Total 4,520,000 5,055,0003,005,0001,441,000 3,124,000 Total natural gas and natural gas equivalent of oil and liquids*MCF:Prove

5、d Developed Reserves 4,968,000 6,418,0005,400,0004,051,000 5,844,000 Proved Undeveloped Reserves 7,782,000 7,859,000,-,-,-,Total 12,750,000 14,277,0005,400,0004,051,000 5,844,000 *MCF means 1,000 cubic feet*Oil and liquids are converted to natural gas equivalents on the basis of one barrel equals 5.

6、8 MCF.Reserves are calculated by an independent engineering firm based on SEC constant pricing.revenues under this contract during fiscal 2020.Additionally,the Company has a backlog of drilling and pump installation and repair contracts of approximately$11,000,000 at February 1,2020,of which$8,000,0

7、00 is expected to be realized in fiscal 2020,which may make this segments operating profit substantially higher in fiscal 2020 as compared to fiscal 2019.Conclusion Mr.Martin Anderson and Dr.Murray C.Gardner will not be nominated for reelection to our Board of Directors at our 2020 Annual Meeting.Mr

8、.Anderson and Dr.Gardner have served with distinction for 3 5 years and 24 years,respectively.The Board of Directors wishes to thank them for their years of service and acknowledge the many contributions that each has made to the Companys success through their wisdom,sage advice,business experience

9、and commitment to the Company.Mr.Anderson was part of the group that founded our contract drilling subsidiary in the 1970 s,and Dr.Gardner advised us on our geothermal operations in the early 1980s.Once again,we thank them for their many contributions to the Company.Over the last several years,we ha

10、ve asked for your patience,as stockholders of Barnwell,as we moved through a restructuring process to change the way we do business in Canada and lower our general and administrative expense.Over the last five years,we have lowered our general and administrative expense from$8,551,000 in fiscal 2015

11、 to$5,524,000 in fiscal 2019,a reduction of 35.4%.This has been accomplished through reductions in salaries and wages,professional fees,travel and entertainment,medical expenses,and various other controllable general and administrative expenses.We intend to continue exploring ways to significantly r

12、educe our general and administrative expenses in absolute terms and as a percentage of our revenues as we move forward.We are proud of the steps we have taken and the results we recently announced for the first quarter of our 2020 fiscal year which show a 90%improved bottom line and operating profit

13、s in our oil and gas and water well company divisions.We thank you,our stockholders,for your continued support.For the Board of Directors,-.James S.Barnwell m Ghaitman of the Board Chief Executive Officer,President and Director This page intentionally left blank UNITED STATES SECURITIES AND EXCHANGE

14、 COMMISSIONWASHINGTON,D.C.20549FORM 10-K(Mark One)X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended September 30,2019 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number 1-5103 B

15、ARNWELL 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,Suite 2900,Honolulu,Hawaii96813-2840(Address of principal executive offices)(Zip code)Re

16、gistrants telephone number,including area code:(808)531-8400 Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbols(s)Name of each exchange on which registeredCommon Stock,$0.50 par valueBRNNYSE AmericanSecurities registered pursuant to Section 12(g)of the Act:N

17、oneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes NoIndicate by check mark whether the registran

18、t(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes NoI

19、ndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such file

20、s).Yes NoIndicate 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 definitive proxy or information statements incorporated by reference in Part III

21、 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,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”

22、“smaller reporting company”and emerging growth 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 Emerging growth company If an emerging growth company,indicate by check mark

23、 if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Ye

24、s NoThe 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 31,2019(the last business day of the registrants most recently completed second fiscal quarter)was$3,839,000.As of Decembe

25、r 3,2019 there were 8,277,160 shares of common stock outstanding.Documents Incorporated by Reference1.Proxy statement,to be forwarded to stockholders on or about January 16,2020,is incorporated by reference in Part III hereof.2TABLE OF CONTENTS Page Glossary of TermsPART I Discussion of Forward-Look

26、ing Statements4 Item 1.Business Item 1A.Risk Factors Item 1B.Unresolved Staff Comments Item 2.Properties Item 3.Legal Proceedings Item 4.Mine Safety Disclosures PART II Item 5.Market For Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6.Selected F

27、inancial Data Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations Item 7A.Quantitative and Qualitative Disclosures About Market Risk Item 8.Financial Statements and Supplementary Data Item 9.Changes in and Disagreements with Accountants on Accounting and Finan

28、cial Disclosure Item 9A.Controls and Procedures Item 9B.Other Information PART III Item 10.Directors,Executive Officers and Corporate Governance Item 11.Executive Compensation Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13.Certain Relat

29、ionships and Related Transactions,and Director Independence Item 14.Principal Accounting Fees and Services PART IV Item 15.Exhibits,Financial Statement Schedules Signatures Index to Exhibits35183131323233333453541061061061071071071081081091111133GLOSSARY OF TERMS Defined below are certain terms used

30、 in this Form 10-K:Terms DefinitionsASC-Accounting Standards CodificationASU-Accounting Standards UpdateBarnwell-Barnwell Industries,Inc.and all majority-owned subsidiariesBarnwell of Canada-Barnwell of Canada,LimitedBbl(s)-stock tank barrel(s)of oil equivalent to 42 U.S.gallonsBoe-barrel of oil equ

31、ivalent at the rate of 5.8 Mcf per Bbl of oil or NGLFASB-Financial Accounting Standards BoardGAAP-U.S.generally accepted accounting principlesGross-Total number of acres or wells in which Barnwell owns an interest;includes interests ownedof record by Barnwell and,in addition,the portion(s)owned by o

32、thers;for example,a 50%interest in a 320 acre lease represents 320 gross acres and a 50%interest in a well represents 1gross well.In the context of production volumes,gross represents amounts before deductionof the royalty share due others.InSite-InSite Petroleum Consultants Ltd.Kaupulehu 2007-Kaupu

33、lehu 2007,LLLPKD I-KD Acquisition,LLLP,formerly known as WB KD Acquisition,LLC(“WB”)KD II-KD Acquisition II,LP,formerly known as WB KD Acquisition,II,LLC(“WBKD”)KD Kona-KD Kona 2013 LLLPKKM Makai-KKM Makai,LLLPKukio Resort LandDevelopmentPartnerships-The following partnerships in which Barnwell owns

34、 non-controlling interest:KD Kukio Resorts,LLLP(“KD Kukio Resorts”)KD Maniniowali,LLLP(“KD Maniniowali”)KD Kaupulehu,LLLP,which consists of KD I and KD II(“KDK”)MBbls-thousands of barrels of oilMcf-1,000 cubic feet of natural gas at 14.65 pounds per square inch absolute and 60 degreesFahrenheitMcfe-

35、Mcf equivalent at the rate of 1 Bbl=5.8 McfMMcf-millions of cubic feet of natural gasNet-Barnwells aggregate interest in the total acres or wells;for example,a 50%interest in a 320acre lease represents 160 net acres and a 50%interest in a well represents 0.5 net well.In thecontext of production volu

36、mes,net represents amounts after deduction of the royalty share dueothers.NGL(s)-natural gas liquid(s)Octavian Oil-Octavian Oil,Ltd.OPEC-Organization of the Petroleum Exporting Countries SEC-United States Securities and Exchange CommissionVIE-Variable interest entityWater Resources-Water Resources I

37、nternational,Inc.4PART I CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATIONFOR THE PURPOSE OF“SAFE HARBOR”PROVISIONS OF THEPRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Form 10-K,and the documents incorporated herein by reference,contain“forward-looking statements”within the meanin

38、g of the Private Securities Litigation Reform Act of 1995(PSLRA).A forward-looking statement is one which is based on current expectations of future events or conditions and does not relate to historical or current facts.These statements include various estimates,forecasts,projections of Barnwell In

39、dustries,Inc.s(referred to herein together with its majority-owned subsidiaries as“Barnwell,”“we,”“our,”“us”or the“Company”)future performance,statements of Barnwells plans and objectives and other similar statements.All such statements we make are forward-looking statements made under the safe harb

40、or of the PSLRA,except to the extent such statements relate to the operations of a partnership or limited liability company.Forward-looking statements include phrases such as“expects,”“anticipates,”“intends,”“plans,”“believes,”“predicts,”“estimates,”“assumes,”“projects,”“may,”“will,”“will be,”“shoul

41、d,”or similar expressions.Although Barnwell believes that its current expectations are based on reasonable assumptions,it cannot assure that the expectations contained in such forward-looking statements will be achieved.Forward-looking statements involve risks,uncertainties and assumptions which cou

42、ld cause actual results to differ materially from those contained in such statements.Investors should not place undue reliance on these forward-looking statements,as they speak only as of the date of filing of this Form 10-K,and Barnwell expressly disclaims any obligation or undertaking to publicly

43、release any updates or revisions to any forward-looking statements contained herein.Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are domestic and international general economic conditions,such as recessionary trends and

44、 inflation;domestic and international political,legislative,economic,regulatory and legal actions,including changes in the policies of the Organization of the Petroleum Exporting Countries or other developments involving or affecting oil and natural gas producing countries;military conflict,embargoe

45、s,internal instability or actions or reactions of the governments of the United States and/or Canada in anticipation of or in response to such developments;interest costs,restrictions on production,restrictions on imports and exports in both the United States and Canada,the maintenance of specified

46、reserves,tax increases and retroactive tax claims,royalty increases,expropriation of property,cancellation of contract rights,environmental protection controls,environmental compliance requirements and laws pertaining to workers health and safety;the condition of Hawaiis real estate market,including

47、 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 cost of building materials and labor,the introduction of building code modifications,changes to zoning laws,the condition of Hawaiis tourism industry and the

48、level of confidence in Hawaiis economy;levels of land development activity in Hawaii;levels of demand for water well drilling and pump installation in Hawaii;the potential liability resulting from pending or future litigation;the Companys acquisition or disposition of assets;the effects of changed a

49、ccounting rules under GAAP promulgated by rule-setting bodies;and the factors set forth under the heading“Risk 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 SEC.In addition,unpredictab

50、le or unknown factors not discussed in this report could also cause actual 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.5ITEM 1.BUSINESS OverviewBa

51、rnwell was incorporated in Delaware in 1956 and fiscal 2019 represented Barnwells 63rd year of operations.Barnwell operates in the following three principal business segments:Oil and Natural Gas Segment -Barnwell engages in oil and natural gas development,production,acquisitions and sales in Canada.

52、Land Investment Segment -Barnwell invests in land interests in Hawaii.Contract Drilling Segment -Barnwell provides well drilling services and water pumping system installation and repairs in Hawaii.Oil and Natural Gas SegmentOverview Barnwell acquires and develops crude oil and natural gas assets in

53、 the province of Alberta,Canada via two corporate entities,Barnwell of Canada and Octavian Oil.Barnwell of Canada is a U.S.incorporated company that has been active in Canada for over 50 years,primarily as a non-operator participating in exploration projects operated by others.Octavian Oil is a Cana

54、dian company,set up in 2016,to achieve growth through the acquisition of crude oil reserves and development of those reserves through horizontal well drilling and completion techniques.Strategy Since 2013,Barnwell has transformed its Canadian oil and natural gas segment operation from a 90%non-opera

55、ted production base,most of which was from its 40-year-old Dunvegan gas field,to a more operated production base.In 2013,only about 20%of Barnwells production was conventional oil,and capital investments were being directed towards heavy oil drilling projects in the province of Saskatchewan.In 2014

56、Barnwell sold all of its heavy oil properties,and in 2015 Barnwell sold its Dunvegan gas property.These sales allowed Barnwell to minimize the effects of the subsequent commodity price collapse in 2015 and downstream transportation issues.Barnwell of Canada retained its core conventional oil assets

57、and,since 2015,has acquired various conventional oil interests in Alberta from other companies to consolidate interests in these core properties.In February 2018,Barnwell sold its interest in its oil and natural gas property Red Earth.In August 2018,Barnwell closed a significant acquisition of conve

58、ntional oil assets and infrastructure in the Twining area of Alberta.At September 30,2019 and September 30,2018,Barnwells reserves were approximately 80%operated and 65%conventional oil and natural gas liquids.In November 2019,Barnwell commenced the drilling of a development well in the Twining area

59、 of Alberta.Twenty-six fracture stages were completed in early December 2019 and connection of the well into operating facilities via pipeline is planned,however the results of fracing are not yet known as of the date of this report.OperationsAll acquisitions,operational and developmental activities

60、 in the Twining area are the responsibility of the President and Chief Operating Officer of Octavian Oil with the approvals for major expenditures secured from Barnwells senior executive management and Board of Directors.6 Our oil and natural gas segment revenues,profitability,and future rate of gro

61、wth are dependent on oil and natural gas prices and obtaining external financing or sufficient land investment cash flows to fund the development of our proved undeveloped reserves.The industry has experienced a prolonged period of low oil and natural gas prices that has negatively impacted our oper

62、ating results,cash flows and liquidity.Credit and capital markets for oil and natural gas companies have been negatively affected as well,resulting in a decline in sources of financing as compared to previous years.By divesting significant oil and natural gas assets prior to the 2015 decline in comm

63、odity prices,Barnwell was able to repay all of its debt,use funds for general corporate purposes,and fund its acquisition investments.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

64、a lesser degree.Oil and natural gas unit sales are based on the quantity produced from the properties by the properties operator.Prices received in Canada,especially natural gas and heavy oil have also been negatively impacted by the lack of export pipeline capacity.On August 28,2018,Barnwell comple

65、ted the acquisition of interests in oil and natural gas properties located in the Twining area of Alberta,Canada,from an independent third party.The purchase price per the agreement was$10,362,000,which took into account estimated customary purchase price adjustments to reflect the economic activity

66、 from the effective date of July 1,2018 to the closing date.The final determination of the customary adjustments to the purchase price resulted in a$172,000 reduction in the purchase price in the year ended September 30,2019,bringing the final purchase price to$10,190,000.Barnwell also assumed$3,076

67、,000 in asset retirement obligations associated with the Twining acquisition.This acquisition represented a significant step in Barnwells long-term strategy to transform its Canadian operations to having almost exclusively conventional light and medium oil assets.This was a strategic purchase by the

68、 Company of what is now its largest oil and natural gas property.The Twining assets,which Barnwell operates,are expected to provide Barnwell with relatively low decline oil production,significant upside from a large volume of oil-in-place,operated infrastructure,and an advantageous geographic locati

69、on in Central Alberta.Our proved undeveloped reserves,which are primarily attributable to Twining,are estimated to be converted to proved developed reserves through future capital expenditures by Barnwell of approximately$13,000,000 for the development of 12 gross(8.82 net)wells over the next five y

70、ears.Preparation of Reserve EstimatesBarnwells reserves are estimated by our independent petroleum reserve engineers,InSite Petroleum Consultants Ltd.(“InSite”),in accordance with generally accepted petroleum engineering and evaluation principles and techniques and rules and regulations of the SEC.A

71、ll information with respect to the Companys reserves in this Form 10-K is derived from the report of InSite.A copy of the report issued by InSite is filed with this Form 10-K as Exhibit 99.1.The preparation of data used by the independent petroleum reserve engineers to compile our oil and natural ga

72、s reserve estimates is completed in accordance with various internal control procedures which include verification of data input into reserves evaluation software,reconciliations and reviews of data provided to the independent petroleum reserve engineers to ensure completeness,and management review

73、controls,including an independent internal review of the final reserve report for completeness and accuracy.Barnwell has a Reserves Committee consisting of four of the five independent directors,the Companys Chief Executive Officer,and the Companys Chief Financial Officer.The Reserves Committee 7was

74、 established to ensure the independence of the Companys petroleum reserve engineers.The Reserves Committee is responsible for reviewing the annual reserve evaluation report prepared by the independent petroleum reserve engineering firm and ensuring that the reserves are reported fairly in a manner c

75、onsistent with applicable standards.The Reserves Committee meets annually to discuss reserve issues and policies and to meet with Company personnel and the independent petroleum reserve engineers.Barnwell of Canadas President and Chief Operating Officer,who is a professional engineer with over 35 ye

76、ars of relevant experience in all facets of the oil and natural gas industry in Canada and is a member of the Association of Professional Engineers and Geoscientists of Alberta,has primary responsibility for the preparation of the Companys reserve estimates by our independent reserve engineers.Accou

77、nting and land support is provided by Barnwell of Canada staff as needed.ReservesThe amounts set forth in the following table,based on InSites evaluation of our reserves,summarize our estimated proved reserves of oil(including natural gas liquids)and natural gas as of September 30,2019 on all proper

78、ties in which Barnwell has an interest.All of our oil and natural gas reserves are located in Canada and are based on constant dollar price and cost assumptions.The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are

79、more imprecise than estimates of established proved producing oil and natural gas properties.Accordingly,these estimates are expected to change as future information becomes available.Proved oil and natural gas reserves are the estimated quantities of oil and natural gas that geological and engineer

80、ing data demonstrate,with reasonable certainty,to be recoverable in future years from known reservoirs under economic and operating conditions(i.e.,prices and costs)existing at the time the estimate is made.Proved developed oil and natural gas reserves are proved reserves that can be expected to be

81、recovered through existing wells and equipment in place and under operating methods being utilized at the time the estimates were made.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 SEC,since

82、October 1,2018.As of September 30,2019Estimated NetProvedDevelopedReservesEstimated NetProvedUndevelopedReservesEstimated NetProvedReservesOil,including natural gas liquids(Bbls)529,000890,0001,419,000Natural gas(Mcf)1,900,0002,620,0004,520,000Total(Boe)856,0001,342,0002,198,000During fiscal 2019,Ba

83、rnwells total net proved developed reserves of oil and natural gas liquids decreased by 164,000 Bbls(24%)and total net proved developed reserves of natural gas decreased by 499,000 Mcf(21%),for a combined decrease of 251,000 Boe(23%).The decrease in oil and natural gas liquids reserves and natural g

84、as reserves were primarily the result of current year production.Net proved undeveloped reserves,which primarily relate to our Twining area,totaled 890,000 Bbls of oil and natural gas liquids and 2,620,000 Mcf of gas as of September 30,2019.During fiscal 2019,total net proved undeveloped reserves of

85、 oil and natural gas liquids decreased by 7,000 Bbls(1%)and total net proved undeveloped reserves of gas decreased by 36,000 Mcf(1%).Our net proved undeveloped reserves are planned for development within five years and are based on approximately$13,000,000 of future estimated 8capital expenditures t

86、o develop 12 gross(8.82 net)wells.Eleven gross(8.54 net)wells are in the Twining area while one gross(0.28 net)well is in the Spirit River area.The Spirit River development well started drilling in September 2019 and one gross(1.0 net)Twining development well started drilling in November 2019.The ab

87、ility of Barnwell to convert the undeveloped reserves to developed reserves will be heavily influenced by the cash flows generated by the oil and natural gas segment,the results of such drilling,and the ability of the Company to raise sufficient funds that may be needed for any potential future capi

88、tal financing.The following table sets forth Barnwells oil and natural gas net reserves at September 30,2019,by property name,based on information prepared by InSite,as well as net production and net revenues by property name for the year ended September 30,2019.The reserve data in this table is bas

89、ed on constant dollars where reserve estimates are based on sales prices,costs and statutory tax rates in existence at September 30,2019,the date of the projection.As of September 30,2019For the year ended September 30,2019Net ProvedProducing ReservesTotal Net ProvedReservesNet ProductionNet Revenue

90、sPropertyNameOil&NGL(MBbls)Gas(MMcf)Oil&NGL(MBbls)Gas(MMcf)Oil&NGL(Bbls)Gas(Mcf)Oil&NGLGasBonanza/Balsam541185411816,00036,000$606,000$46,000Hillsdown8298294,00044,000170,00056,000Progress20221384433,00068,000141,00081,000Spirit River3930982074,00011,000157,00011,000Twining3281,1771,1633,69294,00037

91、2,0003,786,000462,000Wood River5831583118,0003,000661,0006,000Otherproperties2,00094,000111,000112,000Total5071,6061,4194,520141,000628,000$5,632,000$774,000 Net proved reserves that are attributable to existing producing wells are primarily determined using decline curve analysis and rate transient

92、 analysis,which incorporates the principles of hydrocarbon flow.Net proved reserves attributable to producing wells with limited production history and for undeveloped locations are estimated using performance from analogous wells in the surrounding area and geologic data to assess the reservoir con

93、tinuity.Technologies relied on to establish reasonable certainty of economic producibility include electrical logs,radioactivity logs,core analyses,geologic maps and available production data,seismic data and well test data.9Standardized Measure of Discounted Future Net Cash FlowsThe following table

94、 sets forth Barnwells“Estimated Future Net 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%)as of September 30,2019.Estimated future net revenues for total proved reserves are net of estima

95、ted future expenditures of developing and producing the proved reserves,and assume the continuation of existing economic conditions.Net revenues have been calculated using the average first-day-of-the-month price during the 12-month period ending as of the balance sheet date and current costs,after

96、deducting all royalties,operating costs,future estimated capital expenditures(including abandonment costs),and income taxes.The amounts below include future cash flows from reserves that are currently proved undeveloped reserves and do not deduct general and administrative or interest expenses.Year

97、ending September 30,2020$(312,000)20211,131,00020221,098,000Thereafter(4,865,000)Undiscounted future net cash flows,after income taxes$(2,948,000)Standardized measure of discounted future net cash flows$2,310,000*_*This amount does not purport to represent,nor should it be interpreted as,the fair va

98、lue of Barnwells oil and natural gas 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(these amounts were based

99、 on a natural gas price of$1.23 per Mcf and an oil price of$45.46 per Bbl)and costs,and a discount factor more representative of the time value of money and the risks inherent in reserve estimates.In December 2018,the Society of Petroleum Evaluation Engineers and associated industry professionals up

100、dated the Canadian Oil and Gas Evaluation(“COGE”)Handbook.The updates clarify and streamline existing guidelines and offer additional guidance regarding Canadian reserves evaluations.Barnwell has included all abandonment,decommissioning and reclamation costs and inactive well costs in accordance wit

101、h best practice recommendations into the Companys September 30,2019 year-end reserve report.Oil and Natural Gas ProductionThe following table summarizes(a)Barnwells net production for the last three fiscal years,based on sales of natural gas,oil and natural gas liquids,from all wells in which Barnwe

102、ll has or had an interest,and(b)the average sales prices and average production costs for such production during the same periods.Production amounts reported are net of royalties.All of Barnwells net production in fiscal 2019,2018 and 2017 was derived in Alberta,Canada.For a discussion regarding our

103、 total annual production volumes,average sales prices,and related production costs,see Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations.”The 2018 volumes reflect volumes from the Twining acquisition only from the closing date of August 28,2018.10 Year ende

104、d September 30,201920182017Annual net production:Natural gas(Mcf)628,000328,000378,000Oil(Bbls)123,00062,00081,000Natural gas liquids(Bbls)18,0005,0005,000Total(Boe)250,000123,000151,000Total(Mcfe)1,446,000717,000877,000Annual average sales price per unit of production:Mcf of natural gas*$1.15$1.12$

105、1.98Bbl of oil*$41.84$51.53$40.72Bbl of natural gas liquids*$25.84$43.02$30.19Annual average production cost per Boe produced*$20.64$21.08$19.03Annual average production cost per Mcfe produced*$3.56$3.63$3.28_*Calculated on revenues net of pipeline charges before royalty expense divided by gross pro

106、duction.*Calculated on revenues before royalty expense divided by gross production.*Calculated on production costs,excluding natural gas pipeline charges,divided by the combined total production of natural gas liquids,oil and natural gas.Capital Expenditures and AcquisitionsBarnwell invested$629,000

107、 in oil and natural gas properties during fiscal 2019,including accrued capital expenditures and acquisitions of oil and natural gas properties and excluding additions and revisions to estimated asset retirement obligations,of which$269,000 was for the acquisition of oil and natural gas working inte

108、rests in an oil and natural gas property in the Wood River area.Well Drilling ActivitiesIn fiscal 2019,we participated in a horizontal development well that was drilled in the Spirit River area,in which we have a 28.3%working interest.This well was successful and started producing in November 2019.D

109、uring the first three full weeks of production the well has averaged about 1,000 Boe per day,of which about 283 Boe per day are net to Barnwell.One gross(0.2 net)development well was drilled in fiscal 2018 and one gross(0.1 net)development well was drilled in fiscal 2017.Producing WellsAs of Septemb

110、er 30,2019,Barnwell had interests in 64 gross(39.3 net)producing wells,of which 55 gross(36.4 net)were oil wells and 9 gross(2.9 net)were natural gas wells.All wells were in Alberta,Canada.11Developed Acreage and Undeveloped AcreageThe following table sets forth the gross and net acres of both devel

111、oped and undeveloped oil and natural gas leases which Barnwell held as of September 30,2019.Developed Acreage*Undeveloped Acreage*TotalLocationGrossNetGrossNetGrossNetCanada179,31841,30984,07315,548263,39156,857_*“Developed Acreage”includes the acres covered by leases upon which there are one or mor

112、e producing wells.“Undeveloped Acreage”includes acres covered by leases upon which there are no producing wells and which are maintained by the payment of delay rentals or the commencement of drilling thereon.Seventy-seven percent of Barnwells undeveloped acreage is not subject to expiration at Sept

113、ember 30,2019.Twenty-three percent of Barnwells leasehold interests in undeveloped acreage is subject to expiration and expire over the next five fiscal years,if not developed,as follows:6%expire during fiscal 2020;7%expire during fiscal 2021;6%expire during fiscal 2022;4%expire during fiscal 2023;a

114、nd 0%expire in fiscal 2024.There can be no assurance that Barnwell will be successful in renewing its leasehold interests in the event of expiration.Much of the undeveloped acreage is at non-operated properties over which we do not have control,and the value of such acreage is not estimated to be si

115、gnificant at current commodity prices.Barnwells undeveloped acreage includes a significant concentration in the Thornbury(5,919 net acres)and Twining(1,623 net acres)areas of Alberta,Canada.Marketing of Oil and Natural Gas Barnwell sells its oil,natural gas,and natural gas liquids production,includi

116、ng under short-term contracts between itself and two main oil marketers,one natural gas purchaser,and one natural gas liquids marketer.The prices received are freely negotiated between buyers and sellers and are determined from transparent posted prices adjusted for quality and transportation differ

117、entials.In fiscal 2019,over 80%of Barnwells oil and natural gas revenues were from products sold at spot prices.Barnwell does not use derivative instruments to manage price risk.In fiscal 2019 and 2018,Barnwell took most of its oil,natural gas liquids and natural gas“in kind”where Barnwell markets t

118、he products instead of having the operator of a producing property market the products on Barnwells behalf.We sell oil,natural gas and natural gas liquids to a variety of energy marketing companies.Because our products are commodities for which there are numerous marketers,we are not dependent upon

119、one purchaser or a small group of purchasers.Accordingly,the loss of any single purchaser would not materially affect our revenues.Governmental RegulationThe jurisdictions in which the oil and natural gas properties of Barnwell are located have regulatory provisions relating to permits for the drill

120、ing of wells,the spacing of wells,the prevention of oil and natural gas waste,allowable rates of production,environmental protection,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

121、production.The province of Alberta and Government of Canada also monitor and regulate the volume of natural gas that may be removed from the province and the conditions of removal.12There is no current government regulation of the price that may be charged on the sale of Canadian oil or natural gas

122、production.Canadian natural gas production destined for export is priced by market forces subject to export contracts meeting certain criteria prescribed by Canadas National Energy Board and the Government of Canada.All of Barnwells gross revenues were derived from properties located within Alberta,

123、which charges oil and natural gas producers a royalty for production within the province.Provincial royalties are calculated as a percentage of revenue and vary depending on production volumes,selling prices and the date of discovery.Barnwell also pays gross overriding royalties and leasehold royalt

124、ies on a portion of its oil and natural gas sales to parties other than the province of Alberta.In January 2016,the Alberta Royalty Panel recommended a new modernized Alberta royalty framework which applies to wells drilled on or after January 1,2017.The previous royalty framework will continue to a

125、pply to wells drilled prior to January 1,2017 for a period of ten years,after which they will fall under the current royalty framework.Under the current royalty framework the same royalty calculation applies to both oil and natural gas wells,whereas the previous royalty framework had different royal

126、ties applicable to each category,and royalties are determined on a revenue minus cost basis where producers pay a flat royalty rate of 5%of gross revenues until a well reaches payout after which an increased post-payout royalty applies.Post payout royalties vary with commodity prices and are adjuste

127、d down for cost increases as wells age.In fiscal 2019 and 2018,47%and 66%,respectively,of royalties related to Alberta government charges,and 53%and 34%,respectively,of royalties related to freehold,override and other charges which are not directly affected by the Alberta royalty framework.In fiscal

128、 2019,the weighted-average royalty rate paid on all of Barnwells natural gas was 12%,and the weighted-average royalty rate paid on oil was 15%.Barnwells oil and natural gas segment is currently subject to the provisions of the Alberta Energy Regulators(“AER”)Licensee Liability Rating(“LLR”)program.U

129、nder the LLR program the AER calculates a Liability Management Ratio(“LMR”)for a company based on the ratio of the companys deemed assets over its deemed liabilities relating to wells and facilities for which the company is the licensed operator.The LMR assessment is designed to assess a companys ab

130、ility to address its suspension,abandonment,remediation,and reclamation liabilities.The value of the deemed assets is based on each wells most recent twelve months of production and a rolling three-year average industry netback as determined by the AER annually.The AER has not recalculated the three

131、-year average industry netback since March 2015 making the current value a premium to what most producers have been realizing.A recalculation of the value using current industry netback values would likely have a negative impact on our LMR.Companies with an LMR less than 1.0 are required to deposit

132、funds with the AER to cover future deemed liabilities.At September 30,2019,the Company had sufficient deemed asset value that no security deposit was due.The AER reviews and approves the transfers of all well,facility and pipeline license from one operator to another,and requires purchasers of AER l

133、icensed oil and natural gas assets to have an LMR of 2.0 or higher immediately following the transfer of a license.This review process typically takes 30 to 60 days from the date of application.Application was made on August 28,2018 for Barnwell of Canada to accept the transfer of the various licens

134、es relating to the Twining acquisition.On October 2,2018,the AER approved the transfer of all of the related licenses.As of the November 3,2018 LMR report,we had an LMR of 2.09.13 In September 2019,the AER issued an abandonment/closure order for all wells and facilities in the Manyberries area which

135、 had been operated by LGX Oil&Gas Ltd.,an operating company that had gone into receivership in 2016.Of the wells and facilities listed by the AER,Barnwell has an average 11%working interest in 78 wells and 6 facilities.The estimated asset retirement obligation for the Companys wells and facilities i

136、n the Manyberries area is included in“Asset retirement obligation”in the Consolidated Balance Sheets.On November 5,2019,in response to the AER order,the Company submitted its proposed plan to abandon the Manyberries wells and facilities in an orderly fashion over a ten-year period.This area has uniq

137、ue access issues as a result of an Emergency Protection Order,under the Canadian Governments Species at Risk Act,to protect the Sage Grouse.Access is limited to a window of mid-September to the end of November each year.The Company has taken the lead on behalf of two other working interest owners an

138、d has met with the Orphan Well Association(“OWA”),who will be responsible for abandoning and reclaiming the majority of the wells,to coordinate future activities.The Company expended some minor expenses in October 2019 to perform field inspections,secure wells,and take an inventory of equipment.The

139、plan that the Company has submitted proposes field activity beginning in the fall of 2020,our fiscal 2021 first quarter,which would initially involve removal and salvage of the surface equipment;these costs are estimated to be minimal due in part to the salvage value of the equipment.Beyond fiscal 2

140、021,the Company expects to perform seven to ten well abandonments per year over an estimated ten-year period as well as abandon the facilities in that time period.Annual gross costs estimated to be incurred currently are approximately$500,000,net to the Company approximately$55,000,however,the Compa

141、ny expects it will have to pay the gross costs and then recover from the other working interest owners and the OWA their costs such that there will be a period between Barnwell having to pay the gross costs and getting reimbursed for the other parties portion.CompetitionBarnwell competes in the sale

142、 of oil and natural gas on the basis of price and on the ability to deliver products.The oil and natural gas industry is intensely competitive in all phases,including the acquisition and development of new production and reserves and the acquisition of equipment and labor necessary to conduct drilli

143、ng activities.The competition comes from numerous major oil companies as well as numerous 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 consumer

144、s.Barnwell is a minor participant in the industry and competes in its oil and natural gas activities with many other companies having far greater financial,technical and other resources.Land Investment SegmentOverviewBarnwell owns a 77.6%interest in Kaupulehu Developments,a Hawaii general partnershi

145、p that has the right to receive payments from KD I and KD II resulting from the sale of lots and/or residential units by KD I and KD II within the approximately 870 acres of the Kaupulehu Lot 4A area in two increments(“Increment I”and“Increment II”),located approximately six miles north of the Kona

146、International Airport in the North Kona District of the island of Hawaii.Kaupulehu Developments also holds an interest in approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A under a lease that terminates in December 2025,which currently has no development

147、 potential without both a development agreement with the lessor and zoning reclassification.14 Barnwell,through two limited liability limited partnerships,KD Kona and KKM Makai,holds a non-controlling ownership interest in the Kukio Resort land development partnerships which is comprised of KD Kukio

148、 Resorts,KD Maniniowali,and KDK.These entities,collectively referred to hereinafter as the“Kukio Resort Land Development Partnerships,”own certain real estate and development rights interests in the Kukio,Maniniowali and Kaupulehu portions of Kukio Resort,a private residential community on the Kona

149、coast of the island of Hawaii,as well as Kukio Resorts real estate sales office operations.KDK holds interests in KD I and KD II.KD I is the developer of Kaupulehu Lot 4A Increment I,and KD II is the developer of Kaupulehu Lot 4A increment II.Barnwells ownership interests in the Kukio Resort Land De

150、velopment Partnerships is accounted for using the equity method of accounting.OperationsIn the 1980s,Kaupulehu Developments obtained the state and county zoning changes necessary to permit development of the Four Seasons Resort Hualalai at Historic Kaupulehu and Hualalai Golf Club,which opened in 19

151、96,a second golf course,and single-family and multi-family residential units.These projects were developed by an unaffiliated entity on leasehold land acquired from Kaupulehu Developments.In the 1990s and 2000s,Kaupulehu Developments obtained the state and county zoning changes necessary to permit d

152、evelopment of single-family and multi-family residential units,a golf course and a limited commercial area on approximately 870 leasehold acres,known as Lot 4A,zoned for resort/residential development,located adjacent to and north of the Four Seasons Resort Hualalai at Historic Kaupulehu.In 2004 and

153、 2006,Kaupulehu Developments sold its leasehold interest in Kaupulehu Lot 4A to KD Is and KD IIs predecessors in interest,which was prior to Barnwells affiliation with KD I and KD II which commenced on November 27,2013,the acquisition date of our ownership interest in the Kukio Resort Land Developme

154、nt Partnerships.Increment I is an area of 80 single-family lots,61 of which were sold from 2006 to 2019 and of which 19 lots remain to be sold,and a beach club on the portion of the property bordering the Pacific Ocean.The purchasers of the 80 single-family lots will have the right to apply for memb

155、ership in the Kukio 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-family and multi-family residential units and a golf course an

156、d clubhouse.Two residential lots of approximately two to three acres in size fronting the ocean were developed within Increment II and sold by KD II,and the remaining acreage within Increment II is not yet under development.It is uncertain when or if KD II will develop the other areas of Increment I

157、I,and there is no assurance with regards to the amounts of future sales from Increments I and II.Kaupulehu Developments is entitled to receive payments from KD I based on the following percentages of the gross receipts from KD Is sales of single-family residential lots in Increment I:10%of such aggr

158、egate gross proceeds greater than$100,000,000 up to$300,000,000;and 14%of such aggregate gross proceeds in excess of$300,000,000.In fiscal 2019,one single-family lot in Increment I was sold bringing the total amount of gross proceeds from single-family lot sales through September 30,2019 to$216,400,

159、000.Prior to March 7,2019,Kaupulehu Developments was entitled to receive payments from KD II based on a percentage of the gross receipts from KD IIs sales of residential lots or units in Increment II ranging from 8%to 10%of the price of improved or unimproved lots or 2.60%to 3.25%of the price of uni

160、ts constructed on a lot,to be determined in the future depending upon a number of variables,including whether 15the lots are sold prior to improvement.Kaupulehu Developments was also entitled to receive 50%of distributions otherwise payable from KD II to its members up to$8,000,000,of which$3,500,00

161、0 had been received,after the members of KD II received distributions equal to the original basis of capital invested in the project.In March 2019,KD II admitted a new development partner,Replay Kaupulehu Development,LLC(“Replay”),a party unrelated to Barnwell,in an effort to move forward with devel

162、opment of the remainder of Increment II at Kaupulehu.Effective March 7,2019,KDK and Replay hold ownership interests of 55%and 45%,respectively,of KD II.Accordingly,Barnwell has a 10.8%indirect non-controlling ownership interest in KD II through KDK as of that date that will continue to be accounted

163、for using the equity method of accounting.Barnwell continues to have an indirect 19.6%non-controlling ownership interest in KD Kukio Resorts,LLLP,KD Maniniowali,LLLP,and KD I.Concurrent with the transaction whereby KD II admitted Replay as a new development partner,Kaupulehu Developments entered int

164、o new agreements with KD II whereby the aforementioned terms of the former Increment II arrangement were eliminated and Kaupulehu Developments will instead be entitled to 15%of the cumulative net profits of KD II,the cost of which is to be solely borne by KDK out of its 55%ownership interest in KD I

165、I,plus a priority payout of 10%of KDKs cumulative net profits derived from Increment II sales subsequent to Phase 2A,up to a maximum of$3,000,000 as to the priority payout.Such interests are limited to distributions or net profits interests and Barnwell will not have any partnership interests in KD

166、II or KDK through its interest in Kaupulehu Developments.The new arrangement also gives Barnwell rights to three single-family residential lots in Phase 2A of Increment II,and four single-family residential lots in phases subsequent to Phase 2A when such lots are developed by KD II,all at no cost to

167、 Barnwell.Barnwell is committed to commence construction of improvements within 90 days of the transfer of the four lots in the phases subsequent to Phase 2A as a condition of the transfer of such lots.Also,in addition to Barnwells existing obligations to pay professional fees to certain parties bas

168、ed on percentages of its gross receipts,Kaupulehu Developments is now also obligated to pay an amount equal to 0.72%and 0.20%of the cumulative net profits of KD II to KD Development,LLC and a pool of various individuals,respectively,all of whom are partners of KKM Makai and are unrelated to Barnwell

169、,in compensation for the agreement of these parties to admit the new development partner for Increment II.Such compensation will be reflected as the obligation becomes probable and the amount of the obligation can be reasonably estimated.The Increment I percentage of sales arrangement between Barnwe

170、ll and KD I remains unchanged.In fiscal 2019,the Kukio Resort Land Development Partnerships made cash distributions to its partners of which Barnwell received$314,000,after distributing$38,000 to minority interests.CompetitionBarnwells land investment segment is subject to intense competition in all

171、 phases of its operations including the acquisition of new properties,the securing of approvals 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 involv

172、ed in land investment activities.The principal factors affecting competition are the location of the project and pricing.Barnwell 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 res

173、ources.16Contract Drilling SegmentOverviewBarnwells wholly-owned subsidiary,Water Resources,drills water and water monitoring wells of varying depths in Hawaii,installs and repairs water pumping systems,and is the distributor for Floway pumps and equipment in the state of Hawaii.OperationsWater Reso

174、urces owns and operates five water well drilling rigs,two pump rigs and other ancillary drilling and pump equipment.Additionally,Water Resources leases a three-quarter of an acre maintenance facility in Honolulu,Hawaii,a one acre maintenance and storage facility with 2,800 square feet of interior sp

175、ace in Kawaihae,Hawaii,and a one-half acre equipment storage yard in Waimea,Hawaii,and maintains an inventory of drilling materials and pump supplies.Water Resources currently operates in Hawaii and is not subject to seasonal fluctuations.The demand for Water Resources services is primarily dependen

176、t upon land development activities in Hawaii.Water Resources markets its services to land developers and government agencies,and identifies potential contracts through public notices,its officers involvement in the community and referrals.Contracts are usually fixed price per lineal foot drilled and

177、 are negotiated with private entities or obtained through competitive bidding with private entities or local,state and federal agencies.Contract revenues are not dependent upon the discovery of water or other similar targets,and contracts are not subject to renegotiation of profits or termination at

178、 the election of the governmental entities involved.Contracts provide for arbitration in the event of disputes.In fiscal 2019,Water Resources started four well drilling and five pump installation and repair contracts and completed one well drilling and three pump installation and repair contracts.Al

179、l of the completed contracts were started in the current year.Seventy-two percent of well drilling and pump installation and repair jobs,representing 26%of total contract drilling revenues in fiscal 2019,have been pursuant to government contracts.At September 30,2019,there was a backlog of eight wel

180、l drilling and seven pump installation and repair contracts,of which six well drilling and all seven pump installation and repair contracts were in progress as of September 30,2019.The approximate dollar amount of Water Resources backlog of firm well drilling and pump installation and repair contrac

181、ts at December 1,2019 and 2018 was as follows:December 1,20192018Well drilling$8,800,000$4,600,000Pump installation and repair1,200,0001,200,000$10,000,000$5,800,000 Of the contracts in backlog at December 1,2019,$6,800,000 is expected to be recognized in fiscal 2020 with the remainder to be recogni

182、zed in the following fiscal year.17CompetitionWater Resources competes with other drilling contractors in Hawaii,some of which use drill rigs similar to Water Resources.These competitors are also capable of installing and repairing vertical turbine and submersible water pumping systems in Hawaii.The

183、se contractors compete actively with Water Resources for government and private contracts.Pricing is Water Resources major method of competition;reliability of service is also a significant factor.Competitive pressures are expected to remain high,thus there is no assurance that the quantity or value

184、s of available or awarded jobs which occurred in fiscal 2019 will continue.Financial Information About Industry Segments and Geographic AreasNote 10 in the“Notes to Consolidated Financial Statements”in Item 8 contains information on our segments and geographic areas.EmployeesAt December 1,2019,Barnw

185、ell employed 43 individuals;42 on a full time basis and 1 on a part time basis.Environmental CostsBarnwell is subject to extensive environmental laws and regulations.U.S.Federal and state and Canadian Federal and provincial governmental agencies issue rules and regulations and enforce laws to protec

186、t the environment 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 environmen

187、t and maintenance 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 where it has a working interest.For further information on environmental remediation,see the Contingencies

188、section included in Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations”and the notes to our consolidated financial statements included in Item 8,“Financial Statements and Supplementary Data.”Available InformationWe are required to file annual,quarterly and c

189、urrent reports and other information with the SEC.These filings are not deemed to be incorporated by reference in this report.You may read and copy any document filed by us at the Public Reference Room of the SEC,100 F Street,N.E.,Washington,D.C.20549,on official business days during the hours of 10

190、 a.m.to 3 p.m.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

191、 website free of charge our annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,and any amendments to those reports as soon as practicable after we electronically file such reports with,or furnish them to,the SEC.The contents of these websites are not incorporated

192、into this filing.Furthermore,the Companys references to URLs for these websites are intended to be textual references only.18ITEM 1A.RISK FACTORS The business of Barnwell and its subsidiaries face numerous risks,including those set forth below or those described elsewhere in this Form 10-K or in Bar

193、nwells other filings with the SEC.The risks described below are not the only risks that Barnwell faces.If any of the following risk factors should occur,our profitability,financial condition or liquidity could be materially negatively impacted.Entity-Wide RisksThe Company faces issues that could imp

194、air our ability to continue as a going concern in the future.Our ability to sustain our business in the future will depend on sufficient oil and natural gas operating cash flows,which are highly sensitive to potentially volatile oil and natural gas prices,sufficient contract drilling operating cash

195、flows,which are subject to potentially large changes in demand,sufficient future land investment segment proceeds and distributions from the Kukio Resort Land Development Partnerships,the timing of which are both highly uncertain and not within Barnwells control,and our ability to fund our needed oi

196、l and natural gas capital expenditures and the level of success of such capital expenditures,as well as our ability to fund oil and natural gas asset retirement obligations and ongoing operating and general and administrative expenses.The Twining oil and natural gas reserves consist of proved produc

197、ing reserves as well as a significant amount of proved reserves that are undeveloped.Our proved undeveloped reserves are estimated to require roughly$13,000,000 in future oil and natural gas capital expenditures to develop within the next five years.It is possible that we will need to obtain a signi

198、ficant amount of new financing in the form of debt or equity in order to develop the reserves to the level estimated by our independent reserve engineers.Management believes our current cash balances and estimated future operating cash flows will be sufficient to fund the Companys estimated cash out

199、flows for the next 12 months from the date of this report.The estimated future operating cash flows are based on managements probable estimates and assumes oil and natural gas prices do not decline and contract drilling jobs do not encounter unforeseen difficulties and are completed without unforese

200、en delays or stoppages.The estimated future operating cash flows are also based on managements estimates of operating cash flows from the drilling of oil and natural gas wells to convert proved undeveloped reserves to proved producing reserves,as well as the cash outflows required for the drilling o

201、f such wells.If actual results are less than managements estimates and if we are then unable to obtain financing or if the financing is not obtained in sufficient time or is not of sufficient magnitude to sustain our business,or if unforeseen circumstances arise that impair our ability to sustain ou

202、r business,the Company will need to consider further sales of our assets or alternative strategies,or we may be forced to wind down our operations,either through liquidation or bankruptcy,and we may not be able to continue as a going concern beyond December 2020.Stockholders may be diluted significa

203、ntly through our efforts to obtain financing and satisfy obligations through the issuance of securities.Our Board of Directors has authority,without action or vote of the stockholders,subject to the requirements of the NYSE American(which generally require stockholder approval for any transactions w

204、hich would result in the issuance of more than 20%of our then outstanding shares of common stock or voting rights representing over 20%of our then outstanding shares of stock,subject to certain exceptions,including sales in public offerings and/or sales which are undertaken at or above the greater o

205、f the book value and/or market value of the issuers common stock on the date the transaction is agreed to be completed),to 19issue all or part of the authorized but unissued shares of common stock,preferred stock or warrants to purchase such shares of common stock.In addition,we may attempt to raise

206、 capital by selling shares of our common stock,possibly at a discount to market in the future.These actions would result in dilution of the ownership interests of existing stockholders and may further dilute common stock book value,and that dilution may be material.Such issuances also may serve to e

207、nhance existing managements ability to maintain control of us,because the shares may be issued to parties or entities committed to supporting existing management.We are subject to the Continued Listing Criteria of the NYSE American and our failure to satisfy these criteria may result in delisting of

208、 our common stock.Our common stock is currently listed on the NYSE American.In order to maintain this listing,we must maintain certain share prices,financial and share distribution targets,including maintaining a minimum amount of stockholders equity and a minimum number of public stockholders.In ad

209、dition to these objective standards,the NYSE American may delist the securities of any issuer if,in its opinion,the issuers financial condition and/or operating results appear unsatisfactory;if it appears that the extent of public distribution or the aggregate market value of the security has become

210、 so reduced as to make continued listing on the NYSE American inadvisable;if the issuer sells or disposes of principal operating assets or ceases to be an operating company;if an issuer fails to comply with the NYSE Americans listing requirements;if an issuers common stock sells at what the NYSE Ame

211、rican considers a“low selling price”(generally trading below$0.20 per share for an extended period of time);or if any other event occurs or any condition exists which makes continued listing on the NYSE American,in its opinion,inadvisable.If the NYSE American delists our common stock,investors may f

212、ace material adverse consequences,including,but not limited to,a lack of trading market for our securities,reduced liquidity,and an inability for us to obtain additional financing to fund our operations.Due to the fact that our common stock is listed on the NYSE American,we are subject to financial

213、and other reporting and corporate governance requirements which increase our costs and expenses.We are currently required to file annual and quarterly information and other reports with the Securities and Exchange Commission that are specified in Sections 13 and 15(d)of the Exchange Act.Additionally

214、,due to the fact that our common stock is listed on the NYSE American,we are also subject to the requirements to maintain independent directors,comply with other corporate governance requirements and are required to pay annual listing and stock issuance fees.These obligations require a commitment of

215、 additional resources including,but not limited,to additional expenses,and may result in the diversion of our senior managements time and attention from our day-to-day operations.These obligations increase our expenses and may make it more complicated or time consuming for us to undertake certain co

216、rporate actions due to the fact that we may require NYSE approval for such transactions and/or NYSE rules may require us to obtain stockholder approval for such transactions.A small number of stockholders,including our CEO,own a significant amount of our common stock and have influence over our busi

217、ness regardless of the opposition of other stockholders.As of September 30,2019,the CEO,who is a member of the Board of Directors,and two others hold approximately 36%of our outstanding common stock.The interests of one or more of these stockholders may not always coincide with the interests of othe

218、r stockholders.These stockholders have significant influence over all matters submitted to our stockholders,including the election of our directors,and could accelerate,delay,deter or prevent a change of control of the Company.The significant stockholders who are also members of the Board of Directo

219、rs could significantly affect our business,policies and affairs.20Our operations are subject to currency rate fluctuations.Our operations are subject to fluctuations in foreign currency exchange rates between the U.S.dollar and the Canadian dollar.Our financial statements,presented in U.S.dollars,ma

220、y be affected by foreign currency fluctuations through both translation risk and transaction risk.Volatility in exchange rates may adversely affect our results of operations,particularly through the weakening of the U.S.dollar relative to the Canadian dollar which may affect the relative prices at w

221、hich we sell our oil and natural gas and may affect the cost of certain items required in our operations.To date,we have not entered into foreign currency hedging transactions to control or minimize these risks.Adverse changes in actuarial assumptions used to calculate retirement plan costs due to e

222、conomic or other factors,or lower returns on plan assets could adversely affect Barnwells results and financial condition.Retirement plan cash funding obligations and plan expenses and obligations are subject to a high degree of uncertainty and could increase in future years depending on numerous fa

223、ctors,including the performance of the financial markets,specifically the equity markets,levels of interest rates,and the cost of health care insurance premiums.The price of our common stock has been volatile and could continue to fluctuate substantially.The market price of our common stock has been

224、 volatile and could fluctuate based on a variety of factors,including:fluctuations in commodity prices;variations in results of operations;announcements by us and our competitors;legislative or regulatory changes;general trends in the industry;general market conditions;litigation;and other events ap

225、plicable to our industries.Failure to retain key personnel could hurt our operations.We require highly skilled and experienced personnel to operate our business.In addition to competing in highly competitive industries,we compete in a highly competitive labor market.Our business could be adversely a

226、ffected by an inability to retain personnel or upward pressure on wages as a result of the highly competitive labor market.Further,there are significant personal liability risks to Barnwell of Canadas individual officers and directors related to well clean-up costs that may affect our ability to att

227、ract or retain the necessary people.21We are a smaller reporting company and benefit from certain reduced governance and disclosure requirements,including that our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial repo

228、rting.We cannot be certain if the omission of reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.Currently,we are a“smaller reporting company,”meaning that our outstanding common stock held by nonaffiliates had a value of

229、 less than$250 million at the end of our most recently completed second fiscal quarter.As a smaller reporting company,we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,meaning our auditors are not required to attest to the effectiveness

230、of the Companys internal control over financial reporting.As a result,investors and others may be less comfortable with the effectiveness of the Companys internal controls and the risk that materialweaknesses or other deficiencies in internal controls go undetected may increase.In addition,as a smal

231、ler reporting company,we take advantage of our ability to provide certain other less comprehensive disclosures in our SEC filings,including,among other things,providing only two years of audited financial statements in annual reports and simplified executive compensation disclosures.Consequently,it

232、may be morechallenging for investors to analyze our results of operations and financial prospects,as the information we provide to stockholders may be different from what one might receive from other public companies in which one hold shares.As a smaller reporting company,we are not required to prov

233、ide this information.Risks Related to Oil and Natural Gas Segment Acquisitions or discoveries of additional reserves are needed to increase our oil and natural gas segment operating results and cash flow.Since fiscal 2014,Barnwell has been selectively divesting oil and natural assets to improve oper

234、ational focus,reduce abandonment liabilities,and decrease the Companys debt burden,however,as a result of these sales,our oil and natural gas segment revenues and operating cash flow have significantly declined.Most notably,in September 2015,we sold our interest in our principal oil and natural gas

235、property Dunvegan,which resulted in a 60%decrease in our proved natural gas reserves and a 34%decrease in our proved oil and natural gas liquids reserves.In fiscal 2015,Dunvegan contributed 46%of our total oil and natural gas revenues.In February 2018,we sold our interest in our oil and natural gas

236、property Red Earth.Red Earth represented 0.07%of our proved natural gas reserves and 25%of our proved oil and natural gas liquids reserves as of September 30,2017,and 22%of our total oil and natural gas revenues in the year ended September 30,2017.In August 2018,Barnwell made a significant reinvestm

237、ent into its oil and natural gas segment with the acquisition of the Twining property in Alberta,Canada which resulted in a significant increase in our proved reserves.However,a significant portion of those proved reserves include proved undeveloped reserves for which it is estimated that$13,000,000

238、 in future capital expenditures will need to be made to convert those undeveloped reserves into developed reserves.The ability to convert the undeveloped reserves to developed reserves will be heavily influenced by the cash flows generated by the oil and natural gas segment,the results of such drill

239、ing,and the need for and sufficiency of any potential future capital financing.If future circumstances are such that we are not able to make the capital expenditures necessary to convert the undeveloped reserves to developed reserves,our future reserves and resulting operating results and cash flows

240、 from our reserves will be less than our expectations and less than the estimations included in this report.Also,continued reinvestment in oil and natural gas segment assets are needed to replace the significant amount of reserves produced and sold.22Future oil and natural gas operating results and

241、cash flow are highly dependent upon our level of success in acquiring or finding additional reserves on an economic basis.We cannot guarantee that we will be successful in developing or acquiring additional reserves and our current financial resources may be insufficient to make such investments.Fur

242、thermore,if oil or natural gas prices increase,our cost for additional reserves could also increase.We may have difficulty funding oil and natural gas segment capital expenditures which could have an adverse effect on our business.Conversion of our proved undeveloped reserves into proved developed r

243、eserves will require substantial capital expenditures which we intend to fund using cash on hand and operational cash generated,if any.However,the Companys current cash on hand and future cash earnings is likely to be needed to fund upcoming cash needs including asset retirement obligations,retireme

244、nt plan funding,and ongoing operating and general and administrative expenses,such that some or potentially all of the cash will not be available for reinvestment.Future cash flows from operations are uncertain and are based on a number of variables including the level of production from existing we

245、lls,oil and natural gas prices,and our success in acquiring and developing new reserves.Disruptions in the capital and credit markets,in particular with respect to companies in the energy sector,could limit our ability to access these markets or may significantly increase our cost to borrow.Decrease

246、s in commodity prices in recent years,among other factors,are causing and may continue to cause lenders to increase interest rates,enact tighter lending standards which we may not be able to satisfy,and reduce or cease to provide funding to borrowers.If additional capital is required,we may not be a

247、ble to obtain financing on terms favorable to us,or at all.If cash on hand and cash generated by operations,if any,is not sufficient to meet our capital requirements,the failure to obtain additional financing could limit our ability to fund capital expenditures,and we may need to curtail the develop

248、ment of our proved undeveloped reserves or be forced to sell some of our oil and natural gas segment assets under untimely or unfavorable terms.Any such curtailment or sale could have a material adverse effect on our business,financial condition and results of operations.We may not realize an adequa

249、te return on oil and natural gas investments.Drilling for oil and natural gas involves numerous risks,including the risk that we will not encounter commercially productive oil or natural gas reservoirs.The wells we drill or participate in may not be productive,and we may not recover all or any porti

250、on of our investment in those wells.If future oil and natural gas segment acquisition and development activities are not successful it could have an adverse effect on our future results of operations and financial condition.Oil and natural gas prices are highly volatile and further declines,or exten

251、ded low prices will significantly affect our financial condition and results of operations.Much of our revenues and cash flow are greatly dependent upon prevailing prices for oil and natural gas.Lower oil and natural gas prices not only decrease our revenues on a per unit basis,but also reduce the a

252、mount of oil and natural gas we can produce economically,if any.Prices that do not produce sufficient operating margins will have a material adverse effect on our operations,financial condition,operating cash flows,borrowing ability,reserves,and the amount of capital that we are able to allocate for

253、 the acquisition and development of oil and natural gas reserves.23Various factors beyond our control affect prices of oil and natural gas including,but not limited to,changes in supply and demand,market uncertainty,weather,worldwide political instability,foreign supply of oil and natural gas,the le

254、vel of consumer product demand,government regulations and taxes,the price and availability of alternative fuels and the overall economic environment.Energy prices are also subject to other political and regulatory actions outside our control,which may include changes in the policies of the Organizat

255、ion of the Petroleum Exporting Countries or other developments involving or affecting oil-producing countries,or actions or reactions of the government of the United States in anticipation of or in response to such developments.The inability of one or more of our working interest partners to meet th

256、eir obligations may adversely affect our financial results.For our operated properties,we pay expenses and bill our non-operating partners for their respective shares of costs.Some of our non-operating partners may experience liquidity problems and may not be able to meet their financial obligations

257、.Nonperformance by a non-operating partner could result in significant financial losses.Liquidity problems encountered by our working interest partners or the third party operators of our non-operated properties may also result in significant financial losses as the other working interest partners o

258、r third party operators may be unwilling or unable to pay their share of the costs of projects as they become due.In the event a third party operator of a non-operated property becomes insolvent,it may result in increased operating expenses and cash required for abandonment liabilities if the Compan

259、y is required to take over operatorship.Barnwell holds a 10%working interest,the largest working interest other than that held by the operator,in a property with approximately 80 wells where the operator is in receivership.We may incur material costs to comply with or as a result of health,safety,an

260、d environmental laws and regulations.The oil and natural gas industry is 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

261、the oil and natural gas industry may be changed to impose higher standards and potentially more costly obligations.Although we have recorded a provision in our financial statements relating to our estimated future environmental and reclamation obligations that we believe is reasonable,we cannot guar

262、antee that we will be able to satisfy our actual future environmental and reclamation obligations.Barnwells oil and natural gas segment is subject to the provisions of the Alberta Energy Regulators(“AER”)Licensee Liability Rating(“LLR”)program.Under the LLR program the AER calculates a Liability Man

263、agement Ratio(“LMR”)for a company based on the ratio of the companys deemed assets over its deemed liabilities relating to wells and facilities for which the company is the licensed operator and imposes a security deposit on operators whose estimated liabilities exceed their deemed asset value.At Se

264、ptember 30,2019,the Company had sufficient deemed asset value that no security deposit was due.However,decreases in prices and production and related netbacks from relevant properties could result in a decline in the Companys deemed asset value to a point where a deposit could be due in the future.T

265、he AER requires purchasers of AER licensed oil and natural gas assets to have an LMR of 2.0 or higher immediately following the transfer of a license.This LMR requirement for well transfers hinders our ability to generate capital by selling oil and natural gas assets as there are less qualified buye

266、rs.24A requirement to provide security deposit funds to the AER in the future would result in the diversion of cash on hand and operating cash flows that could otherwise be used to fund oil and natural gas reserve replacement efforts,which could in turn have a material adverse effect on our business

267、,financial condition and results of operations.If Barnwell fails to comply with the requirements of the LLR program,Barnwells oil and natural gas subsidiary would be subject to the AERs enforcement provisions which could include suspension of operations and non-compliance fees and could ultimately r

268、esult in the AER serving the Company with a closure order to shut-in all operated wells.Additionally,if Barnwell is non-compliant,the Company would be prohibited from transferring well licenses which would prohibit us from selling any oil and natural gas assets until the required cash deposit is mad

269、e with the AER.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 time,as opposed to sudden and catastrophic damages,is not avai

270、lable 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 the cost of remedying an environmental problem,we might be re

271、quired to suspend operations or enter into interim compliance measures pending completion of the required remedy.We may fail to fully identify potential problems related to acquired reserves or to properly estimate those reserves.We periodically evaluate acquisitions of reserves,properties,prospects

272、 and leaseholds and other strategic transactions that appear to fit within our overall business strategy.Our evaluation includes an assessment of reserves,future oil and natural gas prices,operating costs,potential for future drilling and production,validity of the sellers title to the properties an

273、d potential environmental issues,litigation and other liabilities.In connection with these assessments,we perform a review of the subject properties that we believe to be generally consistent with industry practices.Our review will not reveal all existing or potential problems nor will it permit us

274、to become sufficiently familiar with the properties to fully assess their deficiencies and potential recoverable reserves.Inspections may not always be performed on every well,and environmental problems are not necessarily observable even when an inspection is undertaken.Even when problems are ident

275、ified,the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems.We often are not entitled to contractual indemnification for environmental liabilities or title defects in excess of the amounts claimed by us before closing and acquire proper

276、ties on an“as is”basis.There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and future production rates and costs with respect to acquired properties,and actual results may vary substantially from those assumed in the estimates.If oil and natural gas pric

277、es decline,we may be required to take write-downs of the carrying values of our oil and natural gas properties.Oil and natural gas prices affect the value of our oil and natural gas properties as determined in our full cost ceiling calculation.Any future ceiling test write-downs will result in reduc

278、tions of the carrying value of our oil and natural gas properties and an equivalent charge to earnings.25 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 equipmen

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

280、erations 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 responding to fac

281、tors 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 affect our

282、 revenues.An increase in operating costs greater than anticipated could have a material adverse effect on our results of operations and financial condition.Higher operating costs for our properties will directly decrease the amount of cash flow received by us.Electricity,supplies,and labor costs are

283、 a few of the operating costs that are susceptible to material fluctuation.The need for significant repairs and maintenance of infrastructure may increase as our properties age.A significant increase in operating costs could negatively impact operating results and cash flow.Our operating results are

284、 affected by our ability to market the oil and natural gas that we produce.Our business depends in part upon the availability,proximity and capacity of oil and natural gas gathering systems,pipelines and processing facilities.Canadian federal and provincial,as well as United States federal and state

285、,regulation of oil and natural gas production,processing and transportation,tax and energy policies,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 prod

286、uction,overall production or realized prices may decline.We are not the operator and have limited influence over the operations of certain of our oil and natural gas properties.We hold minority interests in certain of our oil and natural gas properties.As a result,we cannot control the pace of explo

287、ration or development,major decisions affecting the drilling of wells,the plan for development and production at non-operated properties,or the timing and amount of costs related to abandonment and reclamation activities although contract provisions give Barnwell certain consent rights in some matte

288、rs.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 accessible to us,we depend on the operators at non-operated properties to provide us with reliable accounting information.We also depe

289、nd on operators and joint operators to maintain the financial resources to fund their share of all abandonment and reclamation costs.26Actual reserves will vary from reserve estimates.Estimating reserves is inherently uncertain and the reserves estimation process involves significant decisions and a

290、ssumptions in the evaluation of available geological,geophysical,engineering and economic data.The reserve data and standardized measures set forth herein are only estimates.Ultimately,actual reserves attributable to our properties will vary from estimates,and those variations may be material.The es

291、timation of reserves involves a number of factors and assumptions,including,among others:oil and natural gas prices as prescribed by SEC regulations;historical production from our wells compared with production rates from similar producing wells in the area;future commodity prices,production and dev

292、elopment costs,royalties and capital expenditures;initial production rates;production decline rates;ultimate recovery of reserves;success of future development activities;marketability of production;effects of government regulation;and other government levies that may be imposed over the producing l

293、ife of reserves.If these factors,assumptions and prices prove to be inaccurate,actual results may vary materially from reserve estimates.SEC rules could limit our ability to book additional proved undeveloped reserves(“PUDs”)in the future.SEC rules require that,subject to limited exceptions,PUDs may

294、 only be booked if they relate to wells scheduled to be drilled within five years after the date of booking.This requirement may limit our ability to book additional PUDs as we pursue our drilling program.Moreover,we may be required to write down our PUDs if we do not drill or plan on delaying those

295、 wells within the required five-year timeframe.Part of our strategy involves using some of the latest available horizontal drilling and completion techniques.The results of our drilling are subject to drilling and completion technique risks,and results may not meet our expectations for reserves or p

296、roduction.Many of our operations involve,and are planned to utilize,the latest drilling and completion techniques as developed by our service providers in order to maximize production and ultimate recoveries and therefore generate the highest possible returns.Risks we face while completing our wells

297、 include,but are not limited to,the inability to fracture stimulate the planned number of stages,the inability to run tools and other equipment the entire length of the well bore during completion operations,the inability to recover such tools and other equipment,and the inability to successfully cl

298、ean out the well bore after completion of the final fracture stimulation.Ultimately,the success of these drilling and completion techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period.If our drilling results a

299、re less than anticipated or we are unable to execute our drilling program because of capital constraints,lease expirations,limited access to gathering systems and takeaway capacity,and/or prices for crude oil,natural gas,and natural gas liquids decline,then the return on our investment for a particu

300、lar project may not be as attractive as we anticipated and we could incur material write-downs of oil and gas properties and the value of our undeveloped acreage could decline in the future.27 Production and reserves,if any,attributable to the use of enhanced recovery methods are inherently difficul

301、t to predict.If our enhanced recovery methods do not allow for the extraction of crude oil,natural gas,and associated liquids in a manner or to the extent that we anticipate,we may not realize an acceptable return on our investments in such projects.Delays in business operations could adversely affe

302、ct the amount and timing of our cash inflows.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 operators in remitting payment to us,payments between any of these parties may also be delayed by:restrictions impos

303、ed 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;recovery by the operator of expenses incurred in the operation of the properties;and the establishment by the o

304、perator of reserves for these expenses.Any of these delays could expose us to additional third party credit risks.The oil and natural gas market in which we operate exposes us to potential liabilities that may not be covered by insurance.Our operations are subject to all of the risks associated with

305、 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 encountering unexpected formations or pressures,premature declines of reservoirs,blow-outs,equipment f

306、ailures 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 these risks could result in personal injury,loss of life,or environmental and other damage to our

307、 property or the property of others.While we carry various levels of insurance,we could be affected by civil,criminal,regulatory or administrative actions,claims or proceedings.We cannot fully protect against all of the risks listed above,nor are all of these risks insurable.There is no assurance th

308、at any applicable insurance or indemnification agreements will adequately protect us against liability for the risks listed above.We could face substantial 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 indemnifi

309、cation 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,even if available,that insurance premiums or other costs will not rise significantly in the future,so as to make the cost of such insurance prohibi

310、tive.Deficiencies in operating practices and record keeping,if any,may increase our risks and liabilities relating to incidents such as spills and releases and may increase the level of regulatory enforcement actions.28Our operations are subject to domestic and foreign government regulation and othe

311、r risks,particularly in Canada and the United States.Barnwells oil and natural gas operations are affected by political developments and laws and regulations,particularly in Canada and the United States,such as restrictions on production,restrictions on imports and exports,the maintenance of specifi

312、ed reserves,tax increases and retroactive tax claims,expropriation of property,cancellation of contract 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

313、lands in Alberta,Saskatchewan and British Columbia is controlled by the governments of each of those 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

314、 our operations in Canada;54%in fiscal 2019.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 contractors in which Canadian nationals have substantial owners

315、hip interests.Furthermore,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,pol

316、lution control and remediation 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 regul

317、ations may discourage 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

318、tax laws,other legislation 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 an

319、d other matters in Canada,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.Unforeseen title defects may result in a loss of entitlement to production and reserves.Although we conduct title revi

320、ews in accordance with industry practice prior 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 fro

321、m such purchased assets could be jeopardized.Risks Related to Land Investment Segment Receipt of future payments from KD I and KD II and cash distributions from the Kukio Resort Land Development Partnerships is dependent upon the developers continued efforts and ability to develop and market the pro

322、perty.We are entitled to receive future payments based on a percentage of the sales prices of residential lots sold within the Kaupulehu area by KD I and KD II as well as a percentage of future distributions KD II 29makes to its members.However,in order to collect such payments we are reliant upon t

323、he developer,KD I and KD II,in which we own a non-controlling ownership interest,to continue to market the remaining lots within Increment I and to proceed with the development or sale of the remaining portion of Increment II.Additionally,future cash distributions from the Kukio Resort Land Developm

324、ent Partnerships,which includes KD I and KD II,are also dependent on future lot sales in Increment I by KD I and the development or sale of Increment II by KD II.It is uncertain when or if KD II will develop or sell the remaining portion of Increment II,and there is no assurance with regards to the

325、amounts of future sales from Increments I and II.We do not have a controlling interest in the partnerships,and therefore are dependent on the general partner for development decisions.The receipt of future payments and cash distributions could be jeopardized if the developer fails to proceed with de

326、velopment and marketing of the property.We hold investment interests in unconsolidated land development partnerships,which are accounted for using the equity method of accounting,in which we do not have a controlling interest.These investments involve risks and are highly illiquid.These investments

327、involve risks which include:the lack of a controlling interest in these partnerships and,therefore,the inability to require that the entities sell assets,return invested capital or take any other action without obtaining the majority vote of partners;potential for future additional capital contribut

328、ions to fund operations and development activities;the adverse impact on overall profitability if the entities do not achieve the financial results projected;the reallocation of amounts of capital from other operating initiatives and/or an increase in indebtedness to pay potential future additional

329、capital contributions,which could in turn restrict our ability to access additional capital when needed or to pursue other important elements of our business strategy;undisclosed,contingent or other liabilities or problems,unanticipated costs,and an inability to recover or manage such liabilities an

330、d costs;and certain underlying partnership data is not accessible to us,therefore we depend on the general partner to provide us with reliable accounting information.We may be required to write-down the carrying value of our investment in the Kukio Resort Land Development Partnerships if our assumpt

331、ions about future lot sales and profitability prove incorrect.Any write-down would negatively impact our results of operations.In analyzing the value of our investment in the Kukio Resort Land Development Partnerships,we have made assumptions about the level of future lot sales,operating and develop

332、ment costs,cash generation and market conditions.These assumptions are based on managements and the general partners best estimates and if the actual results differ significantly from these assumptions,we may not be able to realize the value of the assets recorded,which could lead to an impairment o

333、f certain of these assets in the future.Such a write-down would have a negative impact on our results of operations.Our land investment business is 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 impacted by the condition of Hawaiis real estate mark